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Journal of Small Business Management 2012 50(3), pp.

429446

Customer Orientation and Performance in


Small Firms: Examining the Moderating
Influence of Risk-Taking, Innovativeness,
and Opportunity Focus jsbm_361 429..446

by Beverly K. Brockman, Michael A. Jones, and Richard C. Becherer

Customer orientation is considered to be an essential element for small firm success


despite relatively little empirical evidence to support such a claim. This research
examines the customer orientationperformance relationship among 180 small firms,
and the moderating influence of risk-taking, innovativeness, and opportunity focus
on that relationship. Results support the overall positive influence of customer orien-
tation on performance and indicate that the influence is stronger as risk-taking,
innovativeness, and opportunity focus increase. Interestingly, customer orientation
does not positively influence small firm performance under low levels of risk-taking,
innovativeness, and opportunity focus.

Beverly K. Brockman is the George Lester Nation Associate Professor of Entrepreneurship


at the University of Tennessee at Chattanooga. She holds BBA and MBA degrees from the
University of Kentucky and a Ph.D. from the University of Alabama. Her areas of specialization
include marketing strategy, entrepreneurship, product development, and organizational learn-
ing. Her research has been published in Academy of Entrepreneurship Journal, Decision
Sciences, Journal of the Academy of Marketing Science, Journal of Business Research, Journal
of Product Innovation Management, and others.
Michael A. Jones is the Alan S. Lorberbaum professor of marketing at the University of
Tennessee at Chattanooga. He received his Ph.D. in marketing from the University of Alabama.
His research has appeared in the Journal of Retailing, Journal of Business Research, Journal
of Service Research, Journal of Services Marketing, Journal of Consumer Affairs, and others.
Richard C. Becherer holds the Clarence E. Harris chair of Excellence in Business and
Entrepreneurship at the University of Tennessee at Chattanooga. He has had extensive
experience both as an academic and as an entrepreneur. He cofounded one of the first
for-profit Health Maintenance Organizations in the United States, which became a public
company. He has been published in numerous journals, including Entrepreneurship Theory
and Practice, Journal of Small Business Management, Journal of Marketing, and Decision
Sciences. He holds a doctorate degree from the University of Kentucky and was a Fulbright
Scholar in the Czech Republic in 2008.
Address correspondence to: Beverly K. Brockman, Marketing and Entrepreneurship Depart-
ment, University of Tennessee at Chattanooga, Dept 6156, 615 McCallie Avenue, Chattanooga,
TN 37403-2598. E-mail: Bev-brockman@utc.edu.

BROCKMAN, JONES, AND BECHERER 429


versions of large companies, small does
Introduction not necessarily mean entrepreneurial for
Customer orientation (CO) has been a venture. Different classifications exist
considered the fundamental component to describe a small business, such as
of marketing for decades (King 1965; lifestyle firm versus entrepreneurial
McKitterick 1957), with CO serving as venture (Timmons and Spinelli 2009),
the foundation for the marketing concept and manager versus entrepreneur in a
and market orientation (McNamara 1972; young microfirm (LeBrasseur, Blanco,
Narver and Slater 1990; Webster 1988). and Dodge 2006). The degree of risk-
Small firms are uniquely situated to excel taking, innovativeness, and opportunity
in CO due to the closeness between focus in a small firm may be used to
upper management and the customer assess the extent of its entrepreneurial
(Appiah-Adu and Singh 1998; Pelham orientation. Each of these individual
and Wilson 1996). In fact, CO is a signifi- dimensions may play a moderating role
cant tool for small firms to use in distin- in the relationship between CO and the
guishing themselves from large firms. performance of the small firm. A comple-
Despite its place in marketing, there has mentary relationship, as a positive influ-
been relatively little empirical consider- ence on firm performance, has been
ation of CO and its influence on firm found between market orientation and
performance (Hajjat 2002) in either large an entrepreneurial culture (Baker and
or small firms. Rather, CO is typically Sinkula 2009; Bhuian, Menguc, and Bell
studied as one dimension among several 2005; Matsuno, Mentzer, and zsomer
in market orientation (Jaworski and 2002); however, there has been little
Kohli 1993; Kohli, Jaworski, and Kumar research focused on the moderating
1993; Narver and Slater 1990). Thus, effect of entrepreneurial culture on the
though a link has been established CObusiness performance link for small
between the broader concept of market firms.
orientation and firm performance (Baker The purpose of this study is to inves-
and Sinkula 2009; Narver and Slater tigate the moderating influence of risk-
1990; Slater and Narver 1994), the indi- taking, innovativeness, and opportunity
vidual influence of CO on firm perfor- focus on the relationship between CO
mance is not as clear, especially in small and firm performance for small firms. By
firms. An empirical demonstration of CO separating CO from the market orienta-
as a positive influence on firm perfor- tions multidimensional nature, we
mance would provide support for this provide an important empirical test of a
dimension as an independent factor in relationship that has been mostly implied
success. in the marketing literature. Further,
In addition to the limited empirical evaluating the COperformance link with
study of CO, its role in small firm success the entrepreneurial dimensions as mod-
when moderating variables are consid- erators extends previous work where the
ered is also unclear. For example, an entrepreneurial components are either
entrepreneurial culture, with a focus on combined or evaluated with a market
risk-taking, innovation, and opportunity orientation rather than CO. Finally, our
(Miller 1983), may complement a CO, focus on CO in small firms provides an
leading to an even higher level of busi- empirical study of a cultural construct
ness performance than can be achieved that can provide a source of differentia-
with CO alone (Baker and Sinkula 2009; tion from larger, resource-rich compa-
Li et al. 2008; Matsuno, Mentzer, and nies. We begin with a review of the
zsomer 2002; Slater and Narver 1995). literature and development of the
Just as small firms are not simply smaller hypotheses, followed by a description of

