The impact of market orientation on small firm performance: a configurational approach

Purpose: In this study, the authors examine the influence of market orientation on small firms' performance. The authors theorize that the association between market orientation and small firm performance provides an incomplete picture in a competitive environment. The application of configuration approach which involves simultaneous consideration of market orientation, strategic flexibility and competition intensity is crucial to examine driver of firm performance. Design/methodology/approach: The sample of the research study consists of 272 small firms from an emerging economy, India. Ordinary least squares regression has been used to investigate the hypothesized relationships. Findings: The authors noted that the three-way interaction between market orientation, strategic flexibility and competition intensity elucidates variance in small firm performance over and above a contingency model and a direct relationship. Research limitations/implications: The findings contribute to the existing literature by exhibiting the effect of market orientation on firm performance. The configuration model suggests that small firms can outperform competitors in a lower competitive environment if they have high market orientation and high strategic flexibility investment. To leverage market opportunities and achieve better firm performance, small firms’ owners should analyze the usefulness of current capabilities in a changing competitive environment concurrently and align market orientation to those conditions. Originality/value: The strategic management and marketing literature suggests that relationship between market orientation and performance is ambiguous. The findings offer insights to managers regarding the appropriate use of strategic flexibility in leveraging the benefits of market orientation in a highly competitive environment. Furthermore, by collecting data from the context of an emerging economy, India, the authors attempt to strengthen the applicability of market orientation in different contexts.