Market-Driving Behavior in Emerging Firms (eBook)

Dr. Jesko-Philipp Neuenburg wrote this dissertation under Prof. Malte Brettel’s supervision at the WIN chair of the RWTH Aachen.

Foreword 5
Preface 7
Table of Contents 8
Abbreviations 12
Figures 14
Tables 16
1. Introduction 18
1.1 Relevant research problem 18
1.2 Objectives of this investigation 20
1.3 Content of thesis 22
2. Basics of investigation 25
2.1 Emerging firms 25
2.1.1 Emerging firms and entrepreneurial research 25
2.1.2 Definition of emerging firms 26
2.1.3 Characteristics that differentiate emerging firms from established companies 29
2.2 Market orientation 31
2.3 Market-Driving Behavior 39
2.4 Market-Driven Behavior 55
2.5 Market-driving vs. market-driven behavior: the theoretical groundwork 64
2.5.1 Market-driving vs. market-driven behavior: a process perspective 65
2.5.2 Market-driving vs. market-driven behavior: a timing perspective 66
2.5.3 Market-driving behavior: a strategy perspective 68
2.5.4 Elements of market-driving behavior: a stakeholder perspective 73
3. Conceptualization of market-driving behavior in emerging firms 78
3.1 A brief review of the existing literature on market-driving behavior in emerging firms 78
3.2 Elements of market-driving behavior in emerging firms 81
3.2.1 Customer-driving behavior 82
3.2.2 Competitor-driving behavior 84
3.2.3 Channel-driving behavior 85
3.2.4 Regulator-driving behavior 86
3.2.5 Multiplier-driving behavior 89
3.2.6 Employee-driving behavior 90
3.3 Consequences of market-driving behavior 91
3.3.1 How market-driving behavior leads to competitive advantage 91
3.3.2 Impact of market-driving behavior on company performance 92
3.4 Moderators of the market-driving behavior – business performance relationship 94
3.4.1 Company development phase 97
3.4.2 Industry development stage 99
3.4.3 Order of market entry 100
3.4.4 Technology turbulence 102
3.4.5 Market turbulence 102
3.4.6 Competitive intensity 104
3.4.7 Regulation intensity 105
3.4.8 Degree of innovation 106
3.5 Overview of structural model 108
4. Measurement of market-driving behavior in emerging firms 111
4.1 Measurement of market-driving behavior in the extant literature 111
4.2 Design of the survey instrument 112
4.2.1 The market-driving behavior (MaDri) indicators 113
4.2.1.1 Customer-driving behavior 114
4.2.1.2 Competitor-driving behavior 115
4.2.1.3 Channel-driving behavior 116
4.2.1.4 Regulator-driving behavior 116
4.2.1.5 Multiplier-driving behavior 117
4.2.1.6 Employee-driving behavior 119
4.2.2 The market-driven behavior indicators 120
4.2.2.1 Intelligence generation 121
4.2.2.2 Intelligence dissemination 122
4.2.2.3 Responsiveness 123
4.2.3 The scales 124
5. Empirical study of market-driving behavior in emerging technology firms 125
5.1 Data collection 125
5.1.1 Selection of target companies for survey 125
5.1.2 Survey procedure 126
5.1.3 Sample representativeness 126
5.1.4 Removal of unsuitable answers 127
5.1.5 Data editing 127
5.1.6 Analysis of non-response and informant bias 128
5.2 Sample properties 129
5.2.1 Industries represented in the sample 129
5.2.2 Age, Size and Stages of sample companies 130
5.3 Data analysis 132
5.3.1 Specification of constructs 133
5.3.2 Selection of analytical method 136
5.3.3 Assessment of model quality 140
5.3.3.1 Quality assessment of reflective measurement models 141
5.3.3.2 Quality assessment of formative measurement models 143
5.3.3.3 Quality assessment of structural model 144
5.3.4 Evaluation of the measurement models: Validation of constructs 149
5.3.4.1 Reflective Constructs 149
5.3.4.2 Formative Constructs 155
5.3.5 Evaluation of the structural model 158
5.3.6 Moderators of market oriented behaviors 162
5.3.6.1 Absolute influence of market-driving behavior on firm performance 164
5.3.6.2 Relative influence of market-driving behavior vis-à-vis market-driven behavior on firm performance 165
6. Discussion 168
6.1 Interpretation of Results 168
6.1.1 The market-driving behavior construct and its dimensions 169
6.1.2 Performance implications of market-driving behavior 170
6.1.3 Consideration of environment 176
6.1.3.1 Company development phase 177
6.1.3.2 Industry development stage 181
6.1.3.3 Order of market entry 183
6.1.3.4 Technology turbulence 185
6.1.3.5 Market turbulence 186
6.1.3.6 Competitive intensity 187
6.1.3.7 Regulation intensity 188
6.1.3.8 Degree of innovation 189
6.2 Implications for entrepreneurs 192
6.3 Implications for researchers 195
6.4 Limitations of analysis and suggestions for further research 198
7. Summary 201
8. Appendix 203
8.1 Cover letter 203
8.1.1 Initial Invitation 203
8.1.2 Reminder I 204
8.1.3 Reminder II 205
8.2 Survey instrument 207
8.3 Statistical appendix 216
8.3.1 Results of structural model per moderator 216
8.3.2 Reliability and validity for moderator constructs 242
9. References 244