430 JOURNAL OF SMALL BUSINESS MANAGEMENT


the methods used and presentation of (Matsuno, Mentzer, and zsomer 2002;
study results. We conclude with a theo- Slater and Narver 1995). In one rare
retical discussion and consideration of empirical study of CO, Hajjat (2002)
possibilities for future research. found CO to be a positive influence on
firm performance. His study supports the
seminal work by Appiah-Adu and Singh
Literature Review and (1998), who found a correlation between
Hypothesis Development CO and performance in small and
Customer Orientation medium-sized enterprises. CO is argu-
Customer Orientation (CO) emerged ably more important for success in small
early in the marketing literature (McKit- firms because it provides a source of
terick 1957) and directed the focus of differentiation from large firms and
marketing activities toward satisfaction because of the more natural interaction
of the customer. The theoretical develop- between managers and customers than
ment of the marketing concept (Dickin- that experienced in large firms. Thus,
son, Herbst, and OShaughnessy 1986; based on the expansive theoretical work
King 1965) and then market orientation and limited empirical evidence regarding
(Day 1994; Deshpand and Farley 1996; the influence of CO on firm performance,
Kohli and Jaworski 1990; Narver and we can infer the following hypothesis:
Slater 1990) placed CO as the driving
force for marketing activities despite H1: CO has a positive influence on per-
the multidimensional representation of formance in small firms.
market orientation. Narver and Slater
(1990) described CO as a firms ability to The Moderating Influence of
continuously create superior value for its Risk-Taking, Innovativeness, and
customers due to thorough comprehen- Opportunity Focus
sion of its target markets needs and Although CO is expected to positively
wants. Deshpand, Farley, and Webster influence firm performance, scholarly
(1993, p. 27) defined CO as the set of evidence indicates that this relation-
beliefs that puts the customer interest ship could be strengthened if certain
first. Thus, as expressed by Gatignon organizational variables are present. For
and Xuereb (1997), a firm with a strong example, Berthon, Hulbert, and Pitt
CO has the motivation and the ability to (2004) explored the contrast between
identify and respond to user needs. In customer and innovation orientations,
this process, technical and market issues finding that the two are not mutually
relating to certain customer segments exclusive, and presented an inclusive
can be more thoroughly evaluated than paradigm. Hult and Ketchen (2001) pre-
is possible for firms that are not focused sented evidence that market orientation
on the customer. can enhance firm performance within
Empirically, the influence of CO on the context of additional factors
firm performance has been mostly namely, entrepreneurship, innovative-
inferred by the positive link between ness, and organizational learning.
market orientation and performance Atuahene-Gima and Ko (2001) demon-
(e.g., Baker and Sinkula 1999; Jaworski strated how integration of entrepreneur-
and Kohli 1993; Narver and Slater 1990). ial and marketing activities positively
Market orientation involves organiza- influences new product innovation. And
tional processes focused on the external Appiah-Adu and Singh (1998) found a
market environment so firms with this correlation between innovation orienta-
orientation are in a better position tion and CO in small and medium-sized
to respond to emerging market needs enterprises.

