A Study On The Relationship Between Total Market Orientation, Innovation Strategy And Firm Performance

It is a universal problem that enterprises are affected by the dynamic of business environment,not just semiconductors, information services and software high-tech industries, even those once considered to be stable business environment, the industry faces the problems of dynamic.In the rapid changing environment, it is the basic problem to each enterprise that how to obtain and maintain its competitive advantage. To remain competitive, company should not only exploit the existing capabilities,but also explore new capabilities to adapt to the environment changing.Since 1990s, many studies have proven that market orientation is helpful for enterprises to gain and sustain competitive advantage. However, the construct continues to receive critical, largely adverse, commentary from some scholars.they argue that market orientation is helpful to improve business performance in short term,but because they listen too carefully to their customers,the functions made the enterprises to adapt the market changing passively, so they could not discover and to satisfy the latent needs of customers,therefore could not maintain long-term competitive advantage. Reflect on these questions and criticisms, some marketing scholars charged that businesses appear to have an incomplete understanding of what it means to be market oriented The total MO is composed of two dimensions: responsive MO and proactive MO. Responsive MO is to discover and satisfy customer's expressed needs; proactive MO is to discover and satisfy customer's latent needs. Two types of market orientation is vital for enterprises, but also have their own drawbacks. Responsive market orientation is effective to business stability, but not useful to improving the future adaptability; proactive market-oriented can enhance the dynamic, but is not conducive for the enterprise to gain short-term benefits.According to the two-dimensional market orientation, based on the degree of innovation and konwledge bases, organizational innovation can be classified into exploitative and exploratory innovation. Exploitative innovation causes minor improvements on the basis of the existing knowledge; exploratory innovation causes fundamental changes on the basis of new knowledge. Exploitative innovation could depend on current mature path, so can improve the short-term performance and maintain business stability.But Path Dependence will inhibit the development of new capabilities, leading the firm into "competency trap"; exploratory innovation can maintain long-term competitive advantage, but because of the absence of successful experience, it will lead enterprises into the "failure trap." Studies have shown that ambidextrous organization can achieve both the short term performance and long term advantages. A lot of studies have proven the progressive causation relationships between market orientation, organizational innovation and business performance,but nobody examine systematically the relationship between the responsive and proactive MO, exploitative and exploratory innovation and firm performance. This paper tries to make up the deficiencies, based on the perspective of organization's duality, examine the relationship between the responsive and proactive MO, exploitative and exploratory innovation and firm performance.According to organizational learning theory and knowledge base theory, proactive and responsive market orientation, exploration innovation and exploitation innovation are methods of organizational learning and knowledge accumulation. Among them, the responsive market orientation and exploitation innovation are single-loop learning or adaptive learning; the proactive market orientation and exploration innovation are double-loop learning or creative learning. Learning orientation reflect the tendency of managers'question to existing knowledge, knowledge integration mechanism reflect utilization of the company's organizational knowledge and individual knowledge, both of them are factors of organization learning circumstance, and will influence the relationships among proactive MO, responsive MO, exploration innovation, exploitation innovation and business performance. Therefore, this study also tried to examine the moderating effect of learning orientation and knowledge integration mechanisms among proactive MO, responsive MO, exploration innovation, exploitation innovation and business performance.Based on the survey data from 393 enterprises, we found that: 1) there exist causal relationship between Responsive and proactive MO, exploitative and exploratory innovation and firm performance. The exploitative and exploratory innovation has the mediating effect; 2) two kinds of innovation have positive effect on firm performance, and has a positive interaction and balancing effect. Two types of MO have a direct positive effect on firm performance, and have a positive interactive effect. Proactive MO is conducive to exploratory innovation, but is detrimental to exploitative innovation, responsive MO has a positive effect on the exploitative and exploratory innovation , but the degree of influence of the former should be larger than the latter, and the two types of MO has a negative interaction effect on the exploitative innovation ;3) learning orientation enhances the effect of the proactive MO on firm performance, but it weakened the effect of responsive MO on firm performance. Learning orientation strengths the effect of two types of MO on exploratory innovation; 4) Knowledge integration mechanisms enhance the following relationships: two types of MO on business performance, responsive MO on the exploitative innovation, two types of MO on exploratory innovation, two types of innovations on firm performance.Based on the findings we suggest that managers should be aware that both responsive MO and proactive MO could affect the competitive advantage, because this two kinds of market orientation affect the business performance from exploration innovation and exploitation innovation directly or indirectly ; It is important for business performance to keep the balance between exploration innovation and exploitation innovation , it should avoid to pay excessive attention to each side; To be security and avoid risk, most managers tend to execute exploitation strategy. Proactive MO has positive affect to exploration innovation, improving the level of proactive MO could avoid crowding-out effect; learning orientation enhances the proactive MO's positive affect to business performance and exploration innovation, therefore high levels of learning-oriented managers help organizations achieve the dual nature; knowledge integration mechanism is conducive to improve the mutual promotion between proactive MO, responsive MO, exploration innovation, exploitation innovation and business performance, so high level of knowledge integration mechanism is also necessary for the establishment of the dexterous organization.