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
OVERVIEW
Premise of the paper
 The Market Orientation (MO) construct
 Theory
 Methods
 Results
 Discussion
 Concluding Remarks
 Questions

PREMISE
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 unidimensional as well as multidimensional
MO approach

MARKET ORIENTATION- THE CONSTRUCT
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:
 Five
Narver & Slater (1990)
(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
 Sustainable
of MO
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)
ORGANIZATIONAL IDENTITY AND MO
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 FAMILY FIRMS
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 longsurviving influence of the founder (Davis &
Harveston, 1999)

MO AND FAMILY FIRMS
Very limited research between MO and family
firms
 Only study to date (Tokarczyk et 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.
CUSTOMER ORIENTATION
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.
COMPETITOR 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.
INTERFUNCTIONAL COORDINATION
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.
LONG-TERM FOCUS

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 nonfamily businesses
PROFITABILITY
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.
MO AND PERFORMANCE
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
METHOD

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)

RESULTS
Family firms display significantly less MO than nonfamily 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

LIMITATIONS




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
CONTRIBUTIONS
First to identify a difference between the
implementation of a MO between family and nonfamily 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

CONCLUSION
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

THE FUTURE OF THE PAPER
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

QUESTIONS?
COMMENTS?