Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms: A Quadrad

Analysis
Author(s): Rohit Deshpandé, 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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 Rohit Deshpande, John U. Farley, & Frederick E. Webster, Jr.

CorporateCulture, Customer
Orientation,
and Innovativeness
in
Japanese Firms: A Quadrad
Analysis
"Quadrads" (double dyads) of interviews, each conducted with a pair of marketing executives at a Jap-
anese 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 pos-
itively with the customer's evaluation of the supplier's customer orientation, but the supplier's own as-
sessment of customer orientation did not correspond well to that of the customer. Japanese companies
with corporate cultures stressing competitiveness (markets) and entrepreneurship (adhocracies) outper-
formed those dominated by internal cohesiveness (clans) or by rules (hierarchies). Successful market
innovation also improved performance.

SEVERAL interconnected lines of recent concep- for creating a customer-focused, market-driven enter-
tual thinking and empirical analysis relate mar- prise (Houston 1986; Shapiro 1988; Webster 1988).
keting management to overall business strategy. Three Second, the management literatureis peppered with
related developments indicate a need to integrate these studies of organizational culture, often involving cross-
lines of research. national comparisons of American, European, and
First, managers are returning to the dictum of the Japanese firms (Davis 1984; Deal and Kennedy 1982;
so-called "marketing concept," with its call for cus- Hofstede 1980). In the field of organizational behav-
tomer orientation and innovation as the focus for all ior, rigorous theoretical analysis has been developed
business planning and strategy. Several recent studies and applied to understanding organizational cultures
and articles document renewed management concern (Ouchi 1980; Smircich 1983). Toward the end of the
1980s, the marketing discipline not only became aware
RohitDeshpande is Professorof Marketing andFrederickE.Webster, of organizational culture as a field of study, but also
Jr.,is E.B.Osborn Professorof Marketing,AmosTuckSchoolof Busi- began to develop a related research agenda (Deshpand6
ness Administration,Dartmouth College.JohnU. Farleyis Director, and Webster 1989).
JosephH.Lauder Institute
of Management &International and
Business, Third, there has been heightened interest in mea-
IraA. Lipman TheWharton
Professor, School,TheUniversityof Penn-
sylvania.Theauthorsareindebted to the MarketingScienceInstitute suring and understanding business performance, es-
forseedsupportof thisproject; to Procter&Gamble, ColumbiaBusi- pecially as it relates to market share, product quality,
ness School,andthe TuckAssociatesProgram forfinancial
support; sources of competitive advantage, and industry struc-
andto the International
Universityof Japanforadministrativeandfi- ture (Buzzell and Gale 1987; Porter 1980, 1985). Even
nancialassistance.
GeorgeFieldsandhisstaffatASI,particularly Mari more recently, marketing scholars have begun to ex-
Iwaki, wereinstrumentalin making theprojectwork.Theauthorsalso
to Stewart
expressgratitude Black
andJohnNarver, whoprovided plore the intersection of the marketing concept and
many business performance (Jaworski and Kohli 1992; Kohli
helpfulsuggestionson a previousdraftof thisarticle.
and Jaworski 1990; Narver and Slater 1990, 1991).

Journal of Marketing
Vol. 57 (January 1993), 23-27 QuadradAnalysisof Japanese Firms/ 23

