1-s2.0-S0019850106000836-mainimp

ent 36 (2007) 694–708
Industrial Marketing Managem
The performance effect of organizational learning and market orientation

Daniel Jiménez-Jiménez a,⁎, Juan G. Cegarra-Navarro b,1

a Departamento de Organización de Empresas y Finanzas, Facultad de Economía y Empresa, Universidad de Murcia, Campus de Espinardo,CP: 30.100, Espinardo Murcia, Spain

b Departamento de Economía de la Empresa, Facultad de Ciencias de la Empresa, Universidad Politécnica de Cartagena, Paseo Alfonso XIII, 50,CP: 30.203 Cartagena Murcia, Spain

Received 8 December 2004; received in revised form 9 May 2005; accepted 19 February 2006Available online 5 July 2006

Abstract

In recent decades an important set of articles on management has focused upon the marketing concept and the related construct of marketorientation. The next challenge is to understand how this organizational orientation can be achieved and maintained. Using data from 451companies and through structural equation models, this study considers that organizational learning represents the capacity of a company to movefrom a given situation to another desired situation of market orientation and performance. The results suggest that the influence of marketorientation on performance is only significant when it is mediated by organizational learning. The results also indicate that organizational learninghas a positive effect on performance.© 2006 Elsevier Inc. All rights reserved.

Keywords: Organizational learning; Learning orientation; Market orientation; Performance; Competitive advantage

1. Introduction

Over the last few decades there have been an increasingnumber of studies focusing upon the fields of organizationallearning and market orientation as precursors of organizationalperformance (Hult & Ketchen, 2001), and both can be viewed asresources that a firm might employ to attain competitiveadvantage (Baker & Sinkula, 1999b; Celuch, Kasouf, &Peruvembac, 2002; Day, 1994a,b; Dickson, 1996; Hunt &Morgan, 1996) and a key to successful product innovation andperformance (Dickson, 1996; Slater & Narver, 1995).

The relationships among organizational learning, marketorientation and organizational performance can be exploredfrom the resource-based view of the firm (Barney, 1986a,b;Prahalad & Hamel, 1990; Wernerfelt, 1984). The resource-basedview perceives the firm as a unique bundle of idiosyncraticresources and capabilities where the primary task of managementis to maximize value through the optimal deployment of existing

⁎ Corresponding author. Tel.: +34 968 36 79 00.E-mail addresses: [email protected] (D. Jiménez-Jiménez),

[email protected] (J.G. Cegarra-Navarro).1 Tel.: +34 968 32 57 88.

0019-8501/$ - see front matter © 2006 Elsevier Inc. All rights reserved.doi:10.1016/j.indmarman.2006.02.008

resources and capabilities, while developing the firm's resourcebase for the future (Grant, 1996). Thus, the resource-based viewprovides a firm-specific perspective wherein the importance oftangible and intangible resources and capabilities that arevaluable, rare and not easily imitated or substituted by a firm(Barney, 1991) are emphasized as the source of competitiveness.

In this context, market orientation (Day, 1994b; Hult &Ketchen, 2001) and organizational learning (Grant, 1996;Spender, 1996) are some of the capabilities that allow firms toattain a stronger positional advantage. On one hand, ‘marketorientation’ could be understood as a philosophy and behaviordirected toward determining and understanding the needs of thetarget customer and adapting the selling organization's responsein order to satisfy those needs better than the competition,thereby creating a competitive advantage (Saxe &Weitz, 1982).On the other hand, ‘organizational learning’ is a mechanism bywhich the organization transforms the individual knowledge ofemployees into social knowledge (Grant, 1996; Spender, 1996).

Although there are many overlaps between amarket orientatedcompany and a learning organization (Baker & Sinkula, 1999b;Slater & Narver, 1995), the two constructs are not identical. Thepurpose of this paper is to contribute to the understanding of thelinks between these constructs and their effects in performance.

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http://dx.doi.org/10.1016/j.indmarman.2006.02.008

695D. Jiménez-Jiménez, J.G. Cegarra-Navarro / Industrial Marketing Management 36 (2007) 694–708

Specifically, we show how organizational learning is consideredto be a main factor in the achievement competitive advantage.This paper is organized as follows: Firstly, we briefly revieworganizational learning and market orientation and their relation-ships with organizational performance. Next, we present themodel and the hypotheses that are going to be tested in the last partof this research. Finally, the results, discussion of theirimplications and future research directions are presented.

2. Organizational learning

Few topics in management have received more attention overthe last decade than that of The Learning Organization (seeCrossan, Lane, White, & Djurfeldt, 1995; Dixon, 1992;Dodgson, 1993; Jones & Hendry, 1994; Slater & Narver, 1995for reviews of relevant literature). Thus, from the original studiesfocused on organizational learning (Argyris, 1976; Cangelosi &Dill, 1965; Chapman, Kennedy, Newell, & Biel, 1959; Cyert &March, 1963; Hirschman & Lindblom, 1962; March & Olsen,1975) there is a very rapidly growing interest from a diversevariety of academic perspectives on this subject (Bontis,Crossan, & Hulland, 2002; Crossan, Kane, & White, 1999;Jones & Hendry, 1994; March, 1991; Romme & Dillen, 1997;Senge, 1990; Stata, 1989). The continuing popularity of thisparadigm has resulted in two main perspectives:

1) Learning organizations can be seen as “…organizations wherepeople continually expand their capacity to create the resultsthey truly desire, where new and expansive patterns ofthinking are nurtured, where collective aspiration is set free,and where people are continually learning to see the wholetogether” (Senge, 1990). This concept, according to Matlay(1997), gains recognition amongst high profile, innovativeorganizations that set out to increase their market sharethrough highly successful, learning-based human resourceand knowledge management strategies.

2) Organizational learning may be seen as a process wherebyempirical measurement is easier than a stock perspective(Sinkula, Baker, & Noordewier, 1997) and besides “anunderstanding of what is known is of less value to the orga-nization than understanding what it is capable of knowing,because a stock of knowledge that is not continually updatedrapidly depreciates in value” (Bell, Whitwell, & Lukas, 2002).

The capacity of organizations to learn has long intriguedresearchers and has motivated an increasing number of thesestudies. However, there is no extended agreement about theconcept of organizational learning due to the diversity of researchdomains in which learning phenomena have been explored(Crossan et al., 1999) and the concept of organizational learning isembedded in different schools of thought, including contingencytheory, psychology, organizational development, ManagementScience, social anthropology, information theory and systemdynamics, sociology, industrial economy, production and oper-ation management systems theory, organizational theory andstrategic management that are founded on very different theo-retical assumptions and should be viewed as complementary to

each other in understanding organizational learning (Dodgson,1993; Easterby-Smith, 1997; Romme & Dillen, 1997; Shrivas-tava, 1983).

