Journal of Small Business Management 2012 50(4), pp.

699–716

Are Growing SMEs More Market-Oriented and

Brand-Oriented? jsbm_372 699..716

by Helen Reijonen, Tommi Laukkanen, Raija Komppula, and

Sasu Tuominen

The aim is to examine whether growing, stable, and declining small and medium-
sized enterprises (SMEs) differ from one another in terms of market orientation and
brand orientation. The results show that growing SMEs have adopted market and
brand orientations to a greater extent than have the stable or declining ones. They
also suggest that these orientations can prove to be helpful in achieving different
kinds of growth goals. Thus, in order to support the growth of SMEs, more information
and training should be offered to them about issues relating to these orientations.

tion, and interfunctional coordination.

Introduction
Market orientation and brand orienta-
tion are both regarded as factors
enabling and enhancing firm perfor-
mance either directly or through media-
tors (e.g., Narver and Slater 1990; Wong
and Merrilees 2008). The aim of this
paper is to examine whether growing,
stable, and declining SMEs differ from
one another in terms of market orienta-
tion and brand orientation. Market orien-
tation is measured by three elements:
customer orientation, competitor orienta-
Brand orientation, on the other hand, is
measured in terms of whether the brand
is seen as a valuable asset and whether it
plays an essential part of the firm’s strat-
egy, marketing and management of the
firm. Performance is measured in terms
of development in revenue, market
share, profitability, and number of per-
sonnel during the past three years.
González-Benito and González-Benito
(2005) summarized those studies that
examine the relationship between
market orientation and performance.

Helen Reijonen is University Lecturer in Marketing at the Department of Business, University

of Eastern Finland.
Tommi Laukkanen is Professor of Marketing at the Department of Business, University of
Eastern Finland.
Raija Komppula is Professor of Marketing and Tourism Business at the Department of
Business, University of Eastern Finland.
Sasu Tuominen is Lecturer in Marketing at the Department of Business, University of Eastern
Finland.
Address correspondence to: Helen Reijonen, Department of Business, University of Eastern
Finland, Yliopistokatu 2, P.O. Box 111, Joensuu 80101, Finland. E-mail: helen.reijonen@uef.fi.

