Market Orientation, Brand Orientation and
Performance in an International SME
Context
N.H. WijnbergDouble Degree Advanced International Business and Marketing Student Number: S1914715 or B3002712
University of Groningen and Newcastle University
9th of December, 2013
Supervised by
2 ABSTRACT
Most small-medium sized enterprises do not fully utilise their marketing potential. In order to enhance this, a market or brand orientation can be adopted. Orientations are principles that influence strategy-making and organisational processes. In general, research agrees that a more orientated organisation has superior performance. The majority of this research investigates market and brand orientation in isolation and as a consequence undermine the interaction between the two concepts and their effect on performance. A hybrid orientation does take this interaction into account, however empirical research to identify and fully capture the effects of this orientation has not been addressed.
This study adopts a holistic approach by investigating both concepts of market and brand orientation, and their impact on customer, brand, and financial performance. The results indicate that the adoption of a hybrid orientation will lead to superior customer and brand performance in this particular context. However, these two types of performance do not influence financial performance. Nonetheless, this implies that managers can improve their marketing practices by rejecting the either-or proposition between market and brand orientation and adopt a hybrid orientation. Moreover, a further integration between market and brand orientation is needed to gain more insights in the interactive nature by investigating different commonalities.
Keywords: Market Orientation – Brand Orientation – Performance – Customer Performance
– Brand Performance – Financial Performance – International – Small Medium Enterprises – SMEs – Born Globals – Traditionalist.
3 TABLE OF CONTENTS ABSTRACT ... 2 1. INTRODUCTION ... 6 2. LITERATURE REVIEW ... 8 2.1 Market Orientation ... 8 2.2 Brand Orientation ... 12 2.3 Hybrid Orientations ... 16 2.4 Internationalisation of SMEs ... 19 3. RESEARCH DESIGN ... 20 3.1 Research Questions ... 20 3.2 Research Strategy ... 24 3.3 Construct Development ... 26 4. ANALYSIS ... 29
4.1 Structural Equation Modelling ... 29
4.2 Assumption Checks ... 31
4.3 Confirmatory Factor Analyses ... 32
4.4 Structural Model ... 34
5. FINDINGS ... 36
6. DISCUSSION ... 41
7. IMPLICATIONS ... 44
8. LIMITATIONS AND FUTURE RESEARCH ... 46
9. CONCLUSION ... 47
10. REFERENCES ... 48
APPENDIX A: Construct Items ... 55
APPENDIX B: Coding ... 57
APPENDIX C: Cleaning and Outliers ... 58
APPENDIX D: Assumption Check ... 60
APPENDIX E: Initial CFA Model ... 61
APPENDIX F: CFA – Model 2 ... 66
APPENDIX G: CFA – Model 3 ... 71
APPENDIX H: CFA – Final Model ... 76
APPENDIX I: SEM ... 81
5 ACKNOWLEGDEMENT
I would like to express my appreciation to the participants of this research for their support. Without their effort and time I could not have met my objectives in doing this study. Besides, I would like to express my sincere gratitude to my supervisors, Dr. H. Bahemia and Dr. I. Kalinic, for their guidance and feedback during this project. Last but not least, I would like to thank my family, my girlfriend, and my friends for supporting me throughout the process.
6 1. INTRODUCTION
Often small-medium enterprises (SMEs) do not realise their full marketing potential, because they regard marketing as something for larger organisations, hold a narrow definition of branding, and do not leverage their advantages of flexibility, closeness, and adaptability (Reijonen, Laukkanen, Komppula, Tuominen, 2012; Wong and Merrilees, 2005; Pelham, 2000). In order to improve their marketing, SMEs can enhance their strategic orientation. A strategic orientation is a guiding light influencing the marketing and strategy making within the organisation (Noble, Sinha, Kumar; 2002). The largest paradigm within this stream of literature is market orientation, which revolves around satisfying the needs and wants of customers in a systematic way (Urde, Baumgarth, and Merrilees, 2013; Slater & Narver, 1998). In response to market orientation, brand orientation emerged and challenged the customer is king motto. Brand orientation is an approach to strategy revolving around strategic branding in order to create brand equity in the interaction with internal and external stakeholders (Gromark & Melin, 2011). In addition, an important aspect of the orientated-related literature is the consequences for organisational performance. Research found that both orientations positively influence organisational performance in different contexts (González-Benito & González-Benito, 2005; Wong & Merrilees, 2008; Jaworksi & Kohli, 1993; Baumgarth, 2010; Gromark & Melin, 2011; Narver & Slater, 1990)
However, most of this research investigated either market or brand orientation in isolation. This undermines the interactive nature of both orientations. As a result, a more realistic and dynamic view is proposed by Urde et al (2013) introducing the concept of hybrid orientations. This theory adds two major-minor orientations – market and brand orientation or brand and market orientation – where neither orientation is superior to the other. Inspired by this article, the primary objective of this present study was to use a more holistic approach in the relationship between market orientation, brand orientation, and performance in an international SME setting. For the reason that these concepts received little to no attention in a SME nor international setting, and to further investigate the effects of interaction between market and brand orientation.
7 customer relationships, and retaining customers (Ngo & Cass, 2012). Secondly, brand performance explains the success of the brand by emphasising the importance of awareness, reputation, and loyalty (Wong & Merrilees, 2008). Finally, financial performance assesses performance regarding sales, market share, and profitability of a company (Calantone & Knight, 2000; Shoham, 1999).
A structural equation model was used to analyse 200 international SMEs and their levels of orientation and performance. The findings indicate that SMEs should adopt a hybrid orientation in order to realise a greater customer and brand performance. In addition, synergistic effects were found confirming the interactive nature of both orientations. However, superior customer and brand performance do not realise better financial performance. Nonetheless, SMEs adopting a hybrid orientation would realise superior customer and brand performance in comparison to competitors with an either-or proposition. These findings implicate a further integration between market and brand orientation to fully capture the interactive nature of both orientations.
8 2. LITERATURE REVIEW
This chapter discusses the concepts of market, brand, and hybrid orientation and their foundations and consequences in both larger organisations and SMEs.
2.1 Market Orientation
Many organisations maintain a ‘customer is king’ motto. This is a classic representation of market orientation, which is the largest paradigm in marketing and therefore widely researched. As any orientation, market orientation serves as a guiding light in the organisation by influencing strategy and marketing (Noble, et al., 2002). These types of companies are committed to understand customers and competitors by the means of systematically evaluating market information (Slater & Narver, 1998). Thus, the concept revolves around the satisfaction of customers’ needs and wants (Urde, et al., 2013). How to satisfy these needs and wants are explained by a cultural and behavioural perspective. The former defines market orientation as a corporate culture or unique mindset, while the latter defines the concept as a set of activities and processes (Narver & Slater, 1990; Kohli & Jaworski, 1990).