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 The MarketingScience Institutehas called for the
needed integrationof these three researchstreamsby
designating the understandingof customer-oriented
organizations, including the underlying cultural fac-
tors, as one of four capitalor highest priorityresearch
topics (MarketingScience Institute 1990). The fun-
damentalquestion is whethercustomerorientation,as
it relates to corporateculture and in concert with or-
ganizationalinnovativeness, has a measurableimpact
on business performance.The canons of the market-
ing concept assert that profit is a rewardfor customer
orientation,which createsa satisfied customer,but we
have only the beginning of systematic empirical doc-
umentationof the presumedrelationship(Jaworskiand
Kohli 1992; Narver and Slater 1990). Hence, to un-
derstandthe impact and functioning of customer ori-
entation, we should relate it to organizationalinno-
vativeness, with the analysis embedded within a
frameworkof organizationalculture.
We conducteda study on a representativenational
sample of major Japanese firms and their key cus-
tomers, using a sampling method called a "quadrad"
design, to examine the impact of culture, customer
orientation, and innovativeness on business perfor-
mance. This study makes three contributions:(1) it is
the first empirical study to relate simultaneouslythe
concepts of organizationalculture, customer orienta-
tion, and innovativenessto business performance;(2)
it demonstratesa uniquesamplingandanalyticalmethod
that involves carefully matched dyad pairs (called
"quadrads")of manufacturersand their key cus-
tomers;and (3) it extends our emergingknowledge of
customer orientationto non-U.S. firms, specifically
to large Japanese businesses on which much current
scholarly and practitionerinterest has been focused
(Kotabe et al 1991; Ohmae 1985).
Conceptual Backgroundand
Hypotheses
Culture, Customer Orientation, and
Innovativeness
The field of organizationalbehavior offers a consid-
erable and very rich theoreticalliteratureon corporate
culture.We describea conceptualframeworkgrounded
in this literatureon culturethat lends itself to the def-
inition and measurementof specific culturalvariables.
We also summarizethe less-developed literatureson
customer orientation and organizational innovative-
ness. Additionally, we hypothesize relationshipsbe-
tween each of these three variablesand business per-
formance. We turn now to the development and
integrationof concepts of organizationalculture, cus-
tomer orientation,and innovativenessthat yielded the
hypotheses explored in our study.
24 / Journalof Marketing,January1993
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Organizational culture. Deshpande and Webster
(1989) reviewed more than 100 studies in organiza-
tional behavior, sociology, and anthropologyand de-
fined organizationalculture as "the patternof shared
values and beliefs that help individualsunderstandor-
ganizationalfunctioning 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 de-
veloped relatively more than the others in terms of
formal conceptual framework, specification of vari-
ables, and operationalizationof measuresand is there-
fore 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 infor-
mation processing and views organizationsas knowl-
edge systems. Such an informationprocessing view
of organizationalfunctioning is very useful for un-
derstandingnot 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 organizationalinfor-
mation processing perspective to understandingcul-
ture 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 "com-
peting values" model of organizationaleffectiveness.
This model, which was first described in an award-
winning article by Quinn and Rohrbaugh(1983), is
based on an empirical analysis of the values individ-
uals hold for organizationalperformance.By using a
list of organizationaleffectiveness criteriadeveloped
by Campbell(1977), Quinnand Rohrbaughfound that
clusters of values reproducedthe dimensions devel-
oped by Jung (1923) to describe psychological arche-
types. As Cameron and Freeman (1991) note, "Be-
cause culturesare defined by the values, assumptions,
and interpretationsof organizationmembers, and be-
cause a common set of dimensions organizes these
factors on both psychological and organizationallev-
els, a model of culture types can be derived." There
has been substantialadditionaldescriptionof the com-
peting values model and its consistency with the Jun-
gian framework(Woodmanand Passmore 1991). Ac-
cording to this view, cultural information within
organizationsis interpretedby individualsin the con-
text 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 stra-
tegic emphases.
As we can see in Figure 1, two key dimensions
define culture types. These key dimensions represent
a mergingof two majortheoreticaltraditionsfrom the
organizationalbehaviorliterature,the systems-structural
perspective(Van de Ven 1976; Zey-Ferrell 1981) and
the transactioncost perspective,which is groundedalso
in economics (Williamson1975). As Ruekert,Walker,
and Roering (1985, p. 15) point out when they argue
for a similarmergingof these dominantorganizational
theory traditions, the weaknesses of each are com-
pensatedfor by the strengthsof the other. This is an
argumentthat has also been developed in the work of

FIGURE1
A Model of Organizational Culture Types'

ORGANIC PROCESSES (flexibility, spontaneity)

TYPE:Clan TYPE:Adhocracy
DOMINANT ATTRIBUTES: DOMINANT ATTRIBUTES:Entrepreneurship,
Cohesiveness, participation, creativity,adaptability
teamwork,sense of family
LEADERSTYLE: Entrepreneur,innovator,
LEADERSTYLE:Mentor,facilitator, risktaker
parent-figure
BONDING:Entrepreneurship,
flexibility,risk
BONDING:Loyalty,tradition,
interpersonalcohesion STRATEGIC EMPHASES:Towardinnovation,
growth,new resources
STRATEGIC EMPHASES:Toward
developinghumanresources,
commitment,morale

INTERNAL MAINTENANCE EXTERNAL POSITIONING

(smoothing activities, integration) (competition, differentiation)
TYPE:Hierarchy TYPE:Market
DOMINANT ATTRIBUTES: Order, DOMINANT ATTRIBUTES:
rulesand regulations,uniformity Competitiveness,
goal achievement
LEADERSTYLE:Coordinator, LEADERSTYLE: Decisive, achievement-oriented
administrator
BONDING:Goal orientation,production,
BONDING:Rules,policiesand
competition
procedures
STRATEGIC EMPHASES:Towardcompetitive
STRATEGIC EMPHASES:Toward
smooth advantageand marketsuperiority
stability,predictability,
operations

MECHANISTICPROCESSES (control, order, stability)

'Adaptedfrom Cameronand Freeman(1991)and Quinn(1988).

