Industrial Marketing Management 34 (2005) 281 – 283

Innovativeness and capacity to innovate in a complexity of firm-level

relationships: A response to Woodside (2004)
Robert F. Hurleya, G. Tomas M. Hultb,*, Gary A. Knightc
a
Fordham University, United States
b
International Business Center (MSU-CIBER), 7 Eppley Center, Michigan State University, East Lansing, MI 48824-1121, United States
c
Florida State University, United States

Accepted 10 July 2004

Available online 19 November 2004

Abstract

Woodside [Woodside, A. G. (2004). Firm orientations, innovativeness and business performance: Advancing a systems dynamics view
following a comment on Hult, Hurley, and Knight’s 2004 study. Industrial Marketing Management, in press.] has crafted a thoughtful paper
that makes a number of contributions and raises several important issues regarding firm orientations, innovation constructs, and business
performance. In this paper, we attempt to address the issues brought up by his close evaluation of our recent IMM paper [Hult, G. T. M.,
Hurley, R. F., & Knight, G. A. (2004). Innovativeness: Its antecedents and impact on business performance. Industrial Marketing
Management, 33(5), 429–438.] in comparison with our thoughts in an earlier paper in the Journal of Marketing [Hurley, R. F., & Hult, G. T.
M. (1998). Innovation, market orientation, and organizational learning: An integration and empirical examination. Journal of Marketing,
62(July), 42–54.].
D 2004 Elsevier Inc. All rights reserved.

