The Relationship of Learning and Memory With Organizational Performance: The Moderating Role of Turbulence

Sangphet Hanvanich
Xavier University

K. Sivakumar
Lehigh University

G. Tomas M. Hult
Michigan State University

Extensive research has documented how firms' learning orientation and memory are related to organizational performance. The objective of this study is to examine the moderating role of turbulence on the relationships between firms' learning orientation and memory and their organizational performance and innovativeness. The study also provides insight into the differential relationships of firms' learning orientation and memory to their performance and innovativeness. Using survey data collected from 200 supply management professionals, the results suggest that the extent to which learning and memory are associated with organizational performance is contingent on the level of environmental turbulence. Specifically, under low environmental turbulence, learning orientation and organizational memory appear to be related to performance and innovativeness; however, under high environmental turbulence, only learning orientation is a useful predictor.

Keywords: learning; memory; turbulence; organizational

performance

marketing scholars. This area of research is based on the organizational learning literature, which maintains that a firm can gain knowledge through the organizational learning process, which consists of acquisition, dissemination, interpretation, and storage of knowledge (Huber 1991). How do environmental conditions such as turbulence moderate these processes? This study examines the moderating roles of two types of environmental turbulence: technological and market. Specifically, we examine how the relationship between learning orientation and memory and organizational innovativeness and performance changes by the degree of environmental turbulence. We focus on learning orientation and organizational memory to provide a complete view of firms' two key learning characteristics. We examine how learning orientation and organizational memory are related to important organizational outcomes not only when firms have different levels of environmental turbulence but also when firms have the same level of environmental turbulence.

The notion that knowledge is a strategic asset (Glazer I991) has stimulated a great deal of interest among
Journal of the Academy of Marketing Science. Volume 34, No. 4, pages 600-612.
DOI: 10.1177/0092070306287327 Copyright 9 2006 by Academy of Marketing Science.

CONCEPTUAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT

Extant literature in organizational learning suggests that learning orientation and organizational memory are related to two key organizational outcomes: overall performance and innovativeness. Drawing on contingency theory and dynamic capabilities perspectives, we propose

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FIGURE 1 A Conceptual Model of the Moderating Role of Turbulence on the Link Between Learning and Memory and Performance
EnvironmentalCondition Technological Turbulence LearningVariables OrganizationalPerformance [ OverallPedormance I [ EnvironmentalConditioni Innovativeness 1

LearningOrientation i
[ Organizational Memoryi

relationship between learning orientation and organizational performance and innovativeness is stronger in environments with high market and technological turbulence than in environments with low turbulence. In contrast, the positive relationship between memory and organizational performance and innovativeness is weaker in environments with high market and technological turbulence than in environments with low turbulence. In addition, we examine the differential relationship of learning orientation and organizational memory to organizational performance and innovativeness when firms are in highly turbulent environments. Thus, the model provides a comprehensive view of the role of environmental turbulence on learning and memory.

Market Turbulence

I I

Learning Orientation and Environmental Turbulence

Learning orientation is defined as a set of organizational values that are related to the propensity of firms to create and use knowledge. This set of values consists of firms' commitment to learning, shared vision, and open-mindedness. We approach learning orientation from the viewpoint Of commitment to learning, because such commitment reflects an organization's positive values toward learning outcomes (March 1996). Consistent with this view, we define learning orientation as the extent to which an organization adopts organizational learning as a basic value necessary for future survival. Drawing on Hargadon and Fanelli's (2002) conceptualization of innovation as a process, we define organizational innovativeness as the ability of firms to seek novel ideas, to accept innovation, and to support idea generation. Because firms with high learning orientation value leaming and creating new knowledge, they are likely to seek new work practices. Therefore, we maintain that an organization's learning orientation is positively related to organizational innovativeness. Following existing literature, we define environmental turbulence in terms of the magnitude of changes in the levels of key environmental variables as well as the unpredictability of future levels of those variables. To this end, environmental turbulence could be considered a factor that is exogenous to firms' internal factors, such as learning orientation and organizational memory (e.g., Johnson, Lee, Saini, and Grohmann 2003). Market turbulence is defined as the rate of change in the composition of customers and their preferences. In markets with a high degree of turbulence, firms tend to have new customers whose product needs are different from those of current customers. In addition, in highly turbulent markets, firms' existing customers often change their product preferences or tend to seek new products constantly. To survive in such an environment, firms must become responsive to the changing preferences of current customers as well as the preferences of new customers. Accordingly, firms that view learning as

that environmental complexity moderates these relationships. A key argument of contingency theory is that organizational strategies are not equally effective under all conditions, whereas the dynamic capabilities perspective contends that in a highly turbulent environment, firms must reconfigure their competencies to address rapid change. As shown in our conceptual model, which we present in Figure 1, we consider two environmentally turbulent conditions: market turbulence and technological turbulence. This subclassification of environmental turbulence is consistent with the conceptualization in the extant literature. Market turbulence is defined as the rate of change in the composition of customers and their preferences. Technological turbulence is defined as the degree of change associated with product and process technologies in the industry in which a firm is embedded. Although organizational learning and memory are essential for organizations, they are two distinct learning dimensions, and one may not lead to the other. Furthermore, they may compete for scarce resources, such as the time and investment required to implement learning or to build memory. Understanding the moderating role of environmental conditions on learning orientation and organizational memory will facilitate explicit and thoughtful decision making, leading to the effective use of organizational resources. We begin with a brief review of the relationship between learning orientation and organizational performance and innovativeness and then examine how the degree of market and technological turbulence changes this relationship. Similarly, we briefly review the relationship between organizational memory and organizational performance and innovativeness and then examine how the degree of market and technological turbulence moderates this relationship. Specifically, we propose that the positive

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a key to improvement and that are not constrained by current business models or practices are more likely to uncover a novel way to serve customers better (Sinkula, Baker, and Noordewier 1997). Thus, we expect that in the presence of market turbulence, the value of learning orientation increases because it can deliver idea heterogeneity or idea variety that broadens the number of possible useful and profitable actions in an organization (Miner 1994; Moorman and Miner 1997; Tushman and Anderson 1986). Consequently, we maintain that under high market turbulence, a learning orientation enables firms to improve performance and organizational innovativeness.

