Professional Documents
Culture Documents
American Marketing Association
American Marketing Association
Analysis
Author(s): Rohit Deshpand, John U. Farley and Frederick E. Webster, Jr.
Source: Journal of Marketing, Vol. 57, No. 1 (Jan., 1993), pp. 23-37
Published by: American Marketing Association
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CorporateCulture, Customer
and
Innovativeness
Orientation,
in
A Quadrad
Japanese Firms:
Analysis
"Quadrads" (double dyads) of interviews, each conducted with a pair of marketing executives at a Japanese vendor firm and a pair of purchasing executives at a Japanese customer firm, provided data on
corporate culture, customer orientation, innovativeness, and market performance. Business performance
(relative profitability, relative size, relative growth rate, and relative share of market) was correlated positively with the customer's evaluation of the supplier's customer orientation, but the supplier's own assessment of customer orientation did not correspond well to that of the customer. Japanese companies
with corporate cultures stressing competitiveness (markets) and entrepreneurship (adhocracies) outperformed those dominated by internal cohesiveness (clans) or by rules (hierarchies). Successful market
innovation also improved performance.
SEVERAL interconnected lines of recent conceptual thinking and empirical analysis relate marketing management to overall business strategy. Three
related developments indicate a need to integrate these
lines of research.
First, managers are returning to the dictum of the
so-called "marketing concept," with its call for customer orientation and innovation as the focus for all
business planning and strategy. Several recent studies
and articles document renewed management concern
RohitDeshpande
is Professor
of Marketing
andFrederick
E.Webster,
Professor
of Marketing,
Jr.,is E.B.Osborn
AmosTuckSchoolof Business Administration,
Dartmouth
College.JohnU. Farleyis Director,
Institute
of Management
&International
JosephH.Lauder
and
Business,
IraA. Lipman
TheWharton
Professor,
of PennSchool,TheUniversity
Theauthorsareindebted
to the Marketing
ScienceInstitute
sylvania.
forseedsupportof thisproject;
to Procter
&Gamble,
Columbia
Business School,andthe TuckAssociatesProgram
forfinancial
support;
andto the International
of Japanforadministrative
andfiUniversity
nancialassistance.
Mari
GeorgeFieldsandhisstaffatASI,particularly
wereinstrumental
in making
Iwaki,
theproject
work.Theauthorsalso
to Stewart
Black
andJohnNarver,
whoprovided
expressgratitude
many
on a previous
draftof thisarticle.
helpfulsuggestions
Journal of Marketing
Vol. 57 (January 1993), 23-27
for creating a customer-focused, market-driven enterprise (Houston 1986; Shapiro 1988; Webster 1988).
Second, the management literatureis peppered with
studies of organizational culture, often involving crossnational comparisons of American, European, and
Japanese firms (Davis 1984; Deal and Kennedy 1982;
Hofstede 1980). In the field of organizational behavior, rigorous theoretical analysis has been developed
and applied to understanding organizational cultures
(Ouchi 1980; Smircich 1983). Toward the end of the
1980s, the marketing discipline not only became aware
of organizational culture as a field of study, but also
began to develop a related research agenda (Deshpand6
and Webster 1989).
Third, there has been heightened interest in measuring and understanding business performance, especially as it relates to market share, product quality,
sources of competitive advantage, and industry structure (Buzzell and Gale 1987; Porter 1980, 1985). Even
more recently, marketing scholars have begun to explore the intersection of the marketing concept and
business performance (Jaworski and Kohli 1992; Kohli
and Jaworski 1990; Narver and Slater 1990, 1991).
Conceptual Backgroundand
Hypotheses
Culture, Customer Orientation, and
Innovativeness
The field of organizationalbehavior offers a considerable and very rich theoreticalliteratureon corporate
culture.We describea conceptualframeworkgrounded
in this literatureon culturethat lends itself to the definition and measurementof specific culturalvariables.
