Ferry Dzulkifli
Qonita Hidayatullah
Master of Science in Management
SBM - ITB
Fostering innovation
The role of market orientation and
organizational learning
Purpose
In particular, the purpose of this
paper is to study empirically the
relationships between market
orientation, organizational learning,
innovation and performance
together in a single model.
Relationship Model …?
Market
Orientation
?
?
Innovation
?
Performance
?
?
Organizational
Learning
Introduction
 Innovation is increasingly considered to be one of the key drivers of
the long-term success of a firm in today’s competitive markets
(Baker and Sinkula, 2002; Balkin et al., 2000; Darroch and
McNaugton, 2002; Lyon and Ferrier, 2002; Utterback, 2001;
Vrakking, 1990; Wolfe, 1994).
 Given the importance of innovation in relation to the competitive
position of the firm, a number of studies have tried to identify the
main determinants of firm’s capacity to innovate (Damanpour, 1991;
Ravichandran, 1999; Wolfe, 1994).
 The state of the art provides some internal and external factors as
antecedents of innovation i.e. Organizational Learning (Stata,
1989; Nonaka and Takeuchi, 1995; Slater and Narver, 1995;
Coombs and Hull, 1998; Hage, 1999; Darroch and McNaugton,
2002) and Market Orientation (e.g. Agarwal et al., 2003; Han et
al., 1998; Hult et al., 2004; Sandvik and Sandvik, 2003).
Steps of Study
 Review of the literature on these topics.
 Propose a causal model to explain the
relationships between these variables.
 Test of the model using a sample of 744 firms.
 Present the findings along with the managerial
and academic implications of the study, its
limitations and recommendations for future
research.
Conceptual Framework
 Innovation and performance
 H1 Organizational innovation will have a positive impact on firm
performance.
 Market orientation as an antecedent of innovation
 H2 Market orientation will have a positive impact on innovation.
 Organizational learning as antecedent of innovation
 H3 Organizational learning will have a positive impact on
innovation.
 Direct effect of organizational learning and market
orientation on performance
 H4 Market orientation will have a positive and direct impact on
performance.
 H5 Organizational learning will have a positive and direct impact
on performance.
Methodology
Data collection and sample
 This study was designed to cover a wide range of industries (excluding the
agricultural sector). A total of 1,600 companies were located and contacted
for participation.
 The information was collected via personal interview with CEOs of
companies, using a structured questionnaire. The unit of analysis for this
study was the company, on the assumption that aspects relating to
organizational innovation, learning, market orientation, and performance
affect the entire organization.
 In total,



744 questionnaires were obtained from 1,600 companies were located and contacted for
participation
Yielding a response rate of 46.5 percent.
Approximately 55 percent of responses came from manufacturing firms and the rest from
the service sector.
 Respondent and non-respondent companies were compared in terms of
size and performance. No significant differences were found between those
two groups, suggesting no response bias.
Market Orientation
Market
Orientation
Organizational
Learning
Organizational
Learning
Innovation & Performance
Innovation
Performance
Second Order Factor Analysis
Market Orientation and Organizational Learning
Second Order Factor Analysis of Innovation
Discriminant Validity
Result
H3
H5
H1
H2
H4
Shibu lijack
Discussion
1. The findings provide support for the relationship
between innovation and performance.
2. The results confirm that both market orientation
and organizational learning are antecedents of
innovation.
3. The effect of organizational learning on innovation
is higher than the effect of market orientation.
4. It was not found for a direct effect of either market
orientation or organizational learning on
performance.
Implication for the practitioners
 Companies should be more innovative to
achieve better performance.
 An organization trying to enhance innovation
should develop a market orientation behavior
and should improve its organizational learning
process.
 The findings show that the effect of market
orientation on innovation is higher when the
company has an organizational learning
process.
Contribution for academics
 It examines in a single model the little-researched links
between market orientation, organizational learning,
innovation and performance.
 Innovation plays a mediating role between both market
orientation and organizational learning and performance.
 Both market orientation and organizational learning affect
innovation and, when studied together, the impact of
organizational learning is higher.
 The findings help to understand better the mechanisms by
which market orientation and organizational learning affect
performance and reflect the need of combining marketing
and management perspectives in future research to
understand how to enhance innovation and performance.
Limitation
The limitations of this empirical study are:
 The data in the study were collected from one
source.
 The cross-sectional design of this research.
 It has subjective performance measures.
Complementary studies should also include
objective measures of performance.
Recommendations for future research
 More research is required into the relation
between market orientation and organizational
learning.
 The relation between the variables of the model
can be better understood taking into account
information about how radical the innovation is.
 It also suggest considering the market
conditions, specifically the degree of dynamism
of the market, as a likely moderator of the
relations proposed in our model.
THANK YOU