IDEAS home Printed from https://ideas.repec.org/a/spr/joamsc/v46y2018i4d10.1007_s11747-017-0574-1.html
   My bibliography  Save this article

Innovation pathway to profitability: the role of entrepreneurial orientation and marketing capabilities

Author

Listed:
  • S. Arunachalam

    () (Indian School of Business)

  • Sridhar N. Ramaswami

    () (Ivy College of Business, Iowa State University
    Indian School of Business)

  • Pol Herrmann

    () (Ivy College of Business, Iowa State University
    EGADE Business School)

  • Doug Walker

    () (Kansas State University)

Abstract

Drawing from the marketing capabilities and innovation literatures, we identify aprocess by which a firm’s entrepreneurial orientation impacts profits and show that it is dependent on marketing capabilities. Using a half-longitudinal design we integrate survey data with performance metrics over two time periods, from a sample of 190 firms. While the effect of entrepreneurial orientation (EO) on innovation is enhanced by architectural marketing capabilities, the effect of innovation outcomes on profits is enhanced by specialized marketing capabilities. Ultimately, the pathway from EO to performance, mediated by innovation, is positively significant at higher levels of both marketing capabilities. The results uncovered using Bayesian conditional process modeling, are robust to alternate model specifications, endogeneity tests, and provide insights into the capabilities-based understanding of entrepreneurism-marketing interface. We discuss resource allocation implications for managers as they attempt to maximize profits through innovation.