We also summarizethe less-developed literatureson
customer orientation and organizational innovativeness. Additionally, we hypothesize relationshipsbetween each of these three variablesand business performance. We turn now to the development and
integrationof concepts of organizationalculture, customer orientation,and innovativenessthat yielded the
hypotheses explored in our study.
(1989) reviewed more than 100 studies in organizational behavior, sociology, and anthropologyand defined organizationalculture as "the patternof shared
values and beliefs that help individualsunderstandorganizationalfunctioning and thus provide them with
the norms for behavior in the organization"(p. 4).
One insightful definition describes culture as "why
things happenthe way they do" versus organizational
climate, "what happens aroundhere" (Schneiderand
Rentsch 1988).
Using a frameworkproposedby Smircich (1983),
Deshpande and Webster (1989, p. 9) reviewed five
alternativetheoreticalparadigmsfor studyingculture,
each with uniquemarketingresearchimplications.One
such paradigm,organizationalcognition, has been developed relatively more than the others in terms of
formal conceptual framework, specification of variables, and operationalizationof measuresand is therefore the one used in our currentstudy. This approach
is based in cognitive organizationtheory(Weick 1985)
and is analogous to the cognitive paradigmin much
of consumer behavior research. This perspective on
organizationalculture focuses on managerial information processing and views organizationsas knowledge systems. Such an informationprocessing view
of organizationalfunctioning is very useful for understandingnot only the cultureof a firm, but also its
customerorientation,because discussion of the latter
has taken an implicit, if not explicit, organizational
information processing approach (cf. Kohli and
Jaworski 1990).
The applicabilityof such an organizationalinformation processing perspective to understandingculture and specifically its relationship to marketing
strategyis discussedby WebsterandDeshpand6(1990).
They describeat some lengththe seminalworkof Quinn
and his colleagues (Quinn 1988; Quinn and McGrath
1985), who have proposed what is labeled a "competing values" model of organizationaleffectiveness.
This model, which was first described in an awardwinning article by Quinn and Rohrbaugh(1983), is
based on an empirical analysis of the values individuals hold for organizationalperformance.By using a
list of organizationaleffectiveness criteriadeveloped
by Campbell(1977), Quinnand Rohrbaughfound that
clusters of values reproducedthe dimensions developed by Jung (1923) to describe psychological archetypes. As Cameron and Freeman (1991) note, "Because culturesare defined by the values, assumptions,
and interpretationsof organizationmembers, and because a common set of dimensions organizes these
factors on both psychological and organizationallevels, a model of culture types can be derived." There
has been substantialadditionaldescriptionof the competing values model and its consistency with the Jun-
24 / Journalof Marketing,January1993
gian framework(Woodmanand Passmore 1991). According to this view, cultural information within
organizationsis interpretedby individualsin the context of theirunderlyingarchetypes(Mitroff1983). More
specifically,the competingvalues model identifiesfour
cultural types based on the Jungian framework as
identified in Figure 1, where the sharedbeliefs pertain
to dominantorganizationalattributes,leadershipstyles,
organizationalbonding mechanisms, and overall strategic emphases.
