Performance in Not-for-Profit Hospitals
Van R. Wood
VIRGINIACOMMONWEALTHUNIVERSITY
Shahid Bhuian
NORTHERNSTATEUNIVERSITY
Pamela Kiecker
VIRGINIACOMMONWEALTHUNIVERSITY
This study explores market orientation in the not-for-profit hospital setting. antecedents and consequences of market orientation, and de-veloping a valid measure of the construct to test its effect on The authors hypothesize a positive relationship between market orientation
and four organizational factors, including professional commitment, pro- organizational performance (Jaworski and Kohli, 1993; Kohli, Jaworski, and Kumar, 1993; Narver and Slater, 1990; Siguaw, fessional education, and professional ethics of the senior management
team, and organizational entrepreneurship, and three environmental fac- Brown, and Widing, 1994; Slater and Narver, 1994). Previous research, however, has several limitations. First, most studies tors, including perceptions of two states of competition and the state
of demand. The study also examines the relationship between market used strategic business units (SBUs) of a few select corpora-tions, particularly for-profit business corporacorpora-tions, as the unit orientation and hospital performance. Data from 237 top hospital
adminis-trators are used to empirically test the hypothesized relationships. Results of analysis. Although such settings provide valuable insights, the robustness of any model of market orientation should be provide evidence of a positive association between market orientation and
both the professional commitment of the senior management team and studied using other organization types, specifically not-for-profit organizations (see calls for research by Kohli, Jaworski, organizational entrepreneurship. Furthermore, the study provides strong
support for the relationship between market orientation and hospital and Kumar, 1993; Narver and Slater, 1990). Second, only one study (Jaworski and Kohli, 1993) tested the influence of ante-performance.J BUSN RES2000. 48.213–226. 2000 Elsevier Science
Inc. All rights reserved. cedents on market orientation. The role of additional influ-ences on market orientation within organizations needs to be investigated (Hambrick, 1987; Jaworski and Kohli, 1993; Siguaw, Brown, and Widing, 1994). Third, only two studies
M
arket orientation is the organization-wide generation (Kohli, Jaworski, and Kumar, 1993; Narver and Slater, 1990) attempted to develop valid measures of market orientation of market intelligence, dissemination of marketin-telligence across departments, and the organization- systematically, with limited results. Narver and Slater’s (1990) measure of market orientation was criticized for its narrow wide responsiveness to market intelligence (Kohli and
Jawor-focus and inclusion of items that did not reflect specific activi-ski, 1990). The benefits of having a market orientation are
ties and behaviors representing market orientation (Kohli, pronounced in numerous scholarly papers, textbooks, and
Jaworski, and Kumar, 1993). Similarly, realizing the psycho-speeches (Kotler, 1988; Webster, 1988). High market
orienta-metric shortcomings and the pragmatic limitations of their tion has been linked to higher business performance (Jaworski
own scale of market orientation, Kohli, Jaworski, and Kumar and Kohli, 1993; Narver and Slater, 1990). Simply stated,
mar-(1993) strongly recommend additional and substantive atten-ket orientation is theorized to be the central construct behind
tion be paid to market orientation. They suggest that the most successful modern marketing management and strategy.
