Market Driving Strategies, Firm Performance: Mediating Role Of Organizational Learning Capabilities

Abstract

The purpose of this study is to reveal the mediating role of organizational learning capabilities in the relationship between market driving strategies and firm performance of companies, to extend and contribute to the literature on this field. Thus, a theoretical framework and hypotheses have been developed that examine the effect of mediating role. A quantitative study was carried out within the theoretical framework and some results were obtained from 215 middle and senior executives working in the companies operating in the manufacturing industry through the scale that has been used. The data obtained in the study revealed the existence of a correlation between dependent and independent variables and the mediator variable, which was being tested. The results reveal that there is a strong relationship between market-driving strategies and business performance and that organizational learning capability influences, even partially, the relationship between these two concepts. As a conclusion, some suggestions are presented for the researchers in the light of the findings.

Keywords: Market-driving strategiesorganizational learning capabilityfirm performance

Introduction

The economic developments and crises in recent years have generated the necessity to create the competitive edge for businesses to survive. Businesses need to make environmental analyses very well in order not to create a competitive edge. Especially data analyses that are related to the economic environment, market, and competition should be monitored closely. Behaviours of businesses that they develop by using the information obtained from these analyses can play a crucial role in the creation of competitive edge. One of these behaviours is the market driving behaviour.

Market driving behaviours or strategies can be defined as the proactive attempt of a business to change the market in a competitive environment including the customers. Market driving approach deals with the structure of the market and the structuring of this market (Chen et al., 2012).

Another important factor in creating competitive edge is the organization and the organizational concepts. One of these concepts is the organizational learning capability. Organizational learning capability is the collection of processes which shape the structural and executive learning processes of the organization. Organizational learning capability consists of a set of processes that create patterns which determine how to use the experiences that organization has, how to improve the information depending on this knowledge and experience and how to archive this knowledge to use when needed.

Looking at the studies in recent years, it is known that there is a meaningful relationship between market driving strategies and business performance. Again, in the studies related to organizational learning capability and business performance, it is thought that there is a positive relationship between learning organization applications and financial performance of companies (Ellinger, Ellinger, Yang, & Howton, 2002). In another study, it is revealed that the innovation potential, performance, and activity of companies are related to organizational learning capability (Alegre & Chiva, 2008; Dibella, Nevis, & Gould, 1996; Jerez-Gómez, Céspedes-Lorente, & Valle‐Cabrera, 2005). In separate studies, based on the fact that both organizational learning capability and market driving strategies have a positive effect on business performance, it has been thought that the organizational learning capability could have a mediating effect between these two concepts.

The scope of this study is to reveal the mediating effect of organizational learning capability in the relationship between market driving strategy and business performance as well as a study to be carried out on businesses manufacturing in various sectors.

The importance of the work to be done is to contribute to the management activities by providing an insight to the organizational measures to be taken along with strategic measures to increase the performances of businesses in a competitive market in practical terms.

The first part of this study consists of theoretical information defining the market driving strategies and organizational learning capability and its aspects. The second part is the research part which consists of questionnaire study and its results. The results obtained from the implementation of the study will be included.

Literature Review and Theoretical Framework

Market Driving Strategies

Today, companies have to develop proactive behaviors to achieve and preserve the sustainable competitive edge. These behaviors can be made much more possible by focusing on the whole market or a part of the activities. There are four main focusing types in the market, namely market oriented, sale oriented, customer oriented, and market driving.

It is proven that there is a positive relationship between market oriented applications and business performance of a company. Market oriented companies perform their focus management through learning, understanding, and meeting the needs and their strategies are established upon "understanding" with market researches and "responding" to the choices with innovative reforms. Although there are many studies revealing that there is a positive relationship between being market oriented and business performance, same studies also confirmed that this approach did not guarantee a sustainable competitive edge (Filieri, 2015). The traditional market oriented approach which is based on the principle of constant customization to the products and services according to the customer demands prevents companies from focusing on their distinct abilities. In addition, it prevents them from their objective of being innovative due to the restricted strategic thinking it dictates. On the other hand, as constant customization is a behavior which is easy to replicate, it disrupts the company's objective of ensuring a long-term competitive edge (Ghauri et al., 2011).

