Creating a Firm-Level Dynamic Capability through Capitalizing on Market Orientation and Innovativeness

Abstract

Drawing on the resource-based view of the firm, this study addresses the dynamic capability–generating capacity of market orientation on firm performance. Whereas prior literature has examined environmental turbulence as a contextual condition shaping the market orientation–firm performance relationship, this study takes an internal approach by focusing on existing stocks of resources within the firm while controlling for environmental conditions. A conceptual model is developed that explains how market orientation can be transformed into dynamic capability when complemented by transformational (reconfigurational) constructs, such as innovativeness. The empirical results support the authors' theory that the effect of market orientation on firm performance is strengthened when market orientation is bundled together with internal complementary resources, such as innovativeness. The authors discuss the findings in the context of varying stages of the product life cycle and at different levels of market development.