Examining the organizational learning concepts, Huber (1991)noted that “an organization learns if any of its units acquireknowledge that it recognizes as potentially useful to the orga-nization”, understanding organizational learning as the develop-ment process of new knowledge or insights that have the potentialto influence behavior. In this case, “organizational learning occurswhen members of the organization act as a learning agent for theorganization, responding to changes in the internal and externalenvironment of the organization by detecting and correctingerrors” (Argyris & Schon, 1978). It is necessary for the individualknowledge to be transferred to the organization, so that it can beused by individuals other than the progenitor (Sinkula, 1994).Thus, there is a link between the learning of the employees of acompany and the learning of this organization (Sinkula et al.,1997). Also, the literature usually distinguishes between single-loop or adaptive learning and double-loop or generative learning.In former individuals and groups adjust their behavior to fixedgoals, norms and assumptions, but in the latter, all these goals,norms and assumptions, as well as their behavior, are open tochange (Argyris & Schon, 1978; Senge, 1990), and consequently,employees are always questioning their assigned roles and targetsrather than merely realizing them.

Although there is some variance in the specifics, organiza-tional learning scholars typically conceptualize organizationallearning as including four primary constructs: informationacquisition, distribution, interpretation, and memory (Crossanet al., 1999; Day, 1994a; Dean & Snell, 1991; Dixon, 1992;Huber, 1991; Nevis, Dibella, & Gould, 1995; Romme & Dillen,1997; Sinkula, 1994; Slater & Narver, 1995; Snell, Youndt, &Wright, 1996). Organizational learning needs the creation andcontrol of both external and internal knowledge for both currentand future operations (Leonard-Barton, 1992). Thus, knowledgeacquisition requires constant effort and continual experimenta-tion from all employees of the organization. Then, when anindividual acquires knowledge, the company has to foster thedistribution of this knowledge among the rest of members of theorganization. This distribution consists in the transmission of theacquired knowledge at an individual level principally throughindividual conversations and interrelations between employeesof the organization (Brown & Duguid, 1991; Koffman & Senge,1993). Before the organization can use the distributed know-ledge, it must first be interpreted. For this to happen, knowledgeis translated, developing models of understanding, bringing outmeaning, and assembling conceptual schemes among keymanagers (Daft & Weick, 1984) developing a shared under-standing and the taking of coordinated action by members of aworkgroup (Crossan et al., 1999). Finally, organizational me-mory is the collective knowledge of an organization and containstheories in use, shared mental models, information databases,formalized procedures and routines, and formal cultural moresthat guide behavior (Slater & Narver, 1995), have effect onperformance (Walsh & Ungson, 1991), are based on pastknowledge and experience (Stata, 1989) and can be brought tobear on present decisions (Walsh & Ungson, 1991).

696 D. Jiménez-Jiménez, J.G. Cegarra-Navarro / Industrial Marketing Management 36 (2007) 694–708

Organizational ability to decode and respond to a challengingenvironment has motivated considerable theoretical and practi-cal interest (Edmondson & Moingeon, 1998a). Thus, theliterature has recognized the strategic importance of organiza-tional learning as a means to attain sustained competitiveadvantage for the firm (DeGeus, 1988; Garvin, 1993; McGill,Slocum, & Lei, 1992; Stata, 1989). By the late 1980s, influentialacademics, policy makers and practitioners promoted organiza-tional learning as a strategic element in the quest for sustainablebusiness competitiveness (Edmondson & Moingeon, 1998b;Hunt & Morgan, 1996; Senge, 1990), and which allowscompanies to achieve better results than the competition(Stata, 1989). In essence, learning orientation is reflected bythe presence of values that influence the propensity of a firm toproactively pursue new knowledge and challenge the status quo(Sinkula et al., 1997; Slater & Narver, 1995). Discussions of theeffect of organizational learning on performance would benefitfrom a better understanding of what learning is and its theoreticalorigins (Bell et al., 2002). So, some authors have looked forthose organizational characteristics that foster the organizationallearning process, such as shared mental models, sharedorganizational vision and open-minded approaches to problemsolving, organizational culture, strategy, teamwork, humanresource management or research and development (see e.g.Fiol & Lyles, 1985; Harvey&Denton, 1999;McGill et al., 1992;Senge, 1990). Among these factors, there is an emergentliterature focused on how organizational learning conferscompetitive advantage through its interplay with marketingcapabilities and outcomes (e.g. Baker & Sinkula, 1999b; Slater& Narver, 1995).

3. Market orientation

Although other terms have previously been used, such as“marketing orientation” or “market driven” (e.g. Kohli &Jaworski, 1990; Shapiro, 1988; Webster, 1988), a review of theliterature reveals diverse definitions of the market orientationconcept. Day (1994b), Deshpandé, Farley, and Webster (1993),Narver and Slater (1990), Slater and Narver (1995) define thisconstruct as an aspect of organizational culture. Thus, marketorientation is “the culture that places the highest priority on theprofitable creation and maintenance of superior customer valuewhile considering the interests of other stakeholders; and providesnorms for behavior regarding the organizational development andresponsiveness to market information” (Slater & Narver, 1995).This culture comprises three behavioral components: customerorientation, competitor orientation and interfunctional coordina-tion (Narver & Slater, 1990).

A second perspective, relevant to this paper, suggests thatmarket orientation is related to the implementation of the mar-keting concept. Kohli and Jaworski (1990) define marketorientation as “the organization-wide generation of market in-telligence pertaining to current and future customer needs, dis-semination of intelligence across departments, and organization-wide responsiveness to it”. Market orientation is defined in asimilar way by Ruekert (1992), but emphasizing an explicitfocus of strategic planning by business units, so it can be viewed

as the degree to which a firm's analysis of the external marketingenvironment influences the strategic planning process (Baker &Sinkula, 2002). Hence, the term market orientation includes theability of the organization to generate, disseminate and usesuperior information about customers and competitors. Conse-quently market orientation is not a discrete phenomenon, and afirm’s market orientation exists along a continuum (Baker &Sinkula, 1999b). According to this point of view, key indicatorsof market orientation include the organization-wide acquisitionof market information, followed by its interdepartmentaldissemination, consideration and processing and the organiza-tional use of this information to respond to customers, channels,competitors and strategic partners to adapt to changing marketconditions.

Studies focused on market orientation have investigated theantecedents (e.g. climate, conflict coordination, structuralvariables), consequences (e.g. business performance, employeeattitudes, product innovation) and relationship moderators (e.g.competition, environment) of market orientation (see e.g. Baker& Sinkula, 1999a,b; Han, Kim, & Shrivastava, 1998; Hurley &Hult, 1998; Jaworski & Kohli, 1993; Kohli & Jaworski, 1990;Sinkula et al., 1997). However, academic and practitionerattention has been mostly directed towards the associationbetween market orientation and organizational performance.The conclusions that have been drawn from studies of therelationship between these concepts are mixed. A growingnumber of empirical studies have verified that an improvementin the level of market orientation will lead to superior orga-nizational performance (Narver & Slater, 1990; Oczkowski &Farrell, 1998; Ruekert, 1992; Slater & Narver, 1994, 2000b), inaccordance with the resource-based theory. Another group ofstudies report no significant relationship (Hart & Diamantopou-los, 1993), and yet a third group report mixed results (Greenley,1995; Jaworski & Kohli, 1993), showing that perhaps therelationship is more complex than a linear one (Hult & Ketchen,2001). However, it is generally accepted in the literature that thelinkage between a market orientation and performance appearsto be robust (Jaworski & Kohli, 1993), and managers shouldstrive to improve the market orientation of their businesses intheir effort to attain higher business performance.