promising applications of the measure may lie with not-for-A body of empirical work on the topic of market orientation
profit organizations (p. 475). also is emerging. Researchers have focused on modeling the
As many practitioners will testify, the current environment confronting not-for-profit organizations is challenging. There
Address correspondence to Van R. Wood, School of Business, Virginia Com- is increasing demand for services (Kotler and Andreasen, monwealth University, 1015 Floyd Avenue, Room 3127, P.O. Box 844000
Richmond, VA 23284-4000. 1991), pressure from the for-profit sector to curtail tax exempt
Journal of Business Research 48, 213–226 (2000)
2000 Elsevier Science Inc. All rights reserved. ISSN 0148-2963/00/$–see front matter
status and other privileges (Unterman and Davis, 1984; Ma- omy, and other environmental forces); (3) monitoring and ana-lyzing competitive actions that influence the current and future son, 1984; Hodgkinson, 1989), enhanced competition among
not-for-profits for privately contributed revenues (Schwartz, needs of customers; and (4) gathering and monitoring market intelligence through both formal and informal means (Day and 1989), and significant shortages of professionally trained and
experienced personnel (Wolf, 1984; Cruickshank, 1989). Wensley, 1983; Houston, 1986; Kohli and Jaworski, 1990). Market intelligence dissemination has two distinct aspects, Faced with these conditions, not-for-profit hospitals are
seek-ing ways to survive, to remain viable, and to grow in today’s including: (1) sharing both existing and anticipated informa-tion throughout the organizainforma-tion (i.e., ensuring vertical and business environment. Although many specific suggestions
have been offered to address these challenges, a number of horizontal flows of information within and between depart-ments) concerning: the current and future needs of customers, authors have called for a broader approach, including a model
of market orientation in not-for-profit organizations. Indeed, exogenous factors, and competition; and (2) ensuring effective use of disseminated information by encouraging all depart-a number of cdepart-alls hdepart-ave been mdepart-ade for this type of resedepart-arch
specifically focusing on not-for-profit hospitals (Hansler, ments and personnel to share information concerning the current and future needs of customers, exogenous factors, 1988; Wood and Bhuian, 1993).
This study is guided by these and other calls and critiques. and competitors (Jaworski and Kohli, 1993; Slater and Narver, 1994). Market intelligence responsiveness entails three dis-Its results contribute to our over-all knowledge of market
orientation by extending a host of earlier studies (e.g., Car- tinct activities, including: (1) developing, designing, imple-menting, and altering goods and services (tangibles and intan-bone, 1990; Hambrick, 1987; Hambrick, Fredrickson, Korn,
and Ferry, 1989; Hansler, 1988; Kohli and Jaworski, 1990; gibles) in response to the current and future needs of customers; (2) developing, designing, implementing, and al-Kotler and Andreasen, 1991; Morris and Paul, 1987; Narver
and Slater, 1990; Wood and Bhuian, 1993). Specifically, the tering systems to promote, distribute, and price goods and services that respond to the current and future needs of cus-research reported here: (1) develops a model describing the
relationships between market orientation, its antecedents, and tomers; and (3) utilizing market segmentation, product differ-entiation, and other marketing strategies in the development, resulting organizational performance (consequences); (2) tests
the model by empirically examining eight specific hypotheses design, implementation, and alteration of goods and services and their corresponding systems of promotion, distribution, concerning the antecedents and consequences of market
ori-entation; and (3) presents the results and implications for and pricing (Kohli, Jaworski, and Kumar, 1993; Narver and Slater, 1990). The domain and key elements of market orienta-managers and researchers seeking prescriptive advice for
im-proving organizational performance. The focus is on not-for- tion are summarized in Figure 2. profit hospitals, addressing the call for more research focused
in this area.
Antecedents to Market Orientation
Several theoretical studies have explored possible antecedents to market orientation (e.g., Kohli and Jaworski, 1990; Wood
Background: The Model
and Bhuian, 1993). As displayed in Figure 1, this study pro-In recent years, academicians and practitioners alike have poses that the degree of market orientation in an organization increasingly focused on market orientation and the factors depends on seven major antecedents: (1) professional commit-that engender this orientation in organizations. Narver and ment of the senior management team; (2) professional educa-Slater (1990) and Jaworski and Kohli (1993) note that market tion of the senior management team; (3) professional ethics of orientation always has been of interest to individuals responsi- the senior management team; (4) organizational entrepreneur-ble for attaining higher organizational performance. Figure 1 ship; (5) perception of the presence and intensity of the com-displays the hypothesized model. It is outlined in the following petition; (6) perception of the competition as a threat; and
pages. (7) perception of demand as under and/or over the capacity
of the organization to serve. In turn, the degree of market
Market Orientation
orientation directly influences organizational performance. A discussion of the seven major antecedents follows.In an attempt to achieve both definitional precision and
theo-Theprofessional commitment of the senior management team retical integration, Kohli and Jaworski (1990) described
mar-is a primary dimension of professionalmar-ism (Bartol, 1979; Car-ket orientation as the organization-wide generation and
dis-bone, 1990; Hall, 1968; Moncrief and Bush, 1988; Wood and semination of, and responsiveness to, market intelligence.
