J PROD INNOV MANAG 2009;26:652661 r 2009 Product Development & Management Association

Market Orientation, NPD Performance, and Organizational Performance in Small Firms

Ann Ledwith and Michele ODwyer

Many studies have established relationships among market orientation, new product performance, and organizational performance; however, few have examined these relationships in small rms. Where small rms have been examined, the results suggest that the relationships identied in large rms do not always apply in small rms. Previous research has linked market orientation with organizational performance, with several authors demonstrating that market orientation increases new product success and thereby improves organizational performance. Ensuring optimal new product performance is essential for small rms, particularly in light of the strong relationship between new product success and a companys health. However, given that the success rate of new products worldwide has been low, increasing understanding of what drives new product performance is critical. Measures of new product success can be grouped into ve categories: (1) market-level measures; (2) nancial measures; (3) customer-acceptance measures; (4) product-level measures; and (5) timing measures. In small rms, the most frequently used success measures are customer-acceptance and product-level measures; however, a link between the new product measures used and organizational success has not been established. This paper presents a model linking market orientation, new product performance, and organizational performance in small rms. The model was explored using data collected from 106 small rms in Ireland. The results show signicant relationships among market orientation, new product performance, and organizational performance. However, when these relationships are explored in more detail, it emerges that of the three measures used for market orientation only onecompetitor orientationis signicantly linked with new product performance. Additionally, of the ve measures used for new product performance only twomarket performance and nancial performanceare linked with organizational performance. The ndings of this study demonstrate that small rms report signicantly lower levels of competitor orientation than customer orientation or interfunctional coordination. However, competitor orientation is the only dimension of market orientation that is signicant in predicting new product performance. Small rms also perform signicantly better on product-level and customer-acceptance new product performance measures than on marketlevel, nancial, or timing measures. The study makes four recommendations for small rms. First, small rms should keep a closer eye on their competitors, improving their understanding of what products competitors offer, why customers do or dont buy competitor products, how they attract customers, and how satised customers are with competitors products. Second, they need to be more aware of the impact that new products will have on their market position in terms of volume, sales growth, revenue, and market share. Third, small rms need to put more effort into measuring the nancial performance of their new products, for example, development costs, contribution, protability, and return on investment (ROI) or internal rate of return (IRR). Finally, small rms should attempt to be more objective in efforts to satisfy customers and to avoid overfocusing on a small number customers to the detriment of increasing market share.

Introduction

any researchers have linked market orientation with organizational performance (Horng and Chen, 1998; Kara, Spillan, and DeShields, 2005; Pelham, 2000) and have proposed a variety of mechanisms by which increased market

Address correspondence to: Ann Ledwith, Engineering Research Centre, College of Engineering, University of Limerick, Ireland. Email: ann.ledwith@ul.ie.

orientation can improve organizational performance (Blankson and Omar, 2002; Blankson, Motwanti, and Levenburg, 2006; Pelham, 1999; Verhees and Meulenberg, 2004). One such mechanism supported by several studies (e.g., Appiah-Adu and Singh, 1998; Langerak, Hultink, and Robben, 2004) is that market orientation increases new product success and thereby improves organizational performance. This study builds on previous research by examining the relationships among market orientation, new product performance, and organizational performance in small rms. Though the

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research on these topics in small rms is more limited than that in large rms, much of what has been published suggests that the relationships identied in large rms do not always apply in small rms (Appiah-Adu and Singh; Blankson et al.; Laforet, 2008). Additionally, there have been many different approaches to the complex task of dening and measuring market orientation, new product performance, and organizational performance. To clarify what is meant by these terms and to determine how they are measured in this study, a brief review of the literature addressing these variables is presented.

