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Market orientation and innovation performance: The moderating roles of firm ownership structures

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  • Song, Jing
  • Wei, Yinghong (Susan)
  • Wang, Rui

Abstract

The marketing literature documents inconsistent results on the link between Market Orientation (MO) and innovation performance. The agency theory suggests that agency problems exist in firms between the principal (owner) and the agent (managers). A proper firm ownership structure design may solve the principal-agent problem. In this study, we investigate an understudied research question: whether and how ownership structures may affect the relationship between MO and innovation performance? We posit that firms should align three different dimensions of ownership structures with MO in order to achieve a superior innovation performance. We assembled a unique data set, with 242 publicly-traded companies, by merging three different data sources in an emerging market — China to test our framework. The results support our proposed model, and confirm the moderating role of ownership structures in the relationship between market orientation and firm innovation performance in China. First, all things being equal, non-state-owned firms may achieve a higher level of innovation performance than their state-owned counterparts through their implementation of MO. Second, allowing top managers to have a certain fraction of the firm's ownership stake (called managerial ownership), that can switch risk preference and time preference of top manager's to those of shareholders, may foster the effect of MO on innovation performance. Third, a high ratio of major owners over minor owners (named as ownership concentration), that can empower and motivate shareholders to closely monitor a manager's behavior, may also strengthen the relationship between MO and innovation performance. The Chinese data from a transition economy sheds light on the ownership structure reforms in China, and provides novel new insights to the marketing theory and practice regarding the role of two new additional emerging dimensions of ownership structures — managerial ownership and ownership concentration in the relationship between MO and innovation performance. Theoretical and managerial implications are discussed, and several avenues for future research are proposed.

Suggested Citation

  • Song, Jing & Wei, Yinghong (Susan) & Wang, Rui, 2015. "Market orientation and innovation performance: The moderating roles of firm ownership structures," International Journal of Research in Marketing, Elsevier, vol. 32(3), pages 319-331.
    • Handle: RePEc:eee:ijrema:v:32:y:2015:i:3:p:319-331
    DOI: 10.1016/j.ijresmar.2015.03.005
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