Bhuian, 1993). It refers to the individual’s dedication to a Market intelligence generation includes four distinct notions,
including: (1) gathering, monitoring, and analyzing informa- career and desire to remain with a particular profession, given opportunities to change professions. Several authors have sug-tion pertaining to the current and future needs of customers;
(2) monitoring and analyzing exogenous factors outside the gested that professionalism of senior management teams is a key factor in developing a customer orientation and subse-industry that influence the current and future needs of
Figure 1. Antecedents and consequences of market orientation: Hypothesized model.
1989; Hambrick, 1987; Kotler and Andreasen, 1991; Young, ket orientation (Unterman and Davis, 1984). Senior managers tend to have high levels of professional commitment and view 1987). Indeed, in attempts to ensure consistent quality service
to customers, leaders of numerous organizations are enhanc- their work as a career rather than merely a job. They typically are focused on practicing their career specialties and indicate ing their professionalism through participation in a wide range
of management training activities (Byrne, 1990). that they would remain in their careers even if they had opportunities in an unrelated field of work with higher pay A close examination of the construct suggests that
profes-sionalism of senior management teams may be related to mar- and/or other benefits (Unterman, and Davis, 1984). Such
dedication to career and career aspirations reinforce long-term willingness to encourage and support creativity, flexibility, and calculated risk-taking. Similarly, authors such as Miller professional goals (e.g., consistent quality service to
custom-ers). In turn, this long-term orientation tends to influence the (1983) and Burgleman (1984) define organizational entrepre-neurship as the willingness to strive for organizational renewal value senior managers place on information about
custom-ers—the essence of a market orientation. through the pursuit of new ventures and opportunities. More recently, organizational entrepreneurship has been described Theprofessional education of the senior management teamis
another dimension of professionalism that seems to be relevant as taking constructive risk, emphasizing research and develop-ment, valuing rapid or steady growth over stability, introduc-to market orientation. If refers introduc-to the belief that continual
professional education is important for high quality manage- ing new products and services at a high rate, and actively seeking unusual or novel solutions to problems (Ginsberg, ment (Hambrick, Fredrickson, Korn, and Ferry, 1989). Senior
managers of organizations who strongly identify with their 1985; Khandwalla, 1977; Mason and Friesen, 1983; Morris and Paul, 1987). A common theme in these definitions is profession tend to emphasize continual skills development
for themselves as well as for other members of the management that organizational entrepreneurship has three conceptually related components, namely innovativeness, proactiveness, team. They often utilize development programs of their
profes-sional societies (Wood and Bhuian, 1993), which provide a and constructive risk-taking (Jarillo, 1989; Wood and Bhuian, 1993). Although a variety of definitions exists for these three variety of educational opportunities to their members,
includ-ing information dissemination, research, conferences and sem- dimensions of organizational entrepreneurship, this study adopts the definitions previously used by Morris and Paul inars, and the open exchange of ideas among professionals.
These activities are aimed at improving the knowledge and (1987), Winston (1984-85), and Wood and Bhuian (1993): innovativeness is introducing novel goods, services, or tech-skills of members to ensure consistent, high-quality service
to their customers. As suggested above, better service to cus- nology and opening new markets; proactiveness is actively seeking unusual or novel ways to achieve organizational objec-tomers requires information about cusobjec-tomers, which is the
central tenet of a market orientation. tives; and constructive risk-taking is making reasonable deci-sions when faced with environmental uncertainties.