The cultural perspective encompasses three behavioural elements: customer orientation, competitor orientation, and interfunctional coordination. A customer orientation tries to create continuous superior value through a sufficient understanding of the target customers, and also through a comprehensive understanding of customers’ whole value chain (Day & Wensley, 1988; Narver & Slater, 1990). Additionally, the competitor orientation component is focused on the understanding of strengths, weaknesses, capabilities, and strategies of current and potential competitors, but also all present and future technologies satisfying the needs and wants of customers (Levit, 1960; Narver & Slater, 1990). Finally, interfunctional coordination is the utilisation of resources to provide continuous superior value for target customers. The creation of value for customers is an effort of the whole organisation, since every point in the value chain provides an opportunity to create value for the organisation (Porter, 1985; Narver & Slater, 1990).
9 intelligence is the process of exchanging information within the organisation. It is important to include every layer, both vertically and horizontally, throughout the organisation to either formally or informally foster the exchange of information (Kohli & Jaworski, 1990). The third and final activity is the responsiveness of the organisation. Companies should take action in response to market intelligence generated and spread amongst its members (Kohli, et al., 1993).
The cultural and behavioural view have commonalities: both conceptualise market information gathering activities and the coordinated dissemination of this information. However, clear differences between the cultural and behaviour view are that the former regards it as a culture by the means of norms and values, while the latter is more focused on action (Reijonen, et al., 2012). Moreover, the cultural view assumes that a market orientated culture leads to the appropriate behaviour, but culture does not always seem to be an antecedent of behaviour (González-Benito & González-Benito, 2005).
The antecedents of market orientation. The literature describes four broad categories of antecedents of market orientation. These are top management factors, interdepartmental factors, organisational systems, and cultural variables (Jaworksi & Kohli, 1993; Kirca, Jayachandran, Bearden, 2005). In regard to top management, values and orientations are shaped by top management and therefore influence the level of market orientation. Thus, by stressing the importance of a market orientation, organisational members will adopt the appropriate culture and behaviour (Jaworksi & Kohli, 1993; Kirca, et al., 2005). A second antecedent is
interdepartmental factors and captures the effects of connectedness and conflict between
departments. The former refers to the extent that formal and informal contacts between departments enhances information sharing and therefore market orientation (Kennedy, Goolsby, Arnould, 2003; Kirca, et al., 2005). The latter describes the effect of tensions between departments which lowers information sharing and responsiveness of organisations (Jaworksi & Kohli, 1993). A third antecedent is organisational systems describing the effect of structural
variables and employee-related systems. In light of structural variables, formalisation,
10 entrepreneurial practices characterised by innovativeness, risk taking behaviour, and proactiveness foster market orientation (Matsuno, Mentzer, Ozsomer, 2002).
Consequences of market orientation. Alongside the antecedents of market orientation, research has focused on the consequences. In particular organisational performance, which is positively influenced – either direct or indirect – by market orientation in 88% of the cases revised by González-Benito and González-Benito (2005). However, not all aspects of performance were significantly influenced. Positive relationships were found with sales, market share, and profitability (Jaworksi & Kohli, 1993; Kirca, et al., 2005). Moreover, these results have been found in different contexts, industries, and countries (Kirca, et al., 2005; Raaij & Stoelhorst, 2008). Some scholars argue that market orientation has evolved into a prerequisite to simply compete. Kumar, Jones, Venkatesan, and Leone (2011) used longitudinal data to establish that market orientation has a diminishing effect on performance over time. In other words, this indicates the erosion of a competitive advantage created by market orientation.
Other consequences of market orientation include customer, innovation, brand, and employee consequences (Slater & Narver, 1994; Kirca, et al., 2005; Ngo & Cass, 2012; Jaworksi & Kohli, 1993). In respect to customer consequences, highly market-orientated organisations are more capable of translating acquired information into products and services. As a result, these products or services are evaluated more positively by consumers. In other words, market orientation enhances the perceived quality of customers by continuously offering superior customer value (Slater & Narver, 1994; Brady & Cronin, 2001). Additionally, a study by Ngo and Cass (2012) found that market orientation positively influences customer performance, which was defined as the organisational performance on customer satisfaction, customer relationship building, customer attraction, and customer retention. In regard to innovation
consequences, market orientation influences the innovativeness, new product performance, and
innovation related performance of a company (Kirca, et al., 2005; Ngo & Cass, 2012). In essence, market orientation should influence innovation because of a continuous and proactive engagement towards meeting customer needs and the focus on greater information use (Han, Kim, Srivastava, 1998). In relation to the brand, work by O’Cass and Ngo (2007) describes positive brand consequences because market orientation generates brand knowledge in the mind of customers, which is a valuable asset for the brand. Finally, consequences concerning
employees are described because market orientation promotes bonding between employees and
11 Market orientation in small-medium enterprises. The concept of market orientation received less attention in an SME context (Raju, Lonial, Crum, 2011). In spite of this, research shows that the concept is appropriate for SMEs because market orientation does not dependent on organisational size (Blankson & Cheng, 2005). Moreover, the adoption of the concept suits characteristics of SMEs, since organisational structures are often less formal, centralised, and departmentalised. Thus, small-medium enterprises can leverage their advantage of flexibility, closeness, and adaptability in order to create high levels of market orientation (Pelham, 1999). However, a remarkable finding is that SMEs often show the same or lower level of market orientation compared to their larger counter-parts (Raju, et al., 2011). A reason for this might be the omnipresence of owners and/or managers in SMEs, because top management emphasis is an important antecedent of market orientation. In other words, marketing practices are less adopted if managers lack marketing-related experience and knowledge (McCartan-Quinn & Carson, 2003; Ledwith & O'Dwyer, 2009).
12 2.2 Brand Orientation
A critique on market orientation is that continuously satisfying the needs and wants of customers hinders the development of the brand (Urde, 1999). As a result, the discussion of brand orientation emerged and challenged the customer is king consensus in marketing. Likewise to market orientation, the core of brand orientation revolves around satisfying customers, however within the framework of the brand identity (Urde, et al., 2013). Over the years brand orientation was regarded as a variant of market orientation, as an orientation that independently solves the problems created by market orientation, or as a different strategic approach (Gromark & Melin, 2013).