1. Introduction 2. Conceptual issues concerning innovation

Professor Arch Woodside has crafted a thoughtful paper
that makes a number of contributions. First, he helps clarify
some conceptual issues concerning the process of innova-
tion from idea generation to implementation. Second, he
raises some important issues regarding the direction of
causality and the need for feedback loops and lag effects to
capture the complexity of market orientation and innovation
as elements of organizational vitality and adaptation.
Finally, he leads by example in offering an interactive
approach to building scholarly knowledge by careful read-
ing, thinking, and productively challenging and extending
the work of other researchers. We will examine each of
these contributions and attempt to build on them in this
paper.
* Corresponding author. Tel.: +1 517 353 4336; fax: +1 517 432 1009.
E-mail address: hult@msu.edu (G.T.M. Hult).
0019-8501/$ - see front matter D 2004 Elsevier Inc. All rights reserved.
doi:10.1016/j.indmarman.2004.07.006
Woodside’s first contribution is to point out a conceptual
flaw in how we conceived of the innovation process in Hult,
Hurley, and Knight (2004) versus our earlier formulation in
Hurley and Hult (1998). In the Hult et al. paper, we
incorrectly suggested that innovativeness was equivalent to
the bcapacity to introduceQ innovations. In Hurley and Hult,
we distinguished between binnovativenessQ, which is a
cultural readiness and appreciation for innovation, from
binnovative capacityQ, which is the degree of innovations
actually produced or adopted by the organization. The
Hurley and Hult formulation more closely resembles our
understanding and research concerning how innovation
actually occurs, and Woodside (2004) is correct to suggest
that the Hult et al. confuses the issue somewhat.
Innovativeness, as being a cultural precursor and
providing the social capital to facilitate innovative behavior,
is central to understanding how to create innovative and
adaptive organizations. Underneath the innovativeness of
the organization’s culture resides a series of individual and
282 R.F. Hurley et al. / Industrial Marketing Management 34 (2005) 281–283
group level properties that are characteristics of individual
and group idea generation, learning, creativity, and change.
Insight and innovative ideas occur to individuals not
organizations, but learning is manifest in the organization
only when ideas are shared, actions taken, and common
meaning developed at the group and organization level
(Hurley, 2002). This adds complexity to Woodside’s (2004)
formulation in that it suggests that a multilevel analysis is
required to accurately model how innovation and business
performance are related (cf. Homburg & Pflesser, 2000).
However, the multi-level logic also supports Woodside’s
(2004) suggestion that the nature of relationships among
market orientation and innovativeness are more intricate
than portrayed in Hult et al. (2004), and perhaps even
different depending on the firms studied (e.g., Hult, Snow,
& Kandemir, 2003). For example, he suggests that there are
strong links among customer orientation, innovativeness,
and firm performance—we agree that this may be the case
in certain circumstances. In addition, we agree with Wood-
side’s suggestions that: (1) the interfunctional coordination
component of market orientation, in addition to supporting
innovativeness, may itself be supported via possession of
innovativeness; and (2) that organizational performance
may impact the firm’s ability to be innovative (either
positively or negatively).
3. Causality, feedback loops, lag effects, and
higher-order analysis
Woodside’s (2004) second contribution is to use the
Hult et al. (2004) paper as a concrete example of how the
introduction of a system dynamics and relationship
marketing perspective can enhance our understanding of
how innovativeness ultimately affects firm performance.
This is an interesting notion that merits further work. In
particular, determining the precise direction of causality in
a strategic relationship is a major challenge in business
research (e.g., Boulding & Staelin, 1995). Generalizability
of a strategic action on firm performance is best assessed,
at least conceptually, both within and across firms, and
also perhaps using firm-level samples that represent world
regions, countries, and strategy types (cf. Makino, Isobe, &
Chan, 2004). This requires longitudinal data in varied
circumstances.
We have some suggestions for pursuing this avenue of
research. We agree with Woodside’s notion that innovation-
related models should be more bi-directional. Specifically in
Hult et al. (2004) and Hurley and Hult (1998), there are
empirical and theoretical reasons to suggest that as the
number of innovations produced by an organization
increases it serves to reinforce the innovativeness of the
culture. Thus, innovativeness in an organization’s culture
generates more innovative behaviors and outcomes but
more innovative behaviors and outcomes also increase the
innovativeness of the culture. In fact, the only way to create
cultural innovativeness is to have leaders preach innovation
as zealots long enough until innovative behaviors and
outcomes are created. Then they can point to these tangible
manifestations of the innovativeness of the culture and
celebrate them as living symbols of the company’s values.
Thereafter, people make their own attributions about the
organization’s culture based on observing these symbols and
conclude that the company values innovation.
At the same time, Woodside (2004) acknowledges the
curse of success when he suggests that improved business
performance can lead to inertia. We would suggest that this
may be truer in less dynamic markets and that a delay term
be introduced. Complacency seems to come naturally
when threats disappear from our perceptual set and when
success is a consistent rather than a random stimulus for a
prolonged period of time. While not the central focus of
his paper, we think that Woodside’s ideas on the
application of systems dynamics and the relationship
marketing paradigm to innovativeness and performance
merits more development. For example, how exactly does
the relationship marketing paradigm change models of
