The Mediating Effect of Proactive Market Orientation on Entrepreneurial Proclivity and Small Scale Business Performance

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1 Journal of Marketing and Management, 7(1), , May The Mediating Effect of Proactive Market Orientation on Entrepreneurial Proclivity and Small Scale Business Performance Hussaini Hamid Abubakar, A.J. Bambale Department of Business Administration and Entrepreneurship Bayero University Kano, Nigeria Abstract Assessment of the impact of market orientation on entrepreneurial firm and performance has continued to generate interest in the field of research considering the divergent perspectives of market orientation and innovative aspirations of entrepreneurs. This study intends to examine how entrepreneurial proclivity and market orientation affect small scale businesses in Nigeria. Using 209 sample size of existing small scale businesses located in the North West zone of Nigeria comprising of Kaduna, Kano, Jigawa, Katsina, Zamfara, Sokoto and Kebbi states. The sampling frame was constructed from a data base provided by Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). Survey method will be adopted for the study because of the nature of the data to be collected and its appropriateness for the research. The study intends to use existing scales seen in the literature to measure entrepreneurial proclivity, proactive market orientation and performance. Key Words: Entrepreneurial proclivity, Proactive market orientation, Performance Introduction Business environment is generally perceived to be dynamic, characterized by challenges and offering new opportunities to which firms must respond creatively through entrepreneurship. The rapid changes in customer needs and technology have created high levels of market and technological uncertainty (Atuahene-Gima & Ko, 2001). Firms are required to build a new set of imperatives in entrepreneurship and in market orientation. This is to enable them to be successful in innovation, new product development, sustenance of competitive advantage and above all achieve credible performance. The results of Bhuian,

2 Journal of Marketing and Management, 7(1), , May Menguc, and Bell s (2005) study confirm that entrepreneurship and market orientation are two key elements in organizational performance. It will therefore not be wrong to state that entrepreneurial proclivity is an antecedent of market orientation. Entrepreneurial proclivity, which according to Verhees, Lans, and Verstegen (2011) is the propensity to act entrepreneurial, enables firms to respond to changes in their environment more effectively than competitors do. This has received substantial conceptual and empirical attention, representing one of the few areas in entrepreneurship research in which a cumulative body of knowledge is developing. The study on entrepreneurial proclivity has therefore become imperative especially where other variables are considered that makes the concept more adaptive to present realities. A key variable that could make the concept more potent to the growth of business operation is the market orientation concept. Studies have been conducted looking for the direct effect (if) of market orientation on firm performance (Appiah Adu &Ranchod,1998;Avlonistis &Gounaris, 1997; Baker &Sinula, 1999; Caruana, Pitt & Berthon,1999; Chan, Hung Ngai & Ellis 1998; Deshpande, Farley & Webster, 2000). There have also been studies on (when) market orientation has positive moderating effect effects on business performance (Greenley, 1995; Grewal & Tansuhaj, 2001; Harris, 2001; Hart & Diamantopolous, 1993; Homburg & Pflesser, 2000; Jaworski & Kohli, 1993). Such studies have induced researchers to examine how ( i.e. mediating effect) market orientation influences business performance. In search of these mediating factors researchers have focused on certain dimensions such as: (1) customer relationship indicators (Siguaw, Baker & Sinkula 1998); (2) firm effectiveness (Pelham 1997), and; (3) innovation (Baker &Sinkula 1999; Han, Kim & Srivastava 1998). Other researchers focused on marketing subunit influence (Omar Merlo & Seigyoung Auh 2009), customer orientation and competitor orientation (Suliyanto, 2011), absorptive capacity and technological innovation capabilities (Aljanabi, & Mohd Noor, 2015) and of recent market responsiveness (Kilic, 2015). There is however very scanty research in the area of proactive market orientation response dimension as the only mediating variable especially as it relates to entrepreneurial proclivity with small scale business performance as a yardstick. Even when

