Master's Thesis
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2007:054 MASTER'S THESIS The Impact of Market Orientation on Business Performance and Website Adoption A Study among Iranian SMEs Yasaman Darabi Luleå University of Technology Master Thesis, Continuation Courses Business Administration Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce 2007:054 - ISSN: 1653-0187 - ISRN: LTU-PB-EX--07/054--SE The Impact of Market Orientation on Business Performance and Website Adoption: A Study among Iranian SMEs Supervisors: Dr. Albert Caruana Dr. Seyed Hessameddin Zegordi Referee: Dr. Nahavandi Dr. Amin Naseri Prepared by: Yasaman Darabi Tarbiat Modares University Faculty of Engineering Department of Industrial Engineering Lulea University of Technology Department of Business Administration and Social Sciences Division of Industrial Marketing and E-Commerce MSc PROGRAM IN MARKETING AND ELECTRONIC COMMERCE Joint 2007 Abstract Studying the impact of market orientation on business performance has been a popular research topic in recent years. However, there seems to be lack of empirical studies that measure market orientation in e-commerce environment. This paper reports the study on “the impact of market orientation on business performance and website adoption in Iranian SMEs”. According to previous studies market orientation is the prerequisite for a successful business operation, but actually there is not enough evidence in supporting the idea in Iranian context and especially about the impact of being market oriented on the perception of managers toward having website. To test this assertion, this study looks into the nature of the correlation between market orientation, company performance and website adoption using 117 website adopters and 102 non-website adopters as sample data from Iranian SMEs. Narver and Slater’s scale (MKTOR) for market orientation, Weerakoon’s Multi-Model Performance Framework (MMPF) for business performance and Technology Acceptance Model (TAM) for website adoption are tested and used. Confirmatory factor analysis was used to validate the measures of market orientation, business performance and website adoption. Regression analysis was performed to determine whether market orientation is associated with firm’s performance and website adoption, using Partial Least Square (PLS) Technique. Our findings suggest that market orientation and business performance are correlated to each other in both sample groups, Iranian SMEs with higher level of market orientation are more willing to use website as a business tool in comparison with firms with lower level of market orientation. In website adopters, behavioral intention, perceived usefulness and perceived ease of use has positive direct effect on website adoption, although perceived usefulness plays most important role. Among non-website adopters, behavioral intention, perceived usefulness and perceived ease of use don’t have any positive impact on website adoption! Managers of both sample groups have positive attitude toward having website while this attitude is greater among website adopters than non-website adopters. Although, website adopters find having website would enhance their job performance and effectiveness, non-website adopters believe website is not so helpful in their jobs. 1 Finally, the implication of the result to both researchers and practitioners has been discussed; limitations and suggestions for further research have been proposed. Key words: Marketing, Internet marketing, Market orientation, Business Performance, Website Adoption, innovation, Small and Medium-Sized Enterprises. 2 Acknowledgements There are several people I would like to give my sincere gratitude and appreciation for the quality of this study. First and foremost I would like to thank my supervisor “Dr. Albert Caruana”, without his assistance, encouragement and support, this thesis would never have been completed. Further I would like to thank my co-supervisor “Dr. Seyed Hessameddin Zegordi” for giving me his valuable time and knowledge. I would like to extend my special thanks to my friends for their patience and helpfulness during data collection process. Finally, I would like to thank my father and mother for their love, trust, understanding and support through out my whole life. April, 2007 Yasaman Darabi 3 TABLE OF CONTENTS 1. CHAPTER ONE: INTRODUCTION………………………………………………..9 1.1 Background ……………………………………………….…………………..……9 1.2 Market Orientation………………………………………….…...………………...11 1.2.1 Definition of Market Orientation in Brief…..………………………………11 1.2.2 Importance of Market Orientation……………………………..…………...12 1.3 Market Orientation and Business Performance..……..……….…...……………...13 1.4 Market Orientation and Website Adoption…..……………….