Hypothesis 1: The positive relationship between learning orientation and (a) organizational innovativeness and (b) overall performance is stronger when market turbulence is high than when market turbulence is low.
Technological turbulence is defined as the degree of change associated with product and process technologies in the industry in which a firm embeds (Glazer and Weiss 1993; Jaworski and Kohli 1993; Moorman and Miner 1997). As do firms with high market turbulence, firms with high technological turbulence face a higher rate of change in product and process technology than do firms with low technological turbulence (Miller 1987; Slater and Narver 1994). To survive in environments with high technological turbulence, firms must keep up with changing technological requirements through constant learning. Under high technological turbulence, idea homogeneity delracts from creativity (Moorman and Miner 1997). Therefore, organizations' commitment to learning can ensure that they continually improve their business processes and generate new ideas. In addition, learning orientation enables firms to adjust promptly to rapid technological changes or to take advantages of the business opportunities that such changes offer. Therefore, we hypothesize that in environments with high technological turbulence, learning orientation is associated more strongly with overall firm performance and innovativeness than in environments with low technological turbulence.

Hypothesis 2: The positive relationship between learning orientation and (a) organizational innovativeness and (b) overall performance is stronger when technological turbulence is high than when technological turbulence is low.

Organizational Memory and Environmental Turbulence

Drawing on Moorman and Miner's (1997) conceptualization, we define organizational memory as the amount of a firm's stored knowledge and familiarity or information about a particular phenomenon. The existing literature posits that organizational memory is a resource that

firms can deploy to improve their financial performance through memory's two basic roles: interpretation and action guidance (Moorman and Miner 1997). The interpretative role of memory filters the way that information and experience are categorized and sorted, whereas the action-guidance role directs individual and organizational behavior. However, previous research shows an inconclusive evidence of the relationship between organizational memory and innovativeness (Ghemawat 1991; March 1991; Moorman and Miner 1997). This inconclusive result may be explained by different types of innovation process in these studies (Baker and Sinkula 2002; Slater and Narver 1995). When the innovation process is generativelearning driven, it entails radical innovations that are outside the firm's current activities. On the contrary, when the innovation process is adaptive-learning driven, it involves incremental innovations that are within the traditional scope of the organization's activities. We assert that when the innovation leans toward adaptive-learning driven, such as the general conceptualization of innovativeness in this study, organizational memory is positively related to innovativeness. Although we expect that there is a positive moderating effect on the relationship between learning orientation and overall firm performance and innovativeness, we argue that turbulence weakens the positive relationship between organizational memory and the organizational outcomes. This line of argument is consistent with the conceptualization of memory as latent knowledge composed of representations of a particular situation constructed and shaped from prior experiences (Hargadon and Fanelli 2002). In the presence of high environmental turbulence, previously learned knowledge may not prove useful in a new setting, causing the value of memory to decrease (Glazer 1991; Weiss and Heide 1993). As Hargadon and Fanelli (2002) stated, "[Latent knowledge or memory] is constraining in that it interprets the situation through an existing schema representing similar past situations and constructs new possibilities for action from the limited set of experiences with past actions in that prior schema" (p. 294). Thus, we expect that the positive relationships of organizational memory to overall firm performance and innovativeness decrease in highly turbulent environments. In the presence of high market turbulence, firms are required to serve new groups of customers or to provide novel offerings to keep up with new demands. In such an environment, the interpretation of stored knowledge or memory may lead firms to filter and retain irrelevant information, leading to ineffective strategies. Consequently, in the presence of high market turbulence, organizational memory may bring about inferior firm performance. Likewise, when market turbulence is high, memory, through its action-guidance role, may cause firms to become cautious about changes in customer needs and preferences and thus may distract firms from actively seeking innovative

Hanvanichet al. / LEARNINGAND MEMORY 603 ideas or accepting new innovations in business processes. Therefore, under high market turbulence, we expect that the value of organizational memory for innovativeness and overall performance decreases. However, prior research has provided inconclusive evidence of how environmental turbulence changes the value of organizational memory. For example, Johnson, Sohi, and Grewal (2004) found that the effect of environmental factors memory on interfirm relationship quality and effectiveness varies from one level of turbulence to another (Johnson et al. 2004). Conversely, Moorman and Miner (1997) found that market turbulence did not significantly weaken the positive relationship between organizational memory and new product financial performance. This lack of market turbulence's moderating effect may be attributable to the financial outcome measure, in which new product performance is assessed from product sales, profit margin, return on assets, and return on investment, all of which are relative to objecfives. We maintain that firms may not experience a sudden decrease in such financial measures, even if they are in an environment marked by high market turbulence, because it may take time before customers switch to competitors' products. As a result, firms with high organizational memory can maintain the same level of financial performance for quite some time, despite changes in the market environment. When overall performance is assessed subjectively, relative to own and other business units, a decrease in the positive association between organizational memory and overall performance because of an increase in market turbulence may be detected. Thus, considering overall performance and innovativeness rather than the financial outcomes, we hypothesize the following. performance is weaker when technological turbulence is high than when technological turbulence is low.