REIJONEN ET AL. 699

Though in some of the studies no rela-
tionship between the two concepts is
found, in the majority of them, a positive
association is suggested. For example,
market orientation is found to enhance
profitability, return on investment
(ROI), market share, and market growth
(e.g., Matsuno, Mentzer, and Özsomer
2002; Pulendran, Speed, and Widing
2003). Even in those studies where no
direct relationship between market ori-
entation and performance is established,
there are mediators, such as innovation
(Vázquez, Santos, and Álvarez 2001) and
knowledge-related resources (Olavarri-
eta and Friedmann 2008) through which
market orientation appears to have a
positive effect on performance. More-
over, it has been argued that market ori-
entation has other positive impacts that
may result in better performance. These
include the enhancement of clarity of
focus and vision in the strategy of an
organization, psychological and social
benefits to employees, improvement of
the esprit de corps, and better customer
satisfaction (Kohli and Jaworski 1990). In
addition, empirical findings have con-
firmed that market orientation may
reduce role ambiguity and improve orga-
nizational commitment (Powpaka 2006).
Though the research on market ori-
entation is fairly robust, little work has
been done on the brand orientation of
firms. This is particularly true in the
case of SMEs. Work by Napoli (2006)
and Wong and Merrilees (2008) does,
however, explore the effect of brand
orientation on firm performance or
brand performance. In the context of
SMEs, classifications of brand orienta-
tion typologies for SMEs exist (Wong
and Merrilees 2005), and it is suggested
that in SMEs, too, brand and reputation
building become key resources over
time (Abimbola and Vallaster 2007).
This paper contributes to the market-
ing literature on SMEs by highlighting
both market and brand orientation and
their relationship to small firm growth. It
700 JOURNAL OF SMALL BUSINESS MANAGEMENT
provides more exact information on
whether the extent of adopting different
elements of market orientation can dis-
tinguish SMEs with different positions of
growth in the evaluation of which
several growth measures have been
used. In addition, the study sheds light
on the little researched area of brand
orientation in SMEs. It is especially inter-
esting to bring together the concepts of
market orientation and brand orientation
and compare their relationship with firm
performance in SMEs.
The remainder of the paper is orga-
nized as follows. In the next section, the
theoretical background is discussed.
Market orientation and brand orientation
are defined and elaborated in the specific
context of SMEs. In addition, the firm
growth in the SME context is briefly dis-
cussed. Finally, the research questions
are specified. In the following section,
the development of the questionnaire
and data collection and analysis methods
are described. Finally, the results are pre-
sented and theoretical and practical con-
clusions drawn.
Theoretical Background
Market Orientation
Market orientation is based on the mar-
keting concept (Jaworski and Kohli 1993)
that may be defined as the organization’s
purpose to identify needs and wants in its
target markets and, subsequently, to
satisfy these more effectively and effi-
ciently than do competitors (Slater and
Narver 1998). Traditionally, market orien-
tation has been examined from two
perspectives—behavioral and cultural
(Becker and Homburg 1999). Kohli and
Jaworski’s (1990) seminal discussion of
the construct of market orientation repre-
sents the behavioral view. From this per-
spective, market orientation is defined
through three sets of activities: generation
of market intelligence concerning present
and future needs of the customers; dis-
semination of this information through
the organization; and the organization-
wide task of responding to the intelli-
gence gathered by making and im-
plementing plans based on the gathered
information (Jaworski and Kohli 1993).
The cultural perspective (Narver and
Slater 1990) claims that market orienta-
tion is an organizational culture com-
posed of three behavioral elements,
namely customer orientation, competitor
orientation, and interfunctional coordi-
nation. Customer- and competitor-
oriented firms gather information about
customers and competitors, and then
effectively disseminate this information
throughout the organization. Interfunc-
tional coordination refers to the coordi-
nated creation of customer value based
on the acquired information.
Clearly, there is some overlap in the
two approaches. From the behavioral
perspective, the focus is on action, and
the emphasis is specifically on informa-
tion related behavior (Helfert, Ritter, and
Walter 2002). From the cultural perspec-
tive, the focus is on the norms and values
within the organization (Becker and
Homburg 1999), but the behavioral com-
ponents are still much emphasized
(Helfert, Ritter, and Walter 2002).
González-Benito and González-Benito
(2005) found a positive relationship
between these approaches. Though they
argued that a cultural market orientation
does not necessarily precede a behavioral
market orientation, they suggested that
the development of market-oriented
culture leads to consistent behavior and,
accordingly, market-oriented behavior
enhances the development of a concor-
dant culture in the organization. In this
paper, the view of Narver and Slater
(1990) is adopted and market orientation
is examined from the cultural perspec-
tive. The growth of SMEs is greatly
affected by the attitudes and objectives of
the owner–managers as exhibited in their
behavior (Reijonen and Komppula 2007).
Consequently, the perspective that high-
lights values within the organization is
chosen while not forgetting the behavior.
REIJONEN ET AL.
Many studies demonstrate the positive
effect of market orientation on firm per-
formance (e.g., Appiah-Adu and Singh
1998; Kohli and Jaworski 1990; Narver
and Slater 1990; Simpson and Taylor
2002; Vorhies, Harker, and Rao 1999).
Market orientation is found to be a pre-
requisite of strong market performance
and firm growth (Tzokas, Carter, and
Kyriazopoulos 2001) and a means by
which a firm may create superior value
for customers and, consequently, achieve
both superior competitive advantage and
thereby above normal market perfor-
mance (Slater and Narver 1998).
Commonly used performance mea-
sures include self-reported, judgmental
evaluations of profitability (e.g., Kim
2003; Narver and Slater 1990), market
share, percentage of new product sales
and ROI (e.g., Matsuno, Mentzer, and
Özsomer 2002), market growth (Kim
2003), and overall performance of the
business unit and overall performance
relative to major competitors (e.g.,
Jaworski and Kohli 1993; Pulendran,
Speed, and Widing 2003).
Market Orientation in SMEs
The number of studies on market ori-
entation in the context of SMEs is small
(Blankson and Cheng 2005). However,
research indicates that market orienta-
tion is not related to any specific firm
size (Blankson and Cheng 2005; Laforet
2008) and that the construct is as appro-
priate to small as it is to large organiza-
tions (Blankson, Motwani, and
Levenburg 2006). It has been suggested,
in fact, that market orientation gives
small enterprises a potential competitive
advantage over their larger counterparts.
The reasons for this are that SMEs are
closer to customers and able to respond
to their needs quickly and flexibly, they
have less organizational bureaucracy and
thus they are able to disseminate cus-
tomer information quickly and with
fewer modifications, and finally, due to
their more informal nature, they can
701
implement marketing plans quickly
(Keskin 2006).
The role of the owner–managers in
SME marketing is pivotal as these indi-
viduals are seen to be omnipresent in
every function of the small firm. To a great
extent, marketing in SMEs is related to the
owner–managers’ attitudes to, experience
of, and expertise in marketing (McCartan-
Quinn and Carson 2003). Their decision-
making and inherent skills and abilities
likewise decisively affect the marketing
practices adopted (O’Dwyer, Gilmore,
and Carson 2009). In the same way,
owner–managers play crucial roles in
developing a market-oriented culture in
their enterprises (Alpkan, Yilmaz, and
Kaya 2007). Empirical findings suggest
that SMEs demonstrate customer orienta-
tion (Hogarth-Scott, Watson, and Wilson
1996) and that, moreover, a customer-
oriented culture in a small enterprise is a
result of the management style of the
owner–manager (Barnes 2001). With
regard to market-oriented activities,
owner–managers are essential to success-
ful implementation. Though many SMEs
are interested in customer and competitor
information (Keh, Nguyen, and Ng 2007),
they seem to be quite opportunistic in
their information seeking (Fuelhart and
Glasmeier 2003) and their main sources
appear to be informal (Renko et al. 2005).
Though dissemination of this information
is not seen as problematic (Renko et al.
2005), it is only the highly entrepreneurial
SMEs that are likely to actively utilize it
(Keh, Nguyen, and Ng 2007).
Those few studies that examine the
impact of market orientation on SME per-
formance (e.g., Kara, Spillan, and
DeShields 2005; Li et al. 2008; Megicks
and Warnaby 2008; Pelham 2000) gener-
ally prove this to be positive. For
example, small firms with a higher
degree of customer orientation are likely
to be more profitable than their less
customer-oriented counterparts (Appiah-
Adu and Singh 1998). The current study
presents more information on how SMEs
702 JOURNAL OF SMALL BUSINESS MANAGEMENT
that have adopted the elements of
market orientation at different levels
perform with regard to growth.
Brand Orientation
The position and importance of
brands as a part of business activities can
be examined through brand orientation.
This concept refers to the extent to
which the marketing strategy and activi-
ties are focused on the brand in order to
create distinctiveness (Wong and Merri-
lees 2005). In brand-oriented firms, a
brand is created and managed by the
organization as an integral part of orga-
nizational processes in interaction with
customers (Urde 1999). The goal is to
achieve sustainable competitive advan-
tage. Brand orientation can therefore be
seen as a strategic choice aiming for
growth and profitability (Urde 1994;
Wong and Merrilees 2005).
It has been suggested that brand ori-
entation may play a critical role in
guiding a firm’s growth (Wong and Mer-
rilees 2005). Although academic research
is in its infancy, the existing work sug-
gests that brand orientation has an indi-
rect influence on the financial
performance of a firm and, further, that
brand barriers (e.g., a lack of resources
and capabilities) have a negative influ-
ence on brand orientation and, conse-
quently, on brand performance and,
further, on firm performance (Wong and
Merrilees 2008). In the context of non-
profit organizations, a positive associa-
tion has been found between brand
orientation and organizational perfor-
mance (Napoli 2006).
A study examining the conceptual
relationship between integrated market-
ing communication, brand orientation,
and market orientation indicates that
higher level of market orientation leads
to a higher level of brand orientation
(Reid, Luxton, and Mavondo 2005). Fur-
thermore, it suggests that the principal
link between the two concepts is the
customer since brand orientation pro-
 Table 1
Approaches to Studying Small Firm Growth
(Adopted from Dobbs and Hamilton 2007)
Approach Suggestions