According to Ghauri et al. (2008); it was claimed that market oriented approach was supporting and promoting a point of view which was passively responding to the up-to-date market trends and current preferences of customers.

Hamel and Prahalad (1990) argue that companies seeing the world through nothing, but their customers' point of view are vulnerable to the extortions of the service sector. On the other hand, Christensen and Bower have used the "firms lose their position of industry leadership […] because they listen too carefully to their customers" statement which can be considered as a criticism of extreme customer orientation. In order to achieve a superior business performance, it is required to affect the market in a more active manner instead of showing a tendency toward meeting every demand.

Filieri (2015) states that the scientists are debating on the fact that companies which aim to succeed or to stabilize their current success need to have a more active attitude. According to them, market routing strategy is a better preference in regard to the market oriented strategy for changing the structure of the market and other players' behaviors. Aforementioned market driving companies are the companies which focus on achieving the competitive edge by changing the structure of the market and even other players' behaviors with their innovations. However, it is hard to follow and maintain this strategy due to the difficulty to change the established structure in the market (Ghauri et al., 2011).

If the basic difference between them is analyzed, it can be seen that while the market oriented approach focuses on meeting the preferences and demands of current customers of the existing market, the market driving approach deals with the structure of the market and the shaping of this structure (Chen et al., 2012).

The two fundamental values of the market driving approach, which is often associated with the concept of innovation in the literature, are being visionary and creative. Market driving companies are the companies which discover the latest needs and create new market opportunities by observing their customers (Filieri, 2015).

Based on their study, Van Vuuren and Wörgötter (2013) think that a reliable and valid evaluation of market driving approach depends on three concepts. These concepts are to foresee the market needs, to influence the customer preferences and to make alliances with various shareholders. One of the results of the study is that the internal factors of a company such as corporate entrepreneurial management, entrepreneurial capital, strategy orientation and entrepreneurial behavior have influenced the market driving skills in a positive manner.

Ghauri et al. (2016,) emphasize the four abilities that influence the success of the market driving strategy. These abilities are; Configuration, Networking, Knowledge Transfer. These abilities are; Configuration, Networking, Knowledge Transfer, and Branding abilities.

If the basic difference between them is analyzed, it can be seen that while the market oriented approach focuses on meeting the preferences and demands of current customers of the existing market, the market driving approach deals with the structure of the market and the shaping of this structure (Chen et al., 2012).

Organizational Learning Capability

Today, organizations and organizational concepts are important due to their effects on the companies' creation of competitive advantage in a competitive environment. One of these concepts is the organizational learning capability.

The concept of organizational learning capability is a concept which has started to develop in 1997s after the learning and organizational learning processes. The concept of organizational learning has been interpreted and defined by many authors differently. While Garvin defines the organizational learning as "the act of changing the organization's ability to reflect its' new knowledge and understanding on the creation, acquisition, and transcription of knowledge"; Hult and Ferrell (1997) define the organizational learning as a behavior-based process which functions in the structure of learning organization.

Making the organization a learning organization and improving the conditions to ensure a faster learning require the organizational and executive features to have a supportive trait for learning. Based on this, the concept of organizational learning capability includes the support of companies' organizational and executive features on the organizational learning process and plays a fundamental role in the learning process (Chiva et al., 2007, p. 225).

Organizational learning capability is the collection of processes which shape the structural and executive learning processes of the organization. Organizational learning capability consists of a set of processes that create patterns which determine how to use the experiences that organization has, how to improve the information depending on this knowledge and experience and how to archive this knowledge to use when needed.

Besides the fact that organizational learning has many different definitions, it is defined by Goh and Richards (1997) as the factors making organizational and executive features or organizational learning easier or allowing an organization to learn. Dibella et al. (1996, p. 41) bring forward that the concept of organizational learning capability can be replicated with the abilities experienced by organizational learning or developed abilities.