Market Orientation in Small Firms

In exploring marketing in small rms Peterson (1989) found that the marketing concept is part of their operating philosophy and that prot-oriented small rms are more likely to adopt a market orientation, which has a signicant impact on performance (Horng and Chen, 1998; Kara et al., 2005; Pelham, 2000) and nancial advantage in small rms (Enright, 2001; Pelham, 1997). A review of small and mediumsized enterprise (SME) marketing literature by Siu (2000) led to the following:  Firms that prioritize marketing perform better than those that do not.  The input of marketing to the strategic planning process is signicantly associated with the performance of small rms.  Better-performing companies dene marketing activities as essentially customer oriented.  Small-rm owners perceive customer orientation as critical to success.
BIOGRAPHICAL SKETCHES Dr. Ann Ledwith is lecturer in manufacturing and operations engineering at the Enterprise Research Centre at the University of Limerick in Ireland. She holds a Ph.D. from the University of Brighton in the United Kingdom. Her research interests include new product development, technology management, and project management in small rms. She has published in various journals including Creativity and Innovation Management, International Journal of Entrepreneurial Behaviour and Research, and Journal of European Industrial Training. Dr. Michele ODwyer is lecturer in entrepreneurship in the Kemmy Business School at the University of Limerick in Ireland. She holds a Ph.D. from the University of Ulster in the United Kingdom. She has published papers in innovation addressing key issues at the marketingentrepreneurship interface, new product development, and entrepreneurship in publications including European Journal of Marketing, Journal of International Management, and International Journal of Entrepreneurial Behaviour and Research.

Verhees and Meulenberg (2004) found that market orientation was useful in the selection of an attractive product assortment; it also increased customer market intelligence, which is related positively to performance in small rms. This is supported by Blankson et al. (2006), who found that small rms emphasized competitiveness and satisfaction of customer needs. Pelham (1999, p. 40) suggested that a strong market orientation culture may provide signicant sources of competitive advantage for small rms. However, Blankson and Omar (2002) illustrated that there is a lack of awareness of the basic principles of marketing in small rms for whom marketing consists of unplanned marketing practices. Appiah-Adu and Singh (1998) linked customer orientation and new product performance and also found a positive association between innovation orientation and customer orientation. Ledwith and ODwyer (2008, p. 107) reported that small rms need to understand their customers and competitors while involving all functions in the development of new products that satisfy customer needs. Pelham (1997) supported this nding by suggesting that small rms with higher levels of market orientation are more likely to command higher prices because of better quality and reliability and that they also experience reduced new product development (NPD) failure and thus lower NPD costs, gain higher market share, and achieve greater economies of scale. In addition, Pelham (ibid., p. 67) also suggested that market orientation in small rms leads to more effective new product development, improved relative product quality and improved customer retention. Market orientation forms the core of an organizational culture, which strives to create superior business performance by focusing on providing added value for customers (Becherer, Halstead, and Haynes, 2001). In addressing the creation of added value for customers and the associated acquisition and dissemination of market information, Narver and Slater (1990) propose that market orientation consists of three behavioral orientations focusing on customers, competitors, and interfunctional coordination. This denition is broader than that adopted by many of the previously discussed studies as it acknowledges that being market orientated involves more than focusing on customers. For example, a positive link has been established between competitor orientation and performance in small rms (Pelham and Wilson, 1996). Han, Kim, and Srivastava (1998) suggested that a complete dependence on customer orientation can lead to a awed organizational strategy that leaves a

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rm prone to a reactive market-orientated culture rather than a proactive culture that anticipates competitor strategies. Raymond and St-Pierre (2004) also supported the concept that a high dependency on a limited number of customers can leave small rms in a very vulnerable position. Mosey (2005) found that SMEs exibility and ability to adapt offers them a competitive advantage over their larger rivals, arguing that SMEs can compete with their larger rivals by developing new-to-market products using novel technologies. However, Mueller (1992) found that frequently managers do not prioritize prot maximization in decision making, instead making competitor-oriented performance-related decisions (Armstrong and Green, 2007). This suggests that the way small rms view performance can have an impact on the decisions they make and thus on their overall success. In other words, it is important to be aware of how small rms measure new product performance and the relationship between the performance measure used and organizational success.