1. Introduction (p. 1)

“The reasonable man adapts himself to the world, the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.” (George Bernard Shaw)

This chapter – which is divided into three short sections – will introduce the topic and research problem of this thesis, lay out the objectives for this work and structure the contents of the following chapters.

1.1 Relevant research problem

The concept of market orientation has received significant attention from researchers and practitioners alike since the early 1990s. This has been the case for established companies as well as for emerging firms. Two schools of thought have developed with regard to the two approaches to market orientation. The first one - which has been considerably more researched – is mostly referred to as the “market-driven” approach to market orientation which implies that “[…] businesses seek to understand customers’ expressed and latent needs, and develop superior solutions to those needs”.

The second one - labeled as the “market-driving” approach – on the other hand involves “a firm’s ability to lead fundamental changes in the evolution of industry conditions by influencing the value creation process at the product, market or industry levels.” This approach, however, is comparably underdeveloped in the existing literature. The first conceptualizations of market-driving strategies and behavior for established companies have been provided by Kumar et al. (2000) and Jaworski et al. (2000).

However, so far there has been no research regarding the adaptation and fine-tuning of that concept for emerging firms. Because emerging firms differ from established companies in various dimensions8 this appears to be a necessary step in order to understand and apply the market-driving concept in the context of entrepreneurship and new venture creation.

In that process it will be vital to understand the cause-effect relationships, antecedents, and consequences of market-driving behavior in emerging firms. Open questions include under what circumstances and in which environment emerging firms benefit from a market-driving strategy, what capabilities emerging firms need to reap those benefits, how an emerging firm actually “drives” a market, customer behavior, competitor actions, channel configuration or regulators, what the key success factors are and which impact can be generated by market-driving behavior.

Furthermore no generally accepted measurement instrument for market-driving behavior has been developed to date despite initial attempts in that direction. Without such a measurement instrument, however, there is no basis for further in-depth investigations on the topic which can be used as a reference point by later research endeavors. Questions on this issue arise around two problem complexes - construction of the measurement instrument and validity for the emerging firm context.

It is important to identify the key variables that determine the level of market-driving behavior, which scale items capture these variables and whether the scale differs between established companies and emerging firms. Finally, existing empirical research on market-driving behavior and strategies – which is in the very early stages – has been directed towards established companies and was predominantly case-based.

In order to empirically validate the conceptual findings about market-driving behavior of emerging firms it is necessary to conduct statistical analyses on larger samples of research objects and to investigate emerging firms as opposed to large, established firms. This doctoral dissertation contributes in the following way: it will add to the theoretical discussion of market-driving behavior by integrating it into the larger context of market orientation and advance the empirical investigation of marketdriving behavior in emerging firms by developing a measurement scale and investigate its impact on firm performance in a variety of environmental scenarios.