An Empirical Investigation of the Link Between Market Orientation and New Product Performance: The Mediating Effects of Organizational Capabilities

In today\u27s business world, one of the most important problems that companies encounter is new product failure. The high product failure rate has been a major concern for practitioners for many years. It was reported that almost half of the new products introduced each year will actually fail (e.g., Sivadas and Dwyer 2000; Zirger and Maidique 1990). Given the fact that the increasing level of technological advancement, consumer expectations, and domestic as well as international competitive pressures continue to shorten the product life cycle for new products, it has become extremely important for companies to understand the critical determinants of new product success and failure and to be able to develop satisfactory, failure-free, and long-living products for markets. The fact that the economic survival of a firm is unarguably dependent upon the successful development and introduction of new products has motivated many scholars to investigate the potential antecedents of new product performance over the last three decades (e.g., Ayers, Dahlstrom, and Skinner 1997; Cooper 1979, 1983, 1990; Cooper and Kleinschmidt 1988; Moorman and Miner 1997). In a number of studies, a market orientation has been presented as a significant factor that positively affects new product performance (e.g., Atuahene-Gima 1995; Cooper 1990, 1994; Cooper and Kleinschmidt 1988; Slater and Narver 1994a, 1994b). In spite of its significance, the relationship between market orientation and new product performance has received scant scholarly attention (e.g., Atuahene-Gima 1995). This research study aims to fill this void in the literature. The overall objective of the study is twofold: (1) to empirically investigate the suggested link between market orientation and new product performance and (2) to identify the organizational- and project-level mediators and their interrelationships that facilitate this link. The study revealed that there was no significant relationship between market orientation and organizational innovativeness. A strong positive relationship between market orientation and learning orientation was found which indicated that the internal environment of an organization can affect the degree to which the organization is learning-oriented. Thus, a learning orientation was proved to be a consequence of a market orientation. The study findings support the notion that a learning orientation can be viewed as a cultural antecedent of organizational innovativeness or innovation orientation as suggested by Hurley and Hult (1998). A higher level of market orientation within an organization resulted in a higher level of integration between the marketing and R&D/engineering functions in the new product development (NPD) process/project undertaken by the organization. A market orientation was also found to have a significant positive effect on the organizational memory level pertinent to the new product\u27s domain