New Product Performance Measures in Small Firms

Successful new products and services are critical for many organizations, since product innovation is signicant in helping organizations to adapt to changes in markets, technology, and competition. Ensuring optimal new product performance is essential for small rms, particularly in light of the strong relationship between new product success and a companys health, established by Shepherd and Ahmed (2000). However, given that the success rate of new products worldwide has been low (Bogue and Delahunty, 1999), increasing understanding of what drives new product success is critical. Measures of new product success can be grouped along three categories: (1) customer-based success; (2) nancial success; and (3) technical performance. These categories were used by Grifn and Page (1996) in a study with product development professionals that explored the degree to which different success measures were appropriate in different situations. Based on an examination of 18 different success measures (grouped within the three categories), Grifn and Page (1993, 1996) found that the usefulness of measures depended on the project and business strategy adopted and therefore recommended using multidimensional sets of measures for new product success. Grifn and Pages (1993, 1996) measures have been adopted in a range of different studies (e.g., Brown, Soutar, and Huang, 2004; Langerak et al., 2004) and

as such are considered to be valid in measuring new product success. However, Grifn and Page (1996) point out that despite the fact that certain measures were recommended by the product development professionals who participated in their study, they are not necessarily commonly used. In an investigation of the success measures used by Australian SMEs, Brown et al. (2004) based their study on the measures proposed by Grifn and Page (1996) and found that the most frequently used success measures were (1) customer acceptance, (2) customer satisfaction, (3) meeting performance goals, and (4) meeting quality goals. These measures can be classied as customer based (customer acceptance and customer satisfaction) and technical (met performance goals and met quality goals) according to the categories proposed by Grifn and Page (1993, 1996). The ndings of this study support earlier research that also identied customer acceptance and customer satisfaction as the most commonly used measures of new product success (Grifn and Page, 1996; Lipovestsky et al., 1997). But while this body of research has identied that customer acceptance, customer satisfaction, meeting performance goals, and meeting quality goals are the most commonly used measures of success in small rms, little has been published to explain the extent to which these measures are related to organizational performance. A large body of research links new product performance to organizational performance (Grifn, 1997; Langerak et al., 2004), but the specic aspects of new product performance that are linked with organizational performance are not always clearly identied. This study examines the relationships among market orientation, new product performance, and organizational performance. The literature reviewed suggests that there should be positive relationships among these variables; this is illustrated in the research model in Figure 1.

Methodology
The research reported is a cross-sectoral survey of a sample of 106 small Irish rms operating in a range of manufacturing industries delivering both industrial and consumer products. Firm size was classied in terms of employment levels and annual turnover, in line with the denition of SMEs adopted by the European Union (EU) Commission in May 2005 (see http://europa.eu.int/comm/enterprise/enterprise_policy accessed 13/01/2009). Small rms were dened as

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Market Orientation 1. Customer Orientation 2. Competitor Orientation 3. Interfunctional Coordination

New Product Performance 1. Market-Level Measures 2. Financial Measures 3. Customer Acceptance Measures 4. Product-Level Measures 5. Timing Measures

Organizational Performance

Figure 1. Research Model

those having fewer than 250 employees and an annual turnover below h50 million. The research instrument was a structured questionnaire that was administered via a postal and electronic mail survey in line with expectations of the interviewees. Respondents were asked to reply to the questionnaire with respect to the new product they had most recently introduced to the marketplace. All three measures shown in Figure 1 are multidimensional. To allow some degree of comparability with earlier work, well-established measures of market orientation (Narver and Slater, 1990), new product performance (Grifn and Page, 1996), and organizational performance (Langerak et al., 2004) were used in this study:  Market orientation: Narver and Slaters (1990) three componentscustomer orientation, competitor orientation, and interfunctional coordinationwere used to measure market orientation. The scale consisted of 21 items addressing stakeholders and activities from which the degree of market orientation.  New product performance: New product development performance was measured using the 16 core measures dened by Grifn and Page (1993), with an additional measure for break-even time. These measures have also been used in many studies, including several that examined market orientation (Brown et al., 2004; Langerak et al., 2004). For the purpose of this study new product performance is considered under ve measures: market-level performance; nancial performance; customer acceptance; product-level performance; and timing.  Organizational performance: Organizational performance was measured using six items: sales growth; protability; new product success; share of sales attributed to new products; market share; and return on investment (ROI) or internal rate of return (IRR) (Langerak et al., 2004; Slater and Narver, 1994). Within the analysis, the different measures of market orientation and new product performance are examined separately, allowing a deeper understanding of the nature of these relationships in small rms.