Quadrad
Analysisof JapaneseFirms/25

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Ouchi and Van de Ven (1980). As noted in Figure 1,
one axis describes the continuum from organic to
mechanistic processes, that is, whether the organiza-
tional emphasis is more on flexibility, spontaneity, and
individuality or on control, stability, and order. The
other axis describes the relative organizational em-
phasis on internal maintenance (i.e., smoothing ac-
tivities, integration) or on external positioning (i.e.,
competition, environmental differentiation). The four
resulting culture types are labeled clan, hierarchy, ad-
hocracy, and market. These labels are consistent with
much theorizing on alternative organizational forms
and the use of similar terms by scholars including
Williamson (1975), Ouchi (1980), and Mintzberg
(1979). They are also consistent with the descriptors
used in previous studies of changes in cultures over
organizational life cycles (Quinn and Cameron 1983),
a study of effective leadership types in organizations
(Quinn 1984), and the organizational frameworks pro-
posed by Bennis (1973) and by Mitroff (1983).
The lower right quadrant, called a market culture,
emphasizes competitiveness and goal achievement
(Cameron and Freeman 1991). Transactions are gov-
erned by market mechanisms (Ouchi 1980). The key
measure of organizational effectiveness is productiv-
ity achieved through these market mechanisms. This
culture type is in direct contrast to the set of values
expressed in a clan culture (hence the terminology of
a "competing values" approach). In the latter, the em-
phasis is on cohesiveness, participation, and team-
work. The commitment of organizational members is
ensured through participation, and organizational co-
hesiveness and personal satisfaction are rated more
highly than financial and market share objectives.
The upper right quadrant, called an adhocracy cul-
ture, emphasizes values of entrepreneurship, creativ-
ity, and adaptability. Flexibility and tolerance are im-
portant beliefs and effectiveness is defined in terms of
finding new markets and new directions for growth.
The competing set of values is found in the hierarchy
culture, which stresses order, rules, and regulations.
Transactions are under the control of surveillance,
evaluation, and direction. Business effectiveness is
defined by consistency and achievement of clearly
stated goals.
It is important to note that these culture types are
modal or dominant ones rather than mutually exclu-
sive ones. By implication, most firms can and do have
elements of several types of cultures, perhaps between
product groups even within the same strategic busi-
ness unit (SBU). However, over time, one type of
culture emerges as the dominant one. (The process of
such culture development and subculture conflict is
discussed in detail by Deshpande and Webster 1989.)
Also, an SBU might not have a consistent culture type.
That is, it might be a market type on leadership style
26 / Journalof Marketing,January1993
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and clan type on strategic emphasis. More discussion
of this issue is provided in the Method section.
The four classifications of culture developed here
imply varying degrees of business performance in a
competitive marketplace. The market culture, char-
acterized by its emphasis on competitive advantage
and market superiority, is likely to result in the best
business performance. At the other extreme, we would
expect a hierarchical culture, with its emphasis on
predictability and smooth operations within a bureau-
cratic organization, to contribute to relatively unsat-
isfactory business performance. Also, given the focus
in an adhocracy culture on innovation, entrepreneur-
ship, and risk-taking, we would expect it to have bet-
ter market performance than a clan culture, in which
loyalty, tradition, and emphasis on internal mainte-
nance could lead to a lack of attention to changing
market needs. In a more general sense, the organi-
zational emphasis on external positioning over inter-
nal maintenance is likely to be associated with stronger
performance. Hence:
H,: Business performance is ranked from highest to low-
est accordingto type of organizationalcultureas fol-
lows.
Best market culture
adhocracy culture
clan culture
Worst hierarchical culture
This hypothesis must be tempered with an under-
standing of our premise about environmental com-
plexity. Much theorizing in the contingency theory
school of organizational behavior argues that HI would
hold true only under conditions of high environmental
complexity-uncertainty due to turbulence, rapidity
of change, and so on (Lawrence 1981). However, our
assumption is that such conditions increasingly char-
acterize our current world. In fact, more than 10 years
ago, two organizational behavior theorists stated:
"Many practitioners and theorists believe that orga-
nizations are operating in more complex environments
than ever before . . . Consider, for example, the mul-
tiple and conflicting goals of most organizations; the
growing environmental constraints, regulations, and
opportunities confronting organizations; the increas-
ing 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 to-
day, 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 Jap-
anese national culture (i.e., nationally shared values
and beliefs), because the sample used in our study
consists of Japanese firms only, we would expect to
find substantialcorporate culture differences within
the overall national culture context. In fact, several
authorshave suggested that there are significant dif-
ferences in values held by Japanese managers in
different firms (Lincoln and Kalleberg 1990), with a
diverse variety of culturaltypes referredto as bureau-
cratic,vitalized,clans, hierarchical,andTheoryZ being
prevalent(Hatvanyand Pucik 1981; Kono 1988; Ouchi
1981; Sullivan 1983).
Customer orientation. Like culture, customer ori-
entation has been given little empirical study despite
great attention to the concept from marketingschol-
ars. Kohli and Jaworski(1990) point out that discus-
sion of customer orientation (or the term they use,
"marketorientation")has been within the context of
implementingthe marketingconcept. The latter is a
taken-for-grantedfundamentalprinciple in marketing
practiceand, perhapsfor this reason, has seldom been
examined empirically. In fact, the area of marketing
implementationitself has received little empirical at-
tention (Walkerand Ruekert 1987), especially on the
critical linkage between strategic planning and mar-
keting execution (Day and Wensley 1988).
Kohli and Jaworski'sdescriptionof customerori-
entationcenterson an organizationwidegenerationand
dissemination of, and responsiveness to, market in-
telligence (p. 3). Narverand Slater(1990, p. 21) rein-
force Kohli and Jaworski's conceptualizationby de-
fining a marketorientationas "theorganizationculture
that most effectively and efficiently creates the nec-
essary behaviorsfor the creationof superiorvalue for
buyersand, thus, continuoussuperiorperformancefor
the business." However, they furtherdistinguish the
three behavioralcomponents of a market orientation
as being customerorientation,competitororientation,