Suggested Citation

  • S. Arunachalam & Sridhar N. Ramaswami & Pol Herrmann & Doug Walker, 2018. "Innovation pathway to profitability: the role of entrepreneurial orientation and marketing capabilities," Journal of the Academy of Marketing Science, Springer, vol. 46(4), pages 744-766, July.
  • Handle: RePEc:spr:joamsc:v:46:y:2018:i:4:d:10.1007_s11747-017-0574-1
    DOI: 10.1007/s11747-017-0574-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11747-017-0574-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hui Feng & Neil A. Morgan & Lopo L. Rego, 2017. "Firm capabilities and growth: the moderating role of market conditions," Journal of the Academy of Marketing Science, Springer, vol. 45(1), pages 76-92, January.
    2. Andreas Rauch & Johan Wiklund & G.T. Lumpkin & Michael Frese, 2009. "Entrepreneurial Orientation and Business Performance: An Assessment of past Research and Suggestions for the Future," Entrepreneurship Theory and Practice, , vol. 33(3), pages 761-787, May.
    3. Armstrong, J. Scott & Overton, Terry S., 1977. "Estimating Nonresponse Bias in Mail Surveys," MPRA Paper 81694, University Library of Munich, Germany.
    4. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    5. Neil A. Morgan & Douglas W. Vorhies & Charlotte H. Mason, 2009. "Market orientation, marketing capabilities, and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 30(8), pages 909-920, August.
    6. Jeffrey G. Covin & G.T. Lumpkin, 2011. "Entrepreneurial Orientation Theory and Research: Reflections on a Needed Construct," Entrepreneurship Theory and Practice, , vol. 35(5), pages 855-872, September.
    7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    8. Pankaj C. Patel & Marko Kohtamäki & Vinit Parida & Joakim Wincent, 2015. "Entrepreneurial orientation-as-experimentation and firm performance: The enabling role of absorptive capacity," Strategic Management Journal, Wiley Blackwell, vol. 36(11), pages 1739-1749, November.
    9. Danny Miller & Peter H. Friesen, 1982. "Innovation in conservative and entrepreneurial firms: Two models of strategic momentum," Strategic Management Journal, Wiley Blackwell, vol. 3(1), pages 1-25, January.
    10. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
    11. Xinshu Zhao & John G. Lynch & Qimei Chen, 2010. "Reconsidering Baron and Kenny: Myths and Truths about Mediation Analysis," Journal of Consumer Research, Oxford University Press, vol. 37(2), pages 197-206, August.
    12. Jeffrey S. Conant & Michael P. Mokwa & P. Rajan Varadarajan, 1990. "Strategic types, distinctive marketing competencies and organizational performance: A multiple measures‐based study," Strategic Management Journal, Wiley Blackwell, vol. 11(5), pages 365-383, September.
    13. Douglas W. Vorhies & Robert E. Morgan & Chad W. Autry, 2009. "Product‐market strategy and the marketing capabilities of the firm: impact on market effectiveness and cash flow performance," Strategic Management Journal, Wiley Blackwell, vol. 30(12), pages 1310-1334, December.
    14. Jeffrey G. Covin & Dennis P. Slevin, 1989. "Strategic management of small firms in hostile and benign environments," Strategic Management Journal, Wiley Blackwell, vol. 10(1), pages 75-87, January.
    15. Sridhar N. Ramaswami & S. Arunachalam, 2016. "Divided attitudinal loyalty and customer value: role of dealers in an indirect channel," Journal of the Academy of Marketing Science, Springer, vol. 44(6), pages 770-790, November.
    16. Danny Miller, 1983. "The Correlates of Entrepreneurship in Three Types of Firms," Management Science, INFORMS, vol. 29(7), pages 770-791, July.
    17. Kwaku Atuahene-Gima & Anthony Ko, 2001. "An Empirical Investigation of the Effect of Market Orientation and Entrepreneurship Orientation Alignment on Product Innovation," Organization Science, INFORMS, vol. 12(1), pages 54-74, February.
    18. Anna S. Cui & Fang Wu, 2016. "Utilizing customer knowledge in innovation: antecedents and impact of customer involvement on new product performance," Journal of the Academy of Marketing Science, Springer, vol. 44(4), pages 516-538, July.
    19. Wiklund, Johan & Shepherd, Dean, 2005. "Entrepreneurial orientation and small business performance: a configurational approach," Journal of Business Venturing, Elsevier, vol. 20(1), pages 71-91, January.
    20. Rosenbusch, Nina & Brinckmann, Jan & Bausch, Andreas, 2011. "Is innovation always beneficial? A meta-analysis of the relationship between innovation and performance in SMEs," Journal of Business Venturing, Elsevier, vol. 26(4), pages 441-457, July.
    21. Jeffrey M. Wooldridge, 2015. "Control Function Methods in Applied Econometrics," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 420-445.
    22. Lumpkin, G. T. & Dess, Gregory G., 2001. "Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle," Journal of Business Venturing, Elsevier, vol. 16(5), pages 429-451, September.
    23. Catherine L. Wang, 2008. "Entrepreneurial Orientation, Learning Orientation, and Firm Performance," Entrepreneurship Theory and Practice, , vol. 32(4), pages 635-657, July.
    24. Ramachandran, K. & Ramnarayan, S., 1993. "Entrepreneurial orientation and networking: Some Indian evidence," Journal of Business Venturing, Elsevier, vol. 8(6), pages 513-524, November.
    25. Shantanu Dutta & Om Narasimhan & Surendra Rajiv, 1999. "Success in High-Technology Markets: Is Marketing Capability Critical?," Marketing Science, INFORMS, vol. 18(4), pages 547-568.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ko, Woo Li & Kim, Sang Yong & Lee, Jong-Ho & Song, Tae Ho, 2020. "The effects of strategic alliance emphasis and marketing efficiency on firm value under different technological environments," Journal of Business Research, Elsevier, vol. 120(C), pages 453-461.
    2. Caroline Reimann & Fernando Carvalho & Marcelo Duarte, 2021. "The Influence of Dynamic and Adaptive Marketing Capabilities on the Performance of Portuguese SMEs in the B2B International Market," Sustainability, MDPI, Open Access Journal, vol. 13(2), pages 1-23, January.
    3. Yiming Zhuang & Younggeun Lee & Xinyue Chang & Renee B. Kim, 2020. "Entrepreneurial orientation and corporate social responsibility performance: An empirical study of state‐controlled and privately controlled firms in China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(1), pages 383-392, January.
