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Article

The Sustainability of Market Orientation from a Dynamic Perspective: The Mediation of Dynamic Capability and the Moderation of Error Management Climate

by
Yi Wang
1,
Xianfang Xue
2 and
Han Guo
3,*
1
Zhejiang Development & Planning Institute, Hangzhou 310030, China
2
School of Economics and Management, Zhejiang Sci-Tech University, Hangzhou 310018, China
3
College of Management, Shanghai University, Shanghai 200444, China
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(7), 3763; https://doi.org/10.3390/su14073763
Submission received: 23 February 2022 / Revised: 13 March 2022 / Accepted: 18 March 2022 / Published: 23 March 2022
(This article belongs to the Section Sustainable Management)
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Abstract

:
In a dynamic, highly competitive environment, corporate strategies need to be re-studied. Market orientation reflects a firm’s emphasis on creating customer value and is an important factor for firms to build competitive advantages, it is crucial to understand the mechanism of market orientation on firm performance in a dynamic environment. In contrast to previous studies, this study aims to explain the impact of different types of market orientation on firm performance, and has two major contributions. First, it demonstrates the relationship between responsive, proactive market orientation and performance from a dynamic perspective, as well as the influencing mechanism. Second, the boundary conditions of market orientation are defined from the perspective of organizational culture. Findings of this empirical study of 336 firms show that: (1) both responsive and proactive market orientation have a significant positive correlation with financial performance and growth performance; (2) dynamic capability mediates the influence of responsive market orientation on financial performance, but shows a “suppressing effect” on the influence of responsive market orientation on growth performance, and in the relationship between proactive market orientation, financial performance, and growth performance, the mediating effect both are significant; (3) error management climate positively moderates the influence of proactive market orientation on financial performance and growth performance.

1. Introduction

Firms face growing technology, refinement of customer needs, and institutional uncertainty and turbulence, which aggravates the uncertainty and dynamics of the external environment. Those strategies that provide a long-term or homeopathic competitive advantage for firms in a stable environment need to be re-studied in the dynamic environment [1]. In a turbulent and highly competitive market environment, market orientation (MO) reflects a firm’s emphasis on creating customer value that is an important factor for firms to gain sustainable competitive advantages [2,3,4]. Especially in the current complex and changeable market environment, customer value creation is the prerequisite for firms to establish competitive advantages. Based on the view of core competitive advantage from the perspective of value, firms create more unique and excellent value for customers, which is more likely to bring sustainable competitive advantage [4,5], enable the enterprise to survive, and achieve better performance. While studies in past years have confirmed the positive effect of market orientation [6,7,8,9], research on the role played by a proactive market orientation which was proposed by Narver et al. [10] is less developed in the rapidly changing external environment and the competitive market, and scholars stress the need to distinguish between responsive and proactive market orientation [11,12]; therefore, it is crucial to understand the mechanism of responsive and proactive market orientation on firm performance in a dynamic environment.
The research on market orientation mainly follows the perspective of organizational behavior proposed by Kohli and Jaworski [13] and the perspective of organizational culture proposed by Narver and Slater [14]; these two viewpoints reflect the core characteristics of focusing with customers, advocating the creation and realization of customer value [15,16]. The literature of market orientation is mostly based on the stable environment to study the effect of market orientation on firm performance and innovation performance, and the influence mechanism between them, such as organizational learning [17,18], entrepreneurial orientation [19], business model innovation [20], innovation [21], new product development [8,10,22]; however, the research in dynamic environments is still inadequate. Based on the research on market orientation from the perspective of organizational culture, Narver et al. propose proactive market orientation as a supplement and divide market orientation into responsive market orientation (RMO) and proactive market orientation (PMO) [10], the dynamic characteristics of the market itself is further embodied. On the other hand, it is worth studying how enterprises can better utilize and implement market orientation in a dynamic environment and bring predictable firm performance.
According to the core competitive advantage theory, the core competence or the overall capability set of an enterprise is the base for the construction of core competitive advantage, and dynamic capability is one of the keys to achieving competitive advantage [23]. Dynamic capability is the ability of a firm to perceive internal and external competition and environmental changes and to adjust and match resources quickly is the micro basis of firm capabilities and is difficult to be imitated and copied [24]; it can quickly absorb market information and turn it into internal resources for use, which is the key to developing market-oriented strategy and establishing competitive advantage [24], therefore, we believe that the dynamic capability of firms is one of the keys to realize that the implementation of market orientation strategy affects the performance, that is, market orientation influences performance through dynamic capability. On the other hand, the effectiveness of the market orientation strategy is also restricted by organizational conditions [25]; for instance, Wang et al. [26] found that market volatility, technological volatility, and competitive intensity promote responsive market orientation, but negatively affect proactive market orientation. For firms that gain advantages through market orientation, they must have higher requirements for successful prediction and response to customer demands, but it also means risks and trial, which form the source of pressure for the organization. According to the conservation of resource theory, individuals tend to avoid stressors in order to avoid resource loss [27]. Is this contrary to the original intention of market orientation? Is an inclusive and relaxed climate for error management more likely to stimulate market-driven results? Therefore, we hypothesize that enterprise error management climate moderates the effect of market orientation on performance.
The present study analyzes the relationship between responsive, proactive market orientation and firm performance. The study has three objectives: (1) to examine the empirical relationships between responsive, proactive market orientation and financial performance, growth performance; (2) to explore the mediating effect of dynamic capability in the relationship between responsive, proactive market orientation and financial performance, growth performance; and (3) the moderating role of error management climate in the effects of responsive, proactive market orientation on financial performance, growth performance. Our research makes three contributions to the market orientation literature. First, we further enrich the research on market orientation by using the classification of responsive market orientation and proactive market orientation to explore the impact of the two kinds of market orientation on financial performance and growth performance. Second, existing literature on market orientation lacks in taking dynamics into consideration, which limits our understanding of the mechanism of how market orientation influences firm performance. Exploring dynamic capability as a mediating mechanism makes up this limitation and responds to the call for research on market orientation from a dynamic perspective [28]. Third, we find error management climate can be used as the boundary condition of market orientation, and the effect is inconsistent between the two types of market orientation, which will further facilitate researchers to explore the boundary condition of market orientation.