BROCKMAN, JONES, AND BECHERER 431


Customer focus is important, but powerful effect of market orientation
there is concern among some scholars on firm performance. More recently,
that a firm could be too focused on the Li et al. (2008) evaluated the indi-
customer and thus miss emerging vidual dimensions of entrepreneurial
markets (Christensen and Bower 1996; orientationinnovativeness, proactive-
Gatignon and Xuereb 1997). Thus, Slater ness, and risk-takingas moderators on
and Narver (1995) and Hamel and Pra- the relationship between market orienta-
halad (1994) emphasized the need for an tion and performance in small Chinese
innovative culture to supplement market firms. Their results support previous
orientation, leading to improved firm work, with innovativeness and proactive-
performance. However, most early ness both acting as positive moderators.
studies of market orientation focused on Risk-taking did not influence the market
learning about the external environment orientationperformance relationship,
without emphasizing the need for an but the authors consider Chinas transi-
innovative mindset (Jaworski and Kohli tional economy as a possible contributing
1993; Kohli and Jaworski 1990; Narver factor in that result. Li et al.s (2008) study
and Slater 1990). Thus, the concept of demonstrated the need to consider the
market-driven emerged and is consid- individual dimensions of entrepreneurial
ered to be the dominant result of a orientation since each one can have a
market orientation. The need to look different effect. Finally, Schindehutte,
beyond current needs of current custom- Morris, and Kocak (2008) presented
ers is also recognized, however, with the entrepreneurial orientation as a critical
idea of customer leading, where cus- component in market-driving behavior.
tomers latent needs are uncovered and Thus, the importance of considering
the firm pulls the customer into new entrepreneurial and market orientation
preferences and behaviors (Narver, as co-contributors in firm performance
Slater, and MacLachlan 2004). A related has been recognized. To this point,
concept, market driving, has also however, most researchers have focused
developed (Day 1999; Hills and Sarin specifically on the market and entrepre-
2003; Jaworski, Kohli, and Sahay 2000) neurial orientations as combined dimen-
and is described as a firm leading essen- sions rather than on CO and the
tial change and development in an individual entrepreneurial orientation
industry. The market driving concept dimensions of entrepreneurshiprisk-
is most closely related to an innovative taking, innovativeness, and opportunity
mindset. focus. It is important to study the indi-
Some researchers have made the con- vidual effects of each dimension because
nection between entrepreneurial drive of the potential of their differing influ-
and market orientation. For example, ences and also to explore their role as
Matsuno, Mentzer, and zsomer (2002) moderators. In addition, there is also a
expanded on the connection between greater need to extend research in this
market and entrepreneurial orientation area to smaller firms as the effects may
found by Atuahene-Gima and Ko (2001), differ from those of large organizations.
modeling entrepreneurial orientation as a A model of the COperformance rela-
direct influence on business performance, tionship with risk-taking, innovativeness,
as well as an indirect one through and opportunity focus as moderators is
market orientation as a mediator. Bhuian, given in the Figure 1.
Menguc, and Bell (2005) presented a cur-
vilinear model and found that a moderate Risk-Taking
degree of entrepreneurial orientation, Organizational risk-taking can involve
acting as a moderator, results in the most activities such as moving into uncertain

432 JOURNAL OF SMALL BUSINESS MANAGEMENT


Figure 1
Customer Orientation and Performance in Small Firms:
Moderating Influence of Risk-Taking, Innovativeness, and
Opportunity Focus

Risk-Taking

Customer
Orientation Performance

Innovativeness Opportunity
Focus

markets or technologies, allocating a their target markets needs (Narver and


large amount of resources, and becom- Slater 1990). Recognizing opportunity
ing highly leveraged (Baird and Thomas and actually acting on it, however, are
1985). According to Lumpkin and Dess two different sets of activities. CO
(1996), entrepreneurial firms exploit enhances a firms ability to identify
opportunities in the market, demonstrat- opportunities, whereas a propensity
ing a greater inclination toward risk- toward risk-taking enables the firm to
taking than larger, more established actually take advantage of it. Customer
companies. Though all small firms are needs and wants are not only recognized
not risk takers, those that are more entre- more thoroughly and more quickly than
preneurial tend to take greater risks. In those of competitors without a strong CO,
fact, small entrepreneurial firms often but the firm is also able to effectively
take more risk than larger firms in their handle the uncertainty that exists with
quest to develop a new technology. This these new opportunities. In short, these
is often supported by larger, established firms can overcome organizational con-
firms that provide capital and even straints, such as overzealous analysis and
harvest opportunities for the entrepre- planning, which are meant to serve as
neurial company. safety nets, and actually take the actions
Firms with a strong CO are able to necessary to take advantage of the situa-
create superior customer value through tion. When a potential source of competi-
earlier and more thorough recognition of tive advantage emerges, time is often a