This research defines brand orientation as a deliberate strategic approach of companies to create and maintain brand equity through an interaction between internal and external stakeholders. This approach describes the brand as strategic hub for organisational processes and brand management as core competence, which eventually relates to business development and financial performance (Gromark & Melin, 2011). In other words, the identity and values of an organisation are central in strategy making and organisational processes. For example, Volvo emphasise values of safety and quality in every process of the organisation (Urde, et al., 2013). Noticeable differences between the two orientations is that brand orientation regards its brand as a strategic hub influencing the organisation, while market orientation regards the brand as a second-order issue. As a result, brand orientation is an inside-out identity driven strategic approach, while market orientation is an outside-in image driven strategic approach (Urde, 1999; Urde, et al., 2013).
13 Building a brand. A brand orientation holds the brand as a strategic hub and therefore stresses the importance of brand building activities. Urde (1999) and Keller (2013) both describe frameworks for brand building. The former is drawn upon a brand orientation perspective, whilst the latter revolves around the concept of customer-based brand equity. However, both frameworks stress the importance of a strong identity as a fundament, a clear positioning, and customer-brand relationships:
In respect to the framework of Urde (1999), the brand mission is regarded as a point of departure asking questions about the identity, the core values, strategy, and vision of a company. These points should be coded into the brand in a holistic identity. Then, this identity will have to be communicated to stakeholders in order to create awareness. However, brands are experienced and not explained. In other words, companies should focus on various positive associations resulting in a unique perception and position of the brand in the mind of customers. As a result this will eventually lead to relationships between brands and customers. On the other hand,
Keller’s framework (2013) is built on four questions and concepts: First of all, who are you?
This should explain the identity of the brand. Secondly, what are you? A question that explains the brand meaning. Thirdly, what about you? This should spark brand responses of customers. Finally, what about you and me? This attempts to explain brand relationships. These questions can be viewed as a pyramid where brand identity ensures deep awareness and functions as a fundament of the brand. The second layer of brand meaning would link associations to the brand in order to explain points-of-parity and points-of-difference in relation to competitors. Thereafter, the third layer will spark positive reactions of consumers to the brand in order to create brand responses. This will eventually build relationship between the brand and customers to achieve intense and active loyalty.
Antecedents of brand orientation. The three most important antecedents of brand orientation are approach, implementation, and goals and follow-ups to the brand (Gromark & Melin, 2011). The former refers to the overall holistic approach of an organisation to brands. Thus, whether managers and employees have a passion for brands (Urde, 1999). This dimension captures certain norms and values in the organisational culture, such as brands are good for profitability, brand management gives a competitive advantage, and marketing programs are seen as an investment rather than a cost (Gromark & Melin, 2011; Keller, 2013). In light of
implementation, this antecedent refers to the alignment of the brand and the organisation (Ind,
14 result, it is important to continuously implement brand norms and values in order to let employees become ambassadors of the brand (Hatch & Schultz, 2003). Thirdly are goals and
follow-ups, which refers to the ability to translate strategy into goals for members of the
organisation (Gromark & Melin, 2011). An important aspect for a strong brand is the quantitative and qualitative measurements of these goals, such as the desired brand image or the perception of core values by customers (Keller, 2013).
Other important antecedents are brand relationships; identity, development and protection of the brand; operational development; top management emphasis; and responsibility and roles (Gromark & Melin, 2011). Firstly, relationships refers to the scope of brand relationships with external stakeholders. This antecedent explains whether the brand is used to create and maintain relationships with the target customers, or also with the general public and potential employees (Gromark & Melin, 2011). Secondly, identity development and protection revolves around fundamental brand actions, such as creating a visual identity, positioning the brand, and registering and protecting the brand (Gromark & Melin, 2011). Thirdly is operational
development, which represents the ability to use core values for organisational processes of
different functions throughout the organisation. Fourthly, the next antecedent is top
management participation. As in line with market orientation, CEOs are of importance by
possessing an overall brand responsibility and therefore stressing the value of brands (De Chernatony & Cottam, 2006). Finally, responsibility and roles refer to responsibility allocation regarding the brand. This responsibility can be assigned to a CEO, a marketing manager, a brand manager, or sometimes the human resource manager (Gromark & Melin, 2011).
15 Brand orientation in a SME context. SME are less brand-oriented than larger organisations, which puts them in a competitive disadvantage (Baumgarth, 2010). This finding is reinforced by Wong and Merrilees (2005), who argue that SMEs maintain a narrow view of branding. The brand is often seen as a function of advertising, the logo, and the brand name communicated through advertisements such as television and leaflets. The reason for this narrow perspective is brand barriers, which let employees focus on daily routines instead of branding (Wong & Merrilees, 2005). In addition, SMEs often think that branding requires a lot of resources and is therefore solely suitable for larger organisations.
16 2.3 Hybrid Orientations
To this point, market orientation can be viewed as an outside-in approach to strategy where satisfying the needs and wants of costumers have priority over the brand. In contrast to brand orientation, which can be regarded as an inside-out approach to strategy where the needs and wants of customers are satisfied within the identity of the brand (Urde, et al., 2013). Taking the two orientations into consideration, it would be unrealistic to theorise that an organisation can only adopt an either-or proposition to these two orientations. In other words, a more realistic view holds an integration between market and brand orientation. This critique has been addressed by Urde et al. (2013) who introduced the concept of hybrid orientations. A hybrid orientation is an orientation where market and brand orientation are equally important for organisational processes and strategy making. Moreover, the interaction between market and brand orientation might cause synergistic effects (Urde, et al., 2013). An important notion of hybrid orientations is the dynamic paths of companies. Urde et al. (2013) argue that a brand-orientated company will evolve into a brand and market brand-orientated firm, because a strong brand has to co- evolve with the needs of its customers. Likewise, the evolution of a market orientated firm into a market and brand orientated company occurs in order to achieve greater control, manageability and coherence, and greater distinctiveness.
This theoretical implication lead to four different orientations: the first is brand orientation, often used by visionary companies – such as the Body Shop – and companies with strong values – such as Amnesty International – which abandon a narrow strategic focus. The former type of firm becomes market-driving instead of market-driven and stresses the importance of brand identity and internal branding (Kumar, Scheer, & Kotler, 2000; Urde. Et al., 2013). Secondly is a brand and market orientation. Since a strong brand must evolve with the needs of customers to stay relevant, brand orientated organisations should enhance their market focus. A good example is Volvo, a company with strong core values of safety, quality, and sustainability. However, customers’ needs and wants appealed for better aesthetics which resulted in a brand and market orientation (Urde, et al., 2013). Thirdly is market orientation, an orientation adopted by organisations with a high customer focus. This orientation can be described as the default
option, since most of the marketing literature discusses this type of orientation. This outside-in
17 exemplified by Electrolux, which starts their new product development with customer insights, based on product characteristics the new product gets adopted by one of Electrolux’s brands (Urde, et al., 2013).
