The impact of internal and external market orientation on performance in local public organisations

Abstract

PurposeThis study aims to build on and extend the literature of market orientation by examining the impact of sub‐dimensions of both internal and external market orientation on financial and non‐financial performance in the local public sector context.Design/methodology/approachIn line with previous studies on market orientation, a quantitative research design was adopted. The data collection was performed through a mail survey of a sample of local Portuguese public organisations (municipality executive board members). Structural equation modelling was used as a means to analyse the hypothesised relationships.FindingsSix out of 12 hypotheses are supported. Concerning the sub‐components of external market orientation, the study finds that the dissemination and responsiveness of external information impacts strongly on non‐financial performance. In turn, external information generation and responsiveness impacts positively on financial performance. With respect to internal market orientation, results revealed a lower impact of different sub‐dimensions on performance. Specifically, the only dimension that impacts positively on organisational performance (financial and non‐financial) is internal information generation. This reinforces the view that there is a need to strengthen internal information dissemination and responsiveness to enhance organisational performance.Originality/valueThis paper offers original and unique findings and to the best of the authors' knowledge this research is one of the few studies addressing the role of internal and external sub‐dimensions of market orientation on performance in the local public sector. The findings of this study add weight to the recent emphasis on disaggregate approaches to (internal and external) market orientation‐performance link.