The impact of internal and external market orientation on performance in local public organisations

Abstract

Purpose –This study builds on and extends the literature of market orientation by examining the impact of sub-dimensions of both internal and external market orientation on financial and non-financial performance in the local public sector context.

Design/methodology/approach – In line with previous studies on market orientation, a quantitative research design was adopted. The data collection was performed through a mail survey of a sample of local Portuguese public organisations (municipality executive board members). Structural equation modelling was used as a means to analyse the hypothesised relationships.

Findings- Six out of twelve hypotheses are supported. Concerning the sub-components of external market orientation, the study finds that the dissemination and responsiveness of external information impacts strongly on non-financial performance. In turn, external information generation and responsiveness impacts positively on financial performance. With respect to internal market orientation, results revealed a lower impact of different sub-dimensions on performance. Specifically, the only dimension that impacts positively on organisational performance (financial and non-financial) is internal information generation. This reinforces the view that there is a need to strengthen internal information dissemination and responsiveness to enhance organisational performance.

Research limitations/implications: This study was restricted to public sector organisations of a specific region of Portugal and used cross-sectional data to test the research model and hypotheses. Future research could usefully investigate the application of these models to other non-profit sectors and use longitudinal designs to test the results reported herein.

Practical implications – In order to ensure efficient collection and dissemination of and responsiveness to intelligence which can be addressed internally and externally, practitioners and researchers need to be aware of the importance of the internal and external components of market orientation as these influence financial and non-financial performance of an organisation in different ways. This information may contribute to the formulation of more effective marketing strategies and a more selective allocation of resources.

Originality/value- This paper offers original and unique findings and to the best of our knowledge this research is one of the few studies addressing the role of internal and external sub-dimensions of market orientation on performance in the local public sector. The findings of this study add weight to the recent emphasis on disaggregate approaches to (internal and external) market orientation – performance link.