The interaction between market and brand orientation. The hybrid orientation theory therefore provides a more realistic view by incorporating the dynamism and evolution of an organisation. In addition, the orientation proposes synergistic effects due to the interaction of market and brand orientation. There has been some research connecting market and brand orientation, which might provide explanations for this interaction.
First of all, scholars describe an alike complementary relationship between customer and brand equity (Leone, Rao, Keller, Luo, McAlister, Srivastava, 2006). Customer equity can be defined as the sum of lifetime customer value or as the optimal balance between costs of customer attraction versus customer retention (Kumar & Reinartz, 2012). The aim of creating customer equity is optimising customer-based interactions (Leone, et al., 2006; Blattenberg & Deighton, 1996). In comparison, brand equity revolves around the thoughts, feelings, perceptions, images, and experiences of brand living in the customer’s mind, which is the result of past marketing activities. The concept of brand equity explains why marketing causes different outcomes for non-branded and branded products (Keller, 2013; Leone, et al., 2006). The interaction between brand and customer equity are present due to a common focus. Both concepts stress the importance of customer loyalty and try to create value by having as many possible customer pay the highest premium possible. However, they tend to focus on different aspects: brand equity emphasise the experiences and feelings caused by marketing programmes, whilst customer equity focuses on quantitative measures outcomes of marketing. Ultimately, the concepts are interrelated because brand needs customers and vice versa.
18 perception about the organisation. As a result, a company is more unique, reputable, and consistent in delivering its message across members.
19 2.4 Internationalisation of SMEs
The context of this research is internationally active SMEs and therefore it would sensible to elaborate this context, since certain factors might influence earlier described concepts of market, brand, or hybrid orientations. In general, the literature describes two approaches to the internationalisation of SMEs: traditional and born-global approaches (Chetty & Campbell-Hunt, 2004):
In regard to the former, traditional models are referred to as stage models, because internationalisation occurs incrementally and in steps. The most well-known traditional model is the Uppsala model by Johanson and Vahlne (1997). The underlying assumption is that organisations with a strong domestic market base start making their export debut by investing resources into a new market similar to the domestic one. As the organisation learns more about the market, its commitment increases by investing even more resources. Step by step these firms progress: first by exporting, then founding an overseas sales subsidiary, and finally overseas production (Chetty & Campbell-Hunt, 2004). In contrast to traditional models, the born-global
approach is characterised by a fast international debut and an attempt to achieve a competitive
edge over competitors by the use of resources and the sale of outputs in different countries. Moreover, these entrepreneurial firms focus on a particular niche by knowledge intensive products (Oviatt & McDougall, 2005; Chetty & Campbell-Hunt, 2004). Assessing salient differences between the two approaches is done in various research (Kalinic & Forza, 2012).
20 3. RESEARCH DESIGN
This chapter will explain the research questions, the research strategy, and the constructs used to collect data necessary for the analysis.
3.1 Research Questions
The purpose of this thesis is to holistically examine the relationship between market orientation, brand orientation, and performance within an international SME context. In order to do so, the following sub-questions can be identified for this research:
What is the relationship between market orientation and customer performance? The core of market orientation revolves around the satisfaction of customer needs and wants (Urde, et al., 2013). Market oriented companies are evaluated more positively by customers in two ways. First of all, market orientation enhances the customers’ perceived quality by offering a superior customer value (Brady & Cronin, 2001). Secondly, market orientation enhances customer satisfaction because highly market-oriented firms are more capable of translating customer needs and wants into products (Slater & Narver, 1994). In addition, research by Ngo and O’Cass (2012) found that marketing capabilities mediates the relationship between market orientation and customer performance. Finally, a meta-analysis by Kirca et al. (2005) provides strong empirical proof for the relationship between market orientation and customer loyalty, therefore the first hypothesis is:
H1: Market orientation has a positive effect on customer performance.
What is the relationship between market orientation and brand performance? Market orientation is an outside-in approach to strategy, which means that the customer is king and the brand is a second-order issue. In the process of satisfying the needs and wants of customers a brand image emerges (Urde, et al., 2013). This image can be a reflection of the customer is king mantra and this positively influences the awareness, loyalty, and reputation of the brand. In addition, O’Cass and Ngo (2007) found a significant positive relationship between market orientation and brand performance. They argue that market oriented firms have strong brands since brand knowledge in the mind of customers is a valuable asset from earlier investments in marketing programmes (Keller, 1993). Thus the second hypothesis is:
21 What is the relationship between brand orientation and brand performance? Brand orientation is an approach to brand building where in an ongoing interaction between stakeholders, brand equity will be created (Gromark & Melin, 2011). In this view strategic brand management is related to financial performance, but by the means of increasing brand awareness, loyalty and reputation (Wong & Merrilees, 2008; Wong & Merrilees, 2007). Other research has found a positive relationship between the concepts due to a larger sense of brand meaning or a greater positional advantage (Napoli, 2006; Bridson, et al., 2013). This logic therefore predicts a positive direct effect on brand performance:
H3: Brand orientation has a positive effect on brand performance.
What is the relationship between brand orientation and customer performance? Brand orientation regards the integrity of the brand superior to needs and wants of customers, because a brand steered by others loses integrity (Urde, 1999). Thus, ignoring the needs of wants of some customers will results in a decreasing customer performance to maintain the integrity of the brand (Urde, et al., 2013). In addition, when a brand orientation is adopted the brand becomes a strategic hub for organisational processes (Gromark & Melin, 2011). The brand is built on brand identity and brand meaning, which should evoke brand responses, and brand relationships (Keller, 2013). Since brands are replacing social structures, the meaning and identity of the brand are of importance for the identity of customers (Solomon, 2005). Subsequently, a misfit between the identity of some customers and the brand can emerge resulting in lower customer satisfaction, more difficulty attracting and retaining customers, and poorer quality relationships. Therefore the following hypothesis is:
H4: Brand orientation has a negative effect on customer performance.
22 market share and brand sales (Chaudhuri & Holbrook, 2001; Chaudhuri, 2002). Finally, Keiningham et al. (2005) found a positive relationship between brand-centric measures and purchases. These effects form the fundament for the following hypotheses:
H5: Brand performance has a positive effect on customer performance.
