Testing the Direct Market Orientation-Performance Relationship: The Case of Stock Brokerage Firms

Abstract

Recent research has shown that more market-oriented business units seem to enjoy a higher level of business performance. However, some have questioned the extent of such relationship and its diminished returns in relation to the strength of market orientation. Others have argued that marketing orientation adds to the cost of doing business. The present study attempts to provide some empirical evidence to examine such suspicion by testing the existence or the lack of a direct relationship. We examine the mediating role of service quality in the market orientation-performance linkage in the context of a homogeneous stock brokerage sector. A direct effect of market orientation on performance is compared with an indirect one to test the direct relationship. The results suggest that the effect of market orientation on business performance is largely attributed to the meditating role of service quality. A direct relationship is shown to be weak. It indicates that market orientation does not directly affect business performance and show how an intermediate variable, service quality, may mediate a market orientation-performance relationship. Important implications are provided for marketing practitioners and academic researchers. 