The organizational learning capability has been examined by researchers in many aspects. Chiva et al. (2007) have examined the organizational learning capability in five aspects. These aspects are; Experimentation; the addition of new ideas and proposals and the degree of sympathetic interest for these new ideas and proposals. Risk-taking; the tolerance for conflict, uncertainty, and mistakes. Interaction with the external environment; the degree of relationship with the outer environment. Dialogue; is defined as the continuous collective research on the processes, assumptions, and certainty that create daily experiences. Participative decision making; is defined as the degree of influence or participation of the employee in decision-making processes. Goh and Richards have examined the organizational learning capability in five aspects as clarity of purpose and mission, leadership commitment and empowerment, experimentation and rewards, transfer of knowledge, and teamwork and group problem -solving. If we are to briefly look at each of these aspects, clarity of purpose and mission is explained in such a way that every employee understands how and in what way they can contribute to the mission of the organization. Leadership commitment and empowerment are described as the role of leaders in the organization in helping the employees learn and engage in behaviours that are consistent with the changing culture. Leadership has been recognized as one of the most important factors during the learning processes. Giving feedbacks, being open to criticism, accepting mistakes, and empowering the employees for decision making and risk taking are especially important sections of these processes. In the aspect of experimentation and rewards, new working methods and the freedom of trial with innovative processes are promoted and supported (Senge, 1990; Garvin, 1993, Pedler, Boydell, & Burgoyne, 1989: Slocum Jr, McGill, & Lei, 1994). In knowledge transfer aspect, the system focuses on allowing the employees to learn from other employees, previous mistakes, and other organizations. It has also been emphasized that it is of utmost importance for intra-organizational communication to be clear, focused, and fast in terms of solving organizational problems and assessing opportunities. The aspect of teamwork and group problem solving is explained as the degree of teamwork in the team to solve the problems of the organization and to produce new/innovative ideas. In their paper, another remarkable work in the literature research, published in 2005, Jerez‐Gómez et al. (2005) examined the organizational learning capability in four aspects. It has been stated that the learning commitment which is one of these aspects corresponds to the Goh and Richard's aspect of leader commitment and empowerment. Being another aspect, the system perspective also corresponds to Goh and Richard's clarity of purpose and mission. The other two aspects, experimentation and transfer of knowledge correspond to Goh and Richard's concepts of experimentation and reward and knowledge transfer.

Hypothesis

When Literature reviewed, it is mentioned that there is a linear and positive relationship between market driving strategies and business performance in many literatures. For example, according to Ghauri et al. (2016) study result is market driving approach consisting of the ability to build, configure, transfer, brand and network can reach success without having to be localized in foreign markets. While demand uncertainty undermines the positive impact of the market orientation business model on firm performance, technological fluctuations and high intensity of competition increase this positive effect (Calantone et al., 2006).

Ghauri et al. (2011), their study has reached that despite being a very successful global company that follows and implements this strategy while talking about the findings, they pointed out that there are few empirical findings supporting the success of these firms compared to their competitors applying different strategies.

Organizations with learning capability change the competition in their favor and create a competitive edge for businesses by transferring the knowledge in themselves faster, assisting employees to improve their abilities and delegate their works, and supporting teamwork in the supportive leadership management. From this point of view, it has been seen that businesses of which learning processes are supported and which are focused on learning, create a long-term competitive edge, unlike others (Hunt & Morgan 1996). In the literature research, it can be seen many times that it affects the learning orientation and business performance in a positive manner. However, the influence of organizational learning capability on business performance has been revealed as its' mediating role in general. In a study carried out by Akgün, Ince, Imamoglu, Keskin and Kocoglu (2014) the mediating effect of organizational learning capability in the relationship between the total quality management of business innovation and business performance has been examined. As a result of the study, it was found out that the increase in financial performance was not a direct consequence of the collective quality management but rather the business innovation and organizational learning capability positively affected the financial performance by affecting collective quality management. In the other study, it is suggested that there is a positive relationship between learning organization applications and financial performance of the companies (Ellinger et al., 2002). Based on the literature and studies, it is thought that the organizational learning capability affects business performance in a positive manner. Research model is shown in Figure 01 .

H1. There is a significant and positive relationship between market driving strategies and organizational learning capability.

H2. There is a significant and positive relationship between market driving strategies and firm performance.

H2a. There is a significant and positive relationship between market driving strategies and market performance.

H2b. There is a significant and positive relationship between market driving strategies and financial performance.

H3. There is a significant and positive relationship between organizational learning capability and firm performance.

H3a. There is a significant and positive relationship between organizational learning capability and market performance.