H6: Brand performance has a positive effect on financial performance.
What is the relationship between customer performance and financial performance? Intuitively, good customer performance (i.e. satisfaction, attracting, relationships, and retention) leads to better financial performance. Much research has investigated the positive relationships between customer performance and financial performance. In respect to customer relationship management (CRM), benefits of a superior customer value-based approach to marketing strategy decreases costs, maximises revenues, and realises better profits (Kumar & Reinartz, 2012). Likewise, Ramaswami et al (2009) found that attracting and retaining high value customers positively influences return on assets, net profits, sales and market share. The following hypothesis is based on this logic:
H7: Customer performance has a positive effect on financial performance.
Are there synergies due to the interaction of market orientation and brand orientation? Urde et al (2013) suggest that hybrid orientations might experience synergistic effects. The concepts of market orientation and brand orientation are connected in several ways. Firstly, the common costumer focus of both market and brand orientation (Reid, et al., 2005). In market orientation a customer orientation is the sufficient understanding of the target customer, whereas branding focuses on the experiences in the minds of customers (Narver & Slater, 1990; Keller, 2013). Secondly, an important aspect of branding is the positioning by points-of-parity and points-of-differences with competitors (Keller, 2013), assessing competitors and their strengths, weaknesses, capabilities, and strategies is also an important aspect of market orientation (Narver & Slater, 1990). These commonalities between the concepts might cause synergies, therefore:
H8: Market orientation amplifies the relationship between (a) brand orientation and
23
H9: Brand orientation amplifies the relationship between (a) market orientation and
brand performance and (b) between market orientation and customer performance.
Are there interaction effects between customer performance and brand performance? Keiningham et al. (2005) argue that interaction effects might occur between customer-centric measures and brand-centric measures of performance. Combing both measures will result in a better understanding of the dynamics of different products. Furthermore, some scholars argue a likewise approach to the concepts of brand equity and market equity, because both put emphasis on the importance of customer loyalty and value created by the highest mark-up (Leone, et al., 2006). Therefore, these propositions might suggest interaction effects between either customer- or brand performance and their relationship with financial performance. Thus:
H10a: Brand performance amplifies the relationship between customer- and financial
performance.
H10b: Customer performance amplifies the relationship between brand- and financial
performance.
Are there differences in levels of orientations between traditionalist and born-globals? As mentioned in the literature born globals are more niche focused and therefore have more market knowledge and customer orientation, use more unique intangible assets, and place more emphasize on differentiation (Rialp, et al., 2005). All these salient differences suggest differences in levels between market orientation and brand orientation because customer orientation is part of market orientation. Furthermore, market knowledge is an outcome of market orientation (Narver & Slater, 1990). With regards to brand orientation, the brand can be considered as a unique intangible asset and differentiation is an important cornerstone of branding (Keller, 2013), therefore these two salient difference would cause higher brand orientation. Thus:
H11: Born globals have higher levels of market orientation and brand orientation than
24 Theorised Conceptual Model. Combing these hypotheses, the following model can be constructed with market orientation (MO), brand orientation (BO), customer performance (CP), brand performance (BP) and financial performance (FP). The interaction effects are not displayed. The conceptual model can be observed in figure 3.1.
FIGURE 3.1:AGRAPHICAL PRESENTATION OF THE CONCEPTUAL MODEL
3.2 Research Strategy
The research method was by the means of an online questionnaire followed up by a telephone call. The following steps were identified to collect the appropriate data: sampling frame, cover design, questionnaire, and pre-testing.
Sample frame. The context of this research is international SMEs which will be represented by the population of Dutch international manufacturing SMEs. The sampling method for this population is quota sampling. This technique uses characteristics of the population to improve the quality of the sample (Thomas, 2004). This leads to the following criteria:
(1) The size of a small-medium enterprise
This research uses the EU definition regarding organisational size to define SMEs. The European Union classifies enterprises by the number of employees and either turnover or balance sheet total (European Comission , 2003). Since the financial information is difficult to obtain, this research will only use the factor of number of employees. An SME can be classified when it has less than 250 employees.
25 (2) Classification of organisation
There are different classifications of organisations, however this research uses the manufacturing classification. Traditionally, manufacturing organisation are more brand engaged than other types (Keller, 2013).
(3) Country of origin
The country of origin of these companies is the Netherlands. This criteria was chosen because of the availability of data about Dutch SMEs provided in the database ORBIS.
(4) Website address
Assessing information about an SME will be easier when there is online presence. This criteria was helpful in collecting information such as email addresses and contact information.
A list of organisations fitting the above criteria was obtained through ORBIS. This is a database by Bureau van Dijk consisting of data about 80 million organisations worldwide. Selecting the above mentioned four criteria resulted in a list of 12000 SMEs. However, these included international and non-international active organisations. To establish this last and important criteria the websites of the SMEs were assessed on information regarding international activity. This process continued until data (e.g. email addresses) about 2000 international SMEs was collected.
Cover design and response rate. The email addresses obtained were used to send out a cover letter kindly asking for participation. A good cover letter must achieve two goals (Kiernan, 2005): firstly, the respondent should be convinced that a problem exists, this problem affects the group where the respondents belongs to, and their participation is needed for finding an appropriate solution. Secondly, the next goal is to show that participation will be respected by explaining that the whole survey is confidential, the results are useful, and that respondents can request further information about the survey. These goals were taken into consideration during the cover design development process.
26 and the use of mixed methods by using email and telephone conversations to convince participants about the value of this research.
Questionnaire. The questionnaire is based on constructs drawn from the literature. Guidelines by Cooper and Schindler (2008) were followed in respect to the questionnaire sequence. As a result, questions asking information about the constructs were obtained first and information about the type of organisation and other personal information, later on. Typical advantages of web-based surveys are cost and a low chance of missing data by forcing respondents to answer particular questions. Anonymity might be considered a problem with surveys (Blumberg, et al., 2011). To counter this, respondents were assured of full confidentially and anonymity several times throughout the process.
Pre-testing. As recommended, the questionnaire was pretested by researchers and participants (Cooper & Schindler, 2008). Five researchers and five participants were asked for several suggestions for improvement. This feedback led to changes regarding the likert-scale and the deletion of customer satisfaction in the market orientation questions. Other feedback included the critique about the subjective method of measuring financial performance, however no action was taken to this matter.