2. Theoretical Basis and Hypotheses

2.1. Market Orientation and Firm Performance

The competitive advantage of a firm comes from its unique, rare, and inimitable ability [29]. According to the theory of competitive advantage from the value perspective, the more contributions and customer values the firm creates, it is more likely to establish competitive advantages. Market orientation can be an important strategy to tap customer demand and create customer value [30], compared with those firms that fail to realize customer value, they are more likely to succeed [31]. Firms with strong market orientation are more sensitive to customer demands, exploit opportunities to enter the market, make quick responses [31], and get a chance to develop products and services to capture the minds of customers. Market orientation will guide firms to understand the real need of customers, hence, there is more possibility of creating customer value by improving the product and service to better meet customer demands [15,30,31,32], which is easier to be acceptable by customers [33]. To accurately assess customer needs and responses that are explicit and expressed of customers, which requires responsive market orientation; however, it is a short-term behavior for an enterprise to only pursue customer demand expression, which may hinder the future development of the enterprise. At the same time, such behavior will be risky, because the information obtained from customers is not always accurate, and the firm cannot always accurately identify the real and useful information. Narver et al. [10] argued that firms need to adopt proactive market orientation to compensate for the development. Comparatively, with responsive market orientation, proactive market orientation emphasizes the potential needs of customers, that can improve the success rate of new product development [10], and is more likely to create higher value for customers [31,32], which is conducive to the establishment of long-term competitive advantages and has a stronger impact on firm’s development [5,30]; therefore, this paper proposes:
H1. 
Firms with higher responsive market orientation will be more sensitive to market information and competitor information, and are more likely to recognize the expressed needs of customers and make respond than firms with lower responsive market orientation, which has a positive effect on financial performance and growth performance.
H2. 
Firms with stronger proactive market orientation are sensitive to the potential needs of customers, are conducive to the development of new markets and products, which has a positive effect on financial performance and growth performance.