…………………...14 1.5 Definition of Small and Medium-sized Enterprises (SMEs)....………….………..15 1.6 Research Problems………………………………………….…………...………...17 1.7 Research Objectives….……...……………………………….……………………18 1.8 Disposition of the Thesis……..………………………………...………………....19 2. CHAPTER TWO: LITERATURE REVIEW……...……………………………...20 2.1. Market Orientation……………….………………………………………………20 2.1.1 Market Orientation Definitions…...………………………………………..21 2.1.1 Market Orientation Scales…...……………………………………………..23 2.2. Business Performance………….………...………………………………………24 2.3. Website Adoption…..………….………...………………………………………31 2.3.1 The Behavioral Adoption Theories………………………………………...32 2.3.1.1 Theory of Reasoned Action (TRA)………………………………..32 2.3.1.2 Theory of Planned Behavior (TPB)……………………………….33 2.3.1.3 Theory of Acceptance Model (TAM)……………………………..35 2.3.1.4 Comparison of TPB and TAM…………………………………….37 2.4 The Research Framework……………………………………..………………….38 2.4.1 Relationship between Market Orientation and Business Performance....….38 2.4.2 Relationship between Market orientation and Website Adoption.…….…..38 2.4.3 TAM Variables……………………………….….……..………………….39 2.4.3.1 Behavioral Intention…………………………………………..…..39 4 2.4.3.2 Attitude…………………………..………………………………..40 2.4.3.3 Perceived Ease of Use…..………..………………………………..40 2.4.3.4 Perceived Usefulness...…………..………………………………..41 2.5 Chapter Summary………………………………………………………………...43 3. CHAPTER THREE: RESEARCH METHODOLOGY…………………………..44 3.1 Research Purpose...………………………………………….…………………..44 3.1.1 Exploratory Research….………………………………..………………….45 3.1.2 Descriptive Research….………………………………..………………….45 3.1.3 Explanatory Research…………………………………..………………….45 3.2 Research Approach………………………………………….…………………..46 3.2.1 Qualitative Method……………………………………..………………….46 3.2.2 Quantitative Method…..………………………………..………………….47 3.3 Research Strategy………………………………………….…………………….47 3.4 Measurement of Constructs and Pilot Test….…………………………………..48 3.5 Sampling and Target Population………………………………………………...50 3.6 Data Collection………………………………………………………………….51 3.7 Statistical Analysis……………………………………………………………....52 3.8 Reliability and Validity………………………………………………………….53 3.9 Chapter Summary……………………………………………………………….54 4. CHAPTER FOUR: DATA DESCRIPTION, ANALYSIS AND RESULTS…....55 4.1 Demographics and Descriptive Statistics………………………………………...55 4.2 Constructs Reliability and Validity Assessment…………………………………57 4.3 Results of Hypotheses Tests……………………………………………………..60 4.3.1 Explaining Market Orientation and Business Performance……………….62 4.3.2 Explaining Market Orientation and Website Adoption…………………...63 4.3.3 Explaining Actual Usage Behavior (Website Adoption)………………….63 4.3.4 Explaining Behavioral Intention Toward Website Adoption……………..64 4.3.5 Explaining Attitude………………………...……………………………...64 4.4 Chapter Summary…………..……………………………………………………..65 5 5. CHAPTER FIVE : DISSCUSION AND CONCLUSION………….……………...66 5.1 Theoretical Implications………………………………………………………….66 5.2 Practical Implications…………………………………………………………….67 5.3 Contributions……………………………………………………………………..70 5.4 Limitations………………………………………………………………………..71 5.5 Future Research…………………………………………………………………..72 5.6 Conclusion………………………………………………………………………..72 REFERENCES……………………………………………………………………….…74 Appendix A. Questionnaire…………………………………………………………….84 Appendix B. Comparative Analysis between Techniques……………………………87 Appendix C. Compatibility by Research Approach……………………………...…..88 6 LIST OF TABLES Table 2.1 Summary of empirical Research on the Relationship between Market Orientation and Business Performance from 1990 to 1999. Table 3.1 Relative Situations for Different Research Strategies Table 3.2 Constructs and Measurers Table 4.1 Sample Demographics Table 4.2 The Average Hours Spent on internet per Week Table 4.3 Assessment of the Reliability Table 4.4 Constructs Weights and Loadings Table 4.5 Hypotheses Testing LIST OF FIGURES Figure 1.1 The Evolution of Marketing Thought Figure 2.1 Theory of Reasoned Action (TRA) Figure 2.2 Theory of Planned Behavior (TPB) Figure 2.3 Theory of Acceptance Model (TAM) Figure 2.4 Research Framework Figure 4.1 Results of the PLS Analysis for Website Adopters Figure 4.2 Results of the PLS Analysis for Non-Website Adopters List of Abbreviations AT Attitude toward Behavior AU Actual Usage BI Behavioral Intention BP Business Performance IS Information Systems IT Information Technology ICT Information and Communication Technologies MO Market Orientation 7 NWA Non-Website Adoption/ Adopters PEOU Perceived Ease of Use PLS Partial Least Square PU Perceived Usefulness SEM Structural Equation Modeling SME Small and Medium-Sized Enterprise TRA Theory of Reasoned Action TPB Theory of Planned Behavior TAM Technology Acceptance Model WA Website Adoption/Adopters α Significance level β Standardized path coefficient 8 Chapter 1 Introduction 1. Introduction This chapter presents a brief background