3 Journal of Marketing and Management, 7(1), , May researchers believe that firms with entrepreneurial proclivity are innovative and proactive, and that the entrepreneurial firm that tend to engage in a greater level of information-scanning activities are more likely to be market oriented (Matsuno, Mentzer, & Ozsomer, 2002). Entrepreneurial proclivity and market orientation are two concepts that are considered to be highly correlated especially when it comes to the aspect of goal settings and attainment of organizational objectives. It is however not certain on the extent to which the two concepts may interact. The question to ask is, do these two organizational traits reinforce or interfere with each other? In the context in which entrepreneurial proclivity and proactive market orientation have opposite effects, which effect will dominate? It is therefore logical if a research is conducted to investigate the mediating mechanism between the two concepts and determine its impact on firm performance. This will inform managers about the strength of each concept and also establish the extent to which such influence business performance. A meta-analysis research study conducted by Rauch, Wiklund, Lumpkin, and Frese, ( 2009) offers the most comprehensive review of the relevant publications to date regarding the performance impact of entrepreneurial proclivity. Out of a total of 46 single-country studies, 39 were based on samples from Western countries (27 from the United States, 9 from Europe, 3 from Australia), which provided general support for the performance efficacy of entrepreneurial proclivity. However, only seven studies were based on Asian samples (China, two; Korea, two; Malaysia, one; Indonesia, one; and Thailand, one). Some evidence has also shown that entrepreneurial proclivity is being applied to corporate settings in the United States (e.g., Matsuno et al., 2002; Zahra, 1991) whether or not this theoretical construct could be applied in developing countries and especially in a small scale setting is not empirically well established. A further study on entrepreneurial proclivity has therefore become imperative for the advancement of knowledge and the testing of the concept across the globe, industries sizes and operations. The main objective of the study is to evaluate the relationship between entrepreneurial proclivity, proactive market orientation and performance in small scale businesses in Nigeria. An attempt is

4 Journal of Marketing and Management, 7(1), , May made to determine the extent of entrepreneurial proclivity in those businesses and to measure the extent to which market intelligence gathering and dissemination is being adopted by the small scale business owner/ managers in the process of their operations with a view to achieving success. Theoretical Framework and Hypotheses Development Several terms have been used in the literature to describe entrepreneurial activities such include, entrepreneurship (Smart & Conant, 1994; Zahra, Sapienza & Davidsson, 2006), entrepreneurial proclivity (Pellissier & Van Buer, 1996; Matsuno, Mentzer & Ozsomer, 2002; Griffith, Noble, & Chen,2006), entrepreneurial orientation (Smart & Conant, 1994; Lumpkin & Dess, 1996) and entrepreneurial management (Stevenson & Jarillo, 1990). According to Matsuno, Mentzer and Ozsomer (2002) these terms are sometimes used interchangeably to describe the equivalent generalized concept. The present study therefore intends to adopt entrepreneurial proclivity for the purpose of the research. Attempt is made to provide definition of the concept as well as to link it with market orientation and small scale business performance. Hypotheses were formulated to provide the framework for the conduct of the research. Entrepreneurial Proclivity Entrepreneurial proclivity is defined as the organization s predisposition to accept entrepreneurial processes, practices, and decision making, characterized by a preference for innovativeness, risk taking, and proactiveness (Matsuno, Mentzer & Ozsomer, 2002). Entrepreneurial proclivity is the propensity to act entrepreneurially and for firms to respond to changes in their environment more effectively than competitors do, through strategic renewal, innovation or growth (Verhees, Lans, & Verstegen, 2011). According to Lumpkin and Dess (1996) entrepreneurial proclivity is the term that is used to describe organizational management processes that implies the methods, practices and decision making styles managers use to act entrepreneurially