2.2. The Mediating Role of Dynamic Capability

Based on the resource-based view and ability-based view of the theory of competitive advantage, scarce, unique resources and hard-to-replicate competencies are sources of competitive advantage. Reilly and Tushman [34] argued that dynamic capability is an important capability for a firm, including absorptive capacity, integration capacity, and innovation capacity [35], is an ability to perceive internal and external competition and environmental changes and quickly coordinate resources [24], plays an important role in helping firms quickly establish competitive advantages in a dynamic environment. Efficient absorptive capacity accelerates the process of identifying, absorbing, and transforming external information into business practice [35], and creates two advantages for firms to do knowledge transformation and utilization: One is to make use of information asymmetry to transform the external effective information quickly identified and absorbed into temporary scarce resources; another is that heterogeneous information and knowledge can be transformed into internal knowledge after absorption, which can promote tacit knowledge to become explicit, stimulate the possibility of change and innovation, and play a role in improving management efficiency [36]. The advantages created by absorptive capacity are reasonably applied to the development of new products and services to effectively promote the development [37]. In addition, the integration capability as the ability to embed new knowledge into the new operational capabilities [38] can effectively realize the reallocation and utilization of existing resources under the situation of resource constraints [39] and is a source of competitive advantage [40]. Innovation ability can promote enterprises to explore the unknown environment, and play a certain role in protecting market share through the development and innovation of new products [41], thus the establishment of competitive advantages can effectively protect the market position. Dynamic capability, as the micro basis of firm capability [24], can optimize a firm’s operation process, resource allocation, and optimal management [42,43]. In other words, part of the competitive advantages established by market orientation comes from dynamic capability.
In the face of changes caused by market information or customer demand changes, firms need to quickly adjust and allocate resources on the basis of grasping accurate market information, customer demands, and competitor information, so as to create higher customer value [6,30]. In the process of realizing value creation, the role of dynamic capability is reflected in two stages. The first stage is described as the perception and judgment of customers’ needs, which dynamic capability ensures the effectiveness of information acquisition and is quickly transformed into internal knowledge and applied to business purposes [36], it is the embodiment of dynamic capability to create competitive advantage from the perspective of capability view. The second stage is described as customer demand response, which, in order to meet customer requirements of products or services, the firm needs to continuously improve products and innovate. In this process, dynamic capability can help firms modify the acquisition of resources according to product strategies, or reconfigure internal and external resources of the firm, which is the embodiment of dynamic capability to create competitive advantage from the perspective of resource view.
Therefore, we assume that no matter responsive or proactive market orientation, dynamic capability can help market orientation better establish competitive advantages, thus providing customers with higher customer value and improving enterprise performance; thus, this paper proposes to:
H3. 
Dynamic capability mediates the relationship between responsive market orientation and financial performance, growth performance, such that higher responsive market orientation has a positive indirect effect on financial performance and growth performance.
H4. 
Dynamic capability mediates the relationship between proactive market orientation and financial performance, growth performance, such that higher proactive market orientation has a positive indirect effect on financial performance and growth performance.

2.3. The Moderating Effect of Error Management Climate

In the acquisition of external market information and the transmission and response of information within the organization, the firm cannot guarantee that the information is correct every time, and errors are inevitable, error management climate is crucial for a firm that how to manage errors, and even affects firm performance [44,45]. For instance, the asymmetry of market information and the transience of opportunities lead to incomplete or incomplete information acquisition, which makes it difficult to accurately predict customer needs based on limited information in decision-making; therefore, effective error handling measures need to be formulated [46].
The attitude and way of dealing with errors of the firm shape the error management climate and form an organizational culture that is likely to affect the influence of market orientation on performance, especially the proactive market orientation. An error management climate will exist in every enterprise [45], but the atmosphere of each firm will be different, individuals face error performance is inconsistent, some calm, some fear, tension, different pressures will be formed [46]. According to resource conservation theory, individuals show avoidance behavior when they are under pressure or facing resource loss, and have the tendency to avoid resource loss [27,46]. In a low error management climate, individuals tend to be more worried about losing appreciation after making mistakes, resulting in the loss of existing resources and even losing the priority of obtaining resources, thus the individual will be avoiding more challenging work, or even covering up mistakes to avoid the loss of resources. With high error management climate makes the organization form a positive attitude to deal with errors, leading to greater reporting willingness [47], shapes the sharing mechanism of values among members of the organization, and speeds up knowledge sharing and transformation [45]. On the other hand, a high error management climate promotes individuals to timely feedback when an error occurs, and individuals can share solutions, reduce the negative consequences of the error, and even reduce the probability of similar errors, and effectively reduce the cost of enterprise management [46,47]. When dealing with errors, it can also promote the effective mining of potential information and opportunities attached to errors, which is beneficial to the management and technology innovation [46], and thus improve the long-term action efficiency of the enterprise. Market orientation aims to dig customers’ demands, is a process of exploration, especially the proactive market orientation, the firm should be given tolerance of error caused by innovation failure, even encourage individuals to explore and experiment, this can improve the enthusiasm of individual innovation is beneficial to the development of new products and services, to help firm digging a new market, thus ensuring the possibility of long-term development of enterprises. Therefore, this paper proposes:
H5. 
Error management climate and responsive market orientation will interact in their effect on financial performance and growth performance, such that positive relationship between responsive market orientation and financial performance, growth performance will be more positive for firms with high error management climate than low error management climate.
H6. 
Error management climate and proactive market orientation will interact in their effect on financial performance and growth performance, such that positive relationship between proactive market orientation and financial performance, growth performance will be more positive for firms with high error management climate than low error management climate.
The framework of this study is shown in Figure 1.