and interfunctionalcoordinationand arguethat on av-
erage all three componentsare equally important.We
note that the conceptual distinction made by Narver
and Slater between a customer and a marketorienta-
tion is not entirely consistent with the Kohli and
Jaworski definition or with the terminology we de-
velop in this article. More explicitly, we see customer
and market orientationsas being synonymous (with
the term "market"defined in the conventionalmanner
as the set of all potential customersof a firm; Kotler
1991) and hence distinguishable from a competitor
orientation,which Narver and Slater define as mean-
ing the "sellerunderstandsthe short-termstrengthsand
weaknesses and long-term capabilities and strategies
of both the key current and the key potential com-
petitors"(p. 21-22). We agree with Day and Wensley
(1988), who conclude that effective marketingstrat-
egy requires a balanced mix of customer and com-
petitor analysis. Indeed, we argue that a competitor
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orientationcan be almost antitheticalto a customer
orientation when the focus is exclusively on the
strengthsof a competitorratherthanon the unmetneeds
of the customer. Narver and Slater's thirdbehavioral
component, interfunctionalcoordination (defined as
the coordinated utilization of company resources in
creating superior value for target customers), is en-
tirely in keeping with the central essence of a cus-
tomer orientation(as Kohli and Jaworskialso argue)
and hence should be part of its meaning and mea-
surement.
All of this discussion takes us to a more formal
definition. We define customer orientationas the set
of beliefs that puts the customer's interest first, while
not excluding those of all other stakeholders such as
owners, managers, and employees, in order to de-
velop a long-term profitable enterprise. We see cus-
tomer orientationas being a part of an overall, but
much more fundamental,corporateculture. Hence a
simple focus on informationaboutthe needs of actual
and potentialcustomersis inadequatewithoutconsid-
eration of the more deeply rooted set of values and
beliefs that are likely to consistently reinforce such a
customerfocus and pervade the organization.
However, the evaluationof how customeroriented
an organizationis shouldcome fromits customersrather
than merely from the company itself. This point is a
critical one. A substantialbody of literatureon cus-
tomer satisfactionhas developedthat reemphasizesthe
need to look at the firm throughthe eyes of its cus-
tomersbecause they are likely to define problems,and
hence solutions, differently (Bolton and Drew 1991).
One objective of our research is to compare self re-
ports with customer reports on customer orientation
to test whether they are related and whethereither is
significantly related to business performance.
On the basis of the assertions of the marketing
concept, customerorientationshould have a favorable
impacton business unit performance,and presumably
this shouldbe trueregardlessof whethercustomerori-
entationis measuredin termsof the perceptionsof the
supplier/seller or those of the customer.Most authors
approachcustomer orientationas an element of cor-
porateculturefromthe vantagepointof the seller(Kohli
and Jaworski 1990; Narver and Slater 1990). Hence:
H2a: The marketer's self-reported customer orientation is
related positively to business performance.
H2b: The marketer's customer orientation, as reported by
customers, is related positively to business perfor-
mance.
Recognizing that customers' and marketers'per-
ceptions may not agree, even though they should (in
the normative sense implied by the marketingcon-
cept), we offer an additionalset of hypotheses:
H3a: Marketer's and customers' perceptions of the mar-
keter's customer orientation agree.
QuadradAnalysisof Japanese Firms/ 27
 H3b: The customers' perceptionof the marketer'scus-
tomer orientationis more importantthan the mar-
keter's own perceptionin explainingthe marketer's
businessperformance.
The latterhypothesisis based in parton Drucker's
(1954) comment that marketingis not a specialized
activity, but rather"the whole business seen from the
point of view of its final result, that is, from the cus-
tomer's point of view" (p. 39) This statementimplies
that a customer'sperceptionof how customeroriented
a firm is will be more critical for successful business
performancethan the seller's own perceptions.In fact,
a discrepancy between customers' and seller's per-
ceptions of how customer orientedthe latter is could
revealfundamentalproblemsabouta lack of touchwith
the market. This situation is considerablymore dan-
gerous when a firm mistakenlybelieves it is customer
oriented (and hence does nothing to rectify its situa-
tion) than when it does not (and hence tries to do bet-
ter).
Organizational innovativeness. Peter Drucker was
one of the first scholarsto state the marketingconcept
(Webster 1988). In an often-cited passage, Drucker
(1954) wrote: "There is only one valid definition of
business purpose: to create a customer. ... It is the
customer who determines what the business is ...
Because it is its purpose to create a customer, any
business enterprise has two-and only these two-
basic functions: marketingand innovation" (p. 37).
Though an increasedinteresthas emerged in concep-
tualizing and measuringthe marketingconcept, little
attentionhas been devoted recently to Drucker's sec-
ond "basic function," innovation. Yet in a separate
literature,thatof diffusionof innovations,scholarshave
noted the importance of organizations' being inno-
vative (Rogers 1983). Much of this literaturefocuses
on innovativenessas a dependentvariable, presuming
it to be importantand worthy of study. Increasingly,
however, scholars have linked innovativeness to or-
ganizationalperformance,suggestingthat a firm needs
to be innovative "to gain a competitive edge in order
to survive and grow" (Gr0nhaugand Kaufmann1988,
p. 3). This issue is importantbecause,as Capon,Farley,
and Hoenig (1990) have stated, the relationshipbe-
tween organizationalfactors such as innovativeness
and business performancehas not been studied ade-
quately. Hence, our final hypothesis is:
H4: The more innovative the firm, the better its perfor-
mance.
In each of the hypotheses we allude to "perfor-
mance," but have not formallydefined the term as we
use it here. Though this point is taken up more ex-
plicitly in the operationalizationssection that follows,
we are using the termto mean global outputmeasures
such as shareof market,profitability,growthrate, and
28 / Journalof Marketing,
January1993
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size of a business in relation to its most significant
competitors. We realize that there are several alter-
native meaningsof "performance"(includinglong vs.
short term, financial vs. relationshipbuilding, and so
on), but our purpose in this study is to begin an ex-
ploratoryinvestigationof the relationshipbetween the
more central constructsof culture, customer orienta-
tion, innovativeness, and such global performance
ratherthan to delve into the admittedlyrichernuances
of performance.We say more about the term in our
suggestions for future research.
Method
The Unit of Observation: The Quadrad
The substantialliteratureon the appropriateunits of