Learning Orientation and Organizational Memory in a High-Turbulence Environment

Thus far, we have developed hypotheses that explain the relationship between firms' learning orientation and organizational memory and their organizational innovativeness and performance. Although these hypotheses explicate how a relationship differs across high- and lowturbulent environments, they leave open one key research question: is learning orientation more beneficial to firms in highly turbulent environments than is organizational memory? Although researchers have investigated the effects of organizational leaming and memory on firm performance (e.g., Baker and Sinkula 1999a, 1999b; Moorman and Miner 1997), the question of which organizational characteristic is related to a superior performance under a given environment has not been explored. Dynamic capability theory explains why firms in a highly turbulent environment should consider emphasizing learning orientation or organizational memory. Building on Nelson and Winter's (1982) view of an organization as a set of interdependent operational and administrative roufines, Teece, Pisano, and Shuen (1997) defined dynamic capabilities as a firm's ability to integrate, to build, and to reconfigure internal and external competencies to address rapidly changing environments (e.g., Zollo and Winter 2002). Dynamic capability is exemplified by an organization that adapts its operating processes through a relatively stable activity dedicated to process improvement (Zollo and Winter 2002). Dynamic capability also enables firms to create new products and processes and to respond to changing market conditions (Helfat 1997). In contrast to the resource-based view of firms, dynamic capability theory posits that firms' competitive advantage need not be derived from rare, inimitable, and nonsubstitutable resources; rather, competitive advantage can be derived from resources that are homogeneous across firms (Eisenhardt and Martin 2000). According to this view, firms can gain a competitive advantage by effectively reconfiguring or using homogeneous resources under different environmental conditions. In highly turbulent environments, real-time information available through learning establishes intuition about the marketplace and enables firms to understand and adapt to the changing situation. Consequently, in highly turbulent environments, we expect that the learning process provides firms with higher performance than does organizational memory. The extant literature supports the notion that firms benefit more from learning orientation than from organizational memory when they are in highly turbulent environments.

Hypothesis 3: The positive relationship between memory and (a) organizational innovativeness and (b) overall performance is weaker when market turbulence is high than when market turbulence is low.
As with the effects of market turbulence, we expect that technological turbulence reduces the positive relationship between organizational memory and overall performance and innovativeness. Although this environmental condition provides firms with new business opportunities, prior experience or stored knowledge embedded in organizational memory may lead a firm to inappropriate action and inferior performance (Anderson and Tushman 1990; Weiss and Heide 1993). We argue that rapid technological changes deter finns from adopting new innovation and discourage them from actively searching for innovative ideas. Consequently, we expect that in the presence of high technological turbulence, the value of organizational memory for overall organizational performance and innovafiveness decreases. Therefore, we hypothesize the following:

Hypothesis 4: The positive relationship between memory and (a) organizational innovativeness and (b) overall

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In such environments, firms are faced with rapid market and technological changes; consequently, existing knowledge can become quickly obsolete or even inhibit new knowledge creation. Because knowledge is not long-lasting in the presence of high turbulence, firms' ability to improve existing skills and learn new ones becomes crucial (March 1991). Strong leaming orientation also signifies firms' strategic intent to succeed, which most likely motivates them to remain attentive to changes in market and technological environments (Hamel and Prahalad 1989). As a result, such firms are likely to uncover useful new knowledge and ideas that are appropriate for addressing changes in highly turbulent environments. Conversely, organization memory may foster a static approach to competition, an approach that can quickly become outdated or easily imitated by competitors (Hamel and Prahalad 1989). In addition, powerful organizational memory can reduce firms' ability to improvise as well as their chances to respond successfully to changing environments (Miner, Bassoff, and Moorman 2001; Moorman and Miner 1998). Thus, we expect that in highly turbulent environments, learning orientation is more strongly associated with innovativeness and performance than is organizational memory.

Hypothesis 5: When market turbulence is high, (a) the

positive relationship between learning orientation and innovativeness is stronger than the positive relationship between organizational memory and innovativeness, and (b) the positive relationship between learning orientation and performance is stronger than the positive relationship between organizational memory and performance. Hypothesis 6: When technological turbulence is high, (a) the positive relationship between learning orientation and innovativeness is stronger than the positive relationship between organizational memory and innovativeness, and (b) the positive relationship between learning orientation and performance is stronger than the positive relationship between organizational memory and performance.

anonymous to secure study participation, we opted not to code the surveys for identification purposes. Following Huber and Power's (1985) guidelines on obtaining quality data from key informants, we developed a survey using Dillman's (2000) method and administered it to supply management (e.g., purchasing, procurement, sourcing) executives who were drawn from the membership list of the Institute of Supply Management. Although each supply management professional belonged to a particular firm, the survey instructed all of them to use the supply chain as their referent when responding to items. We restricted our sample to manufacturing firms and instructed respondents to focus on the last order-fulfillment process within their supply chain. The sampling frame consisted of 2,000 supply management professionals; 200 responded, for an effective response rate of 10.67 percent (127 surveys were nondeliverable). The respondents had been with their firms an average of 11 years, and they represented firms that had existed for an average of 64 years, employed an average of 13,688 people, and had an average of 38 people in their supply management unit. The executives who responded had titles such as senior buyer, manager of purchasing, director of purchasing, senior purchasing agent, director of purchasing and materials management, sourcing manager, vice president of procurement, global purchasing manager, purchasing supervisor, regional purchasing manager, chief purchasing officer, information manager of global procurement, director of global strategic sourcing, manager of strategic sourcing, and corporate purchasing manager.

Measurement
The measures used in our research appear in the appendix and were based on previous research. We drew the measures of learning orientation from the work of Sinknla et al. (1997), we adapted the measures of innovativeness from the work of Hurley and Hult (1998), and we drew the measures of organizational memory and environmental turbulence froJn the work of Moorman and Miner (1997).