All items were measured using seven-point Likerttype scales ranging from strongly disagree to strongly agree for the measures of market orientation and very poor to excellent for the measures of new product and organizational performance. The reliability of these measures was calculated using Cronbachs alpha; a coefcient alpha of greater than 0.7 was required. Tables A1, A2, and A3 in Appendix A list the reliability of each measure and show that all measures were reliable (alpha40.7). In addition, Appendix A also summarizes the number of items, means, and standard deviation of the measures used for the complete sample of 106 rms. In the following analysis of the results only relationships that are signicant at po.01 or lower are highlighted. This decision was taken in view of the relatively small sample sizes to ensure, as far as was possible, that only meaningful relationships were identied.

Results
An initial examination of the tables in Appendix A provides some insights into how small rms are performing along the dimensions explored. First, the mean results for customer orientation (5.58), competitor orientation (5.01), and interfunctional coordination (5.36) were compared using t-tests, which demonstrated signicant differences among all three variables (po.01). This indicates that of the three dimensions used to measure market orientation, small rms were strongest at customer orientation and weakest at competitor orientation. Second, Table 1 lists the measures used to determine new product performance in descending order. Further examination of this list, again using t-tests, illustrates that the performance in the top four measures was signicantly higher than in other measures (po.01). The data illustrate that small rms rate their performance in meeting performance and quality specications, customer acceptance, and satisfaction above all other performance measures. This supports Brown et al. (2004), who found that these were the most

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Table 1. New Product Performance Measuresa

New Product Performance Measure Met Performance Specications (Product-Level Measure) Met Quality Specications (Product-Level Measure) Customer Satisfaction (Customer Acceptance Measure) Customer Acceptance (Customer Acceptance Measure) Customer Competitive Advantage (Customer Acceptance Measure) Number of Customers (Customer Acceptance Measure) Met Sales Growth Goals (Market-Level Measure) Met Protability Goals (Financial Measure) Launch on Time (Timing Measure) Time to Market (Timing Measure) Met Revenue Goals (Market-Level Measure) Break-Even Time (Timing Measure) Unit Volume Goals (Market-Level Measure) Met Contribution Goals (Financial Measure) Development Costs (Financial Measure) ROI or IRR (Financial Measure) Met Market Share Goals (Market-Level Measure)
a

Table 3. Regression of Market Orientation, New Product Performance, Organizational Performancea

Mean 5.96 5.89 5.89 5.85 5.50 5.24 5.00 4.98 4.97 4.96 4.95 4.94 4.93 4.91 4.90 4.88 4.68 Dependent Variable Independent Variables Market Orientation New Product Performance
a

Organizational Performance 1.002 9.578

po.01. po.001.

R2 5 0.557.

ROI, return on investment. IRR, internal rate of return.

common new product performance measures used by small rms; however, Brown et al.s study did not relate these measures to organizational performance. To determine the relationships among market orientation, new product performance, and organizational performance, correlation and regression analyses were performed. The correlation analysis illustrated in Table 2 demonstrates signicant relationships between new product performance and organizational performance (.714), new product performance and market orientation (.308), and market orientation and organizational performance (.285). All were signicant at 0.01 level (two-tailed). To determine the degree to which organizational performance is predicted by either market orientation or new product performance a regression analysis testing the relationships in the research model (Figure 1)

Table 2. Correlation of Market Orientation, New Product Performance, Organizational Performance

Market Orientation Market Orientation New Product Performance Organizational Performance 1 0.308 0.285 New Product Performance 1 0.714 Organizational Performance 1

Signicant at 0.01 level (two-tailed).

