Customer orientation and financial performance relationship: the mediating role of innovative capability

Santos, Mirela Jeffman dos; Perin, Marcelo Gattermann; Simões, Cláudia; Sampaio, Cláudio Hoffmann

doi:10.1590/0104-530X4706-20

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ORIGINAL ARTICLE • Gest. Prod. 27 (4) • 2020 • https://doi.org/10.1590/0104-530X4706-20 copy

Customer orientation and financial performance relationship: the mediating role of innovative capability

A relação entre a orientação ao cliente e o desempenho financeiro: o papel mediador da capacidade de inovação

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract:

Existing research establishes customer orientation (CO) per se as insufficient to achieve higher levels of financial performance (FP). Such reasoning suggests the need for additional skills and capabilities, such as, innovative capability (IC). In addition, environmental variables (e.g., Technological Turbulence – TT) affect these relationships. This paper explores the relationships and effects of CO and IC on FP under different TT conditions. A research framework and hypotheses were developed. The framework captures the following relationships: (i) the direct influence of CO on FP; (ii) the mediating role of IC on the CO/FP relationship; (iii) the moderating role of TT over the mediation of IC on the CO/FP relationship. The fieldwork included an exploratory stage, followed by a cross-sectional survey applied to managers in medium-sized companies in Brazil. Findings revealed that IC partially mediates the relationship between CO and FP, in particular in high TT environments. Managerial implications and avenues for future research are presented.

Keywords:
Customer orientation; Financial performance; Innovative capability; Technological turbulence; Emerging market

Studies	Main Effects			Moderator
Studies	CO → IC	IC → FP	CO → FP	TT
Akman & Yilmaz (2008)Akman, G., & Yilmaz, C. (2008). Innovative capability, innovation strategy and market orientation: an empirical analysis in Turkish software industry. International Journal of Innovation Management, 12(1), 69-111. http://dx.doi.org/10.1142/S1363919608001923. http://dx.doi.org/10.1142/S1363919608001...	✓	✓
Augusto & Coelho (2009)Augusto, M., & Coelho, F. (2009). Market orientation and new-to-the-world products: exploring the moderating effects of innovativeness, competitive strength, and environmental forces. Industrial Marketing Management, 38(1), 94-108. http://dx.doi.org/10.1016/j.indmarman.2007.09.007. http://dx.doi.org/10.1016/j.indmarman.20...	✓
Calantone et al. (2010)Calantone, R. J., Harmancioglu, N., & Droge, C. (2010). Inconclusive innovation “returns”: a meta-analysis of research on innovation in new product development. Journal of Product Innovation Management, 27(7), 1065-1081. http://dx.doi.org/10.1111/j.1540-5885.2010.00771.x. http://dx.doi.org/10.1111/j.1540-5885.20...	✓
Cheng & Krumwiede (2012)Cheng, C. C., & Krumwiede, D. (2012). The role of service innovation in the market orientation: new service performance linkage. Technovation, 32(7-8), 487-497. http://dx.doi.org/10.1016/j.technovation.2012.03.006. http://dx.doi.org/10.1016/j.technovation...	✓		✓
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Frambach et al. (2016)Frambach, R. T., Fiss, P. C., & Ingenbleek, P. T. M. (2016). How important is customer orientation for firm performance? A fuzzy set analysis of orientations, strategies, and environments. Journal of Business Research, 69(4), 1428-1436. http://dx.doi.org/10.1016/j.jbusres.2015.10.120. http://dx.doi.org/10.1016/j.jbusres.2015...	✓		✓
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Song et al. (2005)Song, M., Droge, C., Hanvanich, S., & Calantone, R. (2005). Marketing and technology resource complementarity: an analysis of their interaction effect in two environmental contexts. Strategic Management Journal, 26(3), 259-276. http://dx.doi.org/10.1002/smj.450. http://dx.doi.org/10.1002/smj.450...		✓		✓
Tajeddini (2010)Tajeddini, K. (2010). Effect of customer orientation and entrepreneurial orientation on innovativeness: evidence from the hotel industry in Switzerland. Tourism Management, 31(2), 221-231. http://dx.doi.org/10.1016/j.tourman.2009.02.013. http://dx.doi.org/10.1016/j.tourman.2009...			✓
Theoharakis & Hooley (2008)Theoharakis, V., & Hooley, G. J. (2008). Customer orientation and innovativeness: differing roles in new and old Europe. International Journal of Research in Marketing, 25(1), 69-79. http://dx.doi.org/10.1016/j.ijresmar.2007.09.007. http://dx.doi.org/10.1016/j.ijresmar.200...	✓		✓
Woodside (2005)Woodside, A. G. (2005). Firm orientations, innovativeness, and business performance: advancing a system dynamics view following a comment on Hult, Hurley, and Knight’s 2004 study. Industrial Marketing Management, 34(3), 275-279. http://dx.doi.org/10.1016/j.indmarman.2004.10.001. http://dx.doi.org/10.1016/j.indmarman.20...	✓
Yilmaz et al. (2005)Yilmaz, C., Alpkan, L., & Ergun, E. (2005). Cultural determinants of customer- and learning-oriented value systems and their joint effects on firm performance. Journal of Business Research, 58(10), 1340-1352. http://dx.doi.org/10.1016/j.jbusres.2004.06.002. http://dx.doi.org/10.1016/j.jbusres.2004...			✓