As we can see in Figure 1, two key dimensions
FIGURE1
A Model of Organizational Culture Types'
TYPE:Adhocracy
DOMINANT
ATTRIBUTES:
Cohesiveness, participation,
teamwork,sense of family
DOMINANT
ATTRIBUTES:Entrepreneurship,
creativity,adaptability
LEADERSTYLE:Mentor,facilitator,
parent-figure
BONDING:Loyalty,tradition,
interpersonalcohesion
STRATEGIC
EMPHASES:Toward
developinghumanresources,
commitment,morale
LEADERSTYLE: Entrepreneur,innovator,
risktaker
BONDING:Entrepreneurship,
flexibility,risk
STRATEGIC
EMPHASES:Towardinnovation,
growth,new resources
INTERNAL MAINTENANCE
EXTERNAL POSITIONING
(competition,
differentiation)
TYPE:Hierarchy
TYPE:Market
DOMINANT
ATTRIBUTES:
Order,
rulesand regulations,uniformity
DOMINANT
ATTRIBUTES:
Competitiveness,
goal achievement
LEADERSTYLE:Coordinator,
administrator
BONDING:Rules,policiesand
procedures
STRATEGIC
EMPHASES:Toward
smooth
stability,predictability,
operations
BONDING:Goal orientation,production,
competition
STRATEGIC
EMPHASES:Towardcompetitive
advantageand marketsuperiority
Quadrad
Analysisof JapaneseFirms/25
Worst
market culture
adhocracy culture
clan culture
hierarchical culture
This hypothesis must be tempered with an understanding of our premise about environmental complexity. Much theorizing in the contingency theory
school of organizational behavior argues that HI would
hold true only under conditions of high environmental
due to turbulence, rapidity
complexity-uncertainty
of change, and so on (Lawrence 1981). However, our
assumption is that such conditions increasingly characterize our current world. In fact, more than 10 years
ago, two organizational behavior theorists stated:
"Many practitioners and theorists believe that organizations are operating in more complex environments
than ever before . . . Consider, for example, the multiple and conflicting goals of most organizations; the
growing environmental constraints, regulations, and
opportunities confronting organizations; the increasing sophistication of technology and the tasks to which
it is put; and the many partisan groups involved in the
strategic issues that confront top managers of today's
complex organizations" (Van de Ven and Joyce 1981,
p. 1) Arguably, this observation is even more true today, as Achrol (1991) points out.
We must note also that HI and the literature we
cite to support it are grounded in corporateculture rather
than in national culture. Though there is clearly a Japanese national culture (i.e., nationally shared values
and beliefs), because the sample used in our study
26 / Journalof Marketing,January1993
Recognizing that customers' and marketers'perceptions may not agree, even though they should (in
the normative sense implied by the marketingconcept), we offer an additionalset of hypotheses:
H3a: Marketer's and customers' perceptions of the marketer's customer orientation agree.
H3b:
The customers' perceptionof the marketer'scustomer orientationis more importantthan the marketer's own perceptionin explainingthe marketer's
businessperformance.
It is the
In each of the hypotheses we allude to "performance," but have not formallydefined the term as we
use it here. Though this point is taken up more explicitly in the operationalizationssection that follows,
we are using the termto mean global outputmeasures
such as shareof market,profitability,growthrate, and
Method
The Unit of Observation: The Quadrad
The substantialliteratureon the appropriateunits of
analysesin organizationalbuyingbehaviorleads to two
major conclusions. First, more than one key informant within an organizationalunit is needed to develop reliable measures of organizationalconstructs
(Moriartyand Bateson 1982). This point is particularly importantfor us because we are working with
some new constructsand operationalizations.Second,
the organizational buying behavior literature also
stresses the crucial importanceof the dyad-that is,
measurementsof both buyer and seller-so as to explore the extent of agreementabout theoreticalconstructs (Weitz 1981). The latter is especially salient
in our study because of our hypothesesrelatingto customer orientation.
Interestingly,we were unableto find many studies
in which both majorconclusions were implementedthat is, in which more than one respondentwas interviewed in both the buyer and seller organizations.
The method we describe in this article involves an
analysis of a matched set of buyer-sellerpairs. Some
researchershave attemptedto poll both buyers and
sellers, but have used separateanalyses of buyer and
seller samples ratherthan such a matched-dyadsapproach (Andersonand Narus 1990). Hence, we refer
to our samplingunit as a "quadrad,"that is, the combination of two buyer-sellerdyads. The data used in
our analysis come from 50 such quadrads,each constructedfrom a set of four interviews, two from a supplier and two from a customer firm of that supplier.
For reasons described previously we believe that the
quadradapproach,thoughmuch more time-consuming
and extremelyexpensive to complete successfully, allows for much greaterspecificity in measurement.