Despite these relatively consistent findings, a number ofauthors question the benefits of being market oriented, andsuggest that there may be several limitations to a marketorientation (Farrell & Oczkowski, 2002). Some authors notethat creating a market orientation is only the beginning (Slater &Narver, 1995) and that opting for organizational learning as akey element to sustain competitive advantage is better in thelong run (Farrell & Oczkowski, 2002; Lukas, Hult, & Ferrell,1996; Slater & Narver, 1995). The relationship betweenorganization learning, market orientation and performance isdiscussed in the next section of this paper.

4. The relationship between market orientation,organizational learning and performance

The study of the relationship between market orientation,organizational learning and performance has increased since the


works of Sinkula (1994) and Slater and Narver (1995).Following these authors, the literature has noted that marketorientation is compatible with gaining external knowledge (Day,1994a). Furthermore, market organizations provide the culturalframework fromwhich a learning orientation can develop (Slater& Narver, 1995), and can also be seen as learning orientatedorganizations. Thus, market orientation could be described as aset of processes that enable firms to learn (Dickson, 1996).

Although we have noted that there is a causal relationshipbetween market orientation and organizational learning, the factis that the dependent direction of this relationship is not clear.According to Farrell and Oczkowski (2002) the literature reviewsuggests three alternative models. To date, this issue remainingunresolved (Bell et al., 2002). The first model proposes thatorganizational learning is the foundation for market orientationwhich in turn leads to organizational performance (Day, 1994b;Santos-Vijande, Sazo-Pérez, Álvarez-González, & Vázquez-Casielles, 2005). In the second model, it is market orientationwhich precedes organizational learning in order to attain betterperformance (Farrell, 2000; Slater & Narver, 1995). Finally, in athird model, both organizational learning and market orientationare directly related to organizational performance (Baker &Sinkula, 1999b). Perhaps the key to the problem is to assume thatthese possibilities are not exclusive (Santos-Vijande et al.,2005), because a learning organization can succeed in beingadequately market orientated, and the cultural values of marketorientation and an adequate pattern of behavior coherent withthese, may also give rise to a true learning organization.

However, the common objective of market orientation andorganizational learning studies has been to examine how thesuccessful acquisition of knowledge can help organizations un-derstand customer needs and, ultimately, improve their perfor-mance (e.g. Deshpandé et al., 1993; Kohli & Jaworski, 1990;Slater & Narver, 1995). In spite of these affinities, these conceptsare not the same thing. First, learning orientation influences thepropensity of the firm to create and use all kinds of knowledge,not just market-based knowledge (Baker & Sinkula, 1999b), andspecially promote generative learning as a core competency(Sinkula et al., 1997) rather than only the adaptive learningpromoted by amarket organization. In effect,market orientation isreflected in a firm’s knowledge-producing behaviors and isthereby implicated in its market information processing activity(Baker & Sinkula, 1999b), which may routinely result in adaptivelearning. In contrast, learning orientation is reflected by a firm'sknowledge questioning values, promoting generative learningwhich encompasses more than a purely market place focus(Celuch et al., 2002). Second, organizational learning requiresother cultural variables (e.g. entrepreneurship, organic structure,facilitative leadership, decentralized strategic planning and achallenging external environment) in addition to market orienta-tion (Slater & Narver, 1995), although this last item may be themost important factor. Finally, learning organizations arecharacterized by using internal and external sources of knowledgeacquisition, while market orientation is focused primarily onobserving customers and competitors outside the boundaries ofthe firm (Day, 1994a,b), for the profitable creation of superiorcustomer value (Slater, 1996). Consequently, although market

orientation provides information about the current and latentneeds of their customers, and also monitors and anticipates whatcompetitors are doing to provide customer value, organizationallearning could generate information from experience, learning bydoing or from a consolidated policy of R and D to give a fewexamples beyond the market sphere. It is not necessary for allknowledge acquired to proceed from market sources. Conse-quently, we understand that, although all acquired knowledgefrommarket orientation could be organizational knowledge in theend, the converse is not true, and not all knowledge that isgenerated from an internal focus could present in a markedorientation. Hence, our hypothesis is stated as follows:

H1. Market orientation has a positive impact on the process oforganizational learning.

As the literature has recognized, market orientation isconsidered to be a source of competitive advantage. Because ofits external focus, marketing is well positioned to appreciateinformation about consumers. This orientation provides a focusfor the product development of the business and sales growthefforts by enabling the business to develop strong relationshipswith key customers and insights into opportunities for marketdevelopment (Slater & Narver, 2000a). As the literature shows onrepeated occasions, there is a positive link between marketorientation and organizational performance (Doyle & Wong,1998; Farrell, 2000; Hooley, Fahy, Cox, Beracs, & Snoj, 1999;Jaworski & Kohli, 1993; Ruekert, 1992; Santos-Vijande et al.,2005). This led the authors of the present paper to conclude thatmarketing orientation is the cause of superior performance. Thus,it follows that:

H2. Market orientation has a positive impact on overallorganizational performance.

A strong market orientation is required to focus the companyon those environmental events that are likely to affect their abilityto maximize customer satisfaction relative to competitors, but it isa mechanism that primarily facilitates adaptive learning (Baker &Sinkula, 1999b). Adaptive organizations focus on incrementalimprovements, often based upon the past track record of success.Essentially, they do not question the fundamental assumptionsunderlying the existing ways of doing work. On the other hand,learning orientation is a mechanism that directly affects a firm'sability to challenge old assumptions about the market and how afirm should be organized to address it (Baker & Sinkula, 1999b).This kind of learning is generative learning. Senge (1990) notesthat increasing adaptiveness is only the first stage, and companiesneed to focus on generative learning. Generative learning em-phasizes continuous experimentation and feedback in an ongoingexamination of the very way organizations go about defining andsolving problems. Furthermore, it is concerned with building newcompetences, or identifying and creating opportunities based onleveraging existing competences, to generate new business op-portunities. While market orientation may lead to adaptive,single-loop learning, producing incremental innovations, orga-nizational learning allows firms to develop generative, double-loop learning and radical innovations (Argyris & Schon, 1978;Baker & Sinkula, 2002; Sinkula, 1994; Slater & Narver, 1995).

Table 1Constructs measurements summary: confirmatory factor analysis and scale reliability

Item description Standardizedloading

t-value Reliability(SCR a., AVEb)

Intelligence generation1. Company does a lot of in-house market research 0.56 12.06 SCR=0.77

AVE=0.522. Periodically are analyzed the effect of the shift in the business environment over the company 0.81 19.463. Company adapts quickly to the shift in the business environment (scale: 1=strongly disagree; 5=strongly agree) 0.84 20.39

Intelligence dissemination1. When something important happens to a major customer of the market, the whole business unit knows about itwithin a short period

0.78 18.03 SCR=0.80AVE=0.58

2. Data on customer satisfaction are disseminated at all levels in this business unit on a regular basis 0.77 17.503. When one department finds out something about its competitors, it is quick to inform other departments(scale: 1=strongly disagree; 5=strongly agree)

0.72 16.09

Responsiveness1. Company react quickly to changes in their customer’s product or service needs 0.83 19.98 SCR=0.79

AVE=0.562. Periodically review our product development efforts to ensure that they are in line with what the customer wants 0.84 20.283. If a major competitor was to launch an intensive campaign targeted at our customers, we would implement aresponse immediately (scale: 1=strongly disagree; 5=strongly agree)