    4. Yen-Chun Chen & Ya-Hui Lin & Hsien-Tung Tsai, 2020. "Toward Greater Understanding of the Relationship Between Entrepreneurial Orientation and International Performance," Management International Review, Springer, vol. 60(2), pages 211-245, April.
    5. Dubey, Rameshwar & Gunasekaran, Angappa & Childe, Stephen J. & Bryde, David J. & Giannakis, Mihalis & Foropon, Cyril & Roubaud, David & Hazen, Benjamin T., 2020. "Big data analytics and artificial intelligence pathway to operational performance under the effects of entrepreneurial orientation and environmental dynamism: A study of manufacturing organisations," International Journal of Production Economics, Elsevier, vol. 226(C).
    6. Venkatesh Shankar & Unnati Narang, 2020. "Emerging market innovations: unique and differential drivers, practitioner implications, and research agenda," Journal of the Academy of Marketing Science, Springer, vol. 48(5), pages 1030-1052, September.
    7. L. M. Daphne Yiu & Hugo K. S. Lam & Andy C. L. Yeung & T. C. E. Cheng, 2020. "Enhancing the Financial Returns of R&D Investments through Operations Management," Production and Operations Management, Production and Operations Management Society, vol. 29(7), pages 1658-1678, July.
    8. Patel, Pankaj C. & João Guedes, Maria & Pagano, Michael S. & Olson, Gerard T., 2020. "Industry profitability matters: The value of sustainable growth rate and distance from bankruptcy as enablers of venture survival," Journal of Business Research, Elsevier, vol. 114(C), pages 80-92.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jintong Tang & Zhi Tang & Birton J. Cowden, 2017. "Exploring the Relationship between Entrepreneurial Orientation, CEO Dual Values, and SME Performance in State–Owned vs. Nonstate–Owned Enterprises in China," Entrepreneurship Theory and Practice, , vol. 41(6), pages 883-908, November.
    2. Adomako, Samuel, 2021. "Resource-induced coping heuristics and entrepreneurial orientation in dynamic environments," Journal of Business Research, Elsevier, vol. 122(C), pages 477-487.
    3. Strobl, Andreas & Bauer, Florian & Matzler, Kurt, 2020. "The impact of industry-wide and target market environmental hostility on entrepreneurial leadership in mergers and acquisitions," Journal of World Business, Elsevier, vol. 55(2).
    4. Zhaoyang Guo & Wei Jiang, 2020. "Risk-taking for entrepreneurial new entry: risk-taking dimensions and contingencies," International Entrepreneurship and Management Journal, Springer, vol. 16(2), pages 739-781, June.
    5. Bradley A. George & Louis Marino, 2011. "The Epistemology of Entrepreneurial Orientation: Conceptual Formation, Modeling, and Operationalization," Entrepreneurship Theory and Practice, , vol. 35(5), pages 989-1024, September.
    6. Feng, Cong & Patel, Pankaj C. & Xiang, Kexin, 2020. "The well-trodden path: Complementing market and entrepreneurial orientation with a strategic emphasis to influence IPO survival in the United States," Journal of Business Research, Elsevier, vol. 110(C), pages 370-385.
    7. Patrick M. Kreiser, 2011. "Entrepreneurial Orientation and Organizational Learning: The Impact of Network Range and Network Closure," Entrepreneurship Theory and Practice, , vol. 35(5), pages 1025-1050, September.
    8. Yen-Chun Chen & Ya-Hui Lin & Hsien-Tung Tsai, 2020. "Toward Greater Understanding of the Relationship Between Entrepreneurial Orientation and International Performance," Management International Review, Springer, vol. 60(2), pages 211-245, April.
    9. Rodney C. Runyan & Baoshan Ge & Baobao Dong & Jane L. Swinney, 2012. "Entrepreneurial Orientation in Cross–Cultural Research: Assessing Measurement Invariance in the Construct," Entrepreneurship Theory and Practice, , vol. 36(4), pages 819-836, July.
    10. Tobias Kollmann & Christoph Stöckmann, 2014. "Filling the Entrepreneurial Orientation–Performance Gap: The Mediating Effects of Exploratory and Exploitative Innovations," Entrepreneurship Theory and Practice, , vol. 38(5), pages 1001-1026, September.
    11. William Wales & Erik Monsen & Alexander McKelvie, 2011. "The Organizational Pervasiveness of Entrepreneurial Orientation," Entrepreneurship Theory and Practice, , vol. 35(5), pages 895-923, September.
    12. Samuel Adomako, 2018. "The Moderating Effects Of Adaptive And Intellectual Resource Capabilities On The Relationship Between Entrepreneurial Orientation And Financial Performance," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-35, April.
    13. Erik Lundmark & Anna Krzeminska & Dean A. Shepherd, 2019. "Images of Entrepreneurship: Exploring Root Metaphors and Expanding Upon Them," Entrepreneurship Theory and Practice, , vol. 43(1), pages 138-170, January.
    14. Anna Watson & Olufunmilola (Lola) Dada & Owen Wright & Rozenn Perrigot, 2019. "Entrepreneurial Orientation Rhetoric in Franchise Organizations: The Impact of National Culture," Entrepreneurship Theory and Practice, , vol. 43(4), pages 751-772, July.
    15. Kohtamäki, Marko & Heimonen, Jesse & Sjödin, David & Heikkilä, Vili, 2020. "Strategic agility in innovation: Unpacking the interaction between entrepreneurial orientation and absorptive capacity by using practice theory," Journal of Business Research, Elsevier, vol. 118(C), pages 12-25.
    16. Danny Miller, 2011. "Miller (1983) Revisited: A Reflection on EO Research and Some Suggestions for the Future," Entrepreneurship Theory and Practice, , vol. 35(5), pages 873-894, September.
    17. Unai Arzubiaga & Amaia Maseda & Txomin Iturralde, 2019. "Entrepreneurial orientation in family firms: New drivers and the moderating role of the strategic involvement of the board," Australian Journal of Management, Australian School of Business, vol. 44(1), pages 128-152, February.
    18. Yongbin Zhao & Yuan Li & Soo Hoon Lee & Long Bo Chen, 2011. "Entrepreneurial Orientation, Organizational Learning, and Performance: Evidence from China," Entrepreneurship Theory and Practice, , vol. 35(2), pages 293-317, March.
    19. Saadat Saeed & Shumaila Y. Yousafzai & Andreas Engelen, 2014. "On Cultural and Macroeconomic Contingencies of the Entrepreneurial Orientation–Performance Relationship," Entrepreneurship Theory and Practice, , vol. 38(2), pages 255-290, March.
    20. Katharina Fellnhofer, 2019. "The Complementary Effects Of Firms’ And Team Leaders’ Entrepreneurial Orientation On Innovation Success And Performance," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(05), pages 1-32, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joamsc:v:46:y:2018:i:4:d:10.1007_s11747-017-0574-1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.