3. Research Design

3.1. Samples and Procedures

In this study, we choose firms in the Yangtze River Delta region of China as the research samples. There are a number of small and medium size private enterprises and state-owned enterprises located in this region that significantly contribute to the national economy of China; therefore, this region is appropriate for collecting data to test our model. This study focuses on the relationship of market orientation, dynamic capability, and firm performance, based on the objective, we set the following inclusion criteria: (1) that the questionnaire must be completed by the person in charge or senior management of the firm, and (2) and that the development of the firm is good.
Before the survey, we prepared a paper questionnaire for an offline survey and an online questionnaire for an online survey. We kept the contents of the online questionnaire (a questionnaire link made by wjxmeium-sized.cn (accessed on 14 February 2020), one popular questionnaire tool in China) the same as the offline survey for online survey. The members of the full-time Masters of Business Administration (MBA) Program and Entrepreneurship MBA (EMBA) Program at Zhejiang University were invited to participate in the offline surveys (although the subjects are MBA or EMBA program students, they are running their own businesses or working in important positions at a company), and some firms recommended by investment institutions to participate in this survey, which we collected data through an online questionnaire, and the online questionnaires are consistent with offline. A total of 556 questionnaires were sent out, of which 410 subjects responded (312 online subjects and 98 offline subjects). We confirmed that these questionnaires met the requirements. First, the questionnaire must be filled in by the person in charge or senior management of the firm; secondly, the questionnaire must be filled in completely and there are no obvious problems (e.g., all the answers are the same, or there are many unreasonable answers like the time to complete the online questionnaire was incredibly short). For online subjects, we monitored the time of the subject answered the questionnaire, and removed the fastest 5%, and the slowest 5%, who took too long or short amount of time, these subjects were perceived as either not taking the questions seriously, or answering randomly; therefore, a total of 336 valid samples, 6 firms have been established for less than 2 years (1.8%), 19 firms for 2–4 years (5.7%), 44 for 4–6 years (13.1%), 62 for 6–8 years (18.5%) and 205 for more than 8 years (61%). There are 35 companies with less than 50 employees (10.4%), 42 with 51 to 100 employees (12.5%), 89 with 101 to 300 employees (26.5%), 73 with 301 to 500 employees (21.7%), and 97 with more than 500 employees (28.9%).

3.2. Variable Measures

All measures utilized in this study were tested and validated in previous research. We measured all items via five-point Likert-type scales ranging from 1 (“strongly disagree”) to 5 (“strongly agree”) or from 1 (“strongly unwilling to”) to 5 (“strongly willing to”).
Market orientation: Market orientation adopted the scale revised by Zhang and Duan [48] based on Narver’s [10] measurement, to measure responsive market orientation (Cronbach’s α = 0.737) and proactive market orientation (Cronbach’s α = 0.767), each containing four items.
Dynamic capability: The measurement of dynamic capability employed the scale revised by Li and Zhu [35], which they drew on the views of Teece [24] and Hou [49] on dynamic capability and divided it into three dimensions of absorptive capacity, integration capacity, and innovation capacity, containing thirteen items in total (Cronbach’s α = 0.888). The Cronbach’s α for this scale was 0.888.
Error management climate: The measurement of error management climate employed the scale revised by Wang et al. [44], which is based on the measurement of Dyck et al. [45] It is measured from three dimensions of error learning climate, error communication climate, and error thinking climate, and contains eleven items in total. The Cronbach’s α for this scale was 0.856.
Firm performance: The scale of firm performance was revised according to the scale developed by Murphy et al. by Li and Zhu [35], which includes a total of eight items to measure financial performance and growth performance, such as “compared with other enterprises, the net return rate of our venture is higher”, the Cronbach’s α for this scale was 0.876.
Furthermore, the details of each item are provided in Appendix A.

3.3. Common Method Bias

To confirm whether the variables in this study were received under the influence of the common method bias (CMB) [50], we used Harman’s single-factor test as suggested by Podsakoff and Organ [51] to check for the presence of CMB, a total of six factors were obtained, among which the first factor explained 14.17%, and the common method bias of preliminary judgment data was not obvious. Confirmatory factor analysis results (χ2/df = 1.605, RMSEA = 0.043, CFI = 0.921, IFI = 0.922, TLI = 0.911) also showed good structural validity. Model fitting index after adding common method factor (χ2/df = 1.527, RMSEA = 0.040, CFI = 0.935, IFI = 0.936, TLI = 0.922) were not significantly different from the original model, and significantly better than the single-factor model (χ2/df = 3.082, RMSEA = 0.079, CFI = 0.709, IFI = 0.712, TLI = 0.694), indicating that the common method bias in this study is not obvious.