0.61 13.48

Knowledge acquisition1. There is a consolidated and resourceful R and D policy 0.64 14.56 SCR=0.84

AVE=0.642. New ideas and approaches on work performance are experimented continuously 0.90 23.263. Organizational systems and procedures support innovation. (scale: 1=strongly disagree; 5=strongly agree) 0.90 23.40

Information distribution1. All members are informed about the aims of the company 0.66 14.57 SCR=0.78

AVE=0.542. Meetings are periodically held to inform all the employees about the latest innovations in the company 0.78 17.863. Company has formal mechanisms to guarantee the sharing of the best practices among the different fields of theactivity (scale: 1=strongly disagree; 5=strongly agree)

0.76 17.34

Information interpretation1. All the members of the organization share the same aim to which they feel committed 0.82 19.34 SCR=0.77

AVE=0.532. Employees share knowledge and experience by talking to each order 0.75 17.143. Team work is a very common practice in the company (scale: 1=strongly disagree; 5=strongly agree) 0.62 13.39

Organizational memory1. The company has directories or e-mails filed according to the field they belong to, so as to find an expert on aconcrete issue at any time

0.67 15.30 SCR=0.83AVE=0.62

2. The company has up-to-date databases of its clients 0.87 21.073. Databases are always kept up-to-date (scale: 1=strongly disagree; 5=strongly agree) 0.87 21.11

Open-internal model results1. Quality product 0.56 11.60 SCR=0.77

AVE=0.532. Internal process coordination 0.80 17.893. Personnel activities coordination (scale: in the tree previously years: 1=decreasing evolution; 5=rising evolution) 0.79 17.52

Rational model results1. Share market 0.70 16.13 SCR=0.84

AVE=0.642. Profitability 0.83 20.003. Productivity (scale: in the tree previously years: 1=decreasing evolution; 5=rising evolution) 0.85 20.76

Human relations model results1. Voluntary personnel rotation 0.88 16.99 SCR=0.83

AVE=0.712. Personnel absenteeism (scale: in the tree previously years: 1=decreasing evolution; 5=rising evolution) 0.79 15.58

Fit statistics for measurement model of 29 indicators for ten constructs: χ2(332)=722.98; p<0.001; GFI=0.90; RMSEA=0.051; CFI=0.94; TLI (NNFI)=0.92.a Scale composite reliability (ρc= (Σλi)

2 var (ξ) / ((Σλi)2 var (ξ)+Σθii) (Bagozzi & Yi, 1998)).

b Average variance extracted (ρc= (Σλi2 var (ξ)) / (Σλi

2 var (ξ)+Σθii) (Fornell & Larcker, 1981)).


Finally, a strong market orientation can be readily copied, but thelearning environment that organizes and translates the output ofthese behaviors into a comparative advantage cannot (Dickson,1996).

Therefore, there is a increasing body of literature (Brock-mand & Morgan, 2003; Dodgson, 1993; Nevis et al., 1995) thatsuggests that organizational learning is a complex resource ofthe firm that can be used to create competitive advantage and,


ultimately, superior performance (Hunt & Morgan, 1996).Although there are studies that suggest the contrary (Baker &Sinkula, 1999b; Farrell & Oczkowski, 2002) that there is a weakrelationship between organizational learning and performance,leading to the conclusion that “in the absence of one or the otherit would be better for a firm to have a strong market orientation”(Baker & Sinkula, 1999b), there is enough evidence to support apositive link between organizational learning and performance(Bontis et al., 2002; Farrell, 2000; Tippins & Sohi, 2003).Therefore,

H3. Organizational learning has a positive impact on overallorganizational performance.

Thus, although organizational learning is considered to be akey element for competing in the actual markets (Day, 1994b;Tippins & Sohi, 2003), some authors suggest that it is thecombination of learning and market orientation which has ahigher likelihood of creating a sustainable competitive advan-tage (Baker & Sinkula, 1999b; Day, 1994b; Dickson, 1996).

5. Method

5.1. Research setting and data collection

Our sample was drawn from the SABI database and usedsingle-informants, among Spanish organizations located in thesoutheast of Spain with more than fifteen employees. In 1986Spain become a member of European Union. The Spanisheconomy has grown at an average annual rate of 3.6% between1996 and 2003, and even though that rate fell to 2.3% last year,that still far outstripped the European Union’s dismal average of0.6%, allowing real convergence to occur at a fairly brisk pace(OECD, 2005). Today the economy of Spain is the fifth largest inEurope, accounting for around 9% of EU output. Like otherstudies in organizational learning and market orientation(Jaworski & Kohli, 1993; Sinkula et al., 1997), the presentstudy was designed to extend across industries (excluding theagricultural sector). The sample was composed of companies ofdifferent sizes. Many of these companies engage in internationalactivity. Furthermore, others form part of international companiesor groups of companies. A total of 1600 companies made up thepopulation. The unit of analysis for this study was the company,

Table 2Construct correlation matrix

Construct Mean Standarddeviation

Correlation matrix

1 2 3

1. Intelligence generation 3.341 0.832 12. Intelligence dissemination 3.546 0.843 0.484 13. Responsiveness 3.902 0.771 0.513 0.576 14. Knowledge acquisition 3.163 0.929 0.466 0.284 05. Information distribution 2.791 0.909 0.434 0.342 06. Information interpretation 3.406 0.723 0.405 0.375 07. Organizational memory 3.813 0.944 0.346 0.312 08. Open/internal results 3.947 0.562 0.304 0.233 09. Rational results 3.656 0.740 0.262 0.132 010. Human results 3.537 0.879 0.175 0.115 0

on the assumption that aspects relating to organizational learningand market orientation affect the entire organization.

The information was collected by personal interview with thetop executive of the company, using a structured questionnaireand directed to all companies belonging to the population. Wehave tested for common methods variance (Podsakoff, MacK-enzie, Lee, & Podsakoff, 2003) which is a potential dangerarising from the use of a single informant when collecting data ineach firm, and suggest that the absence of a unique factor with aneigenvalue greater than one indicates that this source of error isnot significant. The presence of an interviewer increased the co-operation rates and facilitated immediate clarification. In orderto collect high-quality data, the interviewers were trained inorder to familiarize them with the variety of situations likely tobe encountered, as well as the concepts, definitions, and pro-cedures involved. Four hundred and fifty-one questionnaireswere obtained, yielding a response rate of 25.2%. Approxi-mately 55% of responses came from manufacturing firms andthe rest from the service sector.

The respondent companies were compared with non-respon-dents on variables such as size and company performance. Nostatistically significant differences were found between the meansof these variables at the 0.01 level in the two groups, suggestingno response bias. Overall, although these variables are frequentlyused, we cannot be certain that the respondents are notunrepresentative of the population on some other variables.

5.2. Measures and measurement properties

Before testing the hypotheses, we discuss the set of ques-tionnaire items for each construct (see Table 1). Table 2 providesan overview of the means of the constructs, together with theirstandard deviations and correlations.