5 Journal of Marketing and Management, 7(1), , May Collectively, the literature offers three sub dimensions of the organizational predisposition toward entrepreneurial management processes: innovativeness, risk taking, and proactiveness (Barringer & Bluedorn, 1999; Covin & Slevin, 1989; Miller, 1983; Morris, Avila, & Allen, 1993). The present study used the term entrepreneurial proclivity, which is defined by Matsuno et al. (2002) as the organization s predisposition to accept entrepreneurial processes, practices, and decision-making, characterized by its preference for innovativeness, risk-taking, and proactiveness. Innovativeness refers to the organization s tendency to engage in and support new ideas, novelty, experimentation, and creative processes that may result in new products, services, or technological processes (Lumpkin & Dess, 1996, p. 142). Risk taking pertains to a firm s willingness to tolerate or accept the unknown or the unknowable when it makes strategic or tactical moves (Miller and Friesen, 1978). Proactiveness refers to the firm s propensity to anticipate and act on future needs. This is done by seeking new opportunities that may or may not be related to the present line of operations, introducing new products and services ahead of competition, and even eliminating operations related to the products and services that have an uncertain future (Miller & Friesen, 1978; Venkatraman, 1989). These three basic dimensions are the requisite ingredients for strategic management. The concept of entrepreneurial proclivity has an important implication to small scale businesses in search of growth opportunities and competitive advantage. The small scale ventures characterized by resource constraint operate in turbulent environment and require the entrepreneurial spirit that will enable its operations to stand the wheel of challenges. Thus, an empirical investigation on the applicability of entrepreneurial proclivity should provide the much needed guidance to the small scale business managers for sustainable growth and enhanced performance. The present study will focus on the applicability of the concept in the small scale business operation settings in Nigeria where the manager is the owner of the business. Entrepreneurial proclivity in this context is viewed as the routine, decision making and practices of small scale

6 Journal of Marketing and Management, 7(1), , May business operators characterized by a preference for innovativeness, risk taking, and pro activeness. Based on the above observation the following hypothesis is formulated H1 Entrepreneurial proclivity has a direct effect on small scale business performance in Nigeria Market Orientation and Small Scale Business Performance Market orientation (MO) has received considerable attention from researchers over the past thirty years, with two general perspectives emerging. The first perspective is a cultural one that centers on values and norms (Narver & Slater, 1990). It defined MO as the organization culture that most effectively and efficiently creates the necessary behavior for the creation of superior value for buyers and thus continuous superior performance for the business. These authors have focused on three behavioral components: customer orientation, competitor orientation, and inter-functional coordination. The second perspective is behavioral in nature. Here market orientation is defined as the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it (Kohli & Jaworski, 1990). The pioneering thesis concerning market orientation surfaced in the 1950s when Peter Drucker explained that customers are the core factors that preserve and protect the organization (Celuch & Murphy, 2010; Eris & Ozmen, 2012). At that time, several expressions such as market focus or customer focus were employed to describe the concept (Foley & Fahy, 2009). After the significant contribution of Kohli and Jaworski (1990), many conceptual framework and empirical studies regarding MO were proposed in literature. This attracted the scholars attention in the field of marketing (Tsiotsou & Vlachopoulou, 2011; Zhang & Duan, 2010). This research depends on Kohli and Jaworskii s approach to study Market orientation which comprised of the following dimensions:

7 Journal of Marketing and Management, 7(1), , May Intelligence generation: is a process of collecting the needed information linked to customers desires, from the environment (Boso et al., 2012a; Gonzalez-Benito, Gonzalez-Benito, & Munoz- Gallego, 2009). Intelligence Dissemination: pertains to knowledge sharing among various sections and firm members (Beck et al., 2011; Chung, 2012; Zhang & Duan, 2010) and the exchange of ideas produced from intelligence among organizational parts through systematic and unsystematic methods (Chao & Spillan, 2010), both horizontal and vertical (Chung, 2012). Responsiveness: is the development and employment of all needed actions towards the generation and sharing of intelligence to satisfy customers needs (Beck et al., 2011; Chao & Spillan, 2010; Chung, 2012; Grinstein, 2008b; Todorovic & Ma, 2008). It is related to performance and represents the speed and coordination of the implementation and review of relevant actions. Hence, market orientation in this context is viewed around the continuous collection of information regarding target-customer needs where the competitor capabilities were positioned. The use of this information leads to create continuously superior customer value. The Market orientation in this direction therefore comprises of either responsive or proactive behaviour (Wiklund, & Shepherd, 2003). Responsive market orientation finds the firm catering to suggested or compelled directions provided by customers. This perspective which reflexes the empirical analysis on Market orienation is the majority of research theme. Proactive market orientation on the other hand finds the firm attempting to discover, understand, and satisfy the latent needs of customers. Therefore, the responsive market orientation ultimately could and would be imitated successfully, as superior customer benefits become parity benefit over time (Wiklund & Shepherd, 2003). For any business to create and to maintain sustainable competitive advantages, it must increase its proactive market orientation continually. Proactive market orientation alerts the firm to new market and technology developments and ideas that challenge existing cause effect relationship (Atuahene, Slater, & Oslon, 2005). It was argued

8 Journal of Marketing and Management, 7(1), , May that when firms respond to market changes with constantly evolving customer needs which is responsive market orientation, the firm s performance would increase (Wei & Wang, 2011). On the other hand, some researchers support the idea that only proactive MO has an impact on firm performance, while some support responsive and proactive MO are independent (Bodlaj,2010; Slater & Mohr, 2000). For the purpose of this study, proactive market orientation has been linked to small scale business performance. Therefore the following hypothesis is postulated: H2: Proactive Market Orientation has a positive impact on small scale business performance in Nigeria. The Relationship between Entrepreneurial Proclivity and Market Orientation The present challenges of business environment, is making entrepreneurial processes of risk taking, pro activeness and innovation very crucial. Moreover, in the continuous pursuit to secure competitive advantage and to generate profits, enterprises should respond better to the market needs than their competitors do. They should be able to accurately forecast the market to be able to continue to provide the best values to their customers. Thus, a market-orientation-based organizational culture is also considered important [ Kohli, & Jaworski, 1990; Narver, Slater 1990, and Chung,& Yoo.,2007). Therefore entrepreneurship and market orientation are the key success factors of today s enterprises. Thereby making it possible for new enterprises to survive and endure ( Ma,, Min-jae Kim & Lee-joo, 2012). Since entrepreneurial proclivity encompasses values and behaviors in innovativeness, risk taking, and competitive aggressiveness, such values may enhance the prospects for developing a breakthrough product or identifying an unserved market segment, both of which are fertile ground for developing competitive advantage (Slater, & Narver, 2000). Similarly, Entrepreneurial proclivity is believe to be an antecedent of market orientation. This is because entrepreneurial proclivity is seen to represents a response of firms to future or potential market needs, this then leads to proactive Market Orientation. Therefore, the following hypothesis is proposed. H3: Entrepreneurial proclivity is antecedents of proactive market orientation.

9 Journal of Marketing and Management, 7(1), , May The Relationship between Entrepreneurial Proclivity, Market orientation and Performance The positive relationship between Entrepreneurial Proclivity and performance resembles the arguments for a positive relationship between market orientation (MO) and performance. Market orientation reflects a firm s propensity to adopt the marketing concept, entailing the belief that the best way for firms to achieve its objectives is to satisfy customers more effectively and efficiently than competitors do. Market Orientation emphasizes responsiveness to market dynamics (i.e. customers and competitors). Entrepreneurial Proclivity on the other hand emphasizes responsiveness to a broader range of environmental forces, including new technologies, legislation and societal concerns. Market-oriented firms are expected to perform particularly well in highly competitive and turbulent market environments. This is because market responsiveness is important in such environments (Grewal and Tansuhaj, 2001; Jaworski and Kohli, 1993; Kohli and Jaworski, 1990). In technologically turbulent environments a market orientation is not expected to contribute to performance, because R&D driven innovation then becomes more important (Grewal and Tansuhaj, 2001; Jaworski and Kohli, 1993; Kohli and Jaworski, 1990). Although researchers conceptually agree that entrepreneurial proclivity should contribute to a firm s superior performance (Barringer and Bluedorn, 1999; Drucker, 1998; Miller, 1983), empirical results provide mixed support (Zahra, 1993). Zahra (1991) notes a positive association of entrepreneurial proclivity with profitability and sales growth. In a marketing context, Matsuno et al. (2002) report that entrepreneurial proclivity by itself has either a minimal (relative market share, percent of new product sales) or a negative return on investment (ROI) direct effect on business performance. While some studies have found a positive correlation with business performance (e.g., Hult, Snow, and Kandemir, 2003; Lee, Lee, and Pennington, 2001), others reported only lower (e.g., Lumpkin and Dess, 2001) or even no performance impact (e.g., Covin, Slevin, and Schultz, 1994). For the purpose of this study proactive market orientation has been adopted to mediate the relationship between proclivity and small scale business performance. Therefore the following hypothesis is postulated:

10 Journal of Marketing and Management, 7(1), , May Hypothesis 4: Proactive market orientation has a mediating effect on entrepreneurial proclivity and small scale business performance in Nigeria. Proactive Market Orientation - Intelligence generation - Intelligence dissemination - Responsiveness Entrepreneurial Proclivity - Innovativeness - Risk taking - Proactive Small scale business Performance - Change in profit - Sales Theoretical Framework Many theories about entrepreneur and entrepreneurship have been developed in the past; and each of these theories emphasizes one or the other particular aspect of entrepreneurship. The theories propounded by economists attempt to define: Who is an entrepreneur? What the role played an entrepreneur? The psychological theories describe the circumstances in which the quality of entrepreneurship takes roots in the mind of the people. An analysis of the entrepreneurial

11 Journal of Marketing and Management, 7(1), , May theories propounded by different experts provides an interesting study and will help understand the complex nature of entrepreneurship. Knight s Theory of Uncertainty (1957) Knight considers that the main function of an entrepreneur is to act in anticipation of future events. He also recognizes that an entrepreneur earns profit because he undertakes risks. He classifies risk into two types, i.e. insurable risk and non-insurable risk. Knight argues that taking suitable insurance policy can insure some risks; while taking suitable safeguards one can protect others that may not produce any profit. The burden of facing those risks that are non-insurable falls on the entrepreneur and he earns his profit for bearing the non-insurable risk. While fire, accident, theft, etc., are some of the insurable risks; changes in demand or fashion, entry of competitors, depletion of raw material and change in political situation of the country are some of the non-insurable risks. Knight calls the non insurable risk as uncertainty. According to him, uncertainty bearing is an essential element of entrepreneurship. Schumpeter s Theory of Innovation (1959) Schumpeter considered the entrepreneur as an innovator if he acts as a catalyst by his innovative ideas and introduces dynamism in the economy. He would then bring about development by interrupting and altering the stagnant circular flow of the economy. He considers that innovation can take the following forms: 1) Introduction of a new product 2) Introduction of a new, improved technology for the production of an already existing product 3) Opening up of a new market into which a specific product has not been introduced so far. 4) Discovery of new sources of supply of raw materials. 5) Introduction of new form of organization. Schumpeter also makes a distinction between an inventor and an innovator. While the inventor finds out new methods, techniques, materials, product, the innovator uses such inventions and discoveries to produce and offer new products to the economy. He calls an entrepreneur as an innovator.