BROCKMAN, JONES, AND BECHERER 433


factor. Firms that engage in lengthy The importance of innovativeness in
reviews, typically those that are more small firms is becoming increasingly
risk-averse, will be left behind, whereas recognized. Indeed, small firms are
those that can respond quickly emerge as structurally better equipped for high
market drivers. Thus, we can infer that a innovativeness due to decreased depart-
greater propensity toward risk-taking will mentalization and less developed organi-
enhance the influence of CO on firm zational control. And most radical
performance. innovations come from small, entrepre-
neurial companies (Timmons and
H2: The relationship between CO and Spinelli 2009). Li et al. (2008) found
performance in small firms is moder- innovativeness acts as a positive modera-
ated by risk-taking such that the rela- tor in the relationship between market
tionship is stronger as risk-taking orientation and firm performance for
increases (i.e., a CO risk-taking small firms in China. Most recently,
interaction). Baker and Sinkula (2009) demonstrated
the separate, yet complementary, effects
of market and entrepreneurial orienta-
Innovativeness tions on innovation success, which ulti-
Innovativeness within an organiza- mately lead to increased profitability in
tion reflects the firms fundamental small firms.
openness to break away from estab- The influence of innovativeness on
lished procedures (Kimberly 1979). A the relationship between CO and busi-
result of this tendency is idea genera- ness performance has not yet been evalu-
tion, experimentation, and creativity so ated, but it is widely accepted that a
that new products and technologies are strong CO allows firms to identify
developed (Lumpkin and Dess 1996; the needs of their customers. Simply
Tan 1996). The positive impact of firm relying on identifying customer needs,
innovativeness on product and process however, will not elevate a firm to a
innovation is well established (Hamel market driving and customer leading ori-
and Prahalad 1991; Kumar, Scheer, and entation (Hills and Sarin 2003; Narver,
Kotler 2000). In addition, the innovative Slater, and MacLachlan 2004). An inno-
dimension within an entrepreneurial ori- vative mindset helps firms extend their
entation has been emphasized in studies search for customer wants because of
where the complementary effect of their openness to new concepts and cre-
market and entrepreneurial orientation ativity, to find new approaches, prod-
on new product innovativeness is con- ucts, and services that customers are not
sidered (e.g., Atuahene-Gima and Ko able to visualize. Thus, based on the evi-
2001; Avlonitis and Salavou 2007; Gati- dence presented here, we can make the
gnon and Xuereb 1997; Narver, Slater, following hypothesis:
and MacLachlan 2000). For example,
Matsuno, Mentzer, and zsomer (2002) H3: The relationship between CO and
found the influence of entrepreneurial performance in small firms is
proclivity on business performance is moderated by innovativeness such
mediated by market orientation. And in that the relationship is stronger as
a case study, Schindehutte, Morris, and innovativeness increases (i.e., a
Kocak (2008) indicated entrepreneurial CO innovativeness interaction).
orientation interacts with market and
technology orientations to raise innova- Opportunity Focus
tion level in an organization, resulting in As explained by Slater and Narver
market-driving behavior. (1995), outstanding innovation occurs

434 JOURNAL OF SMALL BUSINESS MANAGEMENT


when a firm recognizes a chasm between H4: The relationship between CO and
existing market offerings and current performance in small firms is moder-
market needs and then successfully allo- ated by opportunity focus such that
cates resources in filling that gap. Inno- the relationship is stronger as oppor-
vators who fill these gaps ahead of the tunity focus increases (i.e., a
competition often focus on customers CO opportunity focus interaction).
latent needs (Hamel and Prahalad 1991);
thus, they are increasing the prospects of Method
generative rather than adaptive learning. A sample of 1,800 owner/operators of
Organizations stuck in adaptive or primarily small businesses in the United
single-loop learning (Argyris 1977) States was purchased from a commercial
risk becoming too close to powerful sampling company. A packet containing
mainstream customers where core a cover letter describing the research, a
capabilities become core rigidities questionnaire, and a postage paid return
(Leonard-Barton 1992), causing them envelope was mailed to each person in
to miss important market changes the sample. Approximately three weeks
(Christensen and Bower 1996). Being after the first mailing, a second mailing
opportunity-focused helps a firm look was sent to the entire sample. The packet
beyond existing markets so they have a in the second mailing included a letter
better chance of avoiding this trap. Firms encouraging the owner/operator to
with an assertive outlook can respond respond if they had not already done so,
faster and more effectively than the com- the questionnaire, and a postage paid
petition when favorable conditions arise. envelope. A total of 191 completed ques-
Li et al. (2008) emphasized the impor- tionnaires were returned for a
tance of opportunity focus for small 10.6 percent response rate. Though the
firms, finding that proactiveness acts as a response rate was lower than desired,
positive moderator between market ori- response rates of 10 percent or less have
entation and performance. In earlier become somewhat common in market-
work, Tan (1996) determined that speed ing research (Neff and Cuneo 2006).
and surpriseconsequences of acting on Eleven responses were deemed unus-
opportunityare key elements for able, resulting in a final sample size of
success of small firms in Chinas transi- 180. Characteristics of the companies
tional economy. Opportunity focus could responding to the survey are included in
make an even greater contribution as a Table 1. As indicated in Table 1, the
moderator on CO and performance in respondents reflected mainly micro or
uncertain markets (Gatignon and Xuereb small businesses.
1997), and it is also an essential element All constructs included in the figure
of a market driving approach. Under were measured using five-point multi-
these conditions, the firm must not only item scales and all of the scales can be
be engaging in market screening activi- found in the Appendix. The CO scale
ties, it must also be looking for unex- was based on previous research (Kumar,
pected market changes that are both Subramanian, and Yauger 1998) and uti-
timely and favorable. Even in more stable lized five Likert items. Consistent with
markets, a focus on opportunity enables previous research investigating strategic
strategic moves to be made in propitious orientations of companies, the three
conditions. The needs and wants of cus- dimensions of risk-taking, innovative-
tomers that are identified with a strong ness, and opportunity focus were mea-
CO are more likely to be recognized and sured by asking respondents to indicate
acted upon by firms that are opportunity their level of agreement or disagreement
focused. Thus, we hypothesize: with items designed to measure each