The professional ethics of the senior management team is a
third dimension of professionalism. It refers to a felt responsi- High levels of organizational entrepreneurship and high levels of market orientation represent responses to increasingly bility to avoid self-interest in the course of rendering services,
as well as a dedication to providing high-quality service. It complex and turbulent environments (Drucker, 1980, 1985; Wood and Bhuian, 1993). Accordingly, this study posits a also includes a strong desire to “do the right thing” when
dealing with publics (Bartol, 1979; Carbone, 1990). A strong strong relationship between organizational entrepreneurship and market orientation.
service ethic of senior management teams is evidenced by a
deep concern with using their profession to serve their custom- The perception of the presence and intensity of competition encourages organizations to seek out information about those ers when confronted with a conflict between self-interest and
customer interests. Accordingly, a high sense of professional entities that are affected by competition. It supports the view that organizational success and ultimate survival will come to ethics would lead managers to yield their self-interest to
cus-tomers’ interests when conflicts exist. Therefore, managers those organizations that best understand the multiple publics that affect them (Kotler and Andreasen, 1991; Steinberg, 1987). with a strong professional ethic tend to be dedicated to
high-quality customer service. Again, to better serve customers and The external environment in which organizations operate is complex and constantly changing; a significant characteristic to ensure high-quality service, they value information about
customers and, thus, tend to be market-oriented (Wood and of the external environment is competition. Every firm is competing for the attention, resources, and/or loyalty of cus-Bhuian, 1993; Hambrick, 1987).
Each of the three dimensions of professionalism has a sin- tomers. However, the degree to which organizations perceive the presence and intensity of competition varies. Organiza-gle, common theme: how the organization may better serve
its customers. Clearly, to provide better service to customers tions that recognize the presence and intensity of competition have a greater tendency to seek out information about custom-requires gathering, disseminating, and using information
about customers—the core of the market orientation. ers for the purpose of evaluation and to use such information to their advantage (Slater and Narver, 1994; Wood and Bhuian, Traditionally, entrepreneurship has been identified with a
dominant organizational personality (Collins and Moore, 1993).
The organization’sperception of competition as a threatalso 1970; Shapero, 1975). However, entrepreneurship also has
been conceptualized as distinct from activities of the individ- leads to a greater tendency to evaluate competition and attend to customers (Schwartz, 1989). Recognition of the threat from ual. Organizational entrepreneurship, for example, examines
entrepreneurship as an institutional phenomenon (Burgle- competition drives organizations to look to their customers for better ways to meet their needs and wants and thereby man, 1984; Morris and Paul, 1987; Jennings and Lumpkin,
tion is perceived as a threat by the organization, there is a
Method
greater tendency to adopt a market orientation.Scale Development
Theperception of demand faced by the organization as under
or over the capacity to servealso influences organizations’ search Measures of the constructs used in the study are discussed in for information. Demand under the organization’s capacity the following paragraphs. All measures and their respective to serve is a situation where the current demand for the coefficient alphas are listed in Appendix A.
organization’s goods/services is below the desired demand To date, two studies have attempted to develop valid scales level; demand over the organization’s capacity to serve is a for measuringmarket orientation systematically. Both had short-situation where the current demand for the organization’s comings. Kohli, Jaworski, and Kumar (1993) summarized the goods/services is above the desired demand level or, more limitations of Narver and Slater’s (1990) scale as follows. First, particularly, above the level that can be served. In theory, it adopts a focused view of markets emphasizing customers organizations faced with either under or over demand situa- and competition, as compared with a view that emphasizes tions tend to seek out information about customers and modify these two stakeholders and additional factors that drive cus-their market offerings based on consumer data in order to tomer needs and expectation (e.g., technology, regulations). improve or rectify the situation (Bhuian, 1992; Borkowski, Second, it does not reflect the speed with which market intelli-1994; Kindra and Taylor, 1995; Wood and Bhuian, 1993). gence is generated and disseminated within an organization. Third, it includes a number of items that do not measure
Market Orientation and
specific activities and behaviors that represent a market orien-tation. On the other hand, Kohli, Jaworski, and Kumar (1993)Organizational Performance
described the shortcomings of their own scale as: (1) being As Figure 1 suggests, seven antecedents influence market
ori-too long to be pragmatic (32 items); (2) consisting of items entation and subsequent levels of organizational performance.
related to overly specific activities that may not be generaliz-More specifically, a high level of market orientation is
theo-able across various types of industries, particularly not-for-rized to lead to a high level of organizational performance.
