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Miles A. Zachary Aaron F. McKenny Jeremy C. Short G. Tyge Payne. FAMILY FIRMS AND MARKET ORIENTATION: A COMPARATIVE ANALYSIS OF THE S&P 500. Premise of the paper The Market Orientation (MO) construct Theory Methods Results Discussion Concluding Remarks Questions. Overview.
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Miles A. Zachary Aaron F. McKenny Jeremy C. Short G. Tyge Payne FAMILY FIRMS AND MARKET ORIENTATION: A COMPARATIVE ANALYSIS OF THE S&P 500
Premise of the paper The Market Orientation (MO) construct Theory Methods Results Discussion Concluding Remarks Questions Overview
Family firms represent a 80% of all firms in the US (Lee, 2006); 12% of GDP (Shanker & Astrachan, 1996) Despite significant family firm research, none have examined the possible differences between family firms and non-family firms regarding MO We bridge this gap by examining the differences from a unidimensionalas well as multidimensional MO approach Premise
Concept developed in the late 1980’s/early 1990’s • Two foundational definitions- • MARKOR: Kohli & Jaworski (1990) • Three (3) core components—customer focus, coordinated marketing, and profitability • MKTOR: Narver & Slater (1990) • Five (5) dimensions—customer orientation, competitor orientation, interfunctional coordination, long-term focus, and profitability Market Orientation- the Construct
Kohli & Jaworski (1990, 1993) • Generation, dissemination, and responsiveness • Antecedents • Individual factors • Intergroup factors • Organization-wide factors • Consequences of MO • Sustainable competitive advantage (performance) • Esprit de Corps Market Orientation- the Construct
Narver & Slater (1990, 1995) • Expand/focus on the dimensions of MO • Customer Orientation • Competitor Orientation • Interfunctional Coordination • Long-term Focus • Profitability • A singular construct comprised of five (5) dimensions • Contributes to a learning organization Market Orientation- the Construct
MO has been associated with greater firm performance (Kohli & Jaworski, 1990, 1993; Narver & Slater, 1990; Kumar, Subramanian, & Yauger, 1998; Ellis, 2006) • Increased sustainable competitive advantage • Higher employee satisfaction • Improved organizational learning (Narver& Slater, 1995) Market Orientation- the Construct
MO is a function of an organization’s identity (Cunnington, 1996) • Within identity, the organizational culture of a firm is affects and is affected by MO (Carr & Lopez, 2007; Leisen et al., 2002) • MO enhances organizational culture (Carr & Lopez, 2007) • Promotes awareness of and learning from customers/competitors • Emphasizes the generation and dissemination of market information Organizational Identity and MO
Family firms are unique and possess inherent characteristics that are difficult to replicate (Habbershon& Williams, 1999) The “familiness” of a firm lends itself to a unique organizational identity (e.g. Dyer & Whetten, 2006) Family firms are strengthened by the long-surviving influence of the founder (Davis & Harveston, 1999) Organizational Identity and Family Firms
Very limited research between MO and family firms • Only study to date (Tokarczyket al., 2007) examined the “familiness” influence on the implementation of a MO • Case-analyzed 8 firms in two industries • Found significant relationship between the “familiness” factor and the implementation of a MO MO and Family Firms
We intuitively believe a relationship exists based on the predisposition of family firms to the antecedents of MO • We state the first hypothesis along these lines of thought • H1:Family businesses will exhibit a greater level of market orientation than non-family firms as demonstrated in their shareholder letters. MO and Family Firms
Characterized by actions towards seeking superior value for customers • Analyzing the market for current and future customer opportunities • H2: In large, publically held companies, family businesses will exhibit greater levels of customer orientation, a dimension of market orientation, compared to non-family businesses. Customer Orientation
Involves a continual commitment to understanding the threats/opportunities presented by current and future competitors • Improves the cognition of an organizations strengths and weaknesses in the market • H3: In large, publically held companies, family businesses will exhibit greater levels of competitor orientation, a dimension of market orientation, compared to non-family businesses. Competitor Orientation
The coordination of information collection and shared utilization of such information between departments • Firms focusing on synergistic departmental dynamics • H4: In large, publically held companies, family businesses will exhibit a greater level of interfunctional coordination, a dimension of market orientation, compared to non-family businesses. Interfunctional Coordination
Organizational focus on long-run, sustainable goals influenced by customer orientation, competitor orientation, interfunctional coordination, and profitability • H5: In large, publically held companies, family businesses will exhibit a greater long-term focus, a dimension of market orientation, compared to non-family businesses Long-term Focus
An organizations focus on the profitability of the firm’s operations • Seen as both a goal and consequence of an MO (Narver & Slater, 1990) • H6: In large, publically held companies, family businesses will exhibit less emphasis on profitability, a dimension of market orientation, compared to non-family businesses. Profitability
The link has been established between MO and performance (Ellis, 2006) • If family firms differ from non-family firms in their level of MO, does this translate to performance differences? • H7: Being a family business moderates the relationship between market orientation and organizational performance MO and Performance
Content analysis via DICTION 5.0 (Hart, 2000) • Word lists determined based on Narver & Slater (1990) dimensional definitions • Rated by 3 authors independently • Shareholder letters for 2001-2005 were analyzed on the five dimensions of MO for 224 firms • Family firms were measured based on the direct proximity of senior management and/or board members to the founder (Dyer & Whetten, 2006; Chua et al., 1999) Method
Family firms display significantly less MO than non-family firms on the summated measurement of MO Family firms display significantly less competitor orientation and profitability focus on the multidimensional measurement approach Mixed evidence from the performance regression; indicates a more complicated relationship between family firms and ROA/Tobin’s q performance measures regarding MO Results
Content analysis word lists were based on subjective definitions of each dimension of MO; difficult to determine specifically MO-related words Word counts begin the analysis of MO and family firms, however, a bigger story exists within the context of word usage; future studies should examine this The performance aspects of analysis were mixed and should be given further scrutiny While large cap firms are crucial to macroeconomic performance, they are only one class of companies to be analyzed Limitations
First to identify a difference between the implementation of a MO between family and non-family firms The generalizability of these results allows future research to examine specific facets of MO that family firms can improve upon Establishes the grounds upon which future research can examine the sustainability of family firms and MO dynamics, hopefully leading to specific family firm contributions Contributions
This study represents the first step in a long process of examining the family firm dynamics of MO Family firms are at a distinct disadvantage regarding MO currently, however, we believe they have the necessary antecedents to successfully transition to a greater MO level Future research should focus on other specific implications for family firms using MO as a strategic orientation Conclusion
Currently in the process of seeking clearer significance in the multidimensional analysis of MO and family firms using a matched pairs data set Working on improving the performance study by using the same matched pairs data set as above Need to clarify and improve the contributions of the study to the management field; hopefully this can be accomplished through greater results in the performance analysis The Future of the Paper