Market Orientation, Competitive Aggressiveness, and Firm Performance. An Empirical Study

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School of Business | Master's thesis
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Research in competitive dynamics has largely pertained to the series of competitive moves initiated by a firm to either retaliate or engage rivals to improve market position relative to competitors. In spite of the richness of literature, numerous of gaps remain in the stream of research, particularly in regard to the understanding of how a firm’s continuous creation of superior customer value contributes to competitive dynamics research. This study endeavors to address this gap by investigating the moderating effect of market orientation on the relationship between competitive aggressiveness and firm performance. Drawing upon Narver & Slater’s (1990) perspective of market orientation that underscores the importance cultural dimensions in the creation of superior customer value, this paper proposes that market orientation strengthens the relationship between competitive behaviour and firm performance, as market oriented firms possess superior knowledge to exploit more opportunities compared to competitors and are better equipped to defend market position against rivals. An empirical research is employed to investigate the hypothesized relationships among market orientation, competitive aggressiveness, and firm performance. The data were collected from three sets of survey data administered in 2014, 2016, and 2018 (n = 2008) targeting top management members in Finnish firms with over five employees. The proposed theoretical model of the research was validated with a Confirmatory Factor Analysis (CFA) and the hypothesized relationships were tested with a series of Structural Equation Model (SEM) analyses. Although the results of the study reveal that the direct effect of competitive aggressiveness on financial performance was significant and that market orientation positively influences the relationship between competitive aggressiveness and firm performance, these results were highly contextual in regard to firm size, market position, and market focus. The paper has three main contributions. First, although extant literature has examined the effect of competitive aggressiveness on firm performance, most of these studies have been limited to a single industry, leveraging U.S. centric data samples. This research brings the conversation to the Finnish context, examining firms across various industries, shedding light into a relatively unexplored context in competitive dynamics. Second, this research demonstrates the positive moderating role of market orientation between competitive aggressiveness and firm performance, and responds to calls to integrate market orientation within broader models in strategic management literature. Third, the research extends studies in the field of competitive dynamics by examining robustness of findings in regard to an organization’s market focus, size, and market position.
Thesis advisor
Tikkanen, Henrikki
Huhtala, Juho-Petteri
market orientation, competitive aggressiveness, firm performance, competitive dynamics
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