5.2.1. Market orientationIn this study, in order to measure the market orientation, we

have used an adaptation of the MARKOR scale (Kohli, Jaworski,& Kumar, 1993). This scale considers the three dimensions ofmarket orientation: intelligence generation, intelligence dissem-ination and responsiveness, from a market orientation related tothe implementation of the marketing concept. The confirmatoryfactor analysis (Table 1) suggests the use of three items tomeasure

4 5 6 7 8 9 10

.339 1

.286 0.481 1

.362 0.470 0.560 1

.369 0.320 0.329 0.387 1

.237 0.332 0.380 0.347 0.248 1

.183 0.301 0.237 0.294 0.181 0.409 1

.136 0.218 0.266 0.200 0.164 0.294 0.352 1

Table 4Second-order confirmatory factor analysis of the performance

First-order construct First-order Second-order

Indicator Loading t-value Loading t-value

Open/internal model OR1 0.55 – a

OR2 0.81 10.52 0.63 7.65OR3 0.78 10.51RR1 0.70 – a

Rational model RR2 0.83 15.21 0.85 9.90RR3 0.86 15.37

Human relations model HR1 0.84 – a 0.85 8.10HR2 0.83 10.36

Fit statistics for measurement model of 8 indicators for three constructs: χ2(17)=26.89; p<0.001; GFI=0.99; RMSEA=0.035; CFI=0.99; TLI (NNFI)=0.99.a Fixed parameter.

Table 3Second-order confirmatory factor analysis of the organizational learning

First-order construct First-order Second-order

Indicator Loading t-value Loading t-value

Knowledge acquisition KA1 0.64 – a 10.53KA2 0.90 14.95 0.68KA3 0.91 14.98ID1 0.67 – a

Information distribution ID2 0.79 12.99 0.81 11.63ID3 0.76 12.74

Information interpretation II1 0.81 – a

II2 0.76 15.06 0.88 14.84II3 0.62 12.53OM1 0.67 – a

Organizational memory OM2 0.86 14.99 0.46 7.65OM3 0.87 15.01

Fit statistics for measurement model of 12 indicators for four constructs: χ2(50)=149.57; p<0.001; GFI=0.95; RMSEA=0.069; CFI=0.96; TLI (NNFI)=0.96.a Fixed parameter.


intelligence generation (ρcSCR =0.77, ρc

AVE =0.52), three tomeasure intelligence dissemination (ρc

SCR=0.80, ρcAVE=0.58)

and finally another three to quantify responsiveness (ρcSCR=0.79,

ρcAVE=0.56).

5.2.2. Organizational learningThe organizational learning literature advocates more

empirical studies into this subject to compensate for a currentscarcity. Furthermore, most of the studies in this field aretheoretical or derived from consulting stile case study. Whatlittle empirical research there is focuses on learning curves(Epple, Argote, & Devadas, 1991), knowledge codification(Kogut & Zander, 1993), the stocks and flows of knowledge(Bontis et al., 2002) or the organizational learning phases(Yahya & Goh, 2002). After reviewing this literature (Arm-strong & Foley, 2003; Day, 1994a; Kululanga, Edum-Fotwe, &McCaffer, 2001; Schneider & Angelmar, 1993; Snell et al.,1996), and accepting the theoretical classification of Huber(1991) for organizational learning phases, we have used theorganizational learning scale from the study of Pérez López,Montes Peón, and Vázquez Ordás (2004). The measures ofthese variables are displayed for every phase of organizationallearning (see Table 1): knowledge acquisition (scale compositereliability ρc

SCR=0.84, average variance extracted ρcAVE=0.64),

information distribution (ρcSCR=0.78, ρc

AVE=0.54), informationinterpretation (ρc

SCR=0.77, ρcAVE=0.53) and organizational

memory (ρcSCR=0.83, ρc

AVE=0.62). These phases are consideredto be a single construct made up of the four behavioral di-mensions. A second-order factor analysis is conducted to demon-strate that the four behavioral dimensions can be modeled by ahigher order construct in order to analyze our data (Table 3).

We estimated this model using LISREL 8.54. The resultssuggest a good fit of the second-order specification for ourmeasure of organizational learning (χ2 =149.57, df=50,p<0.001; goodness of fit index [GFI]=0.95; root mean squareerror of approximation [RMSEA]=0.069; comparative fit index[CFI]=0.96; Tucker-Lewis index [TLI]=0.95; incremental fit

index [IFI]=0.96). TheGFI, CFI, TLI and IFI statistics exceed therecommended 0.90 threshold level (Hoyle & Panter, 1995).Furthermore, the RMSEA is below 0.080 and the root meansquare residual [RMR] and the standardized RMR are 0.059 and0.050 respectively, which are considered acceptable. Although asignificant chi-square value indicates that the model is aninadequate fit, the sensitivity of this test to sample size confoundsthis finding and makes rejection of the model on the basis of thisevidence alone inappropriate (Bagozzi, 1980). However, a ratioless than three (χ2/df<3) indicates a good fit for the hypothesizedmodel (Carmines & McIver, 1981; Joreskog, 1978).

5.2.3. PerformanceFinally, the third group of variables presented is that relating

to company effectiveness. In order to measure the impact oforganizational learning and market orientation on companyperformance, self-explanatory measures of performance (Baker& Sinkula, 1999b), such as change in market share, new productsuccess, growth, profitability, etc. (e.g. Han et al., 1998) areusually employed, because, as has been shown in previous tests(Dess & Robinson, 1984), subjective and objective measures ofperformance are highly correlated. Furthermore, the literaturedefends the use of non-financial performance measures alone(Quinn & Rohrbaugh, 1983; Venkatraman & Ramanujam,1986). So, the measures of these variables are taken from Quinnand Rohrbaugh (1983), who suggest that the criteria fororganizational effectiveness can be sorted to different valuedimensions. These dimensions make the identification of fourbasic models of organizational effectiveness possible: the humanrelations model, the internal process model, the open systemmodel and the rational goal model. The preliminary exploratoryanalysis and the confirmatory factor analysis (Table 1) suggestthat only three of these models are useful in the present study: theopen/internal system model (ρc

SCR=0.77, ρcAVE=0.53), the

rational goal model (ρcSCR=0.84, ρc

AVE=0.64) and the humanrelations model (ρc

SCR=0.83, ρcAVE=0.71). With the aim of

analyzing company results, another second order construct hasbeen constructed (see Table 4).

The results suggest a good fit of the second-order specification(χ2 =26.89, df=17, p=0.070; GFI=0.99; RMSEA=0.035;CFI=0.99; TLI=0.99; IFI=0.99). All, GFI, CFI, TLI and IFIexceed the recommended 0.90 threshold level (Hoyle & Panter,

Fig. 1. A model of the relationship between market orientation, organizational learning and performance.


1995). The RMSEA is below 0.050 and the root mean squareresidual [RMR] and the standardized RMR are 0.018 and 0.030respectively, which are very good levels. Therefore, it is possibleto conclude that the three result dimensions can be modeled by asecond-order construct.