profit industries; and (3) only moderately supportive of the This relationship is supported by previous research showing
validity of market orientation. This study attempted to over-a positive relover-ationship between over-a mover-arket orientover-ation over-and
busi-come these limitations of previous scale development. ness profitability (Narver and Slater, 1990; Jaworski and Kohli,
The authors and five other marketing professionals partici-1993) and numerous reports and studies showing that the
pated in modifying, reviewing, and revising scale items. A adoption of marketing principles and use of marketing
re-pretest of the revised scale was conducted with a group of search greatly enhance organizational operations (Kotler,
potential respondents. The resulting scale of market orienta-1984; Levitt, 1969; Webster, 1988; Wood and Bhuian, 1993).
tion consisted of 11 items (see Table 1 and Appendix). Four The following hypotheses formally state the linkages shown
items were used to measure intelligence generation (MO1–
in Figure 1.
MO4), three items were used to measure intelligence
dissemi-H1: Market orientation is positively related to the
profes-nation (MO5–MO7), and four items were used to measure
sional commitment of the senior management team.
intelligence responsiveness (MO8–MO11).
H2: Market orientation is positively related to the profes- The scale represents the domain and elements of market sional education of the senior management team. orientation depicted in Figure 2. Scale items asked respon-dents how much time and effort the hospital spent performing H3: Market orientation is positively related to the
profes-certain marketing practices/functions (e.g., understanding pa-sional ethics of the senior management team.
tients’ needs, ensuring that market information is communi-H4: Market orientation is positively related to
organiza-cated to all relevant departments in the hospital, developing tional entrepreneurship.
goods and services based on information concerning patients’ H5: Market orientation is positively related to the percep- needs) relative to other hospitals in their market area.
Re-tion of the presence and intensity of competiRe-tion. sponses were recorded on a 5-point Likert scale (where 1
5
H6: Market orientation is positively related to the percep- much more time and effort was spent, 35 about the same tion of the competition as a threat. time and effort was spent, and 55much less time and effort was spent). With only slight modifications of these items, all H7: Market orientation is positively related to the
percep-are generalizable across different types of industries. tion of demand faced by the organization as under or
The dimensionality and reliability of the scale were esti-over the capacity to serve.
mated by common factor analysis and coefficient alpha. In H8: Organizational performance is positively related to
the factor analysis, items exhibited an inability to discriminate market orientation.
among the three dimensions (intelligence generation, dissemi-nation, and responsiveness) and resulted in a undimensional The following section describes scale development and data
Table 1. Market Orientation Scale
Factor Matrix
(n5237)
Descriptor Variables (11) Factor Loading Communality
(f) (h2)
MO1 Understanding patients’ needs 0.52 0.27
MO2a Understanding how environmental factors (e.g., governmental regulation, 0.37 0.14
technology) influence patients’ needs
MO3 Understanding how the marketing program of competitors influence patients’ 0.58 0.34
expectations and service preferences
MO4 Utilizing as many means as possible to generate market information (e.g., interaction 0.71 0.51
with patients)
MO5 Ensuring that market information is communicated to all relevant departments in 0.68 0.46
the hospital
MO6 Conducting interdepartmental meetings to discuss market trends and developments 0.67 0.45
MO7 Disseminating data on patient satisfaction to all relevant departments 0.57 0.32
MO8 Developing goods and services based on information concerning patients’ needs 0.69 0.47
MO9 Developing systems to promote, deliver, and price goods and services based on 0.72 0.52
information concerning patients’ needs
MO10 Utilizing marketing techniques (e.g., market segmentation, product differentiation, 0.79 0.62
competitive analysis) to develop new goods and services
MO11 Utilizing marketing techniques (e.g., market segmentation, product differentiation, 0.74 0.54
competitive analysis) to develop systems to promote, deliver, and price goods and services
% variance: 0.88. Eigenvalue: 4.65. Coefficient alpha: 0.89.
aThis item was eliminated based on the scale refinement procedure described in the text.
produced a low loading (.37) and, therefore, was excluded ing unique and novel ways to satisfy patients) relative to other hospitals in their market area. All items were scored on a 5-from the final scale. There was a high degree of reliability
(internal consistency) for the remaining ten items (coefficient point scale, where 15much more active than others and 5
5much less active than others. Factors analysis results indi-alpha5 0.89).