4. Results

4.1. Descriptive Statistics and Correlations

Table 1 shows the descriptive statistics and correlation coefficients for the research variables in this study. The results show that responsive market orientation is significantly positively correlated with financial performance and growth performance (r = 0.355, p < 0.01; r = 0.293, p < 0.01), and proactive market orientation is significantly positively correlated with financial performance and growth performance (r = 0.424, p < 0.01; r = 0.410, p < 0.01). The relationship between dynamic capacity and financial performance, growth performance is significant (r = 0.501, p < 0.01; r = 0.507, p < 0.01). The results provide preliminary support for subsequent hypothesis testing.

4.2. Direct Effect and Mediating Effect Test

Table 2 shows the results of hierarchical regression test. The results of Model 1 and Model 4 show that the relationship between responsive market orientation, financial performance and growth performance are significant (β = 0.315, p < 0.01; β = 0.265, p < 0.01); The results of Model 2 and Model 5 show that the relationship between proactive market orientation, financial performance and growth performance are significant (β = 0.400, p < 0.01; β = 0.388, p < 0.01), Hypothesis 1 and Hypothesis 2 were supported.
Hierarchical regression method was adopted for the mediation test, and the results are shown in Table 3. The regression coefficient between dynamic capability and financial performance is 0.510 (p < 0.01), while the regression coefficient between responsive market orientation and financial performance decreased from 0.315 (p < 0.01) to −0.042 (p = 0.517), the regression coefficient between dynamic capability and growth performance is 0.594 (p < 0.01), while the regression coefficient between responsive market orientation and growth performance decreased from 0.265 (p < 0.01) to −0.151 (p < 0.05). The direct effect of responsive market orientation on growth performance is still significant, but negative, indicating that the dynamic capability has a suppressing effect on the relationship between responsive market orientation and growth performance [52,53,54]. Hypothesis 3 was supported.
The regression coefficient between dynamic capability and financial performance is 0.386 (p < 0.01). The regression coefficient between proactive market orientation and financial performance decreased from 0.400 (p < 0.01) to 0.147 (p < 0.05), the regression coefficient of dynamic capability on growth performance is 0.420 (p < 0.01), and the regression coefficient of proactive market orientation on growth performance decreased from 0.388 (p < 0.01) to 0.112 (p = 0.067). Hypothesis 4 was supported.
The bootstrap method was used to further test the mediating effect of dynamic capability. In the relationship between responsive market orientation and financial performance, growth performance, the mediating effect of dynamic capability are significant, with effect sizes of 0.401 (LLCI = 0.279, ULCI = 0.540) and 0.496 (LLCI = 0.380, ULCI = 0.626). In the relationship between proactive market orientation and financial performance, growth performance, the mediating effect of dynamic capability is significant, with effect sizes of 0.317 (LLCI = 0.205, ULCI = 0.432) and 0.353 (LLCI = 0.241, ULCI = 0.475). Hypothesis 3 and Hypothesis 4 were supported.

4.3. Moderating Effect Test

According to the results of Model 14 and Model 18 in Table 4, the effect of the interaction of responsive market orientation and error management climate on financial performance and growth performance are not significant (β = 0.120, p = 0.245; β = 0.136, p = 0.213), that Hypothesis 5 was not supported. The results of Model 16 and Model 20, the effect of interaction of proactive market orientation and error management climate on financial performance and growth performance are significant (β = 0.187, p < 0.05; β = 0.190, p < 0.05). Hypothesis 6 was supported.
The moderating effect of different levels of error management climate was further examined. In the low group error management atmosphere (−1SD), the direct effect of proactive market orientation on financial performance and growth performance are no longer significant (confidence interval includes 0), and the effect sizes are 0.104 (LLCI = −0.056, ULCI = 0.264), 0.0720 (LLCI = −0.095, ULCI = 0.239). Under high error management climate (+1SD), the direct effect of proactive market orientation on financial performance and growth performance are still significant (confidence interval excluding 0), the effect sizes are 0.3669 (LLCI = 0.181, ULCI = 0.552) and 0.3529 (LLCI = 0.159, ULCI = 0.547). Figure 2 and Figure 3 show that both high and low error management climates have a positive predictive effect on the relationship between proactive market orientation, financial performance and growth performance, and the predictive effect of high error management climate is stronger than that of low error management climate.

5. Conclusions and Discussion

5.1. Research Findings

Based on conservation of resource theory and competitive advantage theory, this paper explored the mechanism of the influence of market orientation on firm performance from a dynamic perspective, and get the following conclusions: (1) both the responsive market orientation and proactive market orientation have a significant effect on firm’s financial performance and growth performance; (2) In the relationship between responsive market orientation and financial performance, dynamic capability has a mediating effect, but in the relationship between responsive market orientation and growth performance, dynamic capability shows a “suppressing effect”, with dynamic capability mediating the effect of proactive market orientation on financial performance and growth performance; (3) error management climate only moderates the effect of proactive market orientation on financial performance and growth performance, higher error management climate strength the effect of proactive market orientation on financial performance and growth performance, and lower error management climate has weakened the effect of proactive market orientation on financial performance and growth performance.