analysesin organizationalbuyingbehaviorleads to two
major conclusions. First, more than one key infor-
mant within an organizationalunit is needed to de-
velop reliable measures of organizationalconstructs
(Moriartyand Bateson 1982). This point is particu-
larly 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 ex-
plore the extent of agreementabout theoreticalcon-
structs (Weitz 1981). The latter is especially salient
in our study because of our hypothesesrelatingto cus-
tomer orientation.
Interestingly,we were unableto find many studies
in which both majorconclusions were implemented-
that is, in which more than one respondentwas in-
terviewed 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-dyadsap-
proach (Andersonand Narus 1990). Hence, we refer
to our samplingunit as a "quadrad,"that is, the com-
bination of two buyer-sellerdyads. The data used in
our analysis come from 50 such quadrads,each con-
structedfrom a set of four interviews, two from a sup-
plier 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, al-
lows for much greaterspecificity in measurement.
Sample
The sample of 50 firms selected for personal inter-
views representsa randomnth-observationsample of
firms publicly tradedon the Nikkei stock exchange in
Tokyo. Two marketingexecutives in a single business
unit of each firm were interviewedin their offices by
professionalinterviewersfrom a Japanesecommercial
marketresearchfirm. Both executives were asked to
respondto survey questionsin the context of the same
specific product/market situation (hereafterreferred
to as a "business"). Divisional ratherthan corporate
marketing executives were chosen because of their
greaterfamiliaritywith their customersand hence the
likely reliability of their self reports (especially on
customer orientation).Each respondentwas asked to
name up to three importantcustomers. The two lists
were assembled and a customer was chosen at ran-
dom. Two purchasingexecutives at the chosen cus-
tomer firm were interviewed. If two such interviews
could not be arranged,anotherfirm on the customer's
list was selected randomlyand the interviewing pro-
cedure was repeated.(Though60 firms originallypar-
ticipated, 10 observationsdid not provide a complete
set of explanatorymeasures and were excluded from
analyses). Hence, our analysis is based on 50 sets of
four interviews per set (i.e., 50 quadrads).This sam-
pling technique is cumbersomeand by economic ne-
cessity constrainsthe total numberof collectable ob-
servations, but it enables us to report on one of the
few nationally representativesamples of firms in Ja-
pan, where gaining access to the kind of information
described here is far from easy.
Questionnaire Development
The originalquestionnairewas preparedin Englishand
translatedinto Japaneseby a Japanese-Americanlan-
guage instructor.The Japanesequestionnairewas back-
translatedby the research staff of a major Japanese
university and modified for meaning. It was then ed-
ited and pretestedby the Japaneseprofessionalmarket
researchorganizationthat conductedthe field work.
Operationalizations
The operationalizationsof the three explanatorycon-
structs(culture,customerorientation,and innovative-
ness) as well as the performancemeasures involving
the development of scales are listed in the Appendix
with the actual questions used for each. The culture
scale was adaptedfrom Cameronand Freeman(1991)
and Quinn (1988). The customerorientationscale was
developed for our study on the basis of extensive
qualitativepersonalinterviewing, a detailed survey of
available literature(including the work of Kohli and
Jaworski 1990 and Narver and Slater 1990), and pre-
testing in a small sample of firms. Hence the mea-
sures we use are very consistent with those used by
Narver and Slater (1990) as well as the conceptual
discussion by Kohli and Jaworski (1990). The inno-
vativeness scale, adopted from Capon, Farley, and
Hulbert (1988), contains both market measures and
strategy measures as suggested also by Capon et al.
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(1992). We used the average of the two relevant re-
sponses within the quadradin each case to build the
scales (i.e., the accepted approachused in organiza-
tional sociology studies, viz, Hage and Aiken 1970).
We did so only afterexaminingthe extent of the view-
point 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 con-
structwere examined for internalvalidity. Items with
low item-to-total zero-order correlations were re-
viewed 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 previ-
ously (Cameronand Freeman 1991; Quinn 1988).
Performancewas measuredby combiningfour self-
evaluations,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 de-
scribed 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 in-
novativeness 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
Means'
Cronbach Low High
Scale No. of Items a All Performers Performers S.D.
Culture
Market 4 .82 106.1b 92.3 110.8 37.4
Adhocracy 4 .66 78.9b 72.5 85.0 26.4
Clan 4 .42 117.0 124.0 114.4 28.8
Hierarchy 4 .71 100.9b 111.9 91.0 31.4
Customer Orientation
As evaluated by supplier 9 .69 32.5 32.3 32.3 3.3
As evaluated by customer 9 .83 32.1b 31.0 32.7 3.2
Innovativeness 5 .85 17.8b 16.9 18.7 2.9
"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 or-
ganizations that is seldom mentioned in more popular
writing. Five of seven measures have significant dif-
ferences for high and low performers-three of four
culture scales, the customer orientation measure pro-
vided 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
We used a discriminant function to classify high and
low performers (the binary performance variable dis-
cussed previously) on the basis of culture, customer
orientation, and innovativeness. This approach also
enables us to make meaningful managerial conclu-
sions about the nature of our findings. Table 2 shows
the correlation of each explanatory variable with the
discriminant function-essentially the partial corre-
lation of each variable with the performance index.
The results are consistent with the analysis of the means
reported in Table 1, but in a ceteris paribus sense.
Culture. The coefficients of the four culture types
order as expected, supporting Hi. Market cultures are
associated with the best performance, followed by ad-
hocracy cultures. Both clan and hierarchical cultures
are associated with poor performance, the latter being
worst as hypothesized. The univariate tests are sig-
nificant for the market and hierarchical cultures and
the others barely miss being significant because of the
relatively small sample size.
Customer orientation. The marketers' customer
orientation as reported by customers is related posi-
tively to business performance (H2b) and the cus-
tomers' perceptions are significantly more important
than the marketers' own perceptions (H3b). In fact,
there is only weak agreement (correlation of .17, p <
.13) between the customers' and the marketers' per-
ceptions of customer orientation, so H3a is not sup-
ported. The extremely low correlation between the
marketers' perceptions and performance (.00, p < .988,
Table 1) also leads to rejection of H2a.1
'It is interesting to speculate on whether clan cultures have greater