Theprofessional commitment, professional education, and pro- cated a unidimensional factor structure and a high degree of reliability (coefficient alpha50.89).
fessional ethics of the senior management teamwere measured
using three scales composed of three, three, and two items, Perception of the presence and intensity of competition and perception of competition as a threatwere measured using two respectively. Existing scales were modified to make them
suit-able for this study (i.e., items were modified to reflect that scales composed of three and two items respectively. Both scales were developed from previous work by Downey, Hell-respondents were being asked to offer their perceptions in
the context of not-for-profit hospitals) (see Bullard and Snizek, riegel, and Slocum (1975) and Negandhi and Reimann (1972). The first scale assesses the degree to which an organization 1988; Carbone, 1990; Hall, 1968; Snizek, 1972). The items
reflect the extent to which the respondent and other members perceives the presence and intensity of competition. A 5-point scale (15strongly agree; 55strongly disagree) was used to of the senior management team of the hospital exhibit each
of the three types of professionalism. A 5-point scale was used measure all items. The second scale assesses senior hospital managers’ perceptions of competition in the marketplace. Spe-for all items (15 strongly agree; 5 5 strongly disagree). A
common factor analysis resulted in three distinct factors. The cifically, respondents were asked to indicate the extent to which senior management personnel perceive competition for coefficient alphas were 0.66, 0.84, and 0.84, respectively.
Organizational entrepreneurshipwas measured using eight patients as threatening their hospitals’ long- and short-term prosperity. The items were scored on a 5-point scale, ranging items (three, three, and two items to measure innovativeness,
proactiveness, and constructive risk taking, respectively). All from “a threat to long- and short-term prosperity” to “not a threat to long- and short-term prosperity,” Factor analysis items were adopted from the literature (Jennings and
Lump-kin, 1989; Khandwalla, 1977; Mason and Friessen, 1983; resulted in two factors with coefficient alphas of 0.86 and 0.70, respectively.
Morris and Paul, 1987) and modified to fit the study. For
each of the items, respondents were asked how active their Because no scale existed for measuring the perception of demand faced by the organization as under- or overcapacity hospital has been in undertaking entrepreneurial functions
Table 2. Characteristics of Sample (n5237)
Job title Education (major) Age
Administrator 27 Business 61 20–30 4
Chief executive officer 30 Medical 19 31–40 21
President 17 Health admin. 10 41–50 45
Vice president 11 Public health 3 51–60 22
Marketing director 8 Others 7 over 60 8
Director 7 100% 100%
100%
Sex Years in senior
Years working in the Male 76 management
health-care industry Female 24 in current
0–5 7 100% hospital
6–10 10 Years of service in a 0–5 51
11–15 17 senior management capacity 6–10 22
16–20 23 in health-care industry 11–15 11
21 and more 43 0–5 13 16–20 8
100% 6–10 22 21 and more 8
11–15 23 100%
16–20 16
Number of beds 21 and more 26
0–50 18 100% Size of senior
51–100 24 management team
101–200 22 Total number of beds
201–300 13 in this hospital’s 0–5 39
301–400 10 market area 6–10 47
401 and more 13 0–500 37 11–15 9
100% 501–1,000 32 16–20 2
Type of hospital 1,001–2,000 17 21 and more 3
Private 98 2,001–3,000 4 100%
Public 2 3,001 and more 10
100% 100%
this study. This measure explicitly inquires about the state of
Data Collection
demand for patients faced by the hospital as under or over Data were collected by means of a self-administered question-the capacity to serve. The item was scored on a 5-point scale, naire mailed to 1,000 chief executives of not-for-profit hospi-ranging from patient demand was “below what we can serve” tals in the United States. This represents a systematic random to “more than what we can serve.”
sample of approximately one out of three not-for-profit admin-Finally,organizational performancewas measured using a
istrators listed in theDirectory of the American Hospital Associa-four-item scale (i.e., improvement of hospital quality of care,
tion. The questionnaire was pretested with senior management increase in hospital revenues, improvement in hospital
finan-personnel of four hospitals located in a southwestern metro-cial position, and improvement of patient satisfaction).