To assess the unidimensionality of each construct, a con-firmatory factor analysis of the ten constructs employing 29 itemswas conducted (Anderson & Gerbing, 1988). The measurementmodel provides a reasonable fit to the data (χ2=722.982, df=332,p<0.001; GFI=0.90; RMSEA=0.051; CFI=0.94; TLI=0.92;IFI=0.94). The traditionally reported fit indices are within theacceptable range. Reliability of the measures is calculated withBagozzi and Yi's (1998) composite reliability index and withFornell and Lacker's (1981) average variance extracted index. Forall the measures, both indices are higher than the evaluationcriteria of 0.6 for the composite reliability and 0.5 for the averagevariance extracted (Bagozzi & Yi, 1998). Furthermore, all itemsload on their hypothesized factors (see Table 1), and the estimatesare positive and significant (the lowest t-value is 11.60), whichprovides evidence of convergent validity (Bagozzi & Yi, 1998).

Table 5Sequential chi-square tests

Model Chi-square Degrees of freed

Proposed model (MT) 771.06 360Market orientation as a second-order (MA1) 784.70 364Non-organizational learning second-order (MA2) 868.14 352Non-performance second-order (MA3) 814.77 355

Compared to the proposal model (MT), the alternative models (MA) present a signifMA1: Market orientation is studied as a second order construct: χ2(364)=784.70; p<MA2: Organizational learning is studied as a non-second order construct: χ2(352)=86MA3: Performance is studied as a non-second order construct: χ2(355)=814.77; p<0

Discriminant validity was tested using three different proceduresrecommended by Anderson and Gerbing (1988) and Fornell andLarcker (1981). First, discriminant validity is indicated since theconfidence interval (±2 S.E.) around the correlation estimatebetween any two latent indicators never includes 1.0 (Anderson&Gerbing, 1988). Second, discriminant validity was tested bycomparing the square root of theAVEs for a particular construct toits correlations with the other constructs (Fornell & Larcker,1981). Finally, we compared the chi-square statistic between theconstrained model where the correlation of a pair of factors wasfixed to unity and the unconstrained model with the correlationfreely estimated (Anderson&Gerbing, 1988). The results of thesethree test provided strong evidence of discriminant validityamong the constructs.

6. Results

The proposed structuralmodel is presented in Fig. 1. Thismodelincorporates the three hypotheses developed previously relating tothe relationship of market orientation, organizational learning and

om Chi-square difference Degrees of freedom difference Probability

13.64 4 p<0.00197,08 8 p<0.00143.71 5 p<0.001

icant worse fit. Therefore, MT is preferred as a better alternative.0.001; GFI=0.89; RMSEA=0.052; CFI=0.93; TLI=0.92.8.14; p<0.001; GFI=0.88; RMSEA=0.058; CFI=0.92; TLI=0.90..001; GFI=0.89; RMSEA=0.054; CFI=0.93; TLI=0.91.

Table 6Construct structural model

Linkages in the model Hypotheses Standardized parameter estimates

Number Sign Parameter Estimate t-value

HypothesisIntelligence generation→organizational learning H1 + γ11 0.48 5.24⁎⁎⁎

Intelligence dissemination→organizational learning H1 + γ12 0.22 2.77⁎⁎⁎

Responsiveness→organizational learning H1 + γ13 0.07 0.70Intelligence generation→performance H2 + γ61 0.07 0.68Intelligence dissemination→performance H2 − γ62 0.15 1.59Responsiveness→performance H2 + γ63 0.03 0.31Organizational learning→performance H3 + β94 0.70 5.98⁎⁎⁎

Second-order constructOrganizational learning→acquisition + β21 0.71 10.42⁎⁎⁎

Organizational learning→distribution + β31 0.81 10.88⁎⁎⁎

Organizational learning→ interpretation + β41 0.85 13.37⁎⁎⁎

Organizational learning→or. memory + β51 0.48 7.89⁎⁎⁎

Performance→open/internal results + β76 0.74 8.03⁎⁎⁎

Performance→ rational results + β86 0.74 9.09⁎⁎⁎

Performance→human relations results + β96 0.54 7.97⁎⁎⁎

Indirect effect a

Intelligence generation→acquisition + κ11 0.34 5.23⁎⁎⁎

Intelligence generation→distribution + κ21 0.39 5.29⁎⁎⁎

Intelligence generation→ interpretation + κ31 0.40 5.52⁎⁎⁎

Intelligence generation→or. memory + κ41 0.23 4.79⁎⁎⁎

Intelligence dissemination→acquisition + κ12 0.16 2.76⁎⁎⁎

Intelligence dissemination→distribution + κ22 0.18 2.77⁎⁎⁎

Intelligence dissemination→ interpretation + κ32 0.19 2.80⁎⁎⁎

Intelligence dissemination→or. memory + κ42 0.11 2.69⁎⁎⁎

Intelligence generation→performance + κ61 0.34 4.08⁎⁎⁎

Intelligence dissemination→performance + κ62 0.15 2.50⁎⁎

Intelligence generation→open/internal model + κ71 0.31 3.78⁎⁎⁎

Intelligence generation→ rational model + κ81 0.30 3.88⁎⁎⁎

Intelligence generation→human relations model + κ91 0.22 3.75⁎⁎⁎

Organizational learning→open/internal model + ι71 0.52 6.30⁎⁎⁎

Organizational learning→ rational model + ι81 0.52 6.83⁎⁎⁎

Organizational learning→human relations model + ι91 0.38 6.17⁎⁎⁎

⁎p<0.1; ⁎⁎p<0.05; ⁎⁎⁎p<0.01.Fit statistics for measurement model of 29 indicators for twelve constructs: χ2(360)=771.06; GFI=0.89; p<0.001; RMSEA=0.051; CFI=0.93; TLI=0.93.a Only significant effects have been included.


performance. Conventional maximum likelihood estimationtechniques were used to test the model (Joreskog & Sorbom,1996). The fit of the model is satisfactory (χ2=771.06, df=360,p<0.001; GFI=0.89; RMSEA=0.051; CFI=0.93; TLI=0.93;IFI=0.93), thereby suggesting that the nomological network ofrelationships fits our data — another indicator of support for thevalidity of these scales (Churchill, 1979). Although p value issmall, it is highly unlikely that non-significant test statistics wouldbe obtained with large sample sizes (Kelloway, 1998).

To provide greater confidence in our model specification, wetested our theoretical model (MT) against three alternativemodel specifications (MA). In the first model market orientationwas considered to be a second-order construct. The second andthird models did not treat organizational learning or perfor-mance respectively as second order constructs. This procedureis recommended by Anderson and Gerbing (1988) and suggeststhe use of the chi-square difference test (CDT) to test the nullhypothesis; MT−MA=0. Compared with a less parsimoniousMA, a non-significant CDT would lead to acceptance of the

more parsimonious MT. Table 5 reports a significant change inchi-square between our model and the other models. In eachcase, the CDT presents a p<0.01 which permits the conclusionto be drawn that the fit of the alternative model is significantlyworse than that of the original model.

In terms of our hypotheses (Table 6), the findings for H1(market orientation→organizational learning) suggests thatintelligence generation (γ11=0.48, p<0.01) and intelligence dis-semination (γ42=0.22, p<0.01) have a positive and significanteffect on the knowledge creation process in the organization.However, no significant effect has been found for responsive-ness (γ13=0.07, non-significant). Furthermore, we have foundindirect effects of intelligence generation (κ11=0.34, κ21=0.39,κ31=0.40, κ41=0.23, p<0.01) and intelligence dissemination(κ12=0.16, κ22=0.18, κ32=0.19, κ42=0.11, p<0.01) over eachorganizational learning phase. Globally, these findings supportthe thesis presented in the literature that the acquisition ofinformation about markets contributes to the generation of neworganizational knowledge.