H3b. There is a significant and positive relationship between organizational learning capability and financial performance.

H4. The organizational learning capability has the mediating role on the effect of market driving strategies on the firm performance.

H4a. The organizational learning capability has the mediating role on the effect of market driving strategies on the market performance.

H4b. The organizational learning capability has the mediating role on the effect of market driving strategies on the financial performance.

Figure 1: Figure 01. Research Model
Figure 01. Research Model
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Research Method

Purpose of the Research

The purpose of the study is to reveal the mediating role of organizational learning capabilities in the relationship between market-driving strategies and business performance of companies.

Sampling and Data Collection

The survey of this study is conducted on 215 employees of 43 medium and high performing firms operating in manufacturing industry in Turkey.

In the first part of the questionnaire, demographic information was requested in order to determine the characteristics of the persons, who completed the form, as well as the characteristics of the company. The second part comprises the questions about the learning capability, market-driving strategies and finally, business performance scale, as the dependent variable. A 5-point Likert scale was used in the questionnaire, except for demographic data. Data obtained from those 215 questionnaires were analyzed through the SPSS statistical packet program.

Analyses

In this study, to measure learning capability 9 item-scale is used which has been developed by Acar and Zehir (2007) and was tested in terms of validity and reliability (α = 0.887). Market-driving strategies scale is adopted Ghauri which uses 16 items to measure three dimensions. Those which are customer and competitor driving behavior dimension is measured in 7 items (α = 0,88), channel driving behavior consists is measured in 4 items (α = 0,80) and wider society driving behavior is measured in 5 items (α = 0,91). In order to measure the firm performance, financial performance scale consisting of 5 items and a market performance scale consisting of 7 items were used. In the firm performance scale, the employees evaluate subjectively and the employees were asked to evaluate their firms in terms of net profitability, level of financial success, increase in marketable products, increase in market share, increase in number of employees, positions according to competitors and general profitability level. These performance evaluations are similar to those used in previous studies in the literature (Vickery, Droge, & Markland, 1993; Yamin, Gunasekaran, & Mavondo, 1999; King & Zeithaml, 2001; Morgan & Strong, 2003; Rosenzweig, Roth, & Dean Jr, 2003).

Findings

In this study, 63.4% of the respondents consist of men while 36.6% were women. The age of the respondents ranges between 22 and 64 years. 19,1% of the respondents comprises of senior managers, 34,4% middle managers, 43,8% low-level managers and white-collar employees. In addition, 72.1% of the respondents work in companies, which employ at least 180 or more employees. 68.4% of the companies, in which the questionnaire was used, are operating globally while 27.9% of them operate nationally and 3.7% of them operate regionally. In addition, 67.4% of companies have been operating for more than 20 years.

Reliability Analysis

As it can be observed in Table 1 , Cronbach's Alpha values of every factor are higher than 0.70. In the literature research, if the Cronbach’s alpha coefficient is 0.70, it is considered that the internal reliability is ensured (Baum & Wally, 2003).

Table 1 -
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Factor Analysis

Factor analysis was conducted using the SPSS program. At the end of the factor analysis, 1 item on “learning capability” scale, 4 items on “customer/competitor driving behavior” scale, 1 item on the “firm performance” scale from the "market performance" dimension, totally 6 items were deleted. Because of showing a weak loading or loaded two different factors. Overall 31 items were distributed into 6 dimensions. Factors analysis is seen in Table 2 .

Table 2 -
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The Correlation Coefficients

Pearson correlation coefficients, standard deviation and mean values ​​are shown in Table 3 . There is a significant correlation between all variables (p <0.001).

Table 3 -
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Regression Analysis

Regression tests were used to find out the relationships among the variables; hence, both single and combined effects of independent variables were examined.

H1. There is a significant and positive relationship between market driving strategies and organizational learning capability.

Market driving strategies were considered as independent variables, and the effect of the market driving strategies on learning capability, which was selected as the dependent variable, was examined. Table 4 shows that, there is a significant relationship between the market driving strategies and organizational learning capability (p <0.001). However, when we examine the relationship between market driving strategy dimensions and organizational learning capability, there is a significant relationship between customer/competitor driving behaviour (β= 0,268) P<0,001 and channel driving behaviour (β= 0,260) P=0,001 and organizational learning capability whereas there is no significant relationship between wider society driving behaviour (β = 0,109) and organizational learning capability. The model showed that the independent variable explain 27.7% of the change on the dependent variable (R2 = 0.277), and the H1 hypothesis is supported.

