The influence of business strategy on new product activity: the mediating role of market orientation

In this paper we examine how business strategy influences the nature and extent of firms’ market orientation and how this in turn influences the extent of firms’ new product activity. Specifically, we develop a framework linking firms’ relative emphasis on cost leadership, product differentiation and focus strategies on firms’ customer, competitor and supplier orientation as well as their new product development and introduction activity. We use this framework to develop relevant hypotheses which we then test on survey data from 157 Dutch firms of varying sizes and from across various industries. The surprising findings are that a greater emphasis on a focus strategy results in a decreased emphasis on customer orientation and that competitor orientation influences new product activity only indirectly via customer orientation. Limitations of the study and implications of the findings for future research on market orientation and new product activity are discussed.