Data collection. The cover letter was emailed to the sample and followed up by a telephone call. This process eventually led to 236 respondents representing a response rate of 11.8%. This number is above the 200 cases recommended by Thomas (2004) and Hair, Blac, Babin, and Anderson (2010) for good quantitative research and structural equation modelling.
3.3 Construct Development
The constructs and their items were taken from the literature resulting in face validity and reliability (Hair, et al., 2010). Moreover, this saved time regarding question content and wording. There are six unobserved or latent variables: market orientation, brand orientation, customer performance, brand performance, financial performance, and innovation. The items for all constructs can be found in appendix A.
27 more adequate for orientation-related research (González-Benito & González-Benito, 2005). This is due to three reasons: (1) subjective performance measures facilitate performance indices which can be considered complex such as customer and brand performance, (2) subjective performance facilitates cross-sectional analysis with competitors and different sectors, and (3) subjective performance can take the lagged effect of strategy into consideration.
Market orientation. In this research the cultural view of market orientation was used. Traditionally, market orientation consists of three behavioural concepts, namely customer orientation, competitor orientation, and interfunctional coordination, and two decision components, namely long-term focus and profit focus (Narver & Slater, 1990). However, due to low reliability the latter two components are often ignored and will therefore not be used in this research (Noble, et al., 2002). The construct is operationalised by the items taken from Reijonen et al. (2012). These items are based on the cultural perspective of Narver and Slater (1990), but have been improved by Gray et al (1998). This measure is chosen because it showed good reliability in a SME context for customer orientation (α = 0.91), competitor orientation (α = 0.93), and interfunctional coordination (α = 0.90).
Brand orientation. The construct of brand orientation also refers to a culture or mindset. This mindset should ensure that branding is incorporated in the marketing strategy by recognising, featuring, and favouring the brand in the strategy processes of an organisation (Wong & Merrilees, 2008). The construct is operationalised by the five items taken from Wong and Merrilees (2007). The construct shows good reliability (α = 0.94).
Customer performance. Customer performance is a concept which explains how well an organisation is doing regarding satisfying customers, building relationships, attracting customers, and customer retention. The construct is adopted from Ngo & Cass (2012), who used it in a study to measure the effects of market orientation and innovation. The construct is operationalised by items drawn from the literature on customer related issues (Jayachandran, et al., 2005; Ramani & Kumar, 2008; Ramaswami, et al., 2009). The construct shows a good reliability (α = 0.77).
28 Financial performance. An important concept in the literature is the effect of marketing strategies, capabilities, and orientations on financial performance. The construct of financial performance tries to capture the performance regarding sales, market share, profitability, and overall financial performance (Calantone & Knight, 2000; Shoham, 1999). The construct is operationalised from the work of Wong and Merrilees (2008) and shows good reliability (α = 0.87).
29 4. ANALYSIS
This chapter will provide an overview of the analysis by addressing coding, missing data, and cleaning processes for the structural equation model.
4.1 Structural Equation Modelling
This research will use a technique called structural equation modelling (SEM). This method examines the structure of interrelationships between multiple variables or constructs. These constructs are unobservable and are commonly called latent variables. Unique about SEM is that it estimates multiple and interrelated effects between constructs, it has the ability to account for measurement error in the process, and it defines a model to explain the entire set of relationships (Hair, et al., 2010). This model is often represented by theory, as discussed earlier, where dependent variables can become independent variables in another relationship. The structural model expresses these relationships between dependent and independent variables (Hair, et al., 2010). Moreover, the unobserved latent variables are measured by observed variables, which were obtained during data collection (Byrne, 2010). The underlying theory is of uppermost importance when doing a structural equation model. Reassuring is that all relations in this research have theoretical justifications. The structural equation model consists of two different models: the measurement model and the structural model. The measurement model tests how well the variables represent the constructs, which is done by a confirmatory factor analysis (CFA). Thereafter the structural model assesses the casual relationships between the constructs (Hair, et al., 2010). However, before the SEM technique can be used, several steps have to be covered. These were coding the data, reporting missing data, cleaning the data and handling outliers, reliability check of the constructs, and the assumption check.
30 Missing data. The missing data was analysed according to four steps: (1) determine the type of missing data, (2) determine the extent of missing data (3) diagnosed the randomness of the missing data process, and (4) selecting the imputation method (Hair, et al., 2010). A total of 233 respondents filled in the questionnaire. There are 20 cases with missing data, which were deleted from the sample since these cases miss essential data to great extent and therefore add no value to this research. This reduces the sample size to 213 with no missing essential data. Some of these cases miss non-essential data for identification purposes such as function and experience. This indicates that only the step 1 and 2 of analysing missing data according to Hair et al (2010) have been used.
Cleaning and outliers. The data was cleaned by looking for unengaged responses. These responses show little variety and therefore effects the quality of the sample. To do so, the standard deviation was used which resulted in the deletion of one response leading to a sample size of 212 cases. A distinction between two sorts of outliers was made: (1) observations with unrealistic values, for example cases which did not fit the SME definition or were not operating internationally and (2) responses with a unique combination of identifiable different characteristics (Hair, et al., 2010). In total there are there were five companies not fitting the description of an SME by the European Definition. Two cases with a number of employees of more than 800 were identified and deleted. The other three cases have 265, 300, and 300 employees which is not drastically different from the SME definition and were therefore retained for analysis. Furthermore, 10 cases did not fit the criteria of being an international active SME, so were deleted from the sample.
Outliers which have a unique combination of characteristics were analysed in a univariate and multivariate way. The former method examined the distribution of observation for each variable in the analysis and selected outliers as those falling outside the distribution. The latter method
used the Mahalanobis D2, which captured the relative multidimensional position to a common
reference point. No strikingly different outliers were detected which shows demonstrable proof of being unrepresentative for the population (Hair, et al., 2010). The outcome of this process can be found in appendix C.
31 and the average number of employees was 43. Most companies had an international debut of 13 years from inception.
TABLE 4.1:DESCRIPTIVES OF SAMPLE
Function Frequency Percentage
CEO 87 43.9%
Marketing and Sales 64 21.3%
Others 47 23.7%
Country Focus Frequency Percentage
Developed Countries 108 54%
Emerging Countries 12 6%
Developed and Emerging 80 40%
Industry Frequency Percentage
Low Tech 68 34%
Medium-Low Tech 43 21.5%
Medium-High Tech 64 32%
High Tech 25 12.5%
Descriptive Mean SD Maximum
Number of countries 20 25 196
Number of employees 43 48 300
International Debut 13 18 100
Experience in Function 10 8 35
4.2 Assumption Checks
There are four important statistical assumptions which represent the requirements of the underlying statistical theory when using multivariate techniques. These are (1) normality, (2) homoscedasticity, (3) linearity, and (4) absence of correlated errors (Hair, et al., 2010). Only the first three can be tested, the latter has to be taken into account during data collection. Most researchers are oblivious to these assumptions, however they are of importance to check (Byrne, 2010).