Table 4 -
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H2. There is a significant and positive relationship between market driving strategies and firm performance.

H2a. There is a significant and positive relationship between market driving strategies and market performance.

H2b. There is a significant and positive relationship between market driving strategies and financial performance.

The effect of market driving strategies and its dimensions on the firm performance and its dimensions (market performance and financial performance) tested and according to the analysis results in Table 5 ; there is a positive relationship between market driving strategies and firm performance (p <0.001). When we examined market driving strategy dimensions, the customer/competitor driving behaviour (β = 0,267) is p <0,00, wider society driving behaviour (β = 0,246) is p <0,01 and channel driving behaviour (β = 0,175) is p <0,05. Hence, there is a significant relationship between the firm performance and market driving strategy dimensions. The model shows that independent variables that actually affect the dependent variable explain 32.7% of the change on the dependent variable (R2=0,327) and the H2 hypothesis is supported.

There is a positive and significant relationship between market driving strategies and market performance p <0.001. When examining the dimensions of the market driving strategy; there is a significant relationship between the market performance and customer/competitor driving behaviour (β = 0,326) is p <0,001, wider society driving behaviour (β = 0,218) is p <0,01. However, there is no significant relationship found between the market performance and channel driving behaviour (β = 0,073) p=0,347. The model shows that the independent variables explain 27.3% of the change on the dependent variable (R2=0,273) and H2a hypothesis is supported.

There is a positive and significant relationship between market driving strategies and financial performance p <0.001. When examining the dimensions of the market driving strategy; there is a significant relationship between financial performance and customer/competitor driving behaviour (β=0,153) is p <0,05, wider society driving behaviour (β = 0,229) is p <0,01 channel driving behaviour (β = 0,252) is p <0,01. The model shows that the independent variables 27.8% of the change on the dependent variable (R2=0,278) and H2b hypothesis is supported.

Table 5 -
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H3. There is a significant and positive relationship between organizational learning capability and firm performance.

H3a. There is a significant and positive relationship between organizational learning capability and market performance.

H3b. There is a significant and positive relationship between organizational learning capability and financial performance.

The study examines the organizational learning capability, selected as an independent variable and the effect of firm performance and its dimensions (market performance and financial performance) selected as the independent variable as well. According to Table 6 ; there is a positive and significant relationship between organizational learning capability and firm performance (β = 0,425) as p <0.001. The model shows that the independent variables explain 17.7% of the change on dependent variable (R2=0,177). There is a positive relationship between organizational learning capability and market performance (β = 0.361) as p <0.001, and the model is explained by a level of 12.6% (R2=0,126). There is a significant and positive relationship between organizational learning capability and financial performance (β = 0,414) as p <0.001 and this model is explained by 16, 7% (R2=0,167). In this case, H3, H3a, and H3b hypotheses are supported.

Table 6 -
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H4. The organizational learning capability has the mediating role on the effect of market driving strategies on the firm performance.

H4a. The organizational learning capability has the mediating role on the effect of market driving strategies on the market performance.

H4b. The organizational learning capability has the mediating role on the effect of market driving strategies on the financial performance.

Baron and Kenny (1986) three phase method was used to test the mediating role of organizational learning in the effect of market driving strategies on firm performance. According to Baron and Kenny (1986), first phase it must be shown that independent variable is being correlated with the dependent variable. In the second phase, must be shown the independent is being correlated with the mediating variable. The third phase is that the independent variable and the mediating variable involve together hierarchic analysis and it must be shown to decrease the effect of independent variable on dependent variable. When the organizational learning capability, which is as the mediating variable, is included together with the independent variable (market driving strategies and dimensions) in the regression analysis; the regression coefficient of the independent variable should decrease on the dependent variable (firm performance and its dimensions). The detailed results of the regression analysis are given in Table 7 . In other studies, in which the relationship between market orientation strategies and organizational learning ability concepts are investigated, there is no strong and clear finding about the relationship between these two concepts (Ghauri et al., 2011; Schindehutte et al., 2008).