Be-politan area. The goals of the pretest were to assess clarity of cause not-for-profit hospitals are the focus of this study, the
questions, determine the length of time required for comple-measure of performance was drawn from the not-for-profit
tion, and examine the appropriateness of both questionnaire literature. Previous performance measures used in studies of
format and subject matter for the population of interest. Minor not-for-profits vary widely. However, most are
organization-revisions were made to the questionnaire based on pretest specific and include both qualitative and quantitative
mea-results. sures. Attempts to develop a common means to evaluate
per-The actual mailing included the questionnaire, a letter of formance across different not-for-profit organizations also
endorsement from the past president of the American Hospital have been made (e.g., Greenberg and Nunamaker, 1987;
Griz-Association, and a self-addressed, stamped reply envelope. zle 1984; Smith, 1988; and Unterman and Davis, 1984).
Following the procedure recommended by Dillman (1978), Among these, the Unterman and Davis (1984) scale includes
a follow-up postcard was sent 1 month after the questionnaire, both quantitative and qualitative measures and provides a
and a second reminder letter sent 4 weeks after the follow-comprehensive taxonomy of not-for-profit organizational
per-up postcard. A total of 237 usable questionnaires was returned formance. Based on this research, a 4-item scale was developed
for a response rate of 35% adjusting for the percentage of for measuring the performance of hospitals in this study. All
nondeliverable addresses. (To determine the number of non-items were scored on a 5-point scale, ranging from “strongly
from the sample. A telephone call was made to each of the 37 ployed. Regression results are presented in Table 3; a correla-tion matrix is shown as Table 4.
hospitals to determine whether or not the addresses were
em-Estimates are presented for the three hypothesized dimen-ployed with the hospital at that time. Twenty-five were found
sions of professionalism of the senior management team (H1– to be working with their respective hospitals; 12 were no
H3) in Equation (1a), organizational entrepreneurship (H4) in longer with their respective hospitals for various reasons
(in-Equation (1b), the two dimensions of the perception of competi-cluding the generally high turnover among senior hospital
tion (H5andH6) in Equation (1c), the perception of the state management being experienced in the industry). Therefore, a
of demand (H7) in Equation (1d), the full set of pro- posed 32% rate of nondeliverables was calculated.) Previous research
antecedents (H1–H7) in Equation (1e), and organizational using hospital administrators as respondents report response
performance (H8) in Equation (1f). As displayed in Equation rates between 10 and 50% (Zallocco and Joseph, 1991).
Non-(1a), results supportH1, indicating that professional commit-response bias was assessed by comparing the commit-responses of
ment of the senior management team is related to market early respondents with those of late respondents (Armstrong
orientation (b50.22,p50.0037), fail to supportH2, indicat-and Overton, 1977). Multivariate analyses of variance
(MA-ing that professional education of the senior management team NOVA) tests indicated no significant difference between early
is unrelated to market orientation, and supportH3, indicating and late respondents. Therefore, it is assumed that
nonre-that the professional ethics of the senior management team sponse bias was minimal. (To verify that selected study
partici-is related to market orientation (b5.13,p5.0493). Com-pants actually were the individuals who completed the
ques-bined, the three dimensions of professionalism explain 8% of tionnaires, a random sample of 15 respondents was called.
the variance market orientation. Respondents were asked if they had personally participated
Although no previous study has empirically tested the effect in the study. Only 12 of these individuals were reached,
of professional commitment of the senior management team but all indicted that they were the respondent of record.
on the market orientation of organizations, several studies Accordingly, it is assumed that the intended study respondents
have implied such a relationship (Badasch, 1988; Byrne, 1990; are represented in the sample.)
Kohli and Jaworski, 1990; Narver and Slater, 1990). This first A profile of the respondents’ personal and hospital
charac-empirical finding, therefore, is consistent with the literature. teristics is displayed in Table 2. In summary, 74% of
respon-The second finding, however, is contrary to the hypothesized dents are administrators, chief executive officers, or presidents
relationship (and inconsistent with the literature). No relation-of hospitals, and have the ultimate legal authority and
over-ship was evident between the professional education of the all responsibility for organizational decision making within
senior management team and market orientation. Again, al-their hospitals. Sixty-one percent of the respondents hold
though no previous study has empirically tested this relation-undergraduate degrees in business; 83% have 11 or more years
ship, several researchers have indicated that the market ori-of experience in the health-care industry. Thus, executives
entation of an organization could be influenced by the included in the sample are assumed to be aware of the different
professional education of the senior management team (Bir-characteristics of hospital management, including the
con-chenall and Streight, 1989; Byrne, 1990; Kohli and Jaworski, sructs of interest in this study.