BROCKMAN, JONES, AND BECHERER 435


Table 1 reflect objective measures (Chandler and
Hanks 1993; Lumpkin and Dess 2001;
Company Characteristics Venkatraman and Ramanujam 1987) and
since previous research highlights the
Company Percentage difficulties associated with obtaining and
Characteristics interpreting objective performance mea-
sures for small firms (Fiorito and LaForge
Age of Company (Years) 1986; Miller and Toulouse 1986; Sapi-
13 14.0 enza, Smith, and Gannon 1988), perfor-
410 40.4 mance in the current study was
1125 36.5 measured using a subjective measure of
26 or More 9.0 performance. Consistent with previous
Number of Full-Time research, respondents were asked to
Employees indicate their level of satisfaction or dis-
12 44.9 satisfaction with six common areas of
310 36.4 performance (Covin and Slevin 1989;
1130 10.8 Gupta and Govindarajan 1984). As indi-
31 or More 8.0 cated in the Appendix, the coefficient
Annual Sales ($) alpha for all the scales was 0.70 or
Under 100,000 23.3 higher, indicating a sufficient level of
100,000249,999 14.4 reliability for the scales used to measure
250,000999,999 24.4 the constructs included in the analysis
1,000,0004,999,999 14.4 (Nunnally 1978). Overall means were cal-
5,000,000 or More 9.4 culated for all multi-item scales, and
No Response 13.9 descriptive statistics for all of the scales
Scope of Operation are included in Table 2.
Local 47.8
Statewide 3.3 Results
Regional 29.4 The hypotheses were tested with mod-
National 11.1 erated regression analysis using ordinary
International 8.3 least squares (OLS) (Aiken and West
Industry 1991) and the results can be found in
Manufacturing 7.3 Table 3. The calculated mean for each
Service 53.6 multi-item scale was used to reflect each
Wholesaler/Distributor 4.5 construct. In addition, all independent
Retail 18.4 variables were mean-centered to reduce
Other 16.2 multicollinearity (Aiken and West 1991).
The number of employees, age of the
company, and annual sales were included
in the model as control variables. None of
dimension (Becherer, Haynes, and the control variables were significant and
Helms 2008; Li et al. 2008; Matsuno, the inclusion of the variables did not
Mentzer, and zsomer 2002; Venkatra- affect the results. Therefore, the control
man 1989; Wang 2008). Risk-taking and variables were removed from the model
opportunity focus were each measured for parsimony and the results do not
with three-item scales, whereas innova- include these variables for clarity. H1
tiveness was measured using a five-item predicted a positive relationship between
scale. Since the findings from previous CO and performance, and the results sup-
research indicate that subjective mea- ported this prediction (b = 0.218; t = 2.98,
sures of performance can accurately p < .01) (see Table 3, model A). Although

436 JOURNAL OF SMALL BUSINESS MANAGEMENT


the main effects of the moderating vari-

Performance
ables were not hypothesized, the next

1.00
step of moderated regression was to add
the main effects to the established rela-
tionship found in H1. Interestingly, as
indicated in Table 3 models B, C, and D,
Opportunity
the main effects of risk-taking, innovative-
ness, and opportunity focus were not
Focus

1.00
0.03
significant (p > .05).
The next step involved adding each
interaction term to the main effects
model. As indicated in Table 4 (models
Innovativeness
Correlations