was performed. Table 3 demonstrates that while new product performance has a direct impact on organizational performance, market orientation does not. Based on the evidence provided in Tables 2 and 3, further analysis focused on the relationships between market orientation and new product performance and between new product performance and organizational performance. Starting with the impact of market orientation on new product performance, Table 4 shows the results of the regression analysis used to examine the relationship between the three dimensions of market orientation and the ve measures of new product performance. The results show that the power of market orientation in predicting new product performance is very weak (R2 5 0.142). Additionally, the only variable in the model that is signicant (po.001) is competitor orientation. This is interesting because, as noted previously, of the three dimensions of market orientation, small rms are weakest at competitor orientation, as shown in Table A1. Furthermore, the only measures of new product performance that are signicantly inuenced by competitor orientation are market-level measures and nancial measures. As shown in Table 1, neither of these was rated highly by small rms as measures of new product success. Table 5 shows the results of the regression analysis used to examine the relationships between the ve measures of new product performance and organizational performance. New product performance is found to be a strong predictor of organizational performance (R2 5 0.557). But of the ve new product performance measures, only market-level measures (3.759; po.001) and nancial measures (2.846; po.01) are found to be signicant. Exploring these results in the context of the new product measures illustrated in Table 1, it is evident that while small rms focus on four new product performance measurestwo from the product-level measures and two from the customer-acceptance

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Table 4. Market Orientation and New Product Performance

Dependent Variables New Product Performance .142 1.402 3.280 0.580 Market-Level Measures .101 0.276 3.286 1.000 Financial Measures .147 0.749 3.766 0.640 Customer-Acceptance Measures .097 0.688 2.895 0.413 Product-Level Measures .033 0.343 0.713 1.381 Timing Measures .167 2.830 2.635 1.053

Independent Variables Market Orientation (R2 ) Interfunctional Coordination Competitor Orientation Customer Orientation
po.01. po.001.

measuresanalysis of the relationship between new product performance and organizational performance (Table 5) suggests that neither product-level nor customer-acceptance performance measures are linked with organizational performance. The implications of these results are discussed next.

Discussion
The model presented in this study examined three measures of market orientation and ve measures of new product performance. Initial analysis of the data showed that the small rms studied did not perform equally across the three dimensions of market orientation. They scored signicantly higher on customer orientation and signicantly lower on competitor orientation. In other words, small rms are weaker at competitor orientation than at either interfunctional coordination or customer orientation. Much of the literature on small rms reports that they are close to their customers, suggesting a high level of customer orientation (Blankson et al., 2006; Verhees and Meulenberg, 2004); additionally, literature suggests that

Table 5. New Product Performance and Organizational Performancea

Dependent Variable Independent Variables Market-Level Measures Financial Measures Customer-Acceptance Measures Product-Level Measures Timing Measures
a

Organizational Performance 3.759 2.846 0.527 0.103 2.310

po.01. po.001.

R2 5 0.557.

interfunctional coordination in small rms is very high (Rothwell and Dodgson, 1991), so this result is not unexpected. However, the importance of this result becomes apparent when the relationship between market orientation and new product performance is examined. The regression analysis exploring the relationship between market orientation and new product performance (Table 4) showed that market orientation is a relatively poor predictor of new product performance. Of the three dimensions of market orientation, only competitor orientation is signicant in determining new product performance. When this is explored further it is found that competitor orientation is signicant at po.001 in the models predicting market-level and nancial performance; additionally, it is signicant at po.01 in the models predicting customer acceptance and timing performance. These ndings suggest that the one aspect of market orientation that is neglected by the small rms in this study (i.e., competitor orientation) is the one that has the greatest impact on new product performance. Of the 17 items used to measure new product performance (Table 1), four scored signicantly higher than the others: two product-level measures and two customer-acceptance measures. In other words, the small rms surveyed felt that they were signicantly better at meeting performance and quality specications and at customer satisfaction and acceptance than at achieving any of the nancial, market-level, or timing performance measures. However, when the model linking new product performance and organizational performance is evaluated (Table 5), it shows that only the market-level and nancial measures are signicant. Again, this is an example of small rms concentrating on the wrong things. They report high levels of customer acceptance and meeting specications, yet these are not signicant in predicting orga-

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Market Orientation 1. Customer Orientation 2. Competitor Orientation 3. Interfunctional Coordination

New Product Performance 1. Market-Level Measures 2. Financial Measures 3. Customer Acceptance Measures 4. Product-Level Measures 5. Timing Measures