TABLE 2
Makeup of the Discriminant Function
Pooled Within-GroupCorrelations
of Function and Independent Variable P-Value for Univariate F-Test
Culture
Market .48 .046
Adhocracy .39 .102
Clan -.28 .239
Hierarchical -.56 .021
Customer Orientation
Measured from customer .52 .031
Measured from producer .00 .988
Innovativeness .52 .034

30 / Journalof Marketing,January1993

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 Innovativeness. Organizationalinnovativeness is
related positively to performanceper H4. It is inter-
esting to note that this relationship,along with that of
customer-reportedcustomer orientation and perfor-
mance, is the second strongestin magnitude(.52, Ta-
ble 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. Us-
ing 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 be-
lieve these results are strong, especially the correct
orderingof culture types in terms of business perfor-
mance. The results for customerreportsof marketori-
entation 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 relation-
ships between corporateculture, customerorientation,
innovativeness, and business performance.We have
begun the empirical phase of our work with an ex-
aminationof Japanese businesses because of the op-
portunity to gather data in that country, where em-
pirical access for marketingscholars has historically
been difficult. Though the focus of our study is on
corporateratherthan nationalculture, Japanalso pro-
vided 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 limita-
tions, however, we are unable to look at within-culture-type customer
orientation. This is clearly a question for future research.
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The results for culture types as determinantsof
businessperformanceare very encouraging.Firmswith
cultures that are relatively responsive (market) and
flexible (adhocracy)outperformmore consensual(clan)
and internally oriented, bureaucratic (hierarchical)
cultures.Thoughthe resultsare not significantfor clan
cultures (perhapsbecause scale reliability was lower
than that for the other measures), they are significant
for all the others and all (includingthose for clan cul-
tures) are in the expected directionand order. In fact,
the finding of highest performancefor marketcultures
is given some credence by recent suggestions that the
oft-heardJapaneseinjunctionof gambatte("tryharder,
persist") might explain the dogged perseverance of
some Japanesefirms in the face of strongcompetition
(Holberton1991). Severalexamplescan be found, such
as Sony continuingto push its 8mm video formatde-
spite the competition from VHS manufacturersJVC
and Matsushita, and the competitively oriented cor-
porate slogans of market leaders such as toiletries
manufacturerKao ("kill Procter & Gamble"), earth-
moving equipment manufacturerKomatsu ("encircle
Caterpillar"),and Canon ("best Xerox"). Indeed, the
marketculturefinding suggests the global universality
of a competitive corporate culture that might tran-
scend a more consensually oriented national culture.
This issue is a promising avenue for futureempirical
research.
The findings on culturetypes are also theoretically
consistentwith the competingvaluesmodel fromwhich
the conceptualframeworkwas derived (Quinn 1988).
More specifically, it is interestingto see that the com-
peting values of the marketcultureoutperformedthose
of the clan culture (in the diagonally opposite quad-
rant in Figure 1), and those of the adhocracyculture
outperformedthose of the diagonally opposing hier-
archy culture. In Jungianterms (Jung 1923), this pat-
tern is an illustrationof a dominantand a shadow side
to the cultureof any organizationwith each competing
for attentionat any given time, a point also made by
Mitroff (1983) in his cognitive view of organizational
knowledge systems. There is clearly greatopportunity
for furtherresearchon this topic by exploringthe con-
flict between dominant cultures and subcultures-an
argumentwell articulatedby Gregory (1983) in her
discussion of native-view paradigms and multiple-
culture confrontations.
As Drucker(1954) suggested, we found that cus-
tomer orientationand innovativenessare also key de-
terminants of business performance, even after we
controlfor culture. Simply put, customer-orientedand
innovative firms do performbetter, a basic assertion
of the marketing concept. However, we found that
Japanesemanagers'reportsof theircompanies' extent
of customerorientationare not relatedto businessper-
formanceand have no significantrelationshipto their
Quadrad of Japanese
Analysis Firms
/ 31
 customers' appraisalsof the marketer'scustomer ori-
entation. Indeed, it is the customer's assessments that
affect business performance,and in the predicteddi-
rection. Two interestingpossibilities should be tested
in futureresearch.One is thatthe strongnationalcon-
sensus 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 strongercorrelationbe-
tween customer and self reportsof customer orienta-
tion 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 be-
liefs relatingto the importanceof customerorientation
is by itself a contributorto businessperformance.Some
of our results supportsuch a possibility. Because cus-
tomer orientationis a theoreticalconstructthat is dis-
tinct from each of the four culture types, relatively
good customer orientation appears to be achievable
under a variety of cultures and, conversely, a partic-
ular type of culture may not necessarily facilitatecus-
tomer 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 re-
search 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 desir-
able (Narver and Slater 1990). However, many mar-