Stochastic Numerous factors affect growth/decline; no dominant theory

Descriptive Stage models; how a small firm adapts internally in order to
grow
Evolutionary Growth is contingent on the interaction of internal and
external factors; it is a result of firm’s unique circumstances
Resource-Based Growth depends on the managerial resources available to plan
and manage it
Learning Through learning knowledge is created that facilitates the
evolution of the business
Deterministic Explanatory variables that explain a major part of the variation
in business growth rates can be identified; these relate, for
example, to people, firm, business environment

vides a means of translating the long- Growth in SMEs

term objectives of market orientation
into a set of activities. In the case of
SMEs, the rallying point between the two
constructs could also be the owner–
manager who often represents the
essence of the enterprise.
Except for a few qualitative studies,
the research on brand orientation in the
context of SMEs is scarce. There are
three ladder models of brand orientation
according to which the role of branding
may vary in SMEs from minimalist to
limited and at its highest to integrated
level of brand orientation (Wong and
Merrilees 2005). The more brand-
oriented the firm is, the more it pursues
strategic brand and marketing related
performance benefits, such as competi-
tive positioning and brand distinctive-
ness. The problem of branding in SMEs is
defined to be related more to a lack of
clear positioning and distinctiveness than
to communication (Inskip 2004). Conse-
quently, there are real opportunities
for SMEs to exploit corporate branding
strategies.
Based on the recent literature, Dobbs
and Hamilton (2007) identified six
approaches to the study of small busi-
ness growth: stochastic, descriptive, evo-
lutionary, resource-based, learning, and
deterministic (Table 1). In empirical
studies, small firm growth is explained
by factors that relate to the following:
managerial strategies (growth objectives,
employee recruitment and development,
product market development, finan-
cial resources, internationalization and
business collaboration, and flexibility);
characteristics of the entrepreneur (moti-
vation, education, experience, and size
of the founding team); environmental/
industry specific factors (e.g., demand
and supply side variations); and charac-
teristics of the firm (e.g., size and age)
(Dobbs and Hamilton 2007). In the
context of SMEs, the role of the owner–
managers is once again emphasized as it
is argued that their abilities, motivations,
and goals have a decisive effect on the
decision to enlarge or maintain the firm
size they are comfortable with (Walker

