Market orientation and business economic performance: A mediated model

Previous studies have found that market orientation signi®cantly predicts economic performance. The present study attempts to provide a necessarily partial model for how this impact takes place using innovation degree, innovation performance and customer loyalty as intermediate variables. The study targets the insurance industry in the European Union. The sample accounted for 22 percent of the companies and 17 percent of the insurance premiums in this market. The results suggest that the addition of these variables improves predictions of objective economic performance 52 percent over what is explained by market orientation alone. Furthermore, the study found that the effects of market orientation on economic performance are completely channeled (mediated) through these variables, particularly through innovation degree and innovation performance. Based on the results the paper provide guidelines for improving the market share, premium growth and pro®tability of European Union insurance ®rms. In a time characterized by increasingly rapid change in consumer preferences, even faster technological progress, and growing competitive rivalry, it becomes essential for companies to develop mechanisms within their organizations to generate market information, analyze it, and respond accordingly. The set of activities developed by companies permanently to monitor, analyze and respond to these market changes is referred to in the Marketing literature as amarket orientationo. Over the last decade there has been a growing interest in the construct of market orientation (Webster, 1994; Day, 1992) and its usefulness in increasing companies’ economic performance (Narver and Slater, 1990; Ruekert, 1992; Jaworski and Kohli, 1993; Lambin, 1996; Deng and Dart, 1994). However, it is still not well understood why there is such an effect and ± The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/researchregister http://www.emeraldinsight.com/0956-4233.htm This research has been partially funded by the Spanish Ministry of Education and Culture, DireccioÂn General de EnsenÄanza Superior with project SEC2001-1169. IJSIM 14,3