A, B, and C), the interaction between


CO and risk-taking (b = 0.164; t = 2.14,
0.50**

p < .05), CO and innovativeness (b =


1.00

0.14

0.149; t = 2.03, p < .05), and CO and


opportunity focus (b = 0.179; t = 2.38,
p < .05) were all significant and positive.
Therefore, the results supported H2, H3,
Risk-Taking

and H4. Consistent with these hypoth-


Descriptive Statistics

0.44**
0.57**

eses, the positive sign for each of these


1.00

0.06

interaction terms indicates that as the


value of each of the moderating vari-
Table 2

ables increases, the strength of the rela-


Orientation

tionship between CO and performance


Customer

increases.
0.24**
0.44**
0.35**
0.22*
1.00

To gain a better understanding of the


nature of the interactions, the relationship
between CO and performance was inves-
tigated under higher and lower condi-
Deviation
Standard

tions of each moderating variable (using


0.54
0.69
0.62
0.69
0.88

median splits). As indicated in Table 5,


the results indicated that CO did not have
a significant influence on performance
under lower conditions of risk-taking
Minimum/
Maximum

2.80/5.00
1.67/5.00
2.00/5.00
1.67/5.00
1.00/5.00

(b = 0.065; t = 0.57, p > .05), innovative-


ness (b = 0.041; t = 0.39, p > .05), and
opportunity focus (b = 0.140; t = 1.21,
p > .05). CO did, however, have a positive
and significant influence on performance
Mean

4.41
3.89
4.02
3.96
3.47

under higher conditions of risk-taking


(b = 0.340; t = 3.59, p < .001), innovative-
ness (b = 0.351; t = 3.48, p < .001), and
Customer Orientation

opportunity focus (b = 0.318; t = 3.38,


Opportunity Focus

p < .001). Therefore, the results sup-


Innovativeness

ported the nature and direction of the


Performance
Risk-Taking

hypotheses in that the relationship


**p < .001.

between CO and performance strength-


*p < .01.

ens as risk-taking, innovativeness, and


opportunity focus increase.

BROCKMAN, JONES, AND BECHERER 437


Table 3
Regression ResultsMain Effects on Performance
Independent Variables b t-Value

Model A
Customer Orientation 0.218 2.98**
F = 8.87, p < .003, R2 = 0.047
Model B
Customer Orientation 0.215 2.84**
Risk-Taking 0.012 0.16
F = 4.42, p < .013, R2 = 0.048
Model C
Customer Orientation 0.194 2.38*
Innovativeness 0.054 0.67
F = 4.64, p < .011, R2 = 0.050
Model D
Customer Orientation 0.237 3.04**
Opportunity Focus -0.057 -0.73
F = 4.69, p < .01, R2 = 0.050

*p < .05.
**p < .01.

nificant, positive influence on small firm


Discussion performance, which helps solidify the
Among marketing academics and relevance of CO as a single variable.
practitioners, CO is considered to be an The results for H2H4 are also sup-
essential element for firm success despite ported, indicating the significance of
a relative lack of empirical evidence to moderating factors. As hypothesized, as
support such a claim. CO is particularly risk-taking, innovativeness, and oppor-
relevant for small firms because of its tunity focus increase, the strength of
potential as a source of competitive the relationship between CO and small
advantage over large companies. The firm performance increases. The some-
widespread support of CO as an encom- what unexpected result, however, is the
passing influence on performance disap- influence of these moderating factors
pears when considering moderating on the COperformance relationship
factors on the COfirm performance rela- when they occur at lower levels.
tionship. Furthermore, there is limited Though CO as a single variable has a
empirical research in this area as well, significant, positive influence on small
particularly with small firms. This study firm performance, that influence is not
helps fill these gaps with both an empiri- significant under lower levels of risk-
cal evaluation of CO influence on small taking, innovativeness, and opportunity
firm performance and an investigation of focus.
the role moderating factors play in that Firms characterized by lower levels of
relationship. risk-taking will not receive as strong a
The results support H1. CO alone, benefit from CO as firms with high levels
without moderating factors, has a sig- of risk-taking. It is possible that such

438 JOURNAL OF SMALL BUSINESS MANAGEMENT


Table 4
Regression ResultsInteraction Effects on Performance
Independent Variables b t-Value

Model A
Customer Orientation 0.256 3.43***
Risk-Taking -0.072 -0.92
Customer Orientation Risk-Taking 0.164 2.14*
F = 5.13, p < .002, R2 = 0.080
Model B
Customer Orientation 0.239 2.93**
Innovativeness 0.057 0.71
Customer Orientation Innovativeness 0.149 2.03*
F = 5.11, p < .002, R2 = 0.080
Model C
Customer Orientation 0.277 3.47***
Opportunity Focus 0.007 0.08
Customer Orientation Opportunity Focus 0.179 2.38*
F = 5.59, p < .001, R2 = 0.087

*p < .05.
**p < .01.
***p < .001.

