Table Of ContentJesko-Philipp Neuenburg
Market-Driving Behavior in Emerging Firms
Jesko-Philipp Neuenburg
Market-Driving Behavior
in Emerging Firms
A Study on Market-Driving Behavior, its
Moderators and Performance Implications
in German Emerging Technology Ventures
With a foreword by Prof. Dr. Malte Brettel
RESEARCH
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D 82 (Diss. RWTH Aachen University, 2009)
1. Auflage 2010
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Foreword
Among researchers the concept of market orientation has been broadly discussed for
many years stimulated above all by the works of Kohli and Jaworski as well as Narver
and Slater. These authors managed to define and operationalize the concept of market
orientation in different ways and also empirically confirmed a positive performance
impact of a company’s market orientation. Likewise it could be shown that for
emerging firms market oriented behavior can influence between 20-25% of company
success. In addition it has been researched which management measures and which
aspects of a company’s culture foster this behavior in young, innovative firms. At the
same time it should be noted that especially these young, innovative companies often
create new markets with their innovative products and that (potential) customers only
learn about the product when it is introduced to the market. It is questionable how a
market oriented company can be successful in such a situation. Information cannot be
generated from the customer and hence also cannot be disseminated or processed.
These doubts form the basis for the idea of a “market-driving behavior“. This is
defined as a company’s ability to create or influence markets. To date it is, however,
unclear how such a behavior should be designed and under which circumstances it
contributes to the success of young, innovative companies
This is the focus area of this dissertation by Jesko Neuenburg. Its objective is to
research the so called market driving behavior (MDB). Mr. Neuenburg discusses the
topic on a theoretical as well as an empirical level. In his theoretical part he presents
an interesting discussion about how companies can influence markets and under which
circumstances it appears more beneficial for them to behave market oriented. In the
following empirical part he illustrates in much detail which properties a market
environment needs to be possess in which influencing markets enhances success. Mr.
Neuenburg makes a number of important contributions with this book: he enriches the
theoretical discussion about the question how to orient oneself or shape the market
under different circumstances thus laying the foundation for further scientific
examination. Furthermore, with his context specific analysis he offers equally exciting
suggestions for entrepreneurs in young, innovative companies.
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Therefore I hope this work will receive attention from the broad audience it deserves.
Malte Brettel
VI
Preface
The last decade has been an exciting time for the world economy.
We’ve seen ups and downs: from the Asian crisis to the rise of China and India; from
the Russian crisis to the new basic resources and oil bonanza; from the new economy
boom to the demise of the “Neuer Markt”; from the devaluation of the Argentine Peso
to the strengthening of the Euro; from the credit driven profit inflation in the financial
services sector to the global financial crisis.
New technologies have changed the way we live and work: the Internet has put the
world’s knowledge on everyone’s desk; mobile phones enable us to reach and be
reached by other people independent of location; broadband connections have made
new business models possible; biotechnology has worked its way into the
pharmaceutical industry and nanotechnology is slowly developing into a cross-
sectional technology.
We’re also facing new challenges: globalization has increased competition and made
business more complex; urbanization produces problems for the cities in developing
countries while the aging population causes a different set of difficulties for most
developed nations; global warming and the depletion of fossil fuels pose a threat to the
long-term sustainability of economic growth; decreasing job security leads to an
increasing “entrepreneurization” of the work environment.
New challenges ask for new concepts. In these dynamic times also the strategic
behavior of individual companies is changing. Many of the new rising stars are
successful because they are more proactive in their market development than is
suggested in the classical marketing literature. Prominent examples for this trend are
plentiful and can be observed by reviewing the current business press. A shift from
“market-driven” to “market-driving” behavior has also been acknowledged in the
literature recently. This dissertation sets out to probe deeper into this emerging topic
and investigate market-driving behavior and its consequences.