METHOD Study Context and Sample

We use the inbound logistics portion of supply chains as the context for our study. As a process that requires interactions with external suppliers, inbound logistics accommodates the study of external environmental effects and provides an appropriate setting for our study. Before collecting the data, we pretested our scale items with eight academics and 7 executives. We also performed a pilot study with 36 executives to assess the research design's quality. These steps resulted in certain changes, primarily in the instructions to respondents; specifically, on the basis of concerns about the need to keep responses

RESULTS Measurement Model

After the data collection, we assessed convergent validity, discriminant validity, and the unidimensionality of each construct. We performed two confirmatory factor analysis models: Model 1 contained four independent and dependent constructs (Learning Orientation, Organizational Memory, Innovativeness, and Performance), and Model 2 consisted of the two environmental turbulence constructs (Market Turbulence and Technological Turbulence). Rather than examining all variables in a six-construct model, we chose this approach to avoid violating a five-to-one ratio

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TABLE 1 Measurement Model Evaluations a

Standardized Phi Values Construct b Variable Standardized Loading t-Value c Composite Reliability AVE

1 1.00

Model 1 LORIENT (1) LOrientl LOrient2 LOrient3 MEMORY (2) Memoryl Memory2 Memory3 INNOVATE(3)
Innol .89 --

.65 .77 .51 .57 .81 .85 .69 -6.06 6.74 .83 -11.24 9.68 .79 Inno2 Inno3 .79 .54 .94 .78 11.23 7.63 .85 Performl Perform2 -8.02 .87 MktTurb1 MktTurb2 MktTurb3 MktTurb4 MktTurb5 .78 .82 .75 .71 .66 .85 .91 .89 .76 -11.70 10.67 9.93 9.20 .92 TecTurbl TecTurb2 TecTurb3 TecTurb4 -17.09 16.56 12.65

.40

.62

.50

1.00

.74

.70

.53

1.00

PERFORM (4)

.57

.55

.37

.40

1.00

Model 2 MKT (1)

.56

1.00

TECH (2)

.73

.45

1.00

NOTE: AVE = average varianceextracted. a. N = 200. b. LORIENT = Learning Orientation;MEMORY = OrganizationalMemory; INNOVATE= Innovativeness;PERFORM = Performance; MKT = Market Turbulence;TECH = TechnologicalTurbulence;Model 1 constructs: Learning Orientation,OrganizationalMemory, Innovativeness,and Performance; Model 1 fit statistics: Z2~3s~ 86.10, ComparativeFit Index (CFI) = .94, Goodness-of-FitIndex (GFI) = .93, Normed Fit Index (NFI) = = .91; Model 2 constructs:Market Turbulenceand TechnologicalTurbulence;Model 2 fit statistics: Z2~26~ 128.69, CFI = .91, GFI = .86, NFI = .89. = c. Constructloadings withouta correspondingt-valuewere fixed at 1.00.

of sample size to parameter estimate, which Bentler and Chou (1988) suggested. The approach has been used in other research, including that of Moorman and Miner (1997). Both confirmatory factor analysis models revealed reasonable model fits and were consistent with other reported research (for Model 1: Z2(38~= 86.10; Comparative Fit Index [CFI] = .94, Goodness-of-Fit Index [GFI] = .93, Normed Fit Index [NFI] = .91; for Model 2: ~2(26)= 128.69; CFI = .91, GFI = .86, NFI = .89). We computed and found the composite reliability of each construct to exceed the standard for acceptance of .7, except for learning orientation, whose construct reliability was .65. Similarly, the average variance extracted (AVE) for each construct was greater than the recommending level of .50 (Fornell and Larcker 1981), except for learning orientation, whose AVE was .40. We found that all the construct loadings in these two models were highly significant (p < .01), and all standardized construct loadings were greater than .5.

We then assessed discriminant validity within the two models by constraining and freeing the phi-value between each pair of constructs. Next, we performed a chi-square difference test between the constrained and the unconstrained models. The results show that for every pair, the model with a free coefficient was superior to the model with a constrained coefficient. That none of the confidence intervals for the correlation estimates between each pair of constructs contained a value of 1.0 provided additional support for discriminant validity. We summarize construct loadings and construct reliability in Table 1 and construct means, standard deviations, and correlations in Table 2.

Structural Models and Hypothesis Testing

To set a stage for the hypothesis testing, we configured two structural models. The first model consists of

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FALL2006 market-turbulence groups, we obtained the chi-square of Z2~55)= 114.09. Thus, the A~2(]) between the baseline and the constrained models is 8.09 (p < .05), suggesting that across the two groups, YLO~e,t-~i ,eis not equal. Because ..... the coefficient in high market turbulence is greater than that in low market turbulence (see Table 3), the results support Hypothesis 1a which maintains that the positive relationship between learning orientation and organizational innovativeness is stronger when market turbulence is high than when market turbulence is low. Next, we constrained 7M~mo~y-~I t~in Model A. The A~2(1) equals ..... 4.53 (p < .05), suggesting that across the two groups, 7M,mo~-~I..~t,is not equal. Because the coefficient in high market turbulence is lower than that in low market turbulence, the results support Hypothesis 3a, which states that the positive relationship between memory and innovativeness is weaker when market turbulence is high than when market turbulence is low. We repeated a similar multigroup analysis for Models B, C, and D. The results for Model B reveal that "~LOrient--*Petformand 7Memo~y--*l%rform not differ across the did high- and low-market-turbulence groups, providing no support for Hypothesis lb and Hypothesis 3b which state that the positive relationship between learning orientation and overall performance is stronger (Hypothesis lb) and the positive relationship between memory and overall performance is weaker (Hypothesis 3b) when market turbulence is high than when market turbulence is low. For Model C, the results show that both "~LOrient--~hmovateand ~/Memory--~Innovate differed across the high- and low-technological-turbulence groups. The results support Hypotheses 2a and 4a, which posit that the positive relationship between learning orientation and organizational innovativeness is stronger (Hypothesis 2a) and the positive relationship between memory and organizational innovativeness is weaker (Hypothesis 4a) when technological turbulence is high than when technological turbulence is low. In Model D, the significant chi-square difference test for ~/LOrient~Perform provided support for Hypothesis 2b, which maintains that the positive relationship between learning orientation and performance is stronger when technological turbulence is high than when technological turbulence is low. However, the results show that YM,r,o~-~r,rfo~did not differ across the high- and low-technological-turbulence groups, providing no support for Hypothesis 4b, which maintains that the positive relationship between memory and overall performance is weaker when technological turbulence is high than when technological turbulence is low. Finally, we tested Hypotheses 5a-6b to assess the differential associations of learning orientation and memory with the organizational outcomes. The procedure differs slightly from those performed for Hypotheses 1-4. Instead of constraining one path coefficient each in high and low environmental turbulence, we constrained two paths (e.g., ~/LOrient--*Innovateand "YMemory--+I. . . . te ) within one level of .