12 Journal of Marketing and Management, 7(1), , May McClelland s Theory of Achievement (1961) David McClelland concerned himself with economic growth and the factors that influence it. He wanted to find the internal factors, i.e. human values and motives that lead men to exploit opportunities and take advantage of favorable trade conditions. His theory on achievement motivation is regarded as the most important psychological theories of entrepreneurship. According to McClelland, individuals whose need for achievement is high will have the drive to excel and win. They will take personal responsibility for solving problems and will be high achievers. In view of the inner urge for personal achievement they will always try to be better than others. He stressed that the need for achievement is the directly relevant factor for explaining economic behavior. People having high need for achievement are more likely to succeed as entrepreneurs. McClelland explains that entrepreneur's interest in profit growth in terms of sales is an expression of their need for an achievement. McClelland applies his n-achievement approach to study the relationship that exists between n- achievement scores and economic development. The n achievement approach suggests promotion of achievement-oriented ways of thinking to hasten the economic development in underdeveloped countries. McClelland says that high level of n-factor will motivate an entrepreneur to take on greater responsibility and also to take bigger risks. They prefer to shoulder tasks that involve real challenges. Peter Ducker (1985) According to Peter Ducker, the entrepreneurial role is one of getting and using resources. The difference is that, in entrepreneurial role the resources must be allocated to the opportunities, whereas, in the managerial role the resources are allocated to solve the problems. Entrepreneurship occurs when resources are redirected towards progressive opportunities and are not used for ensuring administrative efficiency. This redirection of resources distinguishes between the entrepreneurial and managerial personnel. According to Peter Drucker, an entrepreneur is one who always looks for change, responds to it and exploits it as an opportunity. Innovation is an instrument of entrepreneurship. An entrepreneur innovates and creates resources because there is no such thing as resource until someone finds a

13 Journal of Marketing and Management, 7(1), , May use for it and ascertains the economic value of it. Entrepreneurs convert a material into resource or combine the enlisting resources in a new or more productive configuration. Drucker is of the opinion that entrepreneurs need not be owners of their businesses. A professional manager who mobilizes resources and allocates them to make a commercial gain from an opportunity is also an entrepreneur. The present study is underpinned by the Knight s Theory of Uncertainty, Schumpeter s Theory of Innovation and Peter Ducker s theory on entrepreneurship to explain entrepreneurial proclivity characterized by innovativeness, risk taking and proactiveness. This is because various authors have analyzed entrepreneurship behavior from varied approaches but no single factor works as the only determining variable for the phenomenon of entrepreneurship. Methodology The research design for the present study is survey method. Using a sample of existing small scale businesses located in the North West zone of Nigeria comprising of Kaduna, Kano, Jigawa, Katsina, Zamfara, Sokoto and kebbi states. The sampling frame was constructed from a data base provided by Small and Medium Enterprises Development Agency of Nigeria (SMEDAN). The survey method will be adopted because of the nature of the data to be collected and its appropriateness for the research. Research Population and Sample size According to the report of small and medium enterprises development agency of Nigeria (SMEDAN, 2013), the total number of MSMEs in Nigeria as at 2013 stood at 37,067,416 (Micro- 36,994,578, Small- 68,168, and Medium-4,670). However the population of the present study is the number of small scale businesses in the north western zone of the country which is 14,886. (i.e. Jigawa with1022, Kaduna 2712, Kano 7710, Katsina 1256, Kebbi 898, Sokoto 631 and Zamfara 577). The sample size of the population is 209 using a pre determine tabulated formula. According to Bertlett, Kotrlik and Higgins (2001) population that is 6,000 and above in a continuous data and given 5% or 1% level of significance the appropriate sample size is 209. The cluster sampling technique shall be used in determining the sample population across the states in the zone this will be done to ensure fairness and adequate representation.

14 Journal of Marketing and Management, 7(1), , May Method of data analysis Multiple regression analysis shall be used to determine the relationship between the variables of the study (entrepreneurial proclivity, market orientation and firm performance), with small scale business performance as the dependent variable. Four models are specified for the purpose of testing the hypotheses of the study and are presented below: i) SSBP = β0 + β1 INNOVi + β2 RSKi + β3 PRACi + еi Where: SSBP = Small scale business performance β 0 = Regression Constant β1 β3 = Coefficient of independent variables. INNOV = Innovativeness RSK = Risk taking PRAC = Proactiveness е = Stochastic Error term (Disturbance term). i = No of small scale businesses

