A Longitudinal Study of the Impact of Market Structure, Firm Structure, Strategy, and Market Orientation Culture on Dimensions of Small-Firm Performance

Abstract

The purpose of this article is to determine market orientation’s relative impact on small-business performance, compared to other influences, in an integrated model using longitudinal data. Contrary to expectations based on the management literature, the results indicate weak causal relationships between market environment, small-firm structure, and small-firm strategy. The results further indicate weak influences of these variables, but strong and consistent influences of market orientation, on various measures of small-firm performance. Contrary to expectations based on business policy literature, relative product quality and new product success were not significant influences on profitability, perhaps due to the significant influence of market orientation on these variables. In addition, although increases in growth/share had a significant short-term influence on increases in profitability, high levels of previous years’ firm growth/share had a negative influence on current profitability. The previous year’s level of firm coordinating systems and market competitive intensity has a significant impact on the level of small-firm market orientation.