32 regarding non-normality was taken. Moreover, the second assumption is homoscedasticity. This refers to the assumption that dependent variables have the same levels of variance as the predictor variables (Hair, et al., 2010). Homoscedasticity was found, because a straight fit line was found when predicted values were plotted against standardised residuals (Field, 2005). Furthermore, the third assumption is linearity, this is tested by an ANOVA test and linearity was found (Field, 2005). The outcome of this assumption check process can be viewed in appendix D.
4.3 Confirmatory Factor Analyses
The confirmatory factor analyses (CFA) tests how well the variables represent the constructs. An important concept in CFA is unidimensionality, which indicates that variables are explained by one underlying construct (Hair, et al., 2010). This was done in AMOS, an add-on for SPSS. Construct validity, convergent validity, and discriminant validity were obtained by looking at model fit, factor loadings, average variance extracted (AVE), reliability (CR), maximum shared variance (MSV), and average shared variance (ASV) (Hair, et al., 2010). Furthermore, the outcome of AMOS per model is given in appendix E, F, G, and H.
TABLE 4.2:MODEL FIT FOR INITIAL CFAMODEL
Model 1
χ² p-value DoF CFI RMSEA
1215,073 0.000 722 0.897 0.059 Guidelines - Expect <0.05 >1 >0.92 <0.080 MO BO BP CP FP INNO CR 0.71 0.96 0.77 0.78 0.89 0.84 AVE 0.45 0.81 0.41 0.48 0.68 0.46 MSV 0.40 0.37 0.37 0.32 0.15 0.40 ASV 0.21 0.12 0.19 0.17 0.08 0.19
33 discriminant validity is checked with the underlying logic that latent variables should explain more variance in-factor than between-factor (Hair, et al., 2010). This is done by calculating the maximum shared variance (MSV) and the average shared variance (ASV) and check whether these numbers were lower than the average variance explained (AVE). As can be seen in table 4.2 no discriminant validity issues were noticed.
Observing the outcome, the model should be improved by checking factor loadings, modification indices, and residuals. The first shows how much an observed variable loads on the latent variable. The second represents the misspecification of the model. Finally, the third captures the discrepancy of covariances between the hypothesised model and the sample (Byrne, 2010; Hair, et al., 2010). Action was taken when factor loadings were lower than 0.5 (Hair, et al., 2010), modification indices were higher than 10 (Byrne, 2010), and residuals were higher than 2.58 (Jöreskog & Sörbom, 1993). Consequently, COMP6, BP3, and INNO2 were deleted due to their low factor loading and high MIs. Second, CP3 and FP2 were removed due to multiple violations of the residual threshold of 2.58. Third, covariances were drawn between COMP 1 and COMP2 and COMP5, and BP5 and BP1 to deal with their modification indices. These covariances represent systematic errors in measurement due to respondents or overlap in item content (Aish & Jöreskog, 1990).
The second model had better model fit in line with the guidelines of Hair et al (2010). However, convergent validity issues for MO and BP were still present. The same above described routine led to the deletion of COMP1 and BP5. The third model also presented good fit and the average variance explained of BP reached the threshold of 50%. Nonetheless, the deletion of COMP1 did not result in an improvement of the model and was therefore retained in the analysis resulting in the final model.
TABLE 4.3:MODEL FIT FOR FINAL CFA
Final model
χ² p-value DoF CFI RMSEA
34 Taking a look at the fit, the final model represents the data best. The model is over-identified with 507 degrees of freedom, has a fit of 0.934, and a RMSEA of 0.048. Observing table 4.3 for convergent and discriminant validity, all results indicate no validity issues combining a high CR and high AVE. Only MO seems to have a problem with AVE, but has a CR of the threshold of 0.7. Furthermore, all values of MSV and ASV are below AVE indicating no discriminant issues. In total 6 items were deleted (COMP6, BP3, BP5, CP3, FP2, and INNO2). This is under the 20% which represent major change and therefore no new data is needed (Hair, et al., 2010). Moreover, all the latent variables comply with the three indicator rule (Byrne, 2010; Hair, et al., 2010).
4.4 Structural Model
The structural model displays the casual relationship between the construct tested in the CFA (Byrne, 2010). The structural model investigates how market orientation and brand orientation achieve financial performance by the means of customer performance and brand performance and their interaction. All units are measured on firm-level from a firm perspective where exogenous variables represent the past three years and endogenous variable the past 12 months. In addition, the interaction effects will be measured. The structural model did not use any composite measures. A graphical overview is given in the figure 4.2, while the AMOS output is provided in appendix I.
35 Although the model possesses good fit, there could be room for improvement. This was done by checking the modification indices and standardised residual covariances (Hair, et al., 2010). Some regression modification indices linked interfunctional coordination to innovation, and financial performance to customer performance. However, these do not reflect theory and will therefore not be specified in the model. The standardized residual covariance showed three values above 2.5. However, since the model had good fit, there was no reason to modify it.
Mediation effects. A common method for testing mediation effects is the method provided by Baron and Kenny (1986). However, Zhao, Lynch, and Chen (2010) provide more updated guidelines for mediation. A mediation relationship can be established by testing three relationships: a full mediation relationship test, a direct relationship test, and a partial relationship test by taking all paths into consideration. Another and superior way to look at indirect effects is by a bootstrap test and the significance levels in AMOS (Zhao & Chen, 2010).
Interaction effects. Interaction effects indicate how much a relationship is moderated by another variable. To investigate these effects the standardized product of concepts were taken (e.g. MO x BO and CP x BP). There are interaction effects if the products have a significant relationship on the dependent variable (Baron & Kenny, 1986).
Difference analysis. Since the sample size is not large enough to carry out a multi-group analysis for the structural equation model, a difference test was used to analyse differences in the levels of market orientation, brand orientation, and performance values between born-globals and traditionalist. As mentioned before the difference between the international debut of a born-global and traditionalist is that born-globals internationalise within two years. To investigate any differences between the two types an independent t-test was used. The SPSS output of this analysis is given in appendix J.
Reliability. In addition to the reliability established in the CFA, the reliability of the measurement model was reinforced by calculating the Cronbach’s Alpha for all concepts.
