The role of digital orientation and market orientation in generating marketing capability in SMEs

Abstract

Marketing capability is a valuable resource for a firm, and it has a role in firm performance and new product development. Thus, firms with high marketing capability test and introduce innovations to the market, outperforming firms with low marketing capability. Digitalization has however transformed the ways firms create value. Firms need a strong digital orientation combined with a strong market orientation to take advantage of the new opportunities of digital technologies. Both of these strategic orientations can explain superior performance in marketing capability, as they form the bases for new product development and market intelligence, and direct the marketing behaviors of a firm. This is important especially in SMEs who struggle with fewer resources. This research examines the impact of digital orientation and market orientation on marketing capability in SMEs building on the resource-based view (RBV) and dynamic capabilities theory in testing the effects of digital orientation and market orientation on marketing capability. In addition, the moderating effect of firm size is tested. Data for the research was collected from Finnish SMEs. It consists of 242 answers from CEOs or the owners of the firm. Data was analyzed with stepwise linear regression analysis. The results show that both digital orientation and market orientation have a positive and significant relationship with marketing capability. The impact of digital orientation is moderated by firm size; its effect on marketing capability increases when firm size grows. Firm size has also an effect on marketing capability indicating that smaller firms have fewer resources. The whole model explains 45 percent of the variance in marketing capability. This research indicates that both digital orientation and market orientation are important factors explaining why some firms outperform others in marketing and innovation. This research suggests that organizations’ strategic orientations explain its capability, and equip SMEs to compete in the environment.