TABLE 2 Construct Means, Standard Deviations, and Correlations'

M 1. LORIENT 2. MEMORY 3. INNOVATE 4. PERFORM 5. MKT 6. TECH SD 1 2 1 .48 .28 .17 .10 3 4 5 6

5.75 0.95 1 5.45 1.05 .40 5.31 1.10 .54 5.60 1.08 .39 4.72 1.19 .05 5.41 1.28 .11

1 .37 .05 .08

1 .22 .15

.40

NOTE:LORIENT= LearningOrientation;MEMORY= Organizational Memory; INNOVATE= Innovativeness;PERFORM= Performance; MKT= MarketTurbulence;TECH= TechnologicalTurbulence. a. N= 200.

learning orientation and organizational memory as independent constructs and organizational innovativeness as a dependent construct. The second model also contains learning orientation and organizational memory as independent constructs but makes overall firm performance a dependent construct. We structured the models in this manner because each provided a large enough sample size to be divided into two groups for the testing of moderating effects with multigroup analysis, which we discuss subsequently. We then tested the moderating role of environmental turbulence in Hypotheses 1-6, using a mutigroup analysis (Bollen 1989). We created a two-group model by dividing the total sample on the basis of either level of market turbulence or level of technological turbulence. Thus, the two models we described previously become four empirical models, each of which is a two-group model of high and low environmental turbulence. The four models are the relationship of learning orientation and organizational memory to innovativeness for high versus low market turbulence (Model A), the relationships of learning orientation and organizational memory to performance for high versus low market turbulence (Model B), the relationships of learning orientation and organizational memory to innovativeness for high versus low technological turbulence (Model C), and the relationships of learning orientation and organizational memory to performance for high versus low technological turbulence (Model D). We began the multigroup analysis by obtaining the path coefficients in the levels of low and high market turbulence and technological turbulence (see Table 3). We then tested the equality of each path coefficient across two groups using a chi-square difference test between a model with a specific path set to be equal across two groups (a constrained model) and a model with a free path coefficient (a baseline model). For example, in Model A, the fits for the two-group baseline model were X2(54)= 106, CFI = .92, NFI = .86, and GFI = .90. When we constrained ~/LOrient--r ..... te equally across the two

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TABLE 3 Summary of Path Coefficients for Two-Group Analysis9

Market Turbulence Mode[~ Path High~ Low~ Testfor Equality of Paths Across High- and LowMarket-Turbulence Groups Testfor Equality of Paths Within High Market Turbulence

]'Lon~,~-*l,.o,~ 7M~,,o~-~.~

1.51 (3.71) -.25 (-.71) .58 (2.68) -.04 (-.16)

.54 (3.08) .45 (2.87) .52 (3.52) .24 (1.60)

AX2 = 8.09, significant at p < .05 m Hypothesis 1a supported AZ2m= 4.53, significant atp < .05 Hypothesis 3a supported AZ2m= 0.07, ns atp < .05 Hypothesis lb not supported AZ~m = 1.12, ns atp < .05 Hypothesis 3b not supported
Tests for Equality of Paths Across High- and LowTechnological Turbulence Groups

AX2~) = 11.20, significant at p < .05 Hypothesis 5a supported

7LO~.~-~P~o,~ 7~m~-~P~om~

AX2m= 2.78, ns atp < .05 Hypothesis 5b not supported

Testfor Equality of Paths Within High Technological Turbulence

Technological Turbulence Model ~ Path High~ Low~

"/Lo,o,,-~1,,~,t, 7M~-*l,,o~,~

1.10 (4.62) .01 (.07) .72 (4.02) -.03 (-.15)

.47 (2.34) .57 (3.23) .22 (1.42) .36 (2,44)

A)~2m= 4.43, significant atp < .05 Hypothesis 2a supported A~2m = 4.50, significant at p < .05 Hypothesis 4a supported A~2m = 5.11, signifcant at p < .05 Hypothesis 2b supported A~ m = 2.80, ns at p < .05 Hypothesis 4b not supported

A;~2c,= 8.98, significant at p < .05 Hypothesis 6a supported

7LOlient-~Pcrform
7M~o~-~Po~o~

A~2c, = 6.05, significant atp < .05 Hypothesis 6b supported

a. t-value in parentheses. b. Model A: The relationships from learning orientation and organizational memory to innovativeness for high versus low market turbulence; X2~ = 106, Comparative Fit Index (CFI) = .92, Normed Fit Index (NFI) = .86, Goodness-of-Fit Index (GFI) = .90. Model B: The relationships from learning orientation and organizational memory to performance for high versus low market turbulence; Z2~39~ 51.51, = CFI = .98, NFI = .91, GFI = .94. Model C: The relationships from learning orientation and organizational memory to innovativenessfor high versus low technological turbulence; Z2~54~ 92.74, = CFI = .94, NFI = .87, GFI = .92, Model D: The relationships from learning orientation and organizational memory to performance for high versus low technological turbulence; ~2(39)= 52.94, CFI = .97, NFI = .91, GFI = .95. c. Sample size for high-market-turbulence group, low-market-turbulence group, high-technological-turbulence group, and low-technological-turbulence group are 106, 94, 104, and 96, respectively.

environmental turbulence (Bollen 1989; Steiger, Shapiro, and B r o w n e 1985). For example, for M o d e l A, w e assessed the equality of 7LOnem--,l ~ and 7Memo~y-~I. . . t~ ..... . in the high-market-turbulence group (Hypothesis 5a) b y obtaining a chi-square value for the m o d e l in which
~/LOfient---~l..... te and 7M,mn~y-~I te are constrained to be equal .....

support H y p o t h e s e s 6a and 6b but not H y p o t h e s i s 5b. W e summarize all tests results in Table 3 and F i g u r e 2.