5.2. Discussion and Theory Contributions

Our research has contributed to the market orientation literature. First, based on the theory of competitive advantage, we make clear the influence of proactive market orientation and responsive market orientation on enterprise performance, and notice the mechanism of dynamic capability in the relationship, response to the scholars’ call for research on two types of market orientations [11,12]. In our study, results show that both responsive market orientation and proactive market orientation play a significant role in promoting the financial performance and growth performance of firms. First, market orientation promotes the sensitivity of the change of external environment, to be more effective and efficient than competitors in identifying and in satisfying the needs of target markets [10]. For instance, several pieces of research have studied the effect of market orientation, market-oriented firms are willing to use effectuation logic to exploit and change when confronted with new or unexpected information in the uncertainty environment [1], and search market information and effectively identify the information beneficial to the company [6], insight into the changes of competitors and change strategies [1], find customer needs and develop new products [8], establish network [55], cooperative relationship with supply chain [56], to value co-creation [57], which helps firms to quickly occupy the target market, it is verified the view that market orientation can create superior performance [31,58]. Second, the research also proved the positive effect of proactive market orientation on the financial and growth performance, indicating that firms need to pay attention to the potential needs of customers, it is an effective way to establish a competitive advantage to develop new products and services based on customers’ potential needs and to improve firm performance [9,58].into Responsive market orientation emphasizes the present demand, it only can build the temporary competitive advantage, but for the long-term, it will lose market position, hinder the firm growth, and the proactive market orientation can be a supplement of maintaining competitive advantage, this proves the viewpoint proposed by Narver et al. [10] that firms must supplement responsive market orientation with proactive market orientation [12].
Second, we explain the mechanism of market orientation on firm performance from the dynamic perspective, and prove that the mediating role of dynamic capability. The research shows that competitive advantages can be created by the dynamic capability, so as to improve firm performance. The function of dynamic capability is that help the firm solve the problem of how to cope with the constantly changing environment by rapidly absorbing, integrating, and reallocating internal resources, and dealing with external organization competition [24,59]. In a dynamic environment, the captured external information will be processed, transformed to internal system, and be absorbed. According to the absorbed information, the judgment and decision-making of what should be done will be clearer and resource allocation is more efficient. Meanwhile, this series of operations that respond to market information will also constitute a core capability that is difficult to replicate, helping a firm to obtain and maintain a sustainable competitive advantage in a resource constrained and changing external environment [60]; in addition, this study found that dynamic capability in the effect of proactive market orientation on growth performance shows the “suppressing effect”, different from the effect of proactive market orientation on financial performance. A potential message is released to managers, that is, while pursuing to respond to the needs of customers may produce negative effects, and dynamic capability should be used to build competitive advantages to avoid the negative effects.
Finally, the boundary conditions of market orientation are explored, and error management climate is incorporated into the research model. It is found that there are differences between responsive market orientation and proactive market orientation in different culture, and proactive market orientation an appropriate error management climate to play an effective role. Another point worth noting is that a high-level error management climate is needed to match the proactive market orientation strategy. With the high-level error management climate, promoting individuals practice related to communicating about errors, sharing error knowledge, quickly detecting and handling errors [46], affects organizational members’ beliefs about what other members will report about discovered self-made errors, leading to greater reporting willingness [47], it is much easier to create a relaxed culture, while the low-level error management climate is more tense, forcing individuals to feel anxiety, stress, and challenging [46]. According to the conservation of resource theory, individuals will avoid losing resources when facing pressure, it means that in a low-level error management climate one will avoid making mistakes of innovation and lack of innovation behavior, which cause the firm to be more conservative, reducing vitality, and making it inefficient of proactive market orientation strategy, thus weakening the impact on performance. For high-level error management climate firm, openly discussing mistakes and actively sharing experiences facilitates reflection and learning, and establish positive values, even accelerate knowledge conversion [45], reduce the probability of error occurred, effectively reduce management costs, increase the efficiency [44], thus ensuring the possibility of long-term development of firms.

5.3. Practical Contribution

Our study provides two practical contributions for business managers. First, in a dynamic environment, firms are faced with uncertainties. Even if firms have strong market orientation, they may not be able to implement the strategy well. Dynamic capabilities may help firms eliminate or weaken such risks and establish competitive advantages. Second, firm cannot strengthen market orientation at will. Managers of firms must be clear that only focusing on the role of market orientation may not bring better performance, need to pay attention to whether the corporate culture matches the market orientation strategy, and positive error management climate is one of the effective culture to promote the effect of market orientation strategy.