keting managersare uncertainhow customeroriented
their firms really are-a fact demonstratedby the in-
ability 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-
back. Many marketing managers are also uncertain
about what kinds of change and what types of orga-
32 / Journalof Marketing,
January1993
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nizational culture might be needed to achieve a more
customer-orientedposture; external goal orientation
and creativity (which do not necessarily go together)
are culturalcharacteristicsthatseem to favor customer
orientation, and they require top managementcom-
mitment to achieve. Finally, other manifestationsof
customerorientation,such as successful product/ser-
vice innovation, may be more importantto success
thaninternalcultureor orientation,which may be more
facilitative than causative. These mattersclearly war-
rant future research.
Futureresearch in this area might also employ a
more varied set of measuresof business performance.
As Ruekert and Walker (1990) note, different com-
petitive strategies often have different performance
objectives and hence high SBU performanceon one
dimension may involve a tradeoff of lower perfor-
mance on anotherdimension.
Implications for Practice
Given the exploratorynatureof our research,our sug-
gestions for practice are necessarily speculative and
hence brieferthanour suggestions for futureresearch.
First, we confirm the conclusion that performanceis
a complex, multicausalmatterthat depends on inter-
nal factors of the organizationas well as strategy. In
other words, there is no "quickfix" for performance.
The best performerswould have a marketcultureand
be both highly customer oriented and innovative.
Merely having a marketculture or being highly cus-
tomerorientedor being innovativedoes not alone pro-
duce best performance.Poor performersare uninno-
vative, internallyorientedbureaucracies.Variousother
combinations produce intermediate-level perfor-
mance.
The inconsistency between self-reported and
customer-reportedperceptionsof customerorientation
is troubling for practice. Marketing managers seem
unaware of how their customers really see them in
relation to other firms. In several cases, customers
perceive their suppliers as being less customer-
focused than their competitors(or at least less so than
the supplierssee themselves). The same is true when
customersperceive a supplierfirm as not existing pri-
marily to serve them or not using routinemeasuresof
customer service. These trends are especially trou-
bling for two key reasons. First, Japanese firms are
purportedto be more customerorientedthan compet-
itorsin the U.S. or Europe.Hence we expecteda much
higher degree of supplier/customeragreementon ex-
tent of customer orientation. Second, in our research
design, customeridentificationwas on a selective ba-
sis by the supplier;customer respondentswere iden-
tified by their suppliersduring interviews. One there-
fore might naturally expect a subtle bias favoring
customers who are happier with the suppliers' ser-
vices over those who are not. Yet it was precisely this
subset of customers who thought some of their sup-
pliers 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 expecta-
tions 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' rat-
ings 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 im-
prove 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 flat-
ter, more decentralized structures) and information
presentationformat lead to greaterutilizationof stra-
tegically critical, yet politically threatening, infor-
mation (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 nationalconsensus-
oriented, 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 con-
ditions. We do not know whetherthe most successful
global companies (of whatever national origin) tend
to have marketor adhocracycultures,but we can state
that firms that are currentlycompeting with such Jap-
anese firms need to understandtheir operating cor-
porate cultures. It would clearly be a strategic error
for executives in a large French telecommunications
company, for instance, to assume that because of a
purportedlyhierarchytype of culturetheircompetitive
counterpartsin Japanwould keep referringback to es-
tablished, traditionalrules and proceduresand would
insist on stable, smooth operations. Rather, the Jap-
anese firm is likely to be much more entrepreneurial
in bent and flexible in tone. It is likely to be contin-
uously investing in innovation and development and
its executives are likely to be risk-takersratherthan
being risk-averse.Such characteristicswould make for
not necessarilymore formidablecompetition,but rather
competitionon a playing field where the rules are dif-
ferent. This point is reinforcedby our finding that the
customerorientation,culturetype, and innovativeness
characteristicshold for both domestic as well as in-
ternationalJapanesefirms.
Our finding that innovative firms tend to be the
betterperformersis particularlyinterestinggiven his-
torical descriptions of Japanese companies as being
long on technology adaptationbut shorton technology
innovation. Our sample does not appearto fit this ste-
reotype. Certainly there are Japanese firms that are
not marketand technological pioneers, but they tend
not to be the market leaders. The leaders are firms
that are first to markettheirproductsand services and
are also at the cutting edge of technological innova-
tion. If our admittedly small sample affords any in-
dication, the Sony Corporationsof tomorrowwill in-
creasinglybe the prototypicalleaderswhose substantial
investmentsin R&D contributeto their leading share
of global marketsin a variety of industries.