REIJONEN ET AL. 703

and Brown 2004). Empirical studies indi-
cate that owner–managers have a diverse
set of business goals, many of which do
not relate to firm growth and a great part
of the owner–managers also state that
they have a “no growth” objective
(Greenbank 2001). Thus, it is argued that
many small business owners are content
to keep their firms small (Walker and
Brown 2004).
At the same time, the importance of
enhancing the opportunities for small
firms to grow is recognized. The majority
of the firms worldwide are categorized as
SMEs. They are important in creating
jobs and promoting the overall growth of
the economy, for example, by bringing
innovations to the markets.
The growth of a firm is usually evalu-
ated by the changes in its size. Growth
measures include changes in turnover,
assets, number of employees, market
share, market value of the firm, physical
output, and different measures of prof-
itability (e.g., Dobbs and Hamilton 2007;
Murphy, Trailer, and Hill 1996). These
are used as separate measures or as a
combination. In the present study, the
respondents were asked to evaluate
the changes in turnover, number of
employees, profitability and market
share. Based on these evaluations, the
respondents were clustered into
growing, stable, and declining firms.
The decision to use a combination of
different growth measures is based on
the desire to take a more comprehen-
sive look at small firm growth. The dif-
ferent measures represent different
aspects of firm growth with regard to
which small business owners tend to
have different objectives. For example,
the studies by Reijonen and Komppula
(2007) and Komppula (2004) indicated
that growth in turnover is desirable to
most owner–managers, whereas an
increase in the number of employees is
not due to various reasons relating, for
example, to hiring costs and quality of
work.
704 JOURNAL OF SMALL BUSINESS MANAGEMENT
Research Questions
In the academic literature, it is sug-
gested that market orientation has a posi-
tive impact on firm performance (e.g.,
Appiah-Adu and Singh 1998; Kohli and
Jaworski 1990; Narver and Slater 1990;
Simpson and Taylor 2002; Vorhies,
Harker, and Rao 1999). Market orienta-
tion is regarded as a prerequisite for
strong market performance and business
growth (Tzokas, Carter, and Kyriazopou-
los 2001). According to the seminal
paper by Narver and Slater (1990),
market orientation is composed of three
separate elements: customer orientation,
competitor orientation, and interfunc-
tional coordination. With regard to brand
orientation and its impact on firm perfor-
mance, the academic literature is scarce.
However, it is suggested that brand ori-
entation may play a critical role in
guiding a firm’s growth (Wong and Mer-
rilees 2005). The objective of this paper
is to achieve a more profound under-
standing of different elements of market
orientation and brand orientation and
their relation to small firm growth.
In this paper, we examine the
following:
(1) If there are any differences between
declining, stable, and growing SMEs
with regard to the different ele-
ments of market orientation;
(2) If there are any differences between
declining, stable, and growing SMEs
with regard to brand orientation.
Data and Methods
Questionnaire Development
In questionnaire development, we
drew on the literature on market orien-
tation and brand orientation discussed
earlier (Table 2). In prior research, differ-
ent measures of market orientation have
been applied. One of the best known
measures is the 20-item market orienta-
tion scale (MARKOR) developed by
Kohli, Jaworski, and Kumar (1993).
MARKOR focuses on the measurement of
 Table 2
Measure Items in the Questionnaire
Measure Items Source