innovativeness and performance? Is it really necessary to
distinguish entrepreneurial orientation from innovative-
ness? From a systems dynamics and modeling perspective,
does innovativeness not capture the essence of entrepre-
neurship as new creation?
Another issue raised indirectly by Woodside relates to
whether market orientation is a culture-level variable and/
or a strategy-level variable (e.g., Deshpande & Farley,
1998; Ruekert, 1992). We believe that market orientation
involves elements of both—it incorporates values, norms,
artifacts, and behaviors (cf. Homburg & Pflesser, 2000).
This current market-orientation debate derives in part from
the components of market orientation, which, as Woodside
(2004) implies, might be more consistent with strategy or
even tactical level activities: customer orientation, com-
petitor orientation and interfunctional coordination (Narver
& Slater, 1990). Compared to these variables, market
orientation is a relatively abstract concept, and it is the
sub-factors of market orientation that permit realization of
the larger construct. These sub-factors, or first-order
factors, are more btangibleQ and action-oriented than the
higher-order market orientation construct (cf. Hult &
Ketchen, 2001), much like abstractions by the resource-
based view (Wernerfelt, 1984) and thoughts regarding
positional advantage (Day & Wensley, 1988; Hult,
Ketchen, & Nichols, 2002).
4. Interactive approach to building scholarly knowledge
Finally, we very much appreciate Woodside’s (2004)
scholarly approach to advancing theory development and
testing. Clearly, we agree with Woodside when he states that
bthe temptation to trade-off complexity and nuance for the
sake of achieving parsimonious structural equation model-
 R.F. Hurley et al. / Industrial Marketing Management 34 (2005) 281–283
ing needs to be resisted.Q In that spirit, we believe that if
scholars had built more carefully on Kohli and Jaworski’s
(1990) and/or Narver and Slater’s (1990) early efforts to
understand market orientation we believe that we would be
further ahead in understanding how to help organizations be
more innovative. In particular, Kohli and Jaworski started
with a micro view utilizing in-depth interviews with
managers about their efforts to compete in markets. From
these rich interviews with managers, who emphasized things
such as risk taking and senior managers reinforcing the need
for innovation, a model was developed that abstracted the
antecedents, moderators, and consequences of a market
orientation. Had scholars taken Woodside’s approach, we
might have built on Kohli and Jaworski’s research more
carefully and introduced innovation into these models
sooner rather than ignoring it for nearly a decade (Hurley
& Hult, 1998; cf. Han, Kim, & Srivastava, 1998).
References
Boulding, W., & Staelin, R. (1995). Identifying generalizable effects of
strategic actions on firm performance: The case of demand-side returns
to R&D spending. Marketing Science, 14(3), 222 – 236.
Day, G. S., & Wensley, R. (1988, April). Assessing advantage: A
framework for diagnostic competitive superiority. Journal of Marketing,
52, 1 – 20.
Deshpande, R., & Farley, J. (1998). Measuring market orientation:
Generalization and synthesis. Journal of Market-Focused Management,
2(3), 213 – 232.
Han, J. K., Kim, N., & Srivastava, R. (1998, October). Market orientation
and organizational performance: Is innovation a missing link? Journal
of Marketing, 62, 30 – 45.
Homburg, C., & Pflesser, C. (2000, November). A multiple-layer model of
market-oriented organizational culture: Measurement issues and per-
formance outcomes. Journal of Marketing Research, 37, 449 – 462.
Hult, G. T. M., Hurley, R. F., & Knight, G. A. (2004). Innovativeness: Its
antecedents and impact on business performance. Industrial Marketing
Management, 33(5), 429 – 438.
283
Hult, G. T. M., & Ketchen Jr., D. J. (2001). Does market orientation
matter?: A test of the relationship between positional advantage and
performance. Strategic Management Journal, 22(9), 899 – 906.
Hult, G. T. M., Ketchen Jr., D. J., & Nichols Jr., E. L. (2002). An
examination of cultural competitiveness and order fulfillment cycle
time within supply chains. Academy of Management Journal, 45(3),
577 – 586.
Hult, G. T. M., Snow, C. C., & Kandemir, D. (2003). The role of
entrepreneurship in building cultural competitiveness in different
organizational types. Journal of Management, 29(3), 401 – 426.
Hurley, R. F. (2002). Putting people back into organizational learning.
Journal of Business and Industrial Marketing, 17(4), 270 – 281.
Hurley, R. F., & Hult, G. T. M. (1998, July). Innovation, market orientation,
and organizational learning: An integration and empirical examination.
Journal of Marketing, 62, 42 – 54.
Kohli, A. K., & Jaworski, B. J. (1990, April). Market orientation: The
construct, research propositions, and managerial implications. Journal
of Marketing, 54, 1 – 18.
Makino, S., Isobe, T., & Chan, C. M. (2004). Does country matter?
Strategic Management Journal, 25(10), 1027 – 1043.
Narver, J. C., & Slater, S. F. (1990, October). The effect of market
orientation on business profitability. Journal of Marketing, 54, 20 – 35.
Ruekert, R. (1992). Developing a market orientation: An organizational
strategy perspective. International Journal of Research in Marketing, 9,
225 – 245.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic
Management Journal, 5(2), 171 – 180.
Woodside, A. G. (2004). Firm orientations, innovativeness and business
performance: Advancing a systems dynamics view following a com-
ment on Hult, Hurley, and Knight’s 2004 study. Industrial Marketing
Management, 34(3), 275–279.
Robert F. Hurley is Professor of Marketing in the Graduate School of
Business at Fordham University.
G. Tomas M. Hult is Associate Professor of Marketing and Supply Chain
Management and Director of the International Business Center (MSU-
CIBER) in the Eli Broad Graduate School of Management at Michigan
State University, and Executive Director of the Academy of International
Business.
Gary A. Knight is Associate Professor of Marketing and Multinational
Business and Director of the Multinational Business Program in the College
of Business at Florida State University.