Post Hoc Analysis

Thus far, we have performed hypothesis testing to investigate (1) how strengths of the relationship of learning orientation and m e m o r y to innovativeness and performance differ across high versus low environmental turbulence and (2) whether the relationships of learning orientation and m e m o r y to innovativeness and perform a n c e differ within the s a m e level of environmental turbulence. The f o l l o w i n g k e y question remains: are the strengths of the m o d e r a t i n g effects the same across market and technological turbulence? To c o m p a r e the moderating effects of these two turbulence dimensions, we performed hierarchical regressions (see Table 4). In the first step, we regressed innovativeness or p e r f o r m a n c e on

0~2(55~ = 117.20) and then by c o m p a r i n g it with a chisquare value for the baseline M o d e l A (Z2(54) = 106.00). The AZ2r ~ equals 11.20 (p < .05), s u g g e s t i n g that ~/LOriem---)l te and 7Memory---)l te are s i g n i f i c a n t l y differ..... ..... ent. Because ~/LOrient--*Innovate is greater than ~/Memory---~Innovate in the high-market-turbulence group (as Table 3 shows), the results support Hypothesis 5a, which maintains that w h e n m a r k e t t u r b u l e n c e is high, the p o s i t i v e relationship between learning orientation and innovativeness is stronger than the positive relationship between organizational m e m o r y and innovativeness. W e repeat the same procedure for H y p o t h e s e s 5b, 6a, and 6b. The results

608

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FIGURE 2 Strengths of the Relationships of Learning Orientation and Organizational Memory to Overall Innovativeness and Performance in Low and High Market and Technological Turbulences"
Model A Model B

1.6

1.6
_~ 1.1
0

E
.2

1.1

... -" "'"

.1 -.4

LOrient vs. Memory (sig. Hsa)

9 O

.6

....................

1-~ri-e~nt vs, Memo~.~(n.s. H5b)

o.
-.4 Low
Market Turbulence

High

Low
Market Turbulence

High

I . . . . . . LOrient -> Innovate Low vs. High (sig. Hla )

- -

Memory -> Innovate Low vs. High (sig. H3a)

......

LOrient--> Perform - Low vs. High (n.s. Hlb )

Memory --> Perf~ ) H Low vs. High (n.s.

A. Strengths of the Relationships of Learning Orientation and Organizational Memory to Innovativeness in Low and High Market Turbulence

B. Strengths of the Relationships of Learning Orientation and Organizational Memory to Overall Performance in Low and High Market Turbulence
Model D

Model C

1.6
0

1.6
.2 1.1

1.1 .6

. . . . . . -"

LOrient vs. Memory (sig. Hra )

o r o

9 o

.6 .1
--.4

.........

J~
O.

LOrient vs. sJg. H6b)

o. -.4 Low High

Technological Turbulence

Low

High

Technological Turbulence

......

LOrient--> Innovate - Low vs. High (sig. H2a)

Memory --> Innovate Low vs. High (sig. H4a)

. . . . . . LOrient--> Perform - Low vs. High (sig. H2b)

Memory --> Perform I Low vs. High (n.s. H4b)

C. Strengths of the Relationships of Learning Orientation and Orgamzational Memory to Innovativeness in Low and High Technological Turbulences a. Sig. = statistically significant; n.s. = not statistically significant.

D. Strengths of the Relationships of Learning Orientation and Organizational Memory to Overall Performance in Low and High Technological Turbulence

learning orientation and memory. In the second step, we added the multiplicative terms of Learning Orientation Technological Turbulence and Memory x Technological Turbulence to the regression model. In the third step, we included the multiplicative terms of Leaming Orientation Market Turbulence and Memory Market Turbulence as additional predictors. We mean centered all the variables before obtaining the multiplicative terms. The results show that when innovativeness is a dependent variable, the multiplicative terms of Learning Orientation Technological Turbulence in the second step were significant, but the F-change statistic was not significant. On the contrary, in the third step, the F-change statistic was significant, at p < .05. The results reveal that market turbulence moderates the relationship of learning orientation and memory

to innovativeness more strongly than does technological turbulence. However, we found that the moderating effect of market and technological turbulence did not differ when performance was a dependent variable. To assess the moderating role of market-turbulence versus technological-turbulence dimensions in a highturbulence environment, we need to select only samples with high market turbulence (but low technological turbulence) and to contrast them with those with high technological turbulence (but low market turbulence) because the two turbulence dimensions are not mutually exclusive. We distinguished between these two groups by creating the dichotomous dummy variable "group," and we multiplied this variable with learning orientation and memory (Chow 1960). We then performed a new set of hierarchical

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TABLE 4 Post Hoc Regression: Analysis of High Versus Low Market and Technological Turbulences
Dependent Variable Independent Variable
LORIENT MEMORY LORIENT x TECH MEMORY x TECH LORIENT x MKT MEMORY x MKT 200 2, 197 .38 .37 59.92* 200 4, 195 .39 .38 31.44* .01 2.22 2, 195 .49* (6.86) .33* (5.10)