Customer Orientation
V1 We Have a Strong Commitment to Our Gray et al. (1998); Deng and Dart
Customers (1994); Narver and Slater (1990)
V2 We Are Always Looking at Ways to Create Gray et al. (1998); Deng and Dart
Customer Value in Our Products (1994); Narver and Slater (1990)
V3 We Encourage Customer Comments and Gray et al. (1998); Deng and Dart
Complaints because They Help Us Do a (1994); Narver and Slater (1990)
Better Job
V4 Our Business Objectives Are Driven by Farrell, Oczkowski, and Kharabsheh
customer Satisfaction (2008); Narver and Slater (1990)
V5 We Measure Customer Satisfaction on a Gray et al. (1998); Deng and Dart
Regular Basis (1994); Narver and Slater (1990)
V6 After-Sales Service Is an Important Part of Gray et al. (1998); Deng and Dart
Our Business Strategy (1994); Narver and Slater (1990)
Competitor Orientation
V7 We Regularly Monitor our Competitors’ Gray et al. (1998); Deng and Dart
Marketing Efforts (1994)
V8 We Frequently Collect Marketing Data on Gray et al. (1998); Deng and Dart
Our Competitors to Help Direct Our (1994)
Marketing Plans
V9 Our People Are Instructed to Monitor and Gray et al. (1998); Deng and Dart
Report on Competitor Activity (1994)
V10 We Respond Rapidly to Competitors’ Gray et al. (1998); Deng and Dart
Actions (1994); Narver and Slater (1990)
V11 Our Top Managers Often Discuss Gray et al. (1998); Deng and Dart
Competitors’ Actions (1994); Narver and Slater (1990)
V12 We Target Customers and Customer Farrell et al. (2008); Deng and Dart
Groups Where We Have, or Can (1994); Narver and Slater (1990)
Develop, Competitive Advantage
Interfunctional Coordination
V13 Market Information Is Shared Inside Our Gray et al. (1998); Deng and Dart
Organization (1994)
V14 Persons in Charge of Different Activities in Gray et al. (1998); Deng and Dart
Our Organization Are Involved in (1994)
Preparing Business Plans/Strategies
V15 We Do a Good Job Integrating the Gray et al. (1998); Deng and Dart
Activities Inside Our Organization (1994)
V16 We Regularly Have Interorganizational Gray et al. (1998); Jaworski and
Meetings to Discuss Market Trends and Kohli (1993)
Developments
V17 We Regularly Discuss Customer Needs in Gray et al. (1998); Jaworski and
Our Organization Kohli (1993)
Brand Orientation
V18 Branding Is Essential to Our Strategy Wong and Merrilees (2008)
V19 Branding Flows through All Our Marketing Wong and Merrilees (2008)
Activities
V20 Branding Is Essential in Running This Wong and Merrilees (2008)
Company
V21 The Brand Is an Important Asset for Us Wong and Merrilees (2008)

REIJONEN ET AL. 705

activities relating to the generation of
market intelligence, its dissemination
within the organization and responsive-
ness to it. Deng and Dart (1994) adopted
Narver and Slater’s (1990) cultural view
on market orientation and established
a measure that is composed of four
components: customer orientation, com-
petitor orientation, interfunctional coor-
dination, and profit emphasis. Gray et al.
(1998) subsequently developed what
they called “a better measure of market
orientation” in which the ideas of Narver
and Slater (1990), Jaworski and Kohli
(1993), and Deng and Dart (1994) were
integrated. The results of Gray et al.’s
(1998) study showed that some of the
variables measuring intelligence dissemi-
nation (Jaworski and Kohli 1993) can be
combined with the measures of inter-
functional coordination (Narver and
Slater 1990). In the current study, we
examined market orientation through the
three elements: customer orientation,
competitor orientation, and interfunc-
tional coordination (Narver and Slater
1990). However, as suggested by Gray
et al. (1998), the scale measuring
interfunctional coordination includes
variables relating to intelligence dissemi-
nation. Brand orientation was measured
by four items derived from the work of
Wong and Merrilees (2008).
In addition, the performance of the
firms is measured in terms of growth in
revenue, market share, profitability, and
number of personnel during the past
three years. A five-point scale was
applied in which the respondents were
asked to state if their performance, in
terms of the aforementioned measures,
has declined substantially, declined
slightly, remained stable, grown slightly,
or grown substantially. González-Benito
and González-Benito (2005) suggested
that subjective measures (i.e., self-
reported, judgmental assessments) are
more appropriate than objective mea-
sures when examining the impact of
market orientation on performance.
706 JOURNAL OF SMALL BUSINESS MANAGEMENT
Three reasons are given for this: subjec-
tive measures facilitate (1) the assess-
ment of complex dimensions of
performance (e.g., customer satisfac-
tion), (2) cross-sectional analysis because
performance can be quantified in com-
parison to objectives and competitors,
and (3) the consideration of lagged
effects and the strategy of the firm. It is
further argued that the relationship
between market orientation and subjec-
tive measures of performance is stronger
than that between market orientation
and objective measures of performance
(González-Benito and González-Benito
2005). Thus, in the present study, the
respondents were asked to give subjec-
tive evaluations of the development of
their business operations.
Data Collection
The contact information of the SMEs
studied was obtained from a company
register held by a local regional develop-
ment company in North Karelia, Finland.
From this register, all those enterprises
were selected that employed up to 249
persons, were profit-seeking organiza-
tions, and had an e-mail address. Thus,
an online questionnaire was sent to
4,502 SMEs. We obtained 595 responses,
the response rate being 13 percent, of
which 500 were effective for this study.
Data Analysis
The data were analyzed in six phases.
First, the firms were segmented into
three clusters in order to identify the
growing, stable, and declining firms in
terms of the four performance measures,
namely growth in revenue, market share,
profitability, and number of personnel.
Second, principal component analysis
with Varimax rotation was conducted to
determine whether the multi-item infor-
mation derived from the questionnaire
could be condensed, also in the SME
context, into the groups proposed in the
literature. Principal component analysis
was also used to ascertain how the brand
orientation variables interact with the
market orientation variables as these
have not so far been studied together in
a single factor model. After revising the
initial factor model, a four-factor solution
was generated, as suggested in the litera-
ture. The internal consistency of items
(i.e., convergent validity) in each of the
four constructs was tested by Cronbach’s
alphas. Third, a confirmatory factor
analysis (CFA) was conducted in order to
validate the constructs and their discrimi-
nant validity. For cross-validation, the
data were randomly split in two equally
sized subsamples with 250 cases each.
One of the subsamples was used for the
exploratory stage, that is, principal com-
ponent analysis, and the other in the
confirmatory analysis.
Fourth, the items loaded on each of
the constructs were combined to create
composite measures. In the fifth phase,
the composite measures were used as
dependent variables in the analysis of
variance (ANOVA) exploring statistical
differences between declining, stable,
and growing firms of the whole sample.
Finally, in the sixth phase, in order to
simplify the identification of group dif-
ferences, post hoc pairwise comparison
test was used.
Results
Cluster Analysis
The four performance measures were
used as clustering variables in order to
identify declining, stable, and growing
firms. K-means cluster analysis was used.
This is a clustering method that parti-
tions the data into a number of clusters
specified by the researcher. Therefore,
there is no specific analysis result that
would mathematically demonstrate the
best number of clusters, but it is rather
based on some a priori information,
knowledge, or goal of the researcher.
K-means clustering is especially useful as
it is not sensitive to outliers in the data
(as is the case with hierarchical cluster
analysis) when grouping cases have
REIJONEN ET AL.
similar characteristics and when the
sample size is large (Hair et al. 1998).
The results showed that there were 84
firms that could be characterized as
declining, 193 as stable, and 223 as
growing in terms of the four perfor-
mance measures. All the performance
measures make a significant (p < .001)
contribution to the clustering process.
Moreover, the F-statistics show that the
firms differ most in terms of revenue
(F = 621.245) and least in terms of
number of personnel (F = 91.679),
whereas market share (F = 406.317) and
profitability (F = 408.729) fall equally
somewhere in between (Table 3).
Principal Component Analysis
The initial factor procedure with the
randomly split sample of 250 cases and
all 21 items produced a four-factor solu-
tion with eigenvalues greater than 1 rep-
resenting 76.7 percent of the total
variance of the variables. In order to
ensure practical significance, factor load-
ings less than 0.50 were excluded (Hair
et al. 1998). The factor solution revealed
that variable 12 did not load on any of
the four factors, and it was therefore
removed from further analysis. More-
over, variable 17 had significant loadings
on two separate factors and was also
removed from further analysis.
After removing variables 12 and 17, a
revised factor solution was generated
with the remaining 19 items (Table 4).
The revised model is composed of four
factors with eigenvalues greater than 1.
The solution represents 78.6 percent of
the total variance of the variables. The
Kaiser–Meyer–Olkin (KMO) measure of
sampling adequacy (KMO = 0.942) and
the Bartlett test of sphericity (p < .001)
confirmed that the analysis was appro-
priate. Moreover, the internal consis-
tency of the factors measured with
Cronbach’s alphas ranged from 0.893 to
0.968, showing good reliability. In addi-
tion, it can be argued that although we
had to remove two variables from the
707
708
Table 3
Results of the K-Means Cluster Analysis
Performance Declining Stable Growing Total F-value Sig.
Measures n = 84 n = 193 n = 223 n = 500