Variable		Population		Sample
Size (number of employees)
		n	%	n	%
	100-200	1.367	52.2%	91	59.5%
	201-300	599	22.9%	28	18.3%
	301-400	390	14.9%	15	9.8%
	more than 400	264	10.1%	19	12.4%
	Total	2.620		153
Year the company was created
		n	%	n	%
	Before 1900	6	0.2%	1	0.7%
	1901-1950	138	5.3%	7	4.6%
	1951-1980	815	31.1%	46	30.1%
	1981-2000	1.258	48.0%	75	49.0%
	After 2000	403	15.4%	24	15.7%
	Total	2.620		153
Industry
	Standard Industrial Code (SIC)	n	%	n	%
	Agriculture	14	0.5%	1	0.7%
	Construction	10	0.4%	0	0.0%
	Utilities	4	0.2%	0	0.0%
	Manufacture	1.651	63.0%	94	61.4%
	Mining	939	35.8%	58	37.9%
	Transportation and Communications	2	0.1%	0	0.0%
	Total	2.620		153

Item description							Standardized Loadings			t-values
Customer Orientation ( Narver & Slater, 1990 Narver, J. C., & Slater, S. F. (1990). The effect of a market orientation on business performance. Journal of Marketing, 54(4), 20-35. http://dx.doi.org/10.1177/002224299005400403. http://dx.doi.org/10.1177/00222429900540... )
• We constantly monitor our level of commitment and orientation to serving customer needs.							0.808			26.327
• Our business strategies are driven by our beliefs about how we can create greater value for customers							0.661			9.014
• Our strategy for competitive advantage is based on our understanding of customer needs							0.720			12.603
• Our strategy for competitive advantage is based on our understanding of customer needs							0.694			15.143
• We measure customer satisfaction systematically and frequently.							0.780			20.136
• We give close attention to after-sales service.							0.683			10.230
(scale: 1= strongly disagree; 7= strongly agree)
Innovative Capability ( Akman & Yilmaz, 2008 Akman, G., & Yilmaz, C. (2008). Innovative capability, innovation strategy and market orientation: an empirical analysis in Turkish software industry. International Journal of Innovation Management, 12(1), 69-111. http://dx.doi.org/10.1142/S1363919608001923. http://dx.doi.org/10.1142/S1363919608001... )
• Our firm has an organizational culture and a management comprehension that support and encourage innovation.							0.809			27.873
• At our firm, knowledge from different resources is used for product development activities efficiently and rapidly.							0.788			19.828
• Our firm is able to reflect changes at market conditions (such as changes from customer wants, competitors’ products, etc.) to own products and processes as soon as possible.							0.749			16.770
• Workers of our firm are supported and encouraged to participate in activities such as product development, innovation process improvement and to produce new ideas such topics.							0.676			12.406
• New ideas that come from customers, suppliers, etc. are evaluated continuously and try to include into product development activities.							0.686			15.329
• Our firms could be adapted to environmental changes easily and in the short time by making suitable improvements and innovations at its products and processes.							0.641			11.777