INNOVATE
.48* (6.72) .31" (4.70) .12* (2.07) -.01 (-0.23) .51' (7.01 ) .28* (4.13) .08 (1.33) -.01 (-0.20) .17' (2.64) -.01 (-0.27) 200 6, 193 .41 .40 22.75 * .02 3.65* 2, 193 .38* (4.68) .16" (2.11 )

PERFORM
.39* (4.72) .15" (2.00) .03 (0.49) -.05 (-0.86) .37* (4.40) .17" (2.16) .06 (0.83) -.05 (-0.85) -.10 (-1,35) .02 (0.27) 200 6, 193 .18 .16 7.18 * .01 .92 2, 193

dfof regression model

R2 Adjusted R2 F-statistic R2 change F-change statistic df of F-change statistic

200 2, 197 .17 .16 20.34*

200 4, 195 .18 .16 10.31 * .00 .40 2, 195

NOTE: t-value in parentheses. LORIENT = Learning Orientation; MEMORY = Organizational Memory; INNOVATE = Innovativeness; PERFORM = Performance; MKT = Market Turbulence; TECH = Technological Turbulence.

*p < .05. regressions, in which learning orientation and memory were the predictors in the first step. We added the variable group and its multiplicative variables as predictors in the second step. The nonsignificant F-change statistics showed that the effects of learning orientation and memory on innovativeness and performance in a high-market-turbulent environment are equal to those in a high-technologicalturbulent environment. Results of the post hoc analyses are summarized in Tables 4 and 5. memory and organizational outcomes is usually weaker in highly turbulent environments than in environments with low turbulence. The results are consistent with the contingency perspective, in that the two organizational capabilities are not equally effective under all conditions. Also consistent with dynamic capability theory, which advocates the rebuilding of new capabilities to address environmental turbulence, our results show that the effectiveness of learning on organizational outcomes is greater than that of organizational memory in highly turbulent environments. Thus, our study contributes to the theory of organizational learning by providing a complete view of the two key learning characteristics of finns (i.e., learning orientation and organizational memory) under different levels of environmental turbulences. Through post hoc analyses, we find that the two environmental dimensions, market and technological turbulence, do not equally moderate the positive relationship of learning orientation and memory to organizational outcomes. In particular, although we find that the learning orientation-innovativeness link becomes stronger when market or technological turbulence is high, the effect of market turbulence is stronger than that of technological turbulence. However, when we scrutinize only firms in highly turbulent environments, the stronger moderating effect of market turbulence is not found. The finding implies that when environments become more turbulent, market turbulence increases the value of learning orientation more than

DISCUSSION
Our research attempts to contribute to academic thinking and managerial practice by focusing on the moderating role of turbulence on important organizational phenomena, specifically the relationship of learning and memory to organizational performance and innovativeness. Drawing on organizational theory, contingency theory, dynamic capability theory, and empirical data collected from managers, we demonstrate that when environmental turbulence is considered, the relationships of learning and memory to organizational performance and innovativeness contrast greatly. In general, the strength of the relationship between learning orientation and organizational outcomes is stronger in highly turbulent environments than in environments with low turbulence. In contrast, the strength of the relationship between organizational

610 JOURNALOF THE ACADEMYOF MARKETINGSCIENCE

FALL 2006 comparatively stable industries should be better able to establish long-term structures and processes and, thus, to benefit from accumulated knowledge over a period of time. On the other hand, in dynamic industries, instead of focusing on accumulated wisdom, a more profitable strategy would be to acquire skills that are both timely and adaptable to new situations. In this case, organizations' ability to adapt to and learn from change becomes a more useful asset than their ability to store and access cumulative knowledge. By drawing out these differences in optimal strategies for different environments, we offer a contingency view of organizational activities and propose that a "one-size-fits-all" strategy does not work well for different levels of turbulence. Another implication is that, given the contradictory moderating roles of turbulence on learning and memory, organizations must focus on attaining an optimal mix of these capabilities. Because there are costs associated with developing these capabilities, we advise organizations to evaluate their environment and then decide where resources should be deployed to develop appropriate skills and capabilities. Given the critical role of learning orientation, companies need to find ways to update organizational memory, particularly in dynamic environments. If updating mechanisms are inefficient, firms risk losing their competitive edge by applying outdated rules, processes, and procedures to address situations (we thank an anonymous reviewer for providing this insight). Finally, the variables we considered herein, work in tandem with other organizational variables, resources, and strategies. For example, the effectiveness of memory on firm performance may depend not only on how much knowledge is stored in an organization but also on how easily the memory can be accessed (Sinkrula 1994). Likewise, the effectiveness of learning may also depend on organizational structures (Zollo and Winter 2002). Although our research can be assumed to take a ceteris paribus perspective, managers of complex organizations must recognize the interaction between the linkages explored in this article and other organizational phenomena before choosing the most appropriate strategy.

TABLE 5 Post HOC Regression: Analysis of High Market Versus High Technological Turbulences
Dependent Variable Independent Variable
LORIENT

INNOVATE

PERFORM

MEMORY Groupa LORIENTx Group MEMORY Group

n

.43" (3.50) .16 (1.37)

.40* (2.70) .17 (1.15) -.29 (--0.18) .08 (0.28) -.02 (-0.09) 68 5, 62 .26 .20 4.40* .00 .03 3, 62

.47" (3.41) .18 (1.33)

.58* (3.48) .21 (1.34) 2.42 (1.37) -.33 (-1.09) -.10 (-0.32) 68 5, 62 .28 .22 4.74* .03 .71 3, 62

df of regressionmodel

R2 AdjustedR2 F-statistic R2change F-change statistic dfof F-change statistic

68 2, 65 .26 .24 11.47"

68 2, 65 .25 .23 10.92"

NOTE: t-value in parentheses. LORIENT = Learning Orientation; MEMORY = OrganizationalMemory; INNOVATE= Innovativeness; PERFORM= Performance. a. Group 0 = high technologicalturbulence; Group 1 = high market turbulence;sample sizes for the two groupsare 33 and 35, respectively. *p < .05.

technological turbulence does; however, when the turbulent environments elevate to a certain level, finns in technologically turbulent or market-turbulent environments equally enjoy the value of learning orientation. The magnitude and complexity of environmental turbulence found in our study suggest that researchers and managers alike must do more to understand how the management of organizational learning should differ in various environmental conditions. Given the rapid changes taking place in today's marketplace and the broader business environment, this research domain appears to be a promising one for future exploration.