15 Journal of Marketing and Management, 7(1), , May ii) Where: SSBP = β0 + β1 INGi + β2 INDi + β3 RSPi + еi SSBP = Small scale business performance β 0 = Regression Constant β1 β3 = Coefficient of independent variables. ING = Intelligence generation IND = Intelligence Dissemination RSP = Responsiveness е = Stochastic Error term (Disturbance term). i = No of small scale businesses iii) Where: PMO = β0 + β1 INNOVi + β2 RSKi + β3 PRACi + еi PMO = Proactive market orientation β0 = Regression Constant β1 β3 = Coefficient of independent variables. INNOV = Innovativeness RSK = PRAC = Risk taking Proactiveness е = Stochastic Error term (Disturbance term). i = No of small scale businesses

16 Journal of Marketing and Management, 7(1), , May iv) Where: SSBP = β0 + β1 INNOVi + β2 RSKi + β3 PRACi β4 PMOi + еi SSBP = Small scale business performance β 0 = Regression Constant β1 β4 = Coefficient of independent variables. INNOV = Innovativeness RSK = PRAC = PMO = Risk taking Proactiveness Proactive market orientation е = Stochastic Error term (Disturbance term). i = No of small scale businesses Variable measurement In the present study, existing scales seen in the literature will be adopted and 5-point- Likert type scale was used (1 = strongly disagree to 5 = strongly agree ). To measure entrepreneurial proclivity our construct operationalization followed the extant literature. Specifically, we utilized Verhees, Lans and Verstegen (2011) as well as Matsuno et al. s (2002) entrepreneurial proclivity measures, which were also used and cited by several others (e.g., Bahadir, Bharadwaj, and Parzen, 2009;Ireland and Webb, 2007; Li, 2005). Twenty four items are used to assess the key dimensions of entrepreneurial proclivity consisting of proactiveness, risk taking, and innovativeness. Proactive market orientation was measured by the MARKOV scale by Jaworski and Kohli (1993) and Kohli, Jaworski and Kumar (1993). The proactive market orientation scale was measured by 20 items. The performance is measured based on the perception of the respondent and as adopted by Verhees, Lans and Vertegen (2011) (changing profits, sales and return on- investment in 3 years). Six items are used to assess the key dimensions. All items were anchored on a 5-point

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24 Journal of Marketing and Management, 7(1), , May Appendix A The MARKOR scale by Jaworski & Kohli (1993) and Kohli, Jaworski & Kumar (1993) In responding to the following questions, please focus on your strategic business unit rather than the corporation as a whole. If a question is not applicable please leave a blank. Strongly disagree Strongly agree 1. In this business unit, we meet with customers at least once a year to find out what products or services they will need in the future In this business unit, we do a lot of in -house market research We are slow to detect changes in our customers product preference We poll end users at least once a year to assess the quality of our products and services We are slow to detect fundamental shifts in our industry (e.g., competition, technology, regulation).r We periodically review the likely effect of changes in our business environment (e.g. regulation) on customers We have interdepartmental meetings at least once a quarter to discuss market trends and developments Marketing personnel in our business unit spend time discussing customers future needs with other functional departments When something important happens to a major customer or market, the whole business unit knows about it in a short period Data on customer satisfaction are disseminated at all levels in this business unit on a regular basis When one department finds out something important about competitors, it is slow to alert other departments. R It takes us forever to decide how to respond to our competitors price changes. R For one reason or another we tend to ignore changes in our customers product or service needs. R We periodically review our product development efforts to ensure that they are in line with what customers want Several departments get together periodically to plan a response to changes taking place in our business environment If a major competitor were to launch an intensive campaign targeted at our customers, we would implement a response immediately The activities of the different departments in this business unit are well coordinated Customer complaints fall on deaf ears in this business unit.r Even if we came up with a great marketing plan, we probably would not be able to implement it in a timely fashion. R

25 Journal of Marketing and Management, 7(1), , May When we find that customers would like us to modify a product or service, the departments involved make concerted efforts to do so R = reversed score