The Effect of Market Orientation on Business Performance: An Empirical Study of Moderating and Mediating Factors in the Pharmaceutical Industry

Christina Hetkamp & Martin Rodian Pedersen

Student thesis: Master thesis

Abstract

In today’s business world, technological advances have enabled customers to be more informed about their product and service choices. Companies therefore place greater importance on considering customer needs and adjusting their business decisions towards the individual customer. A strategic orientation that centers around the idea of creating superior business performance by means of putting the customer first is market orientation. Market orientation as been argued to drive business performance, because it effectively incorporates current and latent needs of the customers, the internal company dynamics and external market factors. Empirical evidence for the concept has however only been found in later years; still resulting in mixed findings in terms of the link between market orientation and business performance. This thesis therefore concerns with studying two models that 1) explore the market orientation and objective business performance link including three proposed moderating environmental factors, and 2) consider the role of the proposed mediating factor of innovation and three moderating environmental factors. The models are tested within the pharmaceutical industry, by utilizing the current industry trend of shifting attention from payers to patients. By conducting a content analysis of the letters of shareholder of the past five years of publicly listed pharmaceutical companies in developed countries, the two proposed models are empirically investigated. The findings indicate that market orientation positively impacts business performance outcomes. However, the results do not support the moderating effects of the environmental factors on the market orientation and objective business performance link. In terms of the second model, no evidence could be found for the mediating role of innovation. Market orientation therefore does not directly impact innovation and innovation effects further do not influence business performance measures. The outcomes however indicate a significant positive influence of the moderating variables competitive intensity and technological turbulence on the relationship between market orientation and innovation. The results however indicate a negative influence instead of the proposed positive one. No evidence was found for the effect of market turbulence on the innovative performance of the companies.

EducationsMSc in International Marketing and Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages125
SupervisorsWolfgang Sofka