5.4. Limitations

Although this study enriches the market orientation research content, there are still some deficiencies. For example, due to the lack of sufficient sample support, it is difficult to distinguish whether companies in different industries have a consistent conclusion, which limits the applicability of the results of this study. In addition, firms in different stages (e.g., start-up, entity) are bound to have difference tendency of market orientation strategies, future research should explore the functions of different market orientations of entrepreneurship.

Author Contributions

Conceptualization, Y.W., X.X. and H.G.; methodology, Y.W. and H.G.; software, X.X.; validation, X.X. and H.G.; formal analysis, Y.W., H.G. and X.X.; resources, X.X.; data curation, X.X. and H.G.; writing—original draft preparation, Y.W., H.G. and X.X.; writing—review and editing, Y.W. and H.G. All authors have read and agreed to the published version of the manuscript.

Funding

This research was funded by Science Technology Department of Zhejiang Province, grant number 2020R406059.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data presented in this study are available on request from the corresponding author. The data are not publicly available due to privacy restrictions.

Conflicts of Interest

The authors declare no conflict of interest.

Appendix A. Questionnaire

Appendix A.1. Responsive Market Orientation

  • We constantly monitor our level of commitment and orientation to serving customer needs.
  • We measure customer satisfaction systematically and frequently.
  • Our strategy for competitive advantage is based on our understanding of customers’ needs.
  • Data on customer satisfaction are disseminated at all levels in this business unit on a regular basis.

Appendix A.2. Responsive Market Orientation

  • We help our customers anticipate developments in their markets.
  • We continuously try to discover additional needs of our customers of which they are unaware.
  • We incorporate solutions to unarticulated customer needs in our new products and services.
  • We search for opportunities in areas where customers have a difficult time expressing their needs.

Appendix A.3. Dynamic Capability

  • We understand new information and knowledge very quickly.
  • We can quickly identify the changes that new information and new knowledge may bring to our company.
  • We can quickly incorporate new technologies that have been digested into other technologies.
  • We can quickly develop products or services using digested new technologies.
  • The coordination between different departments in our company is good.
  • We can quickly integrate and share new information and knowledge within our company.
  • We can quickly integrate new information and new knowledge to apply new products or new market development.
  • We can successfully adjust or change their strategies as the situation changes.
  • Our company has a culture that encourages innovation and a management system in place.
  • The managers of our enterprise have a deep insight into the future development of our company.
  • We can apply knowledge from different sources to new product or service development quickly and effectively.
  • Our company are quick to incorporate market changes into new products or services.
  • We can seek new profit growth in products or services.

Appendix A.4. Error Management Climate

  • We think mistakes help us improve our work process.
  • We think our mistakes point to areas where we can improve.
  • When it comes to mastering a task, we can learn a lot from their mistakes.
  • When we can’t correct our mistakes, we turn to our colleagues for help.
  • If our colleagues have made mistakes that have prevented them from completing their work, they can turn to others for help.
  • When colleagues made a mistake, they can turn to others for advices.
  • When I made a mistake, I will tell others so they don’t make the same mistake.
  • After the error occurs, we conduct a full analysis of the error.
  • If there is an error, we try to analyze the cause of the error.
  • In our organization, we think a lot about how to avoid same mistakes.
  • In our organization, we are thinking more about how to avoid mistakes.

Appendix A.5. Financial Performance

  • Compared with other companies in the industry, our company has a high net profit margin.
  • Compared with other companies in the industry, our company has a good market position.
  • Compared with other companies in the industry, our company has a good return on investment.
  • Compared with other companies in the industry, our company has a good return on sales.

Appendix A.6. Growth Performance

  • Compared with other companies in the industry, our company’s sales are growing faster.
  • Compared with other companies in the industry, our company’s net income is growing at a faster rate.
  • Compared with other companies in the industry, our company’s market share is growing faster.
  • Compared with other companies in the industry, the growth rate of the number of employees in our company is faster.