firms cannot actually make the move into performance relationship may be limited.
promising areas identified through CO Internally, when a firm is faced with
because of their aversion to risk. Firms resource limitations, it may be more
with lower levels of innovativeness will comfortable taking fewer risks, be more
not receive performance benefits from adverse to experimental approaches, and
CO either, possibly because they are not be as oriented toward pursuing new
unable to grasp new concepts and opportunities. Engaging in riskier deci-
approaches. Such firms are more likely sions, utilizing innovative approaches,
to operate under a market-driven rather and/or pursuing new opportunities gen-
than a market-driving approach; hence, erally requires access to more resources
the CO becomes myopic rather than and more capital, factors that are more
forward-focused. Finally, firms with likely to be present in large rather than
lower levels of opportunity focus do not small companies. Resource-rich firms are
receive performance benefits from CO. better positioned to gain performance
These firms are probably not able to rec- through CO as moderated by risk-
ognize the potential in customer identi- taking, innovativeness, and an opportu-
fied needs, especially those that involve nity focus.
new markets and approaches. Similarly, the firms organizational
A number of factors inside or outside structure may limit its ability to allocate
the firm may constrain it to lower resources toward emerging opportuni-
levels of risk-taking, innovativeness, and ties. A traditional corporate organization
opportunity focus. In these organi- tends to be rigid and hierarchical, a
zations, the benefit from the CO structure that may not easily incorporate

BROCKMAN, JONES, AND BECHERER 439


Table 5
Influence of Customer Orientation on Performance for
Lower and Higher Levels of Risk-Taking, Innovativeness,
and Opportunity Focus
Independent Variables b t-Value

Risk-Taking
Lower risk-taking
Customer Orientation 0.065 0.57
F = 0.33, p = .570, R2 = 0.004
Higher Risk-Taking
Customer Orientation 0.340 3.59*
F = 12.90, p < .001, R2 = 0.115
Innovativeness
Lower Innovativeness
Customer Orientation 0.041 0.39
F = 0.15, p = .696, R2 = 0.002
Higher Innovativeness
Customer Orientation 0.351 3.48*
F = 12.09, p < .001, R2 = 0.123
Opportunity Focus
Lower Opportunity Focus
Customer Orientation 0.140 1.21
F = 1.47, p = .229, R2 = 0.019
Higher Opportunity Focus
Customer Orientation 0.318 3.38*
F = 11.44, p < .001, R2 = 0.101

*p < .001.

new projects or new approaches into the not have an entrepreneurial focus, then
organization. Organizations where the the small firm is much less likely to main-
COperformance relationship may be tain an entrepreneurial orientation.
enhanced via the moderating effect of Though this study uncovers relevant
risk-taking, innovativeness, and opportu- information about the roles of risk-
nity focus are more likely to use flat, taking, innovativeness, and opportunity
informal organizational structures that focus as moderating factors on the
are more fluid. Flat structures are more COperformance relationship, there is
likely to exist in small firms; however, in much that is left unknown. For example,
microfirms, the owner is often the sole it appears that a propensity for risk
decision-maker and the key determinant strengthens the positive influence of CO
of company culture (LeBrasseur, Blanco, on firm performance, but can it be
and Dodge 2006). Small firms that have assumed that all forms of risk-taking are
moved out of the micro stage are still positive? Successful entrepreneurs have
largely influenced in structure and been found to engage in educated rather
culture by the owner. If the owner does than blind risk-taking (Timmons and

440 JOURNAL OF SMALL BUSINESS MANAGEMENT


Spinelli 2009). Engaging in unnecessary is typically considered to be less risky
risk could possibly have a negative than radical innovation; however, in
effect. Considering innovativeness, the dynamic markets, incremental product
type of innovation propensityradical changes may actually result in lost
versus incrementalis likely to influence market position. A strong CO could quite
its moderating effect. In addition, radical possibly strengthen a firms ability to
innovativeness requires a proactive ori- determine if incremental or radical inno-
entation and is likely to lead to riskier vation is needed in a certain market.
actions. Thus, there may be a correlation Research evaluating CO, innovation type,
between risk-taking and radical innova- and risk as related influences on firm
tiveness. Finally, in regard to opportunity performance could be both insightful
focus, firms vary in their ability to assess and managerially relevant. Third, consid-
how certain prospective situations ering opportunity focus, research evalu-
provide a fit between market openings ating firms effectiveness in opportunity
and the firms core competencies. Simply assessment, rather than simple focus,
put, some market opportunities offer should provide a deeper understanding
more for a firm than others, depending of how firms can best use CO to improve
on that firms previous development firm performance. Each opportunity
efforts. varies in its potential, depending on
unique characteristics of the firm. Thus,
Future Research those firms with a superior ability to
A more thorough evaluation of the evaluate growth and payoff potential of
three moderating factors examined various options could reap greater
in this study that affect the CO benefit from their strategic decisions. It
performance relationship could provide seems likely that firms with greater com-
a better understanding of how firms can petency in opportunity assessment will
improve performance through customer also enjoy greater utilization of CO in
focus. First, researchers might evaluate firm performance.
the moderating effect of different types Difference in the COperformance
or qualities of risk-taking. For example, relationship due to firm size is another
whereas growth is considered to be area for potential research. CO holds
essential for firm development, uncon- promise for entrepreneurial firms so
trolled growth or growth in the wrong understanding its differential effects on
areas may result in a firms demise. performance for small versus large firms
Researchers could examine type of is important. An initial step could be an
growththat is, product versus market evaluation of firm size as a moderating
development and acquisition versus factor on the COperformance relation-
organic expansionin considering CO ship. The effect of CO on the performance
and performance. For micro firms, the of entrepreneurial firms is dependent on
speed of growth is particularly relevant more than simple firm size, however. A
to risk so researchers could determine small firm is not necessarily an entrepre-
how this factor affects the CO neurial one. In addition, the moderating
performance relationship. Second, factors evaluated in this studyrisk-
regarding innovation, research is needed taking, innovativeness, and opportunity
to understand how innovation type, and focusmay also vary based on firm size.
its relationship to risk-taking, affects the For example, levels of risk-taking and
usefulness of CO in firm performance. innovativeness tend to be higher in entre-
Firms often lean toward either incremen- preneurial firms. Smaller firms without
tal or radical innovation, rarely engaging the constraint of shareholders expecting
in both equally. Incremental innovation consistent performance and dividends