Secondly, the relationship between organizational learning andperformance is supported in H3 (organizational learning→per-formance; β94=0.70, p<0.01). It can be observed that thosecompanies which foster organizational learning improve theircompetitive position and efficiency. So organizational learninghas a direct impact on performance.

Finally, there is not enough evidence to accept H2 (marketorientation→performance). In this case, we have not found asignificant and direct effect of intelligence generation (γ61=0.07,non-significant), intelligence dissemination (γ62=−0.15, non-significant) or responsiveness (γ63=−0.03, non-significant).However, the test of the link between market orientation andperformance is taken in the context of testing the link betweenorganizational learning and performance. It might well be thatmarket orientation has an effect on performance that is maskeddue to the fact that both links are estimated simultaneously.

Although we have not found a direct effect on performance,results show an indirect effect of both intelligence generation(κ61=0.34, p<0.01) and intelligence dissemination (κ62=0.15,p<0.05) on performance. These results show that market orien-tation has a positive influence on performance through orga-nizational learning.

7. Discussion

The essential purpose of this study was to test empiricallysome of the hypotheses derived from the review of the rela-tionship between market orientation and organizational learningand their effect on organizational performance. In this section, wediscuss the study results.

The first contribution of this research is to extend the debateabout the existing models which relate market orientation,organizational learning and performance. As we have men-

Fig. 2. The performance effect of organiza

tioned, there is no agreement about the right model that reflectsthe interactions between these three constructs. Although manyreasons have been proposed in support of each model, the mainsources maintain that market orientation comes before organi-zational learning. In effect, although there are many importantdifferences between them, both concepts cover the developmentof useful knowledge for organizations. This knowledge is a keyelement for the sustaining of companies that operate in thecurrent turbulent environments, and consequently is a source ofsustaining competitive advantage according to the resource-based view. Thus, researchers have emphasized the importanceof market orientation (Jaworski & Kohli, 1993; Narver & Slater,1990) and learning orientation (Sinkula, 1994; Slater & Narver,1995) in developing a competitive advantage (Day, 1994b).These assumptions have been incorporated into the modelproposed in Fig. 1. In this case, market orientation is analyzedas a precedent construct over organizational learning, and bothorganizational learning and market orientation simultaneouslyaffect organizational performance, contributing to the attain-ment of a competitive advantage for the firm.

The second contribution is based on the results of the empiricaltests of the model (see Fig. 2). In summary, we have uncoveredthree properties of the data that are worth highlighting. The first isthat market orientation has a positive effect on organizationallearning. As predicted, companies which strengthen their abilityto acquire the information of customers and other agents and try tosatisfy their needs are going to encourage the processes of ac-quiring external and internal knowledge, distributing and inter-preting this knowledge and finally save it in organizationalmemory. However, not all the components of market orientationhave the same effect in organizational learning. In fact, we haveonly found a direct relationship between intelligence generationand intelligence dissemination with organizational learning and

tional learning and market orientation.


an indirect one with each phase of organizational learning.Conversely, no significant link has been found for responsiveness.This could be interpreted as that both intelligence generation anddissemination contribute to the process of acquiring, distributingand interpreting the new knowledge. Also, knowledge fromcustomers or competitors needs to be saved in the organization forlater use. On the other hand, responsiveness does not have a cleareffect on organizational learning. Although companies couldalways learn and respond to the information generated and dis-seminated, responsiveness to customer needs and changing mar-ket conditions become more important for the success of firmsand the introduction of new products and services. The findingsfrom this study support the proposition by Slater and Naver(1995) that market orientation is the principal cultural foundationof The Learning Organization. The findings also support theproposition by Baker and Sinkula (1999b) that a market orien-tation provides a grounding for a learning orientation. Our resultsalso support the findings of Farrell (2000) and contradict those ofSantos-Vijande et al. (2005), and demonstrate that marketorientation is an important element for the process of learningin organizations.

Furthermore, our results support a positive relationship be-tween organizational learning and its impacts (Bontis et al., 2002;Farrell, 2000; Tippins & Sohi, 2003). Specifically, the currentresults indicate that the ability of companies to create know-ledge is founded on a fundamental capacity to achieve sustainablecompetitive advantages. Therefore, organizational performancemust be consolidated through empowerment, learning culturesthat allow salespeople the freedom and flexibility required tomeetdynamic customer expectations and changing contingenciesacross selling situations. A learning culture (e.g. language, con-versation and dialogue, leadership) that stimulates creativity andencourages cooperation among members of the organization orgroup in tailoring market offerings to individual customers isrequired. This accomplishes what authors such as Bell et al.(2002) express, when they refer to organizational learning as abasic tool to update knowledge. Consequently, market orientationcould provide strong norms for learning from customers andcompetitors, but it must be complemented by entrepreneurshipand appropriate organizational structures and processes for ge-nerate higher-order learning, and consequently generativelearning (Slater & Narver, 1995). Thus, while market orientationis reflected in knowledge-producing behaviors, organizationallearning is reflected in knowledge-questioning values (Baker &Sinkula, 1999b; Sinkula et al., 1997).

The findings do not support the views of Kohli and Jaworski(1990) that there is a positive association between corporateperformance and market orientation. However, we have found asignificant indirect influence on performance via organizationallearning. This effect is especially important for the generation ofintelligence. These results support the suggestion of Hart andDiamantopoulos (1993), Greenley (1995), Baker and Sinkula,(1999a,b); Hult andKetchen (2001), that the “linkage is not linear,but rather is embedded within a more complex web of relation-ships”. Despite of the benefits of being market-oriented com-panies, “creating a market orientation is only a start” (Slater &Narver, 1995). Indeed, market orientation may not inspire com-

panies to take enough risks if they only concentrate in their currentmarkets and under-invest in emerging markets and/or competi-tors, fail to understand the latent needs of current and newcustomers (Slater & Narver, 1995) or underestimate the potentialcontributions of other learning sources that possess knowledgeuseful to the organization (Achrol, 1991; Dickson, 1992; Farrell,2000). In fact, market-oriented success could breed resistance tolearning when successful outcomes associated with past behaviorand their interpretation prevail (Celuch et al., 2002). Dickson(1996) suggests that market orientation reflects the quantity of afirms’market information processing activities and not its quality.Consequently, a “firm's market orientation cannot prevent theinstitutionalization of flawed information acquisition, interpreta-tion and distribution activities that can stymie learning” (Baker &Sinkula, 2002). In other words, the ‘performance through marketorientation’ process depends on the ability to acquire and dis-seminate knowledge from markets and especially to question allgoals, procedures and assumptions in an adaptive and respon-sive way that is open to change. Only a generative learning cancontribute to performance.

This clearly demonstrates the preeminence of organizationallearning over market orientation and is in agreement with muchrecent literature (Farrell, 2000; Slater & Narver, 1995). Inconclusion, a “learning orientation is a more pervasive resourcethan market orientation because it has bearing on more thanmarketing-related activities in the firm” (Baker & Sinkula,1999a), so the key implication of this research is that a stronglearning orientation is more important to the firm than a strongmarket orientation (Baker & Sinkula, 1999a), because organi-zational learning has a direct effect on organizational perfor-mance, unlike market orientation. However, the results alsoindicate that a ‘learning culture’ is unlikely in an organizationalbasis without being fostered by a ‘market orientation’.