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Sustainability 14 03763 g001 550
Figure 1. Conceptual framework.
Figure 1. Conceptual framework.
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Figure 2. The moderating effect of error management climate on the relationship between proactive market orientation and financial performance.
Figure 2. The moderating effect of error management climate on the relationship between proactive market orientation and financial performance.
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Figure 3. The moderating effect of error management climate on the relationship between proactive market orientation and growth performance.
Figure 3. The moderating effect of error management climate on the relationship between proactive market orientation and growth performance.
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Table
Table 1. The result of descriptive statistics and correlation coefficients (N = 336).
Table 1. The result of descriptive statistics and correlation coefficients (N = 336).
VariablesMSD123456
1 RMO4.1600.5670.675
2 PMO3.9600.5530.524 **0.647
3 DC4.0600.4890.684 **0.655 **0.637
4 EMC4.0540.4860.542 **0.497 **0.656 **0.653
5 FP3.8130.6860.355 **0.424 **0.501 **0.396 **0.746
6 GP3.6410.7150.293 **0.410 **0.507 **0.380 **0.717 **0.674
Note: ** mean p < 0.01; the data in diagonal is the AVE square root of each variable; RMO mean responsive market orientation; PMO mean proactive market orientation; DC mean dynamic capacity; EMC mean error management climate; FP mean financial performance; GP mean growth performance.
Table
Table 2. The results of direct effect (N = 336).
Table 2. The results of direct effect (N = 336).
VariablesFirm Performance
Financial PerformanceGrowth Performance
M1M2M3M4M5M6
Firm ages−0.106−0.065−0.104−0.165−0.126 *−0.163 *
Firm size0.242 **0.253 **0.268 **0.224 *0.226 **0.283 **
RMO0.315 ** 0.265 **
PMO 0.400 ** 0.388 **
DC 0.482 ** 0.493 **
R20.1640.2280.3010.1200.2020.295
Adjust R20.1570.2210.2950.1220.1950.285
F-value21.772 **32.738 **47.637 **15.126 **28.031 **46.355 **
Note: ** mean p < 0.01; * mean p < 0.05. RMO mean responsive market orientation; PMO mean proactive market orientation; DC mean dynamic capacity.
Table
Table 3. Test of mediation effect (N = 336).
Table 3. Test of mediation effect (N = 336).
VariablesDynamic CapabilityFirm Performance
Financial PerformanceGrowth Performance
M7M8M9M10M11M12
Firm ages−0.0040.063−0.104−0.090−0.163 *−0.152 *
Firm size−0.064−0.0050.274 **0.255 **0.262 **0.228 **
RMO0.699 ** −0.042 −0.151 *
PMO 0.656 ** 0.147 * 0.112
DC 0.510 **0.386 **0.594 **0.420 **
R20.4720.4320.3020.3130.3070.302
Adjust R20.4620.4270.2930.3050.2980.294
F-value98.914 **84.245 **35.770 **37.714 **36.605 **35.859 **
Note: ** mean p < 0.01; * mean p < 0.05. RMO mean responsive market orientation; PMO mean proactive market orientation; DC mean dynamic capacity.
Table
Table 4. Test of moderation effect (N = 336).
Table 4. Test of moderation effect (N = 336).
VariablesFirm Performance
Financial PerformanceGrowth Performance
M13M14M15M16M17M18M19M20
Firm ages−0.118 *−0.119 *−0.085−0.081−0.180 **−0.180 **−0.146 *−0.142 *
Firm size0.237 **0.238 **0.239 **0.236 **0.220 **0.220 **0.212 **0.209 **
RMO0.163 **−0.209 0.097−0.308
PMO 0.290 **−0.288 0.277 **−0.285
EMC0.285 **−0.0810.225 **−0.3100.314**−0.0850.226 **−0.294
Int_1: RMO × EMC 0.120
Int_2: PMO × EMC 0.187 * 0.136 0.190 *
R20.2210.2250.2650.2760.1890.1930.2400.249
Adjust R20.2120.2130.2570.2650.1800.1810.2310.238
F−value23.521 **19.109 **29.905 **25.128 **19.334 **15.804 **26.091 **21.936 **
Note: ** mean p < 0.01; * mean p < 0.05. RMO mean responsive market orientation; PMO mean proactive market orientation; DC mean dynamic capacity; EMC mean error management climate.
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Wang, Y.; Xue, X.; Guo, H. The Sustainability of Market Orientation from a Dynamic Perspective: The Mediation of Dynamic Capability and the Moderation of Error Management Climate. Sustainability 2022, 14, 3763. https://doi.org/10.3390/su14073763

AMA Style

Wang Y, Xue X, Guo H. The Sustainability of Market Orientation from a Dynamic Perspective: The Mediation of Dynamic Capability and the Moderation of Error Management Climate. Sustainability. 2022; 14(7):3763. https://doi.org/10.3390/su14073763

Chicago/Turabian Style

Wang, Yi, Xianfang Xue, and Han Guo. 2022. "The Sustainability of Market Orientation from a Dynamic Perspective: The Mediation of Dynamic Capability and the Moderation of Error Management Climate" Sustainability 14, no. 7: 3763. https://doi.org/10.3390/su14073763

APA Style

Wang, Y., Xue, X., & Guo, H. (2022). The Sustainability of Market Orientation from a Dynamic Perspective: The Mediation of Dynamic Capability and the Moderation of Error Management Climate. Sustainability, 14(7), 3763. https://doi.org/10.3390/su14073763

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