Market Orientation, Service Innovation, and Performance

The purpose of this study is to examine and explain the effect of: a). responsive customer orientation and responsive competitor orientation on incremental service innovation, b) proactive customer orientation and proactive competitor orientation on radical service innovation; c) responsive customer orientation, responsive competitor orientation, proactive customer orientation and proactive competitor orientation on performance. d) incremental service innovation and radical services innovation on performance. The data collection was done using a survey. The sample of this study was manager or director of rural credit bank with 128 questionnaires were distributed to rural credit banks in Central Java Province with 85.93% response rate. The data were analyzed using Generalized Structured Component Analysis (GSCA). The results reveals that: a) responsive customer orientation and responsive competitor orientation have a positive and significant effect on incremental service innovation, b) proactive customer orientation and proactive competitor orientation have a positive and significant effect on radical service innovation; c) responsive customer orientation has a negative and non significant effect on performance, responsive competitor orientation has a positive and significant effect on performance, proactive customer and competitor orientation have non significant effect on performance; d) incremental service innovation and radical service innovation have a positive and significant effect on performance. Finally, the analysis of mediation effects shows that: incremental service innovation becomes a complete mediation relationship between responsive customer orientation and performance; incremental service innovation becomes a partial mediation relationship between responsive competitor orientation and performance; while the radical service innovation becomes a complete mediation relationship between proactive customer and competitor orientation on performance. Keywords: responsive customer orientation, proactive customer orientation, responsive competitor orientation, proactive competitor orientation, incremental inovation, radical innovation, and performance