Welcome to presentation on
Effects of Organizational Slack,
Outsourcing, and Market Orientation on
Business Performance in the Emerging
Markets
Dr. Satyendra Singh
Centre for Emerging Markets
Professor, Marketing and International Business
University of Winnipeg, Canada
s.singh@uwinnipeg.ca
www.uwinnipeg.ca/~ssingh5
Outline
• The Model and Theory
• Hypotheses Development
• Methodology
– Data collection and Sample Characteristics
• Analyses – Moderated Regression
• Results
• Discussions
• References
The Model and Theory
Organizational Slack
Market Orientation
-Customer
-Competitor
-Interfunctional
H2
H1
H3
Outsourcing
Control Variables
-Rel. Size, and cost
-competitor conc.
Business
Performance
-ROI
-Market Share
Growth
-New Product
Success Rate
Hypotheses
• H1: MO leads to superior BP
• H2: OS moderates MO—BP relationship
•↑ OS  ↑BP
• H3: O moderates MO—BP relationship
• ↓O  ↑BP
• O=Outsourcing, OS=Organization Slack, MO= Market Orientation,
• BP= Business Performance
Definitions
• Organizational Slack (OS)
• More resources than necessary to produce a given
level of organizational output (Bourgeois, 1981)
•Outsourcing (O)
• Outsource activities despite its ability to make in-house,
so focus  core capability (Deavers, 1997)
•Market Orientation (MO)
• Firms’ ability to satisfy the need of their customers by
developing products or services (Slater and Narver,
1994)
•Business Performance (BP)
• Return on Investment, Market Share Growth, New
Product Success Rate
Data Collection
•Data Collection from Kompass Database
• New Delhi (Okhla Phase, PIN 110020; Naraina, PIN
110028; and, Wazirpur, 110052)
• Mumbai (Laxmi, PIN 400053; Powai, PIN 400076;
and, Thane Wagle, PIN 400604)
•Stratified Sampling
•18% percent response rate
•Telephone calls (1100) made, then followed up by
personal interviews if agreed to participate
•Three graduate students were recruited in each city
•78% asked for a copy of the results
•Questionnaire
•Respondents were knowledgeable (6.3 on 7-pt scale)
The Scales…
•Market Orientation (Narver and Slater, 1990)
•Measured on a 7-pt. scale, 1=strongly disagree, 4=neutral, and 7=strongly agree
•Customer Orientation (6)
•We have customer commitment
•We create customer value
•We understand customer needs
•We have customer satisfaction objectives
•We measure customer satisfaction
•We do after-sales-service
•Competitor Orientation (4)
•Our salespeople share competitors’ information
•We respond rapidly to competitors’ actions
•Our top managers discuss competitors’ strategies
•We target opportunities for competitive advantage
•Inter-functional Coordination (5)
•We make inter-functional customer calls
• We share information among functions
• We integrate functional strategy
• All functions contribute to customer value
• We share resources with other business units
The Scales
•Organizational Slack (Bourgeois, 1981; Lant, 1985 )
•Measured On a 7-pt. scale, 1=severely, 4=does not affect, and 7=not at all
•If we had to work with 10% less time allocated than now, how seriously we will
be affected?
• If our budgets were to cut by 10%, how significantly will our work be affected in
the next year?