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.

1 2 3 4 5
Strongly Neither Agree Strongly
Disagree Disagree Nor Disagree Agree Agree

Instruction: Answer in the context of your specific product/market or service/market business

1. We have routine or regular measures of customer service.
2. Our product and service development is based on good market and customer information.
3. We know our competitors well.
4. We have a good sense of how our customers value our products and services.

QuadradAnalysisof JapaneseFirms/33

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 5. We are more customer focused than our competitors.
6. We compete primarily based on product or service differentiation.
7. The customer's interest should always come first, ahead of the owners'.
8. Our products/services are the best in the business.
9. I believe this business exists primarily to serve customers.
[These same items were used with customers with the first-person pronoun replaced by "the supplier," which was identified at
the beginning of the interview.]

Culture
[The four culture scores were computed by adding all four values of the A items for clan, of the B items for adhocracy, of the
C items for hierarchy, and of the D items for market. The results, reported in Table 1, can therefore equal more or less than 100,
which would be the result only if respondents distributed points equally on each question. The scale was adapted from Cameron
and Freeman (1991) and Quinn (1988).]

These questions relate to what your operation is like. Each of these items contains four descriptions of organizations. Please
distribute 100 points among the four descriptions depending on how similar the description is to your business. None of the
descriptions is any better than any other; they are just different. For each question, please use all 100 points. You may divide
the points in any way you wish. Most businesses will be some mixture of those described.

1. Kind of Organization (Please distribute 100 points)

(A) My organization is a very
points personal place. It is like an ex-
for A tended family. People seem to
share a lot of themselves.
(C) My organization is a very
points formalized and structural place.
for C Established procedures generally
govern what people do.
2. Leadership (Please distribute 100 points)
(A) The head of my organization
points is generally considered to be a
for A mentor, sage, or a father or
mother figure.
(C) The head of my organization
points is generally considered to be a
for C coordinator, an organizer, or
an administrator.
3. What Holds the Organization Together (Please distribute 100 points)
(A) The glue that holds my or-
points ganization together is loyalty and
for A tradition. Commitment to this
firm runs high.
(C) The glue that holds my or-
points ganization together is formal
for C rules and policies. Maintaining
a smooth-running institution is
important here.
4. What Is Important (Please distribute 100 points)
(A) My organization emphasizes
points human resources. High cohe-
for A sion and morale in the firm are
important.
(C) My organization emphasizes
points permanence and stability. Ef-
for C ficient, smooth operations are
important.
(B) My organization is a very
points dynamic and entrepreneurial
for B place. People are willing to stick
their necks out and take risks.
(D) My organization is very pro-
points duction oriented. A major con-
for D cern is with getting the job done,
without much personal involve-
ment.
(B) The head of my organization
points is generally considered to be an
for B entrepreneur, an innovator, or
a risk taker.
(D) The head of my organization
points is generally considered to be a
for D producer, a technician, or a
hard-driver.
(B) The glue that holds my or-
points ganization together is a commit-
for B ment to innovation and devel-
opment. There is an emphasis
on being first.
(D) The glue that holds my or-
points ganization together is the em-
for D phasis on tasks and goal ac-
complishment. A production
orientation is commonly shared.
(B) My organization emphasizes
points growth and acquiring new re-
for B sources. Readiness to meet new
challenges is important.
(D) My organization emphasizes
points competitive actions and
for D achievement. Measurable goals
are important.

34 / Journalof Marketing,January1993

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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 1 2 3 4 5
Later entrant in established but still growing marketsa 1 2 3 4 5
Entrant in mature, stable marketsa 1 2 3 4 5
Entrant in declining marketsa 1 2 3 4 5
At the cutting edge of technological innovation 1 2 3 4 5

Performance
Relative to our businesses' largest competitor, we are:
(1) (2) (3)
(a) Less profitable About equally profitable More profitable
(b) Larger About the same size Smallera
(c) Have a larger market share About the same market share Have a smaller market sharea
(d) Are growing more slowly Are growing at about the same rate Are growing faster

"Reverse scored in construction of the scale.

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