In the analysis to test the mediating effect of organizational learning capability on the effect of market driving strategies on firm performance, firm performance was taken as the dependent variable and market driving strategies and dimensions which is the independent variables and organizational learning capability which is the mediating variable. The organizational learning capability as the mediating variable reduces the beta value of the customer/competitor driving dimension to (β = 0,217) and p = 0,003 <0,01 and the beta value of the wider society driving dimension to (β = 0,263) and p = 0,001 <0,01. However, it changed the beta value of channel driving dimensions as β=0,094) p=0,223, and it became insignificant by the inclusion of organizational learning capability to the analysis. It can be argued that the organizational learning capability has the partial mediating role on the effect of market driving strategies on the firm performance (R2=0,350). H4 hypothesis is supported partially.

In the analysis of mediating effect of the organizational learning capability in the effect of market driving strategies on the market performance, the market performance is selected as the dependent variable while market driving strategies and its dimensions are selected as the independent variable and included in the analysis with the organizational learning capability, which is the mediating variable. The organizational learning capability, as the mediating variable, reduces the beta value of the customer/competitor driving dimension to (β = 0,288) as p = 0,000, it reduces the beta value of the wider society driving dimension to (β = 0,239) as p=0,005<0,01 and the channel driving dimension is insignificant in the previous analysis, it is ignored. The organizational learning capability reduces own beta values to (β = 0.129), it became insignificant p= 0,069. Moreover, when the market driving strategy, as the independent variable, is included into the analysis with organizational learning capability as the mediating variable, it does not eliminate the effect on the market performance as the dependent variable. Thus, it is possible to assume that the organizational learning capability has no mediating role in the effect of market driving strategies on market performance. Hence, the H4a hypothesis is not supported.

In the analysis to test the mediating effect of organizational learning capability on the effect of market driving strategies on financial performance, financial performance was taken as the dependent variable and market driving strategies and dimensions are the independent variables and organizational learning capability is the mediating variable. The organizational learning capability, as the mediating variable, reduces the beta value of the channel driving dimension to (β = 0.172) since p = 0.033 <0.05, it reduces the beta value of the wider society driving dimension to (β = 0.239) since p=0.005<0.01. The organizational learning capability reduces the customer/competitor driving the beta value to (β = 0.098) since p=0.199 and the relationship between the financial performance became insignificant. Therefore, it is possible to assume that the organizational learning capability has a partial mediating role in the effect of market driving strategies on the financial performance (R2= 0.302). Hence, the analysis shows that, H4b is supported partially.

Table 7 -
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Hypothesis results are shown below in Table 8 .

Table 8 -
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Suggestions for Future Researches:

Although there are some studies on the concepts of market driving strategies and organizational learning capability, there is no specific study dedicated to the relation and interaction between these two concepts. Thus, this topic becomes interesting. The study can be done nationwide, for example, with a higher number of samples and expansion to a wider area. At the same time, this will enrich the results and increase the depth of the statistical results.

Conclusion and Discussions

There is an important choice for firms to achieve in the marketplace they want to acquire. Will the company with a limited strategic vision respond to demand and challenges that will be only directed by the components of the market (competitor and customers)? Alternatively, the company will be a business that earns a sustainable competitive advantage and changes the structure of the market as well as the behaviours of its competitors?

Being a market driving company sound evidently better. However, achieving this is not as easy as it seems and the company should activate many factors at the same time and make them operable, in order to achieve this objective. While the main factors of the strategy called as the market driving strategy consist of innovation, entrepreneurship, cooperation with stakeholders, information transfer and brand building, the organizational learning capability has been the subject of this study as being a capability that mediates and helps to increase the business performance, which is the ultimate goal of the business strategy.

The data obtained in the study revealed the existence of a correlation between dependent and independent variables and the mediator variable, which was being tested. In summary, when a company adopts market-driving strategies, the business performance improves and if the organizational capability is significantly high, it helps to improve, albeit partially, the firm performance.

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Publisher

Future Academy

First Online

21.01.2020

Doi

10.15405/epsbs.2019.12.03.17

Online ISSN

2357-1330