•Core and Peripheral Outsourcing (New Scale)
•Measured on 7-pt scale, 1=strongly disagree, 4=neutral, and 7=strongly agree
•Ratio of outsourced production to in-house production
•Ratio of outsourced product to in-house production
•Business Performance (Slater and Narver, 1994)
•Measured on 7-pt scale, -3=very poor, 4=same, and +3=very good
•Return on Investment
•Market Share Growth
•New Product Development
Sample Characteristics
•Total Sample Size
•Manufacturing Products
•Providing Services
•Sales Turnover (<Rs.99m)
•Sales Turnover (between Rs.100 and Rs. 149m)
•Sales Turnover (>Rs.150m)
•Employee Turnover (<49)
•Employee Turnover (between 50 and 99)
•Employee Turnover (>100)
•Respondents’ designation (CEO/MD/Proprietor)
•Respondents’ designation (senior manager)
•Respondents’ designation (mid-level manager)
•Respondents’ relevant business experience (in years)
•Respondents’ international business experience (in years)10.7
•Proportion of outsourcing activities
205
115 (56%)
90 (44%)
88 (43%)
74 (36%)
43 (21%)
66 (32%)
84 (41%)
55 (27%)
125 (61%)
57 (28%)
23 (11%)
11.8
48%
Factor Analysis…
Reliability and Validity Assessment of the Theoretical Construct Measures
Variables
Factor loading
Customer Orientation
(α = .79, adjusted α =.76)
Customer commitment
Create customer value
Understand customer needs
Customer satisfaction objectives
Measure customer satisfaction
After sales service
.73
.77
.79
.83
.78
.74
Customer Orientation
(α = .82, adjusted α = .81)
Salespeople share competitors’ information
Respond rapidly to competitors’ actions
Top managers discuss competitors’ strategies
Target opportunities for competitive advantage
.78
.80
.83
.78
Interfunctional Coordination
(α = .79, adjusted α = .77)
Interfunctional customer
Information shared among functions
Functional integration in strategy
All functions contribute to customer value
Share resources with other business units
.80
.77
.74
.80
.83
Factor Analysis…
Reliability and Validity Assessment of the Theoretical Construct Measures
Variables
Factor loading (std.)
Organizational Slack
Correlation = .29
How we will be affected, if 10% less time allocated
How work will be affected, if 10% less budget was allocated
.77
.74
Outsourcing
Correlation = .31
Ratio of outsourced production to in-house production
Ratio of outsourced product to in-house production
.64
.61
Business Performance
(α = .73, adjusted α = .71 )
Return on Investment
Market Share
New Product Success rate
.78
.74
.71
Moderated Regression Analyses
Standardized Coefficients (Standard Error)
DV=Business Perf
IV=MO, O, OS
Market Orientation
Concentration
Relative Size
Relative Cost
BP
Model 1
.24 *(.08)
.12(.05)
.18(.15)
-.15(.08)
BP
Model 2
.23 *(.12)
.17(.16)
.14(.13)
-.13(.11)
Orgn. Slack (OS)
Orgn Slack * MO
.21 *(.11)
.23 *(.14)
.22 *(.09)
Outsourcing (O)
Outsourcing* MO
F
R2
VIFmax
N
7.34*
.27
3.41
205
8.73
.30
3.55
205
BP
Model 3
.21 *(.13)
.11(.08)
.13(.11)
-.09(.23)
BP
Model 4
.27 *(.09)
.10(.13)
.12(.04)
-.12(.14)
.24 *(.11)
.25 *(.13)
-.23 *(.08)
7.22
.24
2.32
203
8.43
.26
2.35
203
R2 = .22 (w/o OS and O); R2 = .32 (w/ OS and O)
Discussion
• H1: MO leads to superior BP
Supported (b=.24*, .23*, .21*, .27*; p< .05)
• H2: OS moderates MO—BP relationship
•↑ OS  ↑BP
•Supported (b=.23*, p< .05)
• H3: O moderates MO—BP relationship
• ↓O  ↑BP
•Supported (b=.24*, p< .05)
• O=Outsourcing, OS=Organization Slack, MO= Market Orientation,
• BP= Business Performance
References
•Atuahene-Gima, K. (2005), “Resolving the capability-rigidity paradox in new
product innovation,” Journal of Marketing, 69(Oct): 61-83.
•Bourgeois, L.J. (1981), “On the measurement of organizational risk,” Academy
of Management Review, 6: 29-39.
•Day, G.S. (1994), “The capabilities of market-driven organizations,” Journal
of Marketing, 58(4): 31-44.
•Deavers, K.L. (1997), “Outsourcing: A corporate competitiveness strategy, not
a search for low wages,” Journal of Labour Research, 18(4), 503-518.
•Lant, T. (1985), Modeling organizational slack: An empirical investigation.
Stanford University Research Paper #856.
•Narver, J.C. and Slater, S.F. (1990), “The effects of a market orientation on
business profitability,” Journal of Marketing, 54(4): 20-35.
• Slater, S.F. and Narver, N.C. (1994), “Does competitive environment
moderate the market orientation-performance relationship?” Journal of
Marketing, 58(Jan): 46-55.
Thank you for gracing the presentation
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