Revenue 2.04 3.63 4.51 3.76 621.245 p < .001

Market Share 2.37 3.18 4.28 3.53 406.317 p < .001
Profitability 2.02 3.13 4.18 4.41 408.729 p < .001
Number of Personnel 2.43 3.16 3.56 3.21 91.679 p < .001

1 = declined substantially, 5 = grown substantially.

JOURNAL OF SMALL BUSINESS MANAGEMENT

 Table 4
Factor Solution
Measure Items Alpha Initial Percentage Factor
Eigenvalue of Variance Loading
Explained

Customer Orientation 0.905 10.320 22.246

We Have a Strong Commitment to Our Customers 0.763
We Are Always Looking at Ways to Create Customer Value in Our Products 0.758
We Encourage Customer Comments and Complaints because They Help Us Do a Better Job 0.764
Our Business Objectives Are Driven by Customer Satisfaction. 0.858
We Measure Customer Satisfaction on a Regular Basis 0.591
After-Sales Service Is an Important Part of Our Business Strategy 0.757
Competitor Orientation 0.927 2.097 21.807
We Regularly Monitor Our Competitors’ Marketing Efforts 0.841
We Frequently Collect Marketing Data on Our Competitors to Help Direct Our Marketing 0.844
Plans
Our People are Instructed to Monitor and Report on Competitor Activity 0.762
We Respond Rapidly to Competitors’ Actions 0.801