Sample
The sample of 50 firms selected for personal interviews representsa randomnth-observationsample of
firms publicly tradedon the Nikkei stock exchange in
Tokyo. Two marketingexecutives in a single business
28 / Journalof Marketing,
January1993
(1992). We used the average of the two relevant responses within the quadradin each case to build the
scales (i.e., the accepted approachused in organizational sociology studies, viz, Hage and Aiken 1970).
We did so only afterexaminingthe extent of the viewpoint varianceproblem(Heide and John 1990). On all
measurestherewas a significantcorrelation(at the .05
or better level) within the dyad pairs (i.e., supplier 1
and supplier2 or customer 1 and customer 2).
Table 1 gives the validated constructs and their
properties.Measure validationwas performedin two
distinct steps. First, items developed for each constructwere examined for internalvalidity. Items with
low item-to-total zero-order correlations were reviewed for their theoreticalimportanceand deleted if
they tappedno additional,distinct domainof interest.
Second, scale reliabilitywas measuredby the Cronbach
alpha coefficient and items were deleted as necessary
to purify scales if a distinct theoretical domain was
already being adequatelymeasured. As can be seen
in Table 1, all reliabilitycoefficientsbut one are above
.65, thus adequately meeting the standardsfor such
research(Nunnally 1967). Though clan culture has a
lower reliability coefficient, it was retained in the
analysis for theoreticalpurposes because it is part of
the broader conceptual framework described previously (Cameronand Freeman 1991; Quinn 1988).
Performancewas measuredby combiningfour selfevaluations,on a three-pointscale, of profitability,size,
marketshare,and growthratein comparisonwith those
of the largest competitor for that particularbusiness
(i.e., the specific product/marketsituationbeing described by the respondents). The scales used were
groundedin PIMS study measures(Buzzell and Gale
1987; Kotabeet al. 1991). The performancescale had
a Cronbachalpha of .90. The firms were divided into
good and poor performersby a median split, with ties
at the medianassigned to the high performancegroup.
Results
Means of the culture, customer orientation, and innovativeness scores are reported in Table 1. It is
interesting to note that though the predominant
self-reportedculture type is a clan, a fact which is
consistent with most popular writing about Japanese
organizations(Floridaand Kenney 1991), all four types
of cultureare well representedin the sample. Further,
in all cases the self-reportedculturesof individualfirms
contain some elements of more than one culturetype,
so we are considering matters of degree ratherthan
clear prototypes. In particular,these Japanesefirms,
thoughtendingto be clans, also show strongelements
of marketculture.This findingmightbe expectedfrom
the workof Sullivan(1983), HatvanyandPucik(1981),
and others, who have noted a considerablediversity
Quadrad
Analysisof JapaneseFirms/ 29
TABLE 1
Measures
Cronbach
Scale
Culture
Market
Adhocracy
Clan
Hierarchy
Customer Orientation
As evaluated by supplier
As evaluated by customer
Innovativeness
No. of Items
All
4
4
4
4
.82
.66
.42
.71
106.1b
9
9
5
.69
.83
.85
Means'
Low
Performers
High
Performers
S.D.
92.3
72.5
124.0
111.9
110.8
85.0
114.4
91.0
37.4
26.4
28.8
31.4
32.3
31.0
16.9
32.3
32.7
18.7
3.3
3.2
2.9
78.9b
117.0
100.9b
32.5
32.1b
17.8b
"Numbers are summations of the four individual components for each culture type.
bSignificantunivariate difference between high and low performance firms.
in both structural and cultural forms in Japanese organizations that is seldom mentioned in more popular
writing. Five of seven measures have significant differences for high and low performers-three of four
culture scales, the customer orientation measure provided by the customer, and the innovativeness scale.
The two measures not significantly different for high
and low performers are the clan culture scale and the
marketers' self-rating on customer orientation. We say
more about each of these results subsequently. The
results in Table 1 are not significantly different by major
industry classifications of consumer goods, industrial
goods, and services, or by the extent of participation
in international business.
