FAMILY FIRMS AND MARKET ORIENTATION: A COMPARATIVE ANALYSIS OF THE S&P 500

Miles A. ZacharyAaron F. McKennyJeremy C. ShortG. Tyge Payne

OVERVIEW Premise of the paper The Market Orientation (MO) construct Theory Methods Results Discussion Concluding Remarks Questions

PREMISE Family firms represent a 80% of all firms in

the US (Lee, 2006); 12% of GDP (Shanker & Astrachan, 1996)

Despite significant family firm research, none have examined the possible differences between family firms and non-family firms regarding MO

We bridge this gap by examining the differences from a unidimensional as well as multidimensional MO approach

MARKET ORIENTATION- THE CONSTRUCT Concept developed in the late

1980’s/early 1990’s Two foundational definitions-

MARKOR: Kohli & Jaworski (1990) Three (3) core components—customer focus,

coordinated marketing, and profitability MKTOR: Narver & Slater (1990)

Five (5) dimensions—customer orientation, competitor orientation, interfunctional coordination, long-term focus, and profitability

MARKET ORIENTATION- THE CONSTRUCT Kohli & Jaworski (1990, 1993)

Generation, dissemination, and responsiveness

Antecedents Individual factors Intergroup factors Organization-wide factors

Consequences of MO Sustainable competitive advantage

(performance) Esprit de Corps

MARKET ORIENTATION- THE CONSTRUCT Narver & Slater (1990, 1995)

Expand/focus on the dimensions of MO Customer Orientation Competitor Orientation Interfunctional Coordination Long-term Focus Profitability

A singular construct comprised of five (5) dimensions

Contributes to a learning organization

MARKET ORIENTATION- THE CONSTRUCT MO has been associated with greater

firm performance (Kohli & Jaworski, 1990, 1993; Narver & Slater, 1990; Kumar, Subramanian, & Yauger, 1998; Ellis, 2006) Increased sustainable competitive

advantage Higher employee satisfaction Improved organizational learning (Narver &

Slater, 1995)

ORGANIZATIONAL IDENTITY AND MO MO is a function of an organization’s identity

(Cunnington, 1996) Within identity, the organizational culture of a

firm is affects and is affected by MO (Carr & Lopez, 2007; Leisen et al., 2002)

MO enhances organizational culture (Carr & Lopez, 2007) Promotes awareness of and learning from

customers/competitors Emphasizes the generation and dissemination of

market information

ORGANIZATIONAL IDENTITY AND FAMILY FIRMS

Family firms are unique and possess inherent characteristics that are difficult to replicate (Habbershon & Williams, 1999)

The “familiness” of a firm lends itself to a unique organizational identity (e.g. Dyer & Whetten, 2006)

Family firms are strengthened by the long-surviving influence of the founder (Davis & Harveston, 1999)

MO AND FAMILY FIRMS Very limited research between MO and

family firms Only study to date (Tokarczyk et al.,

2007) examined the “familiness” influence on the implementation of a MO Case-analyzed 8 firms in two industries Found significant relationship between the

“familiness” factor and the implementation of a MO

MO AND FAMILY FIRMS We intuitively believe a relationship

exists based on the predisposition of family firms to the antecedents of MO

We state the first hypothesis along these lines of thought H1: Family businesses will exhibit a greater

level of market orientation than non-family firms as demonstrated in their shareholder letters.

CUSTOMER ORIENTATION Characterized by actions towards

seeking superior value for customers Analyzing the market for current and

future customer opportunities H2: In large, publically held companies,

family businesses will exhibit greater levels of customer orientation, a dimension of market orientation, compared to non-family businesses.

COMPETITOR ORIENTATION Involves a continual commitment to

understanding the threats/opportunities presented by current and future competitors

Improves the cognition of an organizations strengths and weaknesses in the market H3: In large, publically held companies,

family businesses will exhibit greater levels of competitor orientation, a dimension of market orientation, compared to non-family businesses.

INTERFUNCTIONAL COORDINATION The coordination of information collection

and shared utilization of such information between departments

Firms focusing on synergistic departmental dynamics H4: In large, publically held companies, family

businesses will exhibit a greater level of interfunctional coordination, a dimension of market orientation, compared to non-family businesses.

LONG-TERM FOCUS Organizational focus on long-run,

sustainable goals influenced by customer orientation, competitor orientation, interfunctional coordination, and profitability H5: In large, publically held companies,

family businesses will exhibit a greater long-term focus, a dimension of market orientation, compared to non-family businesses

PROFITABILITY An organizations focus on the

profitability of the firm’s operations Seen as both a goal and consequence

of an MO (Narver & Slater, 1990) H6: In large, publically held companies,

family businesses will exhibit less emphasis on profitability, a dimension of market orientation, compared to non-family businesses.

MO AND PERFORMANCE The link has been established between

MO and performance (Ellis, 2006) If family firms differ from non-family

firms in their level of MO, does this translate to performance differences? H7: Being a family business moderates the

relationship between market orientation and organizational performance

METHOD Content analysis via DICTION 5.0 (Hart, 2000)

Word lists determined based on Narver & Slater (1990) dimensional definitions

Rated by 3 authors independently Shareholder letters for 2001-2005 were analyzed

on the five dimensions of MO for 224 firms Family firms were measured based on the direct

proximity of senior management and/or board members to the founder (Dyer & Whetten, 2006; Chua et al., 1999)

RESULTS Family firms display significantly less MO than

non-family firms on the summated measurement of MO

Family firms display significantly less competitor orientation and profitability focus on the multidimensional measurement approach

Mixed evidence from the performance regression; indicates a more complicated relationship between family firms and ROA/Tobin’s q performance measures regarding MO

LIMITATIONS Content analysis word lists were based on subjective

definitions of each dimension of MO; difficult to determine specifically MO-related words

Word counts begin the analysis of MO and family firms, however, a bigger story exists within the context of word usage; future studies should examine this

The performance aspects of analysis were mixed and should be given further scrutiny

While large cap firms are crucial to macroeconomic performance, they are only one class of companies to be analyzed

CONTRIBUTIONS First to identify a difference between the

implementation of a MO between family and non-family firms

The generalizability of these results allows future research to examine specific facets of MO that family firms can improve upon

Establishes the grounds upon which future research can examine the sustainability of family firms and MO dynamics, hopefully leading to specific family firm contributions

CONCLUSION This study represents the first step in a long

process of examining the family firm dynamics of MO

Family firms are at a distinct disadvantage regarding MO currently, however, we believe they have the necessary antecedents to successfully transition to a greater MO level

Future research should focus on other specific implications for family firms using MO as a strategic orientation

THE FUTURE OF THE PAPER Currently in the process of seeking clearer

significance in the multidimensional analysis of MO and family firms using a matched pairs data set

Working on improving the performance study by using the same matched pairs data set as above

Need to clarify and improve the contributions of the study to the management field; hopefully this can be accomplished through greater results in the performance analysis

QUESTIONS?

COMMENTS?