REIJONEN ET AL.
Our Top Managers Often Discuss Competitors’ Actions 0.718
Interfunctional Coordination 0.893 1.065 15.716
Market Information Is Shared Inside Our Organization 0.635
All Departments Are Involved in Preparing Business Plans/Strategies 0.757
We Do a Good Job Integrating the Activities inside Our Organization 0.771
We Regularly Have Interorganizational Meetings to Discuss Market Trends and 0.756
Developments
Brand Orientation 0.968 1.444 18.787
Building a Brand Is a Focal Part of Our Strategy 0.873
Building a Brand Is Integrated in All Our Marketing 0.803
Building a Brand Is an Essential Part of Our Business Operations 0.849
Brand Is a Valuable Asset to Us 0.869

n = 250; Kaiser–Meyer–Olkin measure of sampling adequacy = 0.942; chi-square = 4,415.030; Bartlett’s test of sphericity p < .001.

709
 Table 5
Correlations and Square Root of Average Variance
Extracted (AVE)
Construct Composite AVE 1 2 3 4
Reliability

(1) Customer Orientation 0.920 0.540 0.735

(2) Competitor Orientation 0.933 0.670 0.576 0.819
(3) Interfunctional Coordination 0.872 0.630 0.674 0.686 0.794
(4) Brand Orientation 0.965 0.875 0.653 0.505 0.621 0.935

n = 250; goodness-of-fit statistics: c2 (146) = 285.819, p < .001, Goodness-of-Fit Index

(GFI) = 0.890, Adjusted GFI = 0.857, Normed Fit Index (NFI) = 0.926, Comparative Fit
Index (CFI) = 0.962, Root Mean Square Error of Approximation (RMSEA) = 0.062.

final factor solution, our findings are in ANOVA

accordance with the measures of market
orientation suggested and tested in the
literature (Deng and Dart 1994; Gray
et al. 1998).
CFA
To assess discriminant validity, a four-
construct measurement model based on
CFA but with the other random split
sample of 250 cases was constructed.
Discriminant validity analysis refers to
testing statistically whether the con-
structs used in the study are distinct from
each other. The constructs are different,
and discriminant validity is supported if
the square root of the average variance
extracted (AVE) for a given construct is
greater than the absolute value of the
standardized correlation of any other
construct in the analysis. Table 5 pre-
sents the constructs’ correlations derived
from the estimated CFA model, and on
the diagonal, the square root of the AVE
of each construct. The results show that
discriminant validity is supported and
that the four constructs are indeed sepa-
rate from each other. Moreover, the
absolute AVE values exceed the common
threshold level of 0.50 (Fornell and
Larcker 1981), lending further support to
the convergent validity of the constructs.
The total mean values of the four con-
structs measured showed that SMEs lean
most toward customer orientation, fol-
lowed by brand orientation. On the other
hand, it seems that interfunctional coor-
dination and competitor orientation
receive little attention, the mean values
being below 3. The results of the ANOVA
test showed statistically significant
(p < .001) differences between the firms
of declining performance, stable perfor-
mance, and growing performance in rela-
tion to all measured constructs. Brand
orientation appeared to differentiate the
firms most (F = 18.182), competitor ori-
entation least (F = 8.421). Interfunctional
coordination (F = 11.041) and customer
orientation (F = 10.461) fell somewhere
in between (Table 6).
As Levene’s test showed equal vari-
ances in case of each of the constructs,
Tukey’s honestly significant difference
test was used for more detailed explora-
tion of the results. The post hoc pairwise
test showed that in the firms with
growing performance, customer orien-
tation, competitor orientation, inter-
functional coordination, and brand
orientation were at a higher level than in
those firms whose revenues had been
declining or remained stable during the