Jesko-Philipp Neuenburg
VII
Table of Contents
1. Introduction ...................................................................................................... 1
1.1 Relevant research problem ................................................................................ 1
1.2 Objectives of this investigation ......................................................................... 3
1.3 Content of thesis ................................................................................................ 5
2. Basics of investigation ...................................................................................... 8
2.1 Emerging firms .................................................................................................. 8
2.1.1 Emerging firms and entrepreneurial research .................................................... 8
2.1.2 Definition of emerging firms ............................................................................. 9
2.1.3 Characteristics that differentiate emerging firms from established
companies ....................................................................................................... 12
2.2 Market orientation............................................................................................ 14
2.3 Market-Driving Behavior ................................................................................ 22
2.4 Market-Driven Behavior .................................................................................. 38
2.5 Market-driving vs. market-driven behavior: the theoretical groundwork ....... 47
2.5.1 Market-driving vs. market-driven behavior: a process perspective ................ 48
2.5.2 Market-driving vs. market-driven behavior: a timing perspective .................. 49
2.5.3 Market-driving behavior: a strategy perspective ............................................. 51
2.5.4 Elements of market-driving behavior: a stakeholder perspective ................... 56
3. Conceptualization of market-driving behavior in emerging firms ........... 61
3.1 A brief review of the existing literature on market-driving behavior in
emerging firms ................................................................................................. 61
3.2 Elements of market-driving behavior in emerging firms ................................ 64
3.2.1 Customer-driving behavior .............................................................................. 65
3.2.2 Competitor-driving behavior ........................................................................... 67
3.2.3 Channel-driving behavior ................................................................................ 68
3.2.4 Regulator-driving behavior .............................................................................. 69
3.2.5 Multiplier-driving behavior ............................................................................. 72
3.2.6 Employee-driving behavior ............................................................................. 73
3.3 Consequences of market-driving behavior ...................................................... 74
3.3.1 How market-driving behavior leads to competitive advantage ....................... 74
3.3.2 Impact of market-driving behavior on company performance ........................ 75
3.4 Moderators of the market-driving behavior – business performance
relationship ....................................................................................................... 77
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3.4.1 Company development phase .......................................................................... 80
3.4.2 Industry development stage ............................................................................. 82
3.4.3 Order of market entry ...................................................................................... 83
3.4.4 Technology turbulence .................................................................................... 85
3.4.5 Market turbulence ............................................................................................ 85
3.4.6 Competitive intensity ....................................................................................... 87
3.4.7 Regulation intensity ......................................................................................... 88
3.4.8 Degree of innovation ....................................................................................... 89
3.5 Overview of structural model .......................................................................... 91
4. Measurement of market-driving behavior in emerging firms................... 94
4.1 Measurement of market-driving behavior in the extant literature ................... 94
4.2 Design of the survey instrument ...................................................................... 95
4.2.1 The market-driving behavior (MaDri) indicators ............................................ 96
4.2.1.1 Customer-driving behavior .............................................................................. 97
4.2.1.2 Competitor-driving behavior ........................................................................... 98
4.2.1.3 Channel-driving behavior ................................................................................ 99
4.2.1.4 Regulator-driving behavior .............................................................................. 99
4.2.1.5 Multiplier-driving behavior ........................................................................... 100
4.2.1.6 Employee-driving behavior ........................................................................... 102
4.2.2 The market-driven behavior indicators .......................................................... 103
4.2.2.1 Intelligence generation ................................................................................... 104
4.2.2.2 Intelligence dissemination ............................................................................. 105
4.2.2.3 Responsiveness .............................................................................................. 106
4.2.3 The scales ....................................................................................................... 107
5. Empirical study of market-driving behavior in emerging technology
firms .............................................................................................................. 108
5.1 Data collection ............................................................................................... 108
5.1.1 Selection of target companies for survey ....................................................... 108
5.1.2 Survey procedure ........................................................................................... 109
5.1.3 Sample representativeness ............................................................................. 109
5.1.4 Removal of unsuitable answers ..................................................................... 110
5.1.5 Data editing .................................................................................................... 110
5.1.6 Analysis of non-response and informant bias ................................................ 111
5.2 Sample properties .......................................................................................... 112
5.2.1 Industries represented in the sample .............................................................. 112
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5.2.2 Age, Size and Stages of sample companies ................................................... 113
5.3 Data analysis .................................................................................................. 115
5.3.1 Specification of constructs ............................................................................. 116
5.3.2 Selection of analytical method ....................................................................... 119
5.3.3 Assessment of model quality ......................................................................... 123
5.3.3.1 Quality assessment of reflective measurement models ................................. 124
5.3.3.2 Quality assessment of formative measurement models ................................. 126
5.3.3.3 Quality assessment of structural model ......................................................... 127
5.3.4 Evaluation of the measurement models: Validation of constructs ................ 132
5.3.4.1 Reflective Constructs ..................................................................................... 132
5.3.4.2 Formative Constructs ..................................................................................... 138
5.3.5 Evaluation of the structural model ................................................................. 141
5.3.6 Moderators of market oriented behaviors ...................................................... 145
5.3.6.1 Absolute influence of market-driving behavior on firm performance .......... 147
5.3.6.2 Relative influence of market-driving behavior vis-à-vis market-driven
behavior on firm performance ....................................................................... 148
6. Discussion ..................................................................................................... 151
6.1 Interpretation of Results ................................................................................ 151
6.1.1 The market-driving behavior construct and its dimensions ........................... 152
6.1.2 Performance implications of market-driving behavior .................................. 153
6.1.3 Consideration of environment ....................................................................... 159
6.1.3.1 Company development phase ........................................................................ 160
6.1.3.2 Industry development stage ........................................................................... 163
6.1.3.3 Order of market entry .................................................................................... 166
6.1.3.4 Technology turbulence .................................................................................. 168
6.1.3.5 Market turbulence .......................................................................................... 169
6.1.3.6 Competitive intensity ..................................................................................... 170
6.1.3.7 Regulation intensity ....................................................................................... 171
6.1.3.8 Degree of innovation ..................................................................................... 171
6.2 Implications for entrepreneurs ....................................................................... 175
6.3 Implications for researchers ........................................................................... 178
6.4 Limitations of analysis and suggestions for further research ........................ 181
7. Summary ....................................................................................................... 184
8. Appendix ....................................................................................................... 187
8.1 Cover letter .................................................................................................... 187
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