(scale: 1= strongly disagree; 5= strongly agree)
Technological Turbulence ( Jaworski & Kohli, 1993 Jaworski, B. J., & Kohli, A. K. (1993). Market orientation: antecedents and consequences. Journal of Marketing, 57(3), 53-70. http://dx.doi.org/10.1177/002224299305700304. http://dx.doi.org/10.1177/00222429930570... )
• The technology in our industry is changing rapidly.							0.833			10,871
• Technological changes provide big opportunities in our industry.							0.875			13.871
• A large number of new product ideas have been made possible through technological breakthroughs in our industry.							0.855			15.052
• Technological developments in our industry are rather minor^* * Reverse item. SD = Standard deviation; α = Cronbach alpha; CR = composite reliability; AVE = Average variance extracted. Diagonal elements in bold are the square root of AVE.							0.589			4.560
(scale: 1= strongly disagree; 5= strongly agree)
Financial Performance ( Sampaio et al., 2011 Sampaio, C. H., Simões, C., Perin, M. G., & Almeida, A. (2011). Marketing metrics: insights from Brazilian managers. Industrial Marketing Management, 40(1), 8-16. http://dx.doi.org/10.1016/j.indmarman.2010.09.005. http://dx.doi.org/10.1016/j.indmarman.20... )
• Profit levels							0.872			21.747
• Sales volume							0.795			16.077
• Profitability							0.826			14.241
(scale: 1= much lower; 7= much higher)
Construct	Mean	SD	α	CR	AVE	Correlation Matrix
Construct	Mean	SD	α	CR	AVE	1		2	3		4
1. Customer Orientation	5.53	1.02	.82	.87	.53	*.73*
2. Innovative Capability	3.72	.77	.82	.87	.53	.663^ p < 0.01.		*.73*
3. Technological Turbulence	3.42	.98	.81	.87	.63	.251**		.309**	*.80*
4. Financial Performance	3.39	.81	.78	.87	.69	.421**		.415**	.280**		*.83*

Linkages in the model	Standardized parameter estimates
Linkages in the model	Model 1	Model 2
Main effects
H₁: CO → FP	0.431*** (6.071)	0.262^ p < 0.01. (2.721)
CO → IC		0.663^* ***** p < 0.001. Findings suggest that CO has a direct and positive impact on FP. In both models, CO’s direct effect on FP is positive and statistically significant (β=0.431, p<0.001; β=0.262, p<0.01). Consequently, H1 is supported. (13.785)
IC → FP		0.257** (2.710)
Control variables
Size → FP	0.147* (2.108)	0.154^* * p < 0.05. (2.105)
Age → FP	-0.032 (0.753)	-0.004 (0.094)
Sector → FP	-0.172* (2.4)	-0.177** (2.674)
Indirect effects
H2: CO → IC → FP		0.171** (2.266)
R²
IC		0.439
FP	0.231	0.268

TT	B	Bootstrap SE	Bootstrap 95% CI
TT	B	Bootstrap SE	Lower		Upper
-1 SD (2.435)	0.018	0.043	-0.066	0.111
Mean (3.420)	0.092	0.040	0.012	0.174
1 SD (4.400)	0.200	0.065	0.081	0.337

Universidade Federal de São Carlos Departamento de Engenharia de Produção , Caixa Postal 676 , 13.565-905 São Carlos SP Brazil, Tel.: +55 16 3351 8471 - São Carlos - SP - Brazil
E-mail: gp@dep.ufscar.br

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[1] Population represents the Dun & Bradstreet database summary. Column n indicates the number of cases.