Managerial Implications
An important insight from our research is that market turbulence moderates the relationships between different organizational characteristics and outcomes differently. Therefore, managers must be willing to understand and act on these differences. Given the contradictory role of turbulence on the learning-performance and memoryperformance links, managers must focus on dynamic learning mechanisms rather than expect to profit from stored organizational memory. This general rule can be visualized from several perspectives. On one hand, if industries are segmented into different turbulence levels,

Research Implications
Our conceptual framework and empirical support should be viewed as one particular way to examine the role of turbulence in organizational performance. This research domain offers several exciting possibilities for future research. First, both academic researchers and managers would benefit from more comprehensive support for the conceptual framework, specifically through a consideration of different divisions of the organization. Our research was empirically supported in a specific context of the strategic purchasing unit; however, the role of turbulence is relevant to many other organizational divisions

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as well. Similarly, analysis of different industries and different countries would offer valuable perspectives toward understanding the relationship between relevant variables. Second, future research should focus on more fully developing a quantitative model to assess the impact of the variables examined herein. That is, beyond perceptual measures (which are useful from a theory-testing perspective), more objective measures should be explored. For example, what is the quantitative impact of a given change in market turbulence in terms of profitability,

stock market valuation, and so on? What trade-offs are involved in organizational performance and/or innovativeness? Are there circumstances in which learning and memory complement each other and others in which they offset each other? These and other important questions need to be addressed as more researchers explore this domain. Similarly, triangulating perceptual measures with other measures (e.g., expert opinion, secondary data) for variables such as learning and market turbulence will make the results more meaningful.

APPENDIX Scale Items Used for Each Construct

Construct
Learning Orientation

Variable
LOrientl LOrient2 LOrient3 Memoryl Memory2 Memory3 Innol Inno2 Inno3 Perform l Perform2 MktTurb 1 MktTurb2 MktTurb3 MktTurb4 MktTurb5 TecTurbl TecTurb2 TecTurb3 TecTurb4

Scale
1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5

Measures
The basic values of this purchasing process include learning as a key to improvement. Once we quit learning in the purchasing process, we endanger our future. The sense around here is that employee learning is an investment, not an expense. We have a great deal of knowledge about the purchasing process. We have a great deal of familiarity with the purchasing process. We have invested a great deal of research and development in the purchasing process. We actively seek innovative purchasing ideas. Innovation is readily accepted in the purchasing process. People are not penalized for new ideas that do not work. Overall performance of Strategic Sourcing and Supply Chain last year was very good. Overall performance relative to other business units last year was very good. In our kind of business, customers' product preferences change quite a bit over time. Our customers tend to look for new products all the time. We have demand for our products from customers who never bought them before. New customers have product needs that are different from our existing customers. We continuously cater to many new customers The technology in our industry is changing rapidly. Technological changes provide big opportunities in our industry. New product ideas have been made possible through technological breakthrough. Technological developments in our industry are fairly major.

Organizational Memory

Innovativeness

Performance Market Turbulence

Technological Turbulence

ACKNOWLEDGMENTS
T h e authors are grateful to the editor, the Journal o f the Academy o f Marketing Science reviewers, E r w i n D a n n e e l s , a n d J e a n J o h n s o n for c o n s t r u c t i v e c o m m e n t s o n p r e v i o u s v e r s i o n s o f t h e article.

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ABOUT THE AUTHORS

Sangphet Hanvanich (hanvanich@xavier.edu) is an assistant professor of marketing at Xavier University. She received her PhD from Michigan State University. She has published in various journals including the Journal of Service Research and Strategic Management Journal. Her primary research interests are in the areas of marketing strategy, marketing alliances, international business, and international marketing. K. S i v a k u m a r (k.sivakumar@lehigh.edu) (PhD, Syracuse University) is the Arthur Tauck Professor of International Marketing and Logistics, chairperson, and a professor of marketing in the Department of Marketing at Lehigh University. Before joining Lehigh in 2001, he spent 9 years as a faculty member with the University of Illinois at Chicago. His research interests include pricing, global marketing, and innovation management. His research has been published in the Journal of

the Academy of Marketing Science, the Journal of Marketing, the Journal of International Business Studies, Decision Sciences Journal, Marketing Letters, the Journal of Business Research, the Journal of lnteractive Marketing, the Journal of International Marketing, International Marketing Review, the Journal of Product Innovation Management, Pricing Strategy & Practice: An International Journal, Psychology & Marketing, Marketing Science Institute's Working Paper Series, and other
publications. He has won several awards for his research (including the Donald Lehmann Award) and is on the editorial review board of several scholarly journals. He has won outstanding reviewer awards from two journals. Home page: www.lehigh .edu/-kasg. G. Tomas M. Hult (hult@msu.edu) is a professor of marketing and supply chain management and director of the Center for International Business Education and Research at Michigan State University. He serves a's executive director of the Academy of International Business. He is associate editor of the

Journal of International Business Studies, Decision Sciences, and the Journal of Operations Management. His research has been published in the Journal of the Academy of Marketing Science, Academy of Management Journal, Strategic Management Journal, the Journal of Marketing, Decision Sciences, the Journal of Operations Management, the Journal of Management, and the Journal of Retailing, among others.