Organizational Performance

Figure 2. Updated Research Model: Market Orientation, New Product and Organizational Performance in Small Firms

nizational performance. In contrast, they report signicantly lower levers of market-level and nancial measures, yet these are signicant in predicting organizational performance. These ndings result in an updated research model, as shown in Figure 2. The ndings of this study can be summarized as follows: 1. Small rms report signicantly lower levels of competitor orientation than customer orientation or interfunctional coordination. 2. Competitor orientation is the only dimension of market orientation that is signicant in predicting new product performance. 3. Small rms perform signicantly better on product-level and customer-acceptance new product performance measures than on market-level, nancial, or timing measures. 4. The only two new product performance measures that are signicant in predicting organizational performance are market-level and nancial measures. Based on these ndings this study has contributed to the extant literature on market orientation and new product performance by illustrating that rm size matters. In other words, the relationships among market orientation, new product performance, and organizational performance are not the same in SMEs as in large rms. In addition the ndings extend the research in this area, building on previous studies (Brown et al., 2004; Grifn and Page, 1993, 1996; Langerak et al., 2004) by examining the specic measures of new product performance that are linked to organizational performance. The results presented in this paper imply that to improve organizational performance small rms need to develop new products that perform well in terms of market-level and nancial measures. The nal contribution of this paper relates to market orientation; Han et al. (1998) and Raymond and St-Pierre (2004) advise that SMEs should not become overly dependent on customers. The data build on this concept, illustrating that SMEs also need to focus on competitors to improve performance.

Conclusions
This study has examined the impact of market orientation on new product performance and organizational performance. Additionally, the effect of the different measures of new product performance, as dened by Grifn and Page (1996), on organizational performance has been explored in small rms. Generally the research ndings support the extant literature, which suggests that increased market orientation improves new product performance, which in turn leads to higher levels of organizational success. However, there was no support in the data analyzed for a direct link between market orientation and organizational performance. Of the three market orientation dimensions examined, only onecompetitor orientationwas found to have a signicant impact on new product performance. Additionally, of the ve measures of new product performance only twomarket-level and nancial performancewere linked to organizational performance. The implications of these ndings for the managers of small rms are discussed next.

Managerial Implications
The ndings presented in this paper have some interesting implications for the managers of small rms suggesting that their view of new product success may not be helping them to achieve organizational success. While it is probably gratifying for small rms to develop new products that meet specication and satisfy customers, this will not necessarily lead to improved organizational performance. Unless new products also achieve their goals in terms of objective market performance (i.e., revenue and market share as opposed to customer acceptance and satisfaction) and nancial performance they are unlikely to contribute to organizational success. To an extent the study suggests that small-rm managers are measuring the things that are easily measured; for example, it is relatively straightforward to determine whether a new product meets its specications. Also, small rms are close to their customers, as evidenced by the high

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level of customer orientation reported in this study; it is natural that they should want to keep their customers satised, but this study suggests that this is sometimes done at the expense of achieving increased market share or nancial performance. The small rms in this study have not reported a high level of competitor orientation, yet this is the one dimension of market orientation that is linked with new product success. In a sense they are operating in a naive manner, keeping their customers happy but not paying enough attention either to what their competitors are doing or to their own position within their market. This study makes four suggestions. First, small rms should keep a closer eye on their competitors, understanding what products they offer, why customers do or dont buy competitor products, how they attract customers, and how satised customers are with competitors products. Second, they need to be more aware of the impact that new products will have on their market position in terms of volume, sales growth, revenue, and market share. Third, small rms should put more effort into measuring the nancial performance of their new products, for example, development costs, contribution, protability, and ROI or IRR. Fourth, small rms should attempt to be more objective in efforts to satisfy customers and avoid overfocusing on a small number of customers to the detriment of increasing market share.

explore the nature and extent of the relationships identied in this paper. In addition, the multidimensional nature of new product performance warrants further explorationthis research suggests that the different dimensions of new product performance may not be of equal weighting. This merits further examination in different organizational, national, and industrial contexts. Finally, the subject of competitor orientation is underresearched, yet this study found that it has a signicant impact on performance in small rms.

