Completing the market orientation matrix: The impact of proactive competitor orientation on innovation and firm performance

Abstract

The concept of market orientation comprises four components: customer and competitor orientations, each with a proactive and responsive dimension. Studies have considered both responsive and proactive customer orientation. Competitor orientation, however, has been investigated more narrowly. Research has focused specifically on its responsive dimension, a firm's posture of quickly responding to its competitors' actions and their offerings; but has largely disregarded proactive competitor orientation, a firm's posture towards altering the market's competitive behavior in its favor. This study investigates the role of responsive and proactive competitor orientation on influencing innovation and firm performance, as well as the mediating effects of technology and learning orientation. Utilizing a unique dataset that combines primary and time-lagged secondary data from 306 firms, we find that both responsive and proactive competitor orientation are observable drivers of performance in the market, but in notably different ways. Proactive competitor orientation drives innovation performance, directly and through technology orientation. Responsive competitor orientation, instead, enhances firm performance through learning orientation. By providing insights about the proactive side of competitor orientation, this study supplements and completes the so called “market orientation matrix”. This framework provides guidance for leaders to develop and manage a practical application of, and future research on market orientation.