Market Orientation and Company Profitability: Further Evidence Incorporating Longitudinal Data

Abstract

This study examines the association between market orientation and company profitability. It incorporates two methodological approaches that have generally not been used in previous research. First, it uses lagged company and environmental control variables in the data analysis, to better discern their effects on profitability and, hence, clarify any relationship between market orientation and perfor Mance. Second, it analyses the individual components of market orientation and their relationships with business profitability separately. The study finds that, of the components of a market orientation, a competitor orientation emerges as the variable with the strongest association with perfor Mance. This association is robust in two models, one with solely cross‐sectional data, and the other with lagged control variables. In simple terms, the strongest distinguishing feature of high‐profit firms in this study is that they are very attuned to the activities and characteristics of competitors. For managers, this reinforces the view that while a customer orientation is vital, competitor intelligence activities may also be a key factor in ensuring high perfor Mance. The implication for researchers is that each component of market orientation should not necessarily be assumed to have equally strong associations with profitability.