8. Managerial implications

Managing and controlling market orientation and organiza-tional learning both provide a number of important insights formanagers. Both reveal the importance and application of cus-tomer knowledge. Knowledge derived from customers, suppliers,competitors or personnel is critical to their targets. Specifically,the development and usage of organizational learning and marketorientation motivate personnel to direct their activities andprocesses in a coordinated manner in order to attain their goals.This is particularly crucial for those companies that try to focus oncustomers and satisfy their needs. The key managerial implica-tions of this study emphasize three main issues.

First, learning organizations are exceptional in their ability toanticipate and act on opportunities in turbulent and fragmentingmarkets (Slater & Narver, 1995). Consequently, learning is pre-eminent over other resources because only learning enablesfirms to maintain long-term competitive advantage by contin-uously improving market information processing activities at afaster rate than rivals (Dickson, 1996). Moreover, organizationallearning, through the establishment of organizational routinesthat encourage the knowledge creating process, allows a com-pany to offer new products, and to improve their competitive


position. These conclusions should encourage managers todesign their organizations with shared organizational vision andopen-minded approaches to problem solving, organizationalculture and strategy that foster learning, teamwork and otherhuman resource management practices which encourages thecreation of new knowledge (see e.g. Fiol & Lyles, 1985; Harvey& Denton, 1999; McGill et al., 1992; Senge, 1990). This con-figuration allows the development of new knowledge throughacquisition, distribution, interpretation and organizational mem-ory. These four phases constitute a single process (Day, 1994b;Dodgson, 1993; Huber, 1991; McGill et al., 1992). As Huber(1991) asserts, “the division of organizational learning intophases is more pedagogic than structural”. That is to say, thevariables are neither independent nor autonomous, but they arecontinually interacting. Consequently, companies that intendfostering the organizational learning process could inhibit thisprocess if they do not foster all of these phases. Furthermore, notonly the acquisition of knowledge is determinant, but the com-pany has to have up-to-date databases and processes for un-learning useless knowledge.

Second, with the aim of fostering each organizational learningphase, market-oriented companies could foster both intelligencegeneration and dissemination. This mean that managers shouldinvest in market research, analyze the effects of shifts in thebusiness environment or be in contact with customers to knowwhat they think about their products. On the other hand, thecommunication of this information all around the organizationwill encourage all the employees to be conscious of the re-quirements of customers and the challenges in the market. In anycase, the promotion of these activities will foster organizationallearning through each phase. Besides, both intelligence genera-tion and dissemination will have an influence on performancemediated by the process of organizational learning. Consequently,firms must focus their attention upon stimulating those activitiesthat foster the external acquisition of knowledge and also upon thegeneration of internal knowledge, the distribution and interpre-tation of this knowledge and, finally, the promotion of theorganizational memory. In addition managers must respond to themarkets with this knowledge. This is in agreement with the workof authors such as Aggarwal and Singh (2004), who state that alldepartments, not just marketing, should participate in respondingtomarket trends in amarket-oriented company. As a result there isa need to coordinate a company's responsiveness with otherdepartments of the firm. The goal of organizational learning willbe that all members of the organization are conscious of thelocation of useful knowledge. Organizational learning can alsoprovide support for action by retaining a broader range of po-tential responses, thus providing more options for organizationaldecision makers when they respond to changes in the organiza-tional environment. As a result, organizational learning developsa set of competences and organizational routines that, whilegenerating a real value for external and internal stakeholders, canlay the foundation for effective improvement in performance.

Finally, results also indicate that market orientation is a ne-cessity but not a sufficient condition for the maintenance ofcompetitive advantage. It seems that market orientation is notenough for organizations to learn. The ability of an organization

to learn faster than competitors may be the only source ofsustainable competitive advantage (Day, 1994b). The importantmanagerial implications of this proposition are that marketorientation may help companies to direct their efforts to attain acompetitive advantage using the available information (Baker &Sinkula, 1999b) and can help companies in a first stage, but thecompetitive environment obliges companies to attain a morecomprehensive vision (e.g. Slater & Narver, 1995) than a simplepreoccupation among employees to respond to customers'needs. Thus, rather than focusing only on customers and com-petitors, companies should foster the knowledge creating pro-cess both inside and outside the organization. For example,organizational learning provides salespeople with new knowl-edge which supplies the freedom and flexibility required to meetdynamic customer expectations and the changing contingenciesacross selling situations. This new knowledge, externally orinternally generated, could be converted into new products orservices, or may help to reduce the production costs. In any case,failure in the identification, measurement and evaluation of theworth of organizational learning leads to decisions that may notattain competitive advantage. Also, practitioners emphasize therole of network relations, in particular relationships with sup-pliers, as an important organizational learning factor. In practice,organizational personnel cannot always have all the relevantknowledge to resolve problems and therefore need to contactsomeone in the network. In this case, organizational learning canbe understood as any organizational system and process sup-porting a knowledge base that can give managers easy access toinformation that would otherwise require contact with a seller'sstaff. Consequently, organizations should aim to become learningoriented if they are to compete successfully in the long-run (Slater&Narver, 1995), because organizational learningmay be the onlysource of sustainable competitive advantage (DeGeus, 1988;Dickson, 1992; Slater & Narver, 1995).

9. Limitations and the direction for future research

The study is not without limitations. Firstly, only subjectiveinformation from the questionnaire for measuring companyresults was taken into account, thereby limiting this study.Although this kind of information is commonly used in studies,the introduction of other measures from objective sources inorder to replicate these results would be interesting. Moreover,other factors which have not being included in this study are alsolikely to affect organizational learning and market orientation.

Taking into account these limitations, this study points to theneed to explore new avenues of research. Firstly, we considerthat the use of additional information about performance mighthelp to capture the richness of this construct, and would requirethe combination of information coming from the interviews andother data bases. Secondly, it would also be interesting to extendthe survey to other countries since national culture issues mightinfluence the way organizations learn. Finally, another possibleresearch direction could examine the intermediate role ofinnovation in the relationships between organizational learning,market orientation and organizational performance (e.g. Hult &Ketchen, 2001; Weerawardenaa & O'Cassb, 2004). In this case,


new knowledge enables organizations to introduce innovativeproducts and processes or improve existing onesmore efficientlyand effectively (Nonaka & Takeuchi, 1995). Thus, innovationcould explain the performance gap of market orientation.

Acknowledgement

The authors wish to thank Peter LaPlaca and the anonymousreviewers for their helpful comments on earlier drafts of thismanuscript. Business organizations that took part in this studyare also gratefully acknowledged.

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Daniel Jiménez-Jiménez is Assistant Professor of Management at theUniversity of Murcia. He received his Ph.D. in Management and M.A. inHuman Resource Management from the same institution. His current researchfocus in the relationships among HRM, Innovation, Organizational Learningand Marketing Orientation. He has had recent publications in the InternationalJournal of Manpower.

Juan Gabriel Cegarra-Navarro is Assistant Professor of Business Manage-ment in the Polytechnic University of Cartagena. His investigation line isfocused in Knowledge Management and Marketing Orientation.

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