References
Appiah-Adu, K. and Singh, S. (1998). Customer Orientation and Performance: A Study of SMEs. Management Decision 36(6):38594. Armstrong, J.S. and Green, K.C. (2007). Competitor-Oriented Objectives: Myth of Market Share. International Journal of Business 12:11736. Becherer, R.C., Halstead, D., and Haynes, P. (2001). Marketing Orientation in SMEs: Effects of the Internal Environment. Journal of Research in Marketing and Entrepreneurship 3(1):117 (Spring). Blankson, C., Motwanti, J.G., and Levenburg, N.M. (2006). Understanding the Patterns of Market Orientation among Small Businesses. Marketing Intelligence and Planning 24(6):57290. Blankson, C. and Omar, O.E. (2002). Marketing Practices of African and Caribbean Small Businesses in London UK. Qualitative Market Research: An International Journal 5(2):12334. Bogue, J. and Delahunty, C. (1999). Market-Oriented New Product Development: Cheddar-Type Cheese. Agri-Business Discussion Paper No. 23, Department of Food Economics, National University of IrelandCork. Brown, A., Soutar, G.A., and Huang, X. (2004). Measuring New Product Success: An Empirical Investigation of Australian SMEs. Industrial Marketing Management 33(2):11723 (February). Enright, M. (2001). Approaches to Market Orientation and New Product Development in Smaller Enterprises: A Proposal for a Context-Rich Interpretive Framework. Journal of Strategic Marketing 9:30113. Grifn, A. (1997). PDMA Research on New Product Development Practices: Updating Trends and Benchmarking Best Practices. Journal of Product Innovation Management 14(6):42958. Grifn, A. and Page, A.L. (1993). An Interim Report on Measuring Product Development Success and Failure. Journal of Product Innovation Management 10:291308. Grifn, A. and Page, A.L. (1996). PDMA Success Measurement Project: Recommended Measures for Product Development Success and Failure. Journal of Product Innovation Management 13(6):47896. Han, J.K., Kim, N., and Srivastava, R.K. (1998). Market Orientation and Organizational Performance: Is Innovation a Missing Link? Journal of Marketing 62:3045 (October). Horng, S.-C. and Chen, A.C.-H. (1998). Marketing Orientation of Small and Medium Sized Firms in Taiwan. Journal of Small Business Management 36:7985 (July). Kara, A., Spillan, J.E., and DeShields, O.W. Jr. (2005). The Effect of a Market Orientation on Business Performance; A Study of SmallSized Service Retailers Using MARKOR Scale. Journal of Small Business Management 43(2):10518. Laforet, S. (2008). Size, Strategic and Market Orientation Affects on Innovation. Journal of Business Research 61(7):75364. Laforet, S. and Tann, J. (2006). Innovative Characteristics of Small Manufacturing Firms. Journal of Small Business and Enterprise Development 13(3):36380.

Limitations and Future Research

This study has several limitations. First, the sample consisted of 106 small rms; additional rms would further strengthen the ndings. Second, it was conducted within a relatively small country, Ireland; extending it to other geographical regions would be facilitated by the use of established research measures. Several authors have already gathered data using similar measures and indeed have reached some analogous results (Brown et al., 2004; Langerak et al., 2004); extending the study geographically should therefore be possible. Finally, rms from a variety of sectors were included in this research project. Though this is a common practice in studies of small rms it can also be criticized as leading to advice that is overgeneralized and therefore not very practical (Laforet and Tann, 2006); a larger sample would facilitate the extension of the study to include sectoral analysis. Future research could include qualitative analysis, using a number of case studies; this would help to

