The Complementary Effects of Market Orientation and Entrepreneurial Orientation on Profitability in Small Businesses*

William E. Baker and James M. Sinkula

Journal of Small Business Management, 2009, vol. 47, issue 4, 443-464

Abstract: Market orientation (MO) and entrepreneurial orientation (EO) are correlated, but distinct constructs. MO reflects the degree to which firms' strategic market planning is driven by customer and competitor intelligence. Entrepreneurial orientation reflects the degree to which firms' growth objectives are driven by the identification and exploitation of untapped market opportunities. When modeled separately, research has reported direct effects of both constructs on firm profitability. When modeled simultaneously, however, the direct effect of EO has disappeared. This has led some scholars to postulate that EO is an antecedent of MO. The results of this study contradict this presumption and suggest that EO and MO complement one another, at least in small businesses, to boost profitability. The major difference between this and previous studies is the inclusion of innovation success, which captures an indirect effect of EO on profitability. At least in small firms, the results suggest that EO complements MO by instilling an opportunistic culture that impacts the quality and quantity of firms' innovations.

Date: 2009
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Citations: View citations in EconPapers (18)

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DOI: 10.1111/j.1540-627X.2009.00278.x

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