The Discriminant
Function
TABLE 2
Makeup of the Discriminant Function
Pooled Within-GroupCorrelations
of Function and Independent Variable
Culture
Market
Adhocracy
.48
.39
Clan
Hierarchical
Customer Orientation
Measured from customer
Measured from producer
Innovativeness
.046
.102
-.28
.239
-.56
.021
.52
.00
.52
30 / Journalof Marketing,January1993
.031
.988
.034
Innovativeness. Organizationalinnovativeness is
related positively to performanceper H4. It is interesting to note that this relationship,along with that of
customer-reportedcustomer orientation and performance, is the second strongestin magnitude(.52, Table 1), reinforcing Drucker's notion that a customer
focus and innovation should be the raison d'etre of
any business. (The strongestcoefficient in magnitude
is for the negative relationshipbetween hierarchical
culture types and performance,a result on which we
comment in the Discussion section.)
Classification
Overall, the discriminantfunction classified 70% of
the firms correctly into the two performancegroups.
This outcome is significantlybetterthanchance on the
basis of the proportionalchance criterion (Morrison
1969), which predicts52% correctclassification. Using a single-observationU-method holdout jackknife
procedure(Dillon 1979), we found that 66.7% of the
omitted observationswere correctly classified, again
significantly better than chance.
Given the small samplesize of 50 quadrads(though
they do represent200 individualrespondents),we believe these results are strong, especially the correct
orderingof culture types in terms of business performance. The results for customerreportsof marketorientation and for innovativeness are also strong and
consistentwith our hypotheses. The surprise,contrary
to our expectationsbut importantfor its implications,
is the lack of a relationshipbetween customerreports
and self reportsof customer orientation.
Discussion
Implications for Research
Our research was designed to evaluate the relationships between corporateculture, customerorientation,
innovativeness, and business performance.We have
begun the empirical phase of our work with an examinationof Japanese businesses because of the opportunity to gather data in that country, where empirical access for marketingscholars has historically
been difficult. Though the focus of our study is on
corporateratherthan nationalculture, Japanalso provided the opportunityto examine these relationships
in a setting where one would expect a strong national
backgroundculture to be operating. Future research
of this kind based on datafrom Americanor European
companies will enable marketingscholars to compare
and contrastfindings from differentnationalcultures.
consistency on customer orientation (because they have a strong belief
in consensus-oriented management). Because of sample size limitations, however, we are unable to look at within-culture-type customer
orientation. This is clearly a question for future research.
Quadrad
of Japanese
Firms
Analysis
/ 31
customers' appraisalsof the marketer'scustomer orientation. Indeed, it is the customer's assessments that
affect business performance,and in the predicteddirection. Two interestingpossibilities should be tested
in futureresearch.One is thatthe strongnationalconsensus culturein Japan(Floridaand Kenney 1991) may
make it difficult for some managersto be self-critical
on a matter as importantas customer orientation. If
so, we might expect to find a strongercorrelationbetween customer and self reportsof customer orientation in American or Europeanfirms.
The other possibility is that national differences
may not be important;rather,managersin generalmay
not have a good sense of their firm's own customer
orientation. In that case, one could question whether
a corporateculturethat espouses basic values and beliefs relatingto the importanceof customerorientation
is by itself a contributorto businessperformance.Some
of our results supportsuch a possibility. Because customer orientationis a theoreticalconstructthat is distinct from each of the four culture types, relatively
good customer orientation appears to be achievable
under a variety of cultures and, conversely, a particular type of culture may not necessarily facilitatecustomer orientation. Reasoning based on the assertions
of the marketingconcept creates an expectation that
customerorientationwould be strongerin marketand
adhocracy cultures. We found no such relationships
in our data from Japanesefirms.
On a technical level, the data requirementsfor research on these issues are very demanding. We have
shown that self reportingon such mattersas customer
orientation is potentially insufficient, so data from
customers are required.Similarly, because customers
cannotbe expectedto profilesuppliers'culturesclearly,
datafrom suppliersare also needed. If we couple these
requirementswith the need for reliable measures on
both the supplierand the customersides, we find that
we need a complex and expensiveresearchdesign such
as the quadraddesign used in this study.