36 5. FINDINGS
In a statistical sense the model presented works very well and shows a good fit regarding the measurement- and the structural model. The structural model shows good fit by having a CFI of 0.926 and a RMSEA of a 0.48 with a PCLOSE of 0.633. Comparing this fit with the CFA is useful since an SEM cannot have a better χ² than a CFA, which is true in this case. Additionally, the constructs show a good alpha of higher than 0.7 ensuring good reliability (Field, 2005). An overview of the model fit is given in table 5. 1 and graphical overview is given in figure 5.1.
FIGURE 5.1:OVERVIEW OF STRUCTURAL EQUATION MODEL
Furthermore, the mean values are shown in table 5.1. In respect to market orientation, the means show that SMEs are very customer orientated and have a high interfunctional coordination, but focus less on competitors. Moreover, the mean of brand orientation is 3.33. All these results are in line with previous research (Ledwith & O'Dwyer, 2009; Reijonen & Komppula, 2010; Reijonen, et al., 2012). An elaboration of the findings of every relationship in the model will be discussed by stating the hypothesis and support of the casual relationship. An overview of all hypothesis and support is given in table 5.4.
TABLE 5.1:MODEL FIT, MEANS, AND CRONBACH ALPHA FOR SEM
Goodness of fit
χ² p-value DoF CFI RMSEA
836.672 0.000 570 0.926 0.048
- Expect <0.05 >1 >0.92 <0.080
Δ SEM - CFA
97.966 0.00 63 0.08 0.00
CUST COMP INTF MO BO CP BP FP INNO
Mean 4.60 2.82 3.20 2.77 3.33 2.93 3.67 3.48 3.85
Standard Deviation 0.54 0.65 0.42 0.30 0.96 0.41 0.78 0.84 0.65
37 The relationship between market orientation and customer performance. The first hypothesis is that market orientation has a positive effect on customer performance. This hypothesis is supported by the analysis. Market orientation has a β of 0.66 and is highly significant (p<0.001) on customer performance. In other words, when market orientation goes up by 1 standard deviation, customer performance goes up by 0.66 standard deviation. This is in accordance with the findings of Ngo and Cass (2012).
The relationship between market orientation and brand performance. The second hypothesis is that market orientation has a positive effect on brand performance. This hypothesis is also supported by the results, where market orientation has a β of 0.20 and is significant (p<0.05). Thus, when market orientation goes up by 1 standard deviation brand performance goes up by 0.2 standard deviation. This is in line with the finding of O’Cass and Ngo (2007).
The relationship between brand orientation and brand performance. The third hypothesis in this study is that brand orientation has a positive effect on brand performance. This hypothesis is supported by the results. Brand orientation influences brand performance with a β of 0.61 and is highly significant (p<0.001). This indicates that brand performance goes up by 0.62 standard deviation when brand orientation goes up by 1 standard deviation. This effect is also significantly supported in the research by Wong and Merrilees (2008).
The relationship between brand orientation and customer performance. The fourth hypothesis is that brand orientation has a negative effect on market orientation. This hypothesis is supported by the analysis. Brand orientation has a significant negative effect on customer performance (β = -0.43; p<0.001). In other words, when brand orientation goes up by 1 standard deviation, customer performance goes down by 0.43 standard deviation.
38 The relationship between brand performance and customer and financial performance. The sixth hypothesis is that brand performance has a positive effect on customer performance. This hypothesis is supported by the data. The effect is large (β = 0.34) and significant (p<0.05). It appears that increasing brand performance leads to better customer performance.
The seventh hypothesis is that brand performance has a positive effect on financial performance. This hypothesis is not supported by the analysis. The effect is very small (β = 0.03) and non-significant (p>0.05). As the case with customer performance, it seems that other factors influence financial performance because of the low variance explained.
Synergies due to the interaction of market orientation and brand orientation. The eighth hypothesis is that market orientation amplifies the relationship between (a) brand orientation and customer performance and (b) brand orientation and brand performance. The ninth hypothesis is that brand orientation amplifies the relationship between (a) market orientation and brand performance and (b) market orientation and customer performance. The results show support for hypothesis 8b (β = 0.14; p<0.05) and 9a (β = 0.14; p<0.05). Thus market orientation amplifies the relationship between brand orientation and brand performance, and brand orientation amplifies the relationship between market orientation and brand performance. These effects were plotted in figure 5.2. The left graph represents the relationship between brand orientation and brand performance. As can be seen the slope is steeper when levels of market orientation are taken into account. The same holds for the relationship between market orientation and brand performance. The slope is steeper when levels of brand orientation are taken into account.
39 Interaction effects of customer- and brand performance on financial performance. The tenth hypothesis is that (a) brand performance amplifies the relationship between customer- and financial performance and (b) customer performance amplifies the relationship between brand- and financial performance. However, none of these hypotheses are supported by the analysis because they are insignificant (p>0.05).
Are there differences in levels of orientation between traditionalist and born-globals? The last and eleventh hypothesis is that born-globals have higher levels of market orientation and brand orientation than traditionalist. A difference t-test analysis does not support this claim on market orientation (mean: 2.79 vs. 2.75, p>0.05) or brand orientation (mean 3.34 vs. 3.34, p>0.05), as can be seen in the table 5.2.
TABLE 5.2:OUTCOME DIFFERENCE ANALYSIS
CUST COMP INTF MO BO CP BP FP INNO
Born Globals 4.65 2.91 3.20 2.79 3.34 2.94 3.62 3.60 3.87
Traditionalist 4.57 2.78 3.16 2.75 3.34 2.92 3.71 3.41 3.84
Significance level .32 .20 .52 .47 .98 .71 .50 .15 .79
Significant NO NO NO NO NO NO NO NO NO
Mediation. To test mediation, the guidelines of Zhao and Chen (2010) were used. A full mediation relationship is not significant, as described earlier, in both cases of MO and BO – through CP and BP – on FP. This means that the first test does not hold. As a result, the next step is to test for a direct relationship: MO has a non-significant relationship on FP (p= 0.516) and the same holds for BO on FP (p=0.888) when controlling for innovation. The second method to test for mediation is to use the bootstrap method (Zhao & Chen, 2010). The results of this method can be observed in table 5.3, however, no significant results were found.
TABLE 5.3:OUTCOME BOOTSTRAP MEDIATION TEST
Independent Mediator Dependent p-value
MO CP FP 0.128
MO BP FP 0.164
BO CP FP 0.616
BO BP FP 0.676