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Appendix A
Table A1. Summary of Market Orientation Measures
(N 5 106) Market Orientation (21 Items) Customer Orientation, 7 Items (Cronbachs Alpha 5 0.759) 1. Our rm gathers information about customers needs. 2. Our rm has insight into the buying process of customers. 3. Our rm consults customers to improve the quality of service. 4. Our rm handles customers complaints well. 5. Our rm involves customers in decisions that affect the relationship. 6. Our rm looks for ways to offer customers more value. 7. Our rm treats customers as partners. Competitor Orientation, 7 Items (Cronbachs Alpha 5 0.762) 8. Our rm knows whether competitors are open to complaints by customers. 9. Our rm knows why customers continue buying from competitors. 10. Our rm knows whether customers buying from competitors are satised. 11. Our rm monitors customers buying from competitors. 12. Our rm knows why customers switch to competitors. 13. Our rm knows which products competitors offer customers. 14. Our rm knows in what way competitors attract customers. Interfunctional Coordination, 7 Items (Cronbachs Alpha 5 0.859) 15. Our rms departments coordinate their contacts with customers. 16. Our rms departments jointly satisfy customers needs. 17. Our rms departments are collectively responsible for the relationship with customers. 18. Our rms departments jointly visit customers plants. 19. Our rms departments take decisions that affect the relationship with customers collectively. 20. Our rms departments are collectively aware of the importance of the relationship with customers. 21. Our rms departments coordinate their activities aimed at customers. Mean 5.32 5.58 5.81 5.58 5.57 5.75 5.12 5.98 5.29 5.01 4.49 5.07 4.58 4.36 5.17 5.97 5.42 5.36 5.34 5.57 5.44 4.42 5.34 5.93 5.46 SD 0.73 0.86 1.17 1.26 1.41 1.23 1.51 1.21 1.56 0.87 1.59 1.29 1.35 1.81 1.17 0.83 1.24 1.06 1.39 1.13 1.56 1.80 1.47 1.18 1.40 Max. 6.67 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 6.86 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 Min. 3.10 3.14 2.00 1.00 1.00 1.00 1.00 2.00 1.00 3.00 1.00 1.00 1.00 1.00 2.00 3.00 1.00 2.00 2.00 2.00 1.00 1.00 1.00 2.00 1.00

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Table A2. Summary of New Product Performance Measuresa

(N 5 106) New Product Performance, 17 Items Market-Level Measures, 4 Items (Cronbachs Alpha 5 0.933) 1. Unit Volume Goals 2. Met Revenue Goals 3. Met Sales Growth Goals 4. Met Market Share Goals Financial Measures, 4 Items (Cronbachs Alpha 5 0.848) 5. ROI or IRR 6. Met Protability Goals 7. Met Contribution Goals 8. Development Costs Customer Acceptance Measures, 4 Items (Cronbachs Alpha 5 0.760) 9. Customer Acceptance 10. Customer Satisfaction 11. Number of Customers 12. Customer Competitive Advantage Product-Level Measures, 2 Items (Cronbachs Alpha 5 0.712) 13. Met Performance Specications 14. Met Quality Specications Timing Measures, 3 Items (Cronbachs Alpha 5 0.879) 15. Launch on Time 16. Time to Market 17. Break-Even Time Mean 5.26 4.89 4.93 4.95 5.00 4.68 4.92 4.88 4.98 4.91 4.90 5.62 5.85 5.89 5.24 5.50 5.92 5.96 5.89 4.96 4.97 4.96 4.94 SD 0.857 1.27 1.37 1.42 1.41 1.38 1.11 1.41 1.35 1.27 1.33 0.87 0.93 1.04 1.44 1.11 0.91 0.97 1.09 1.37 1.64 1.54 1.37 Max. 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 Min. 3.10 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 3.50 3.00 2.00 1.00 2.00 2.00 2.00 2.00 1.00 1.00 1.00 1.00

Table A3. Summary of Organizational Performance Measures

(N 5 106) Organizational Performance, 6 Items (Cronbachs Alpha 5 0.898) 1. 2. 3. 4. 5. 6.
a

Mean 5.12 5.23 5.17 5.34 5.07 4.92 5.00

SD 1.05 1.40 1.36 1.09 1.28 1.31 1.29

Max. 7.00 7.00 7.00 7.00 7.00 7.00 7.00

Min. 2.00 2.00 2.00 2.00 2.00 2.00 1.00

Sales Growth Protability New Product Success Sales Share New Products (i.e., Products Introduced in the Last 5 Years) Market Share ROI or IRR

ROI, return on investment. IRR, internal rate of return.