That "customer-oriented"
or "market-driven"
firms
are successful is often taken as a matterof faith. Of
course, such orientationis a matterof degree, as no
firm can ignore customers completely, and complete
customer orientation in the view of the customer is
probably neither achievable nor economically desirable (Narver and Slater 1990). However, many marketing managersare uncertainhow customeroriented
their firms really are-a fact demonstratedby the inability of our sample of suppliersto assess accurately
how theircustomersfeel aboutthe matter.Van de Ven
(1990) has stressed the importanceof accuratemarket
feedback to the general success of the firm, and we
have indication here of relatively inaccurate feed-
32 / Journalof Marketing,
January1993
vices over those who are not. Yet it was precisely this
subset of customers who thought some of their suppliers were less customer oriented than the suppliers
thought themselves to be. Further, it is well known
thatboth tradeand end-usercustomersin Japanexpect
very high standardsin product quality and customer
service. Our results indicate that such high expectations are not being uniformly met and that marketers
are not fully aware of that fact. The implications are
clear. Companiesneed to do a much betterjob of self
assessment. In each case, self evaluationsof customer
orientationshould be accompaniedby customers' ratings on the same measures. This point is particularly
importantbecause managersin firms that believe they
are doing an excellent job of being customeroriented
might stop doing the kinds of things necessary to improve in that area. Hence, such customer evaluations
of customer orientationshould be institutionalizedas
partof a regulartrackingmechanism. Further,simply
collectingsuch informationdoes not automaticallymean
that it will be used. Several studies have suggested
that aspects of organizationaldesign (especially flatter, more decentralized structures) and information
presentationformat lead to greaterutilizationof strategically critical, yet politically threatening, information (cf. Deshpande 1982; Deshpande and Kohli
1989; Deshpande and Zaltman 1984).
The findings on corporateculturealso suggest that
Japanese firms that have become the leaders in their
respectivebusinesseshave done so in partbecausetheir
culturesare very differentfrom the nationalconsensusoriented, clan-type culture. To more perspicacious
observersof Japanesebusinesses, this should come as
no surprise.Decades of global competitionhave clearly
shaped a sense of competitivenessand also a drive to
be flexible and responsive to changing market conditions. We do not know whetherthe most successful
Appendix
Measures and Operationalizations
Customer Orientation
The statements below describe norms that operate in businesses. Please indicate your extent of
agreement about how well the
statements describe the actual norms in your business.
Strongly
Disagree
Disagree
3
Neither Agree
Nor Disagree
4
Agree
5
Strongly
Agree
QuadradAnalysisof JapaneseFirms/33
points
for C
points
for B
points
for D
points
for B
points
for D
points
for B
points
for D
(B) The glue that holds my organization together is a commitment to innovation and development. There is an emphasis
on being first.
(D) The glue that holds my organization together is the emphasis on tasks and goal accomplishment. A production
orientation is commonly shared.
points
for B
points
for D
34 / Journalof Marketing,January1993
Innovativeness
[The innovativeness scale was constructed from the items used by Capon, Farley, and Hulbert (1988) to describe organizational
innovativeness.]
In a new product and service introduction, how often is your company:
Never
Always
First-to-market with new products and services
4
5
1
2
3
Later entrant in established but still growing marketsa
5
1
3
4
2
Entrant in mature, stable marketsa
5
1
3
4
2
Entrant in declining marketsa
5
4
1
2
3
At the cutting edge of technological innovation
5
1
4
2
3
Performance
Relative to our businesses' largest competitor, we are:
(1)
(2)
Less profitable
About equally profitable
(a)
About the same size
(b)
Larger
Have a larger market share
About the same market share
(c)
Are growing more slowly
Are growing at about the same rate
(d)
(3)
More profitable
Smallera
Have a smaller market sharea
Are growing faster
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