BROCKMAN, JONES, AND BECHERER 441


can be more risk- and innovation- Effect of Market Orientation and
oriented, which can become part of their Entrepreneurship Orientation Align-
competitive advantage. Their customers ment on Product Innovation, Organi-
often enjoy the benefits associated with a zation Science 12(1), 5474.
progressive smaller firm and remain loyal Avlonitis, G. J., and H. E. Salavou (2007).
to them in an attempt to gain an advan- Entrepreneurial Orientation of SMEs,
tage in the marketplace. Does this mean Product Innovativeness, and Perfor-
that small firms are naturally poised for a mance, Journal of Business Research
higher payoff from CO than large firms? 60(5), 566575.
And is opportunity focus more important Baird, I. S., and H. Thomas (1985).
in small than in large firms if the company Toward a Contingency Model of Stra-
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deeper understanding of the differences agement Review 10(2), 230243.
in these moderating influences based on Baker, W. E., and J. M. Sinkula (1999).
firm size is needed. The Synergistic Effect of Market Ori-
With clear empirical support of CO as entation and Learning Orientation on
a discrete, positive influence on small Organizational Performance, Journal
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can now focus on broadening our under- 27(4), 411427.
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which antecedents and moderating Effects of Market Orientation and
factors have the most influence on CO Entrepreneurial Orientation on Profit-
and its effectiveness? Are there other ability in Small Businesses, Journal
consequences, in addition to firm perfor- of Small Business Management 47(4),
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Is size the primary determinant of differ- tigation of Entrepreneurial Marketing
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market and firm progress. European Journal of Marketing
38(9/10), 10651090.
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Appendix
Scales Used to Measure the Constructs
Customer Orientation1 (Coefficient alpha = 0.82)

1. My business objectives are driven by customer satisfaction.


2. I make sure that my companys competitive advantage is based on understanding
customers needs.
3. I closely monitor and assess my companys level of commitment in serving
customers needs.
4. I insure that business strategies in my company are driven by the goal of
increasing customer value.
5. Providing value for our customers is the most important thing my company
does.

Risk Taking1 (Coefficient alpha = 0.74)

1 My business is willing to take risks when we think it will benefit the


company.
2 My business would rather accept a risk to pursue an opportunity than miss it
altogether.
3 My company would not be considered gamblers, but we do take risks.

Innovativeness1 (Coefficient alpha = 0.79)

1 Being innovate is a competitive advantage for my company.


2 My company tends to be more innovative than most of my competitors.
3 My companys top management creates an atmosphere that encourages creativity
and innovativeness.
4 I would say my company is innovation focused.
5 My company believes in experimenting with new products and ideas.

BROCKMAN, JONES, AND BECHERER 445


Opportunity Focus1 (Coefficient alpha = 0.70)

1 I would characterize my company as opportunity driven.


2 My company is always looking for new opportunities.
3 My company will do whatever it takes to pursue a new opportunity.

Performance2 (Coefficient alpha = 0.92)

1 Return on investment
2 Return on equity
3 Net profit margin
4 Return on assets
5 Sales growth
6 Market share growth
1
Items were measured using a five-point scale anchored by Strongly Disagree and
Strongly Agree
2
Respondents were asked to indicate their level of satisfaction with each of the
performance dimensions using a five-point scale anchored by Very Dissatisfied and
Very Satisfied.

446 JOURNAL OF SMALL BUSINESS MANAGEMENT

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