The role of market orientation as an antecedent of new product performance has been extensively documented in the literature. What is less clear, however, is how firms should make use of their market orientation under different market conditions. This study addresses this question by investigating how market orientation leads to superior new product performance for products that enter the market at different times. In particular, the study examines the moderating effect of order of market entry on the mediated relationship between market orientation and new product performance via product quality and innovation speed. Data from a sample of 244 new product development projects show that a firm's market orientation can improve the performance of first-to-market products and late entrants by facilitating the development of quality products, whereas it can improve the performance of early entrants by facilitating greater innovation speed.
Successful new product development (NPD) is widely recognized as a critical determinant of firm performance and competitive advantage. By finding new or better solutions to customer problems, NPD can both transform existing markets and create new ones. Without innovation, incumbents slowly lose both sales and profitability as competitors innovate past them (Hauser, Tellis, & Griffin, 2006). In view of the increasing levels of competition and decreasing product life cycles, a firm's ability to develop new products successfully has become more important than ever (Art, Norman, Hatfield, & Cardinal, 2010). However, NPD is a complex and difficult process (Balachandra & Friar, 1997).
The role of market orientation (MO) as a strategically valuable resource for successful NPD has been extensively documented in the literature (Baker and Sinkula, 2005 and Grinstein, 2008). However, although there is strong evidence to support the relationship between MO and new product (NP) performance, there is a limited understanding of how firms deploy MO under different market conditions (Ketchen, Hult, & Slater, 2007;Morgan, Vorhies, & Mason, 2009). Drawing upon the resource-based view (RBV) of the firm and contingency theory, we propose a model that addresses this limitation by investigating the way in which MO leads to superior NP performance for products that enter the market at different times. In particular, the study examines the moderating effect of order of market entry on the mediated relationship between MO and NP performance via product quality and innovation speed. The choice of product quality and innovation speed as mediating variables is based on research on order of market entry that regards these variables as important components of pioneers' and followers' NPD strategies (Urban et al., 1986 and Vakratsas et al., 2003).
MO has been shown to increase NP performance through higher product quality (Paladino, 2008) and greater innovation speed (Carbonell & Rodríguez, 2010). However, these routes may involve potential trade-offs. For instance, improving product quality may decrease the speed of development (Crawford, 1992). Therefore, an important question arises: should pioneers (followers) use MO to enhance product quality, or should they use it to speed up NPD? The extant research does not clearly answer this question. For example, whereas some studies describe product quality as being particularly relevant to the success of first-to-market products (Robinson & Fornell, 1985), the question remains how a firm that is slow at developing new products can potentially be a first mover (Kessler & Bierly, 2002). Similarly, there is no convincing evidence on whether followers' primary performance goal during the NPD process should be speed to market or product quality (Vakratsas et al., 2003). The current study attempts to shed some light on this dilemma. Drawing upon a contingent approach to the RBV, we argue that for a particular NP, whether to focus MO on the achievement of superior product quality or greater innovation speed will be contingent on the assumed order of market entry. The effectiveness of MO will be dependent on the use of MO to implement the NPD strategy that is best suited for the specific order of market entry, whether this strategy involves developing high-quality products or accelerating NPD. To date, no prior studies have examined these linkages.
The study represents an important contribution to the literature in two respects. First, because it combines two major research streams (i.e., the literatures on order of market entry and MO), the study provides new insights into the role of MO in enabling firms to execute NPD strategies that are best suited for a particular order of market entry. The key results of our study indicate that MO can improve the performance of first-to-market products and late entrants by facilitating the development of high-quality products, whereas it can improve the performance of early entrants by increasing innovation speed. Second, the study represents a departure from existing marketing research, which has mainly concentrated on explaining the main effects of order of entry (for exceptions, see Bowman and Gatignon, 1996 and Homburg et al., 2009).
This study makes an important contribution to the marketing literature by formulating and testing a model that examines the role of order of market entry as a moderator of the mediating effects of innovation speed and product quality on the MO–NP performance relationship. The findings indicate that the performance of first-to-market products, early entrants and late entrants seems to be related to the specific use that firms make of its MO, whether it is developing high-quality products or accelerating innovation speed. In particular, our results reveal that firms can improve the performance of first-to-market products and late entrants by using MO to develop high-quality products, whereas they can improve the performance of early entrants by using MO to increase innovation speed. Because order of market entry is not entirely under firms' control, firms should remain sufficiently flexible to shift their MO focus between product quality and innovation speed as market conditions change in the short run. That said, from a managerial perspective, the relevance of our findings lies on the firms' ability to quickly adjust their NPD priorities when the actual order of market entry is different from that initially expected.