710 JOURNAL OF SMALL BUSINESS MANAGEMENT

 Table 6
Analysis of Variance Results
Dependent Variable Declining Stable Growing Total F-Value
Customer Orientation 3.44
Competitor Orientation 2.37
Interfunctional Coordination 2.52
Brand Orientation 2.78
n = 500; 1 = totally disagree, 5 = totally agree.
past three years. However, it appeared
that there is no statistically significant
difference between declining and stable
firms in terms of market orientation con-
structs, and in terms of brand orienta-
tion, the difference is significant only at
p < .05 level (Table 7).
The results clearly indicate that
growing firms are significantly more
market-oriented than declining and
stable firms. Moreover, the level of brand
orientation differs most between the
groups. Hence, market orientation and
brand orientation are valid constructs for
studying the growth of SMEs.
Conclusions and
Discussion
This paper examines whether
growing, stable, and declining SMEs
differ from one another with regard to
market orientation and brand orienta-
tion. The relationship between these two
constructs remains underreported in the
literature. In this study, performance is
measured in terms of growth in revenue,
market share, profitability, and number
of personnel over the past three years.
On the basis of these performance mea-
sures, SMEs are classified as declining,
stable, and growing SMEs.
The results show that among the four
constructs measured, it is brand orienta-
tion that differentiates the declining,
stable, and growing SMEs most clearly.
REIJONEN ET AL.
Sig.
3.54 3.84 3.66 10.461 p < .001
2.47 2.81 2.60 8.421 p < .001
2.79 3.13 2.90 11.041 p < .001
3.15 3.59 3.29 18.182 p < .001
In addition, highly significant differences
with regard to growth appear in all
market orientation elements, but com-
petitor orientation has the weakest
effect. Our results permit the conclusion
that growing firms are significantly more
brand-oriented and also more oriented to
customers and interfunctional coopera-
tion than declining and stable firms.
These results are in line with the sugges-
tion presented in the literature that brand
orientation may play a critical role in
guiding a firm’s growth (Urde 1994;
Wong and Merrilees 2005). They are also
in accordance with the findings that
more customer-oriented SMEs are likely
to be more profitable than their less
customer-oriented counterparts (Appiah-
Adu and Singh 1998).
This study highlights the role of inter-
functional coordination, something not
previously emphasized in the literature.
It could be assumed that the importance
of organizing interfunctional coordina-
tion grows with firm size. In micro firms
with fewer than 10 employees, it may be
a quite natural and informal part of busi-
ness operations. With regard to larger
organizations the need to formally coor-
dinate, the creation of customer value
increases. More attention should be paid
to involving employees in sharing and
discussing market intelligence and also
in planning and implementing strategies
created on the basis of the intelligence.
This should, however, be studied further.
711
712
Table 7
Post Hoc Pairwise Multiple Comparisons Test
Dependent Variable Levene Cluster (I) Cluster (J) Mean Standard Tukey
Test (Sig.) Difference (I–J) Error HSD

Customer Orientation p = .308 Growing Declining 0.40456 0.107 ***

Growing Stable 0.30678 0.082 **
Stable Declining 0.09778 0.109 ns
Competitor Orientation p = .139 Growing Declining 0.44051 0.130 **
Growing Stable 0.33774 0.100 **
Stable Declining 0.10276 0.133 ns
Interfunctional Coordination p = .854 Growing Declining 0.60511 0.138 ***
Growing Stable 0.33488 0.106 **
Stable Declining 0.27023 0.141 ns
Brand Orientation p = .083 Growing Declining 0.81738 0.145 ***
Growing Stable 0.44132 0.111 ***
Stable Declining 0.37606 0.148 *

HSD, Honestly Significant Difference; ns, not significant.

JOURNAL OF SMALL BUSINESS MANAGEMENT

*p < .05
**p < .01
***p < .001
 It is noteworthy that the most signifi-
cant statistical differences are found
between declining or stable firms in com-
parison to the growing ones. This result
suggests that the elements of market ori-
entation and brand orientation play a
significant role in enhancing firm perfor-
mance. Consequently, those SMEs
looking for ways to improve their perfor-
mance should focus on brand orientation
and on the various elements of market
orientation. This is in accordance with
the assumption that both market orien-
tation and brand orientation act as
factors enabling and enhancing firm per-
formance either directly or through
mediators (González-Benito and
González-Benito 2005; Narver and Slater
1990; Wong and Merrilees 2008).
Overall, the results of this study
clearly demonstrate that growing SMEs
can be differentiated from stable and
declining SMEs with regard to their level
of adoption of the separate elements of
market orientation and brand orienta-
tion. The growing firms have adopted
them to a greater extent. The literature
suggests that owner–managers are the
pivotal factors in adopting and imple-
menting marketing and, for example,
market orientation in their firms (Alpkan,
Yilmaz, and Kaya 2007; McCartan-Quinn
and Carson 2003; O’Dwyer, Gilmore, and
Carson 2009). Thus, in order to support
the growth of SMEs, more attention
should be paid to the support available
to owner–managers. More information
and training should be offered on issues
relating to market orientation and brand
orientation so that the awareness of their
importance and contribution to the
development of small firms increases.
Consequently, the increased information
may affect decision-making and behavior
in small firms. Our results suggest that
market orientation and brand orientation
play an important role regardless of
whether the aim is to enhance profitabil-
ity or increase the number of personnel.
It is important for owner–managers to
REIJONEN ET AL.
realize that these orientations can prove
to be helpful with various growth and
performance goals. Furthermore, simple,
user-friendly tools should be provided
for the gathering and analysis of market
intelligence. Often in small firms, infor-
mation gathering is very informal. Suit-
able simple tools could make the
utilization of the information more
effective.
Although the impact of market orien-
tation on firm performance has been an
object of interest in many studies, there
remains a need to understand it better in
the context of SMEs. For example, the
results of this study show that the level
of competitor orientation is quite low in
SMEs. Competitor orientation, however,
is regarded as an important factor when
positioning a firm in the markets. Thus, it
would be interesting to study why its
level is so low in SMEs and how higher
competitor orientation might affect per-
formance. The relationship between
market orientation and brand orientation
also needs further investigation.
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