1990). This inconsistent finding may be explained by the Summary statistics for the characteristics of the hospitals
concept of “orientation” itself (i.e., the nature of an organiza-represented by respondents show 86% to have a senior
man-tion’s adaption to a specific situation). That is, numerous agement team of 10 or fewer members. This implies that
orientations can evolve as the environment surrounding an respondents are cognizant of the opinions of other members
organization evolves (Ansoff, 1984; Troye and Wood, 1989). of their top management team. The majority of hospitals (64%)
Indeed, Jaworski and Kohli (1993) suggest that market orien-has 200 or fewer beds, indicating that effects attributable to
tation may not be the only orientation that can lead to higher hospital size would be minimal. Similarly, in most of the cases
organizational performance. It is likely that the professional (69%), the total number of beds in the market areas of the
education of the senior managers of hospitals emphasize other respective hospitals is 1,000 or fewer, minimizing any effect
orientations. For example, cost containment could be a likely caused by size of the market area. These factors suggest that
orientation of management in the health-care industry, be-respondents are in environments where they are capable of
cause escalating costs are considered to be a crucial problem assessing external factors and other variables of interest in this
faced by hospitals today (Kotler and Andreasen, 1991). Fi-study. All in all, the sample of respondents and their respective nally, the results of this study suggest that professional ethics hospitals is highly representative of the population of interest. is only marginally or unrelated to market orientation.
Profes-sional ethics of the senior management team is found to be marginally significant in Equation (1a); in Equation (1e), with
Analysis and Results
all specified variables, this relationship is insignificant (b5
em-Table 3. Antecedents and Consequences of Market Orientation: Regression Results
Independent Variables
Dependent Relevant
Variables Hypotheses Equation PCa PEb PHc OEd PRe PTf PDg OPh R2 F
Market
orientation H1–H3 (1 a) 0.22** 0.00 0.13* — — — — — 0.08 6.44
H4 (1 b) — — — 0.52*** — — — — 0.35 127.39
H5, H6 (1 c) — — — — 0.01 20.05 — — 0.01 0.71
H7 (1 d) — — — — — — 20.06 — 0.01 0.08
H1–H7 (1 e) 0.12* 0.04 0.04 0.49*** 0.01 20.01 20.04 — 0.38 24.17
H8 (1 f) — — — — — — — 0.40*** 0.10 27.35
***p,0.001. **p,0.005. *p,0.05.
aProfessional commitment of the senior management team. bProfessional education of the senior management team. cProfessional ethics of the senior management team. dOrganizational entrepreneurship.
ePerception of the presence and intensity of competition. fPerception of competition as a threat.
gPerception of demand as under or over the capacity to serve. hOrganizational performance.
current and potential patients may not be pragmatic. Many Graham, 1990; Lipp, 1991; Wood and Bhuian, 1993). Equa-tion (1c) examines the relaEqua-tionships between: (1) the percep-not-for-profit hospitals may not have the resources to serve the
health-care needs of numerous indigent patients, for example. tion of the presence and intensity of competition and a market orientation (H5); and (2) the perception of competition as a Consequently, such hospitals may be forced to lower their
expectations with respect to meeting the needs of all patients. threat and a market orientation (H6). Results do not support either hypothesized relationship (b50.01,p50.7108 and The relationship between organizational entrepreneurship
and market orientation expressed inH4is examined in Equa- b50.05,p50.2349, respectively). Paraphrasing Narver and Slater (1990), an explanation for these findings might be that tion (1b). The regression results show a significant positive
relationship as hypothesized (b 5 0.52, p 5 0.0001), ex- it is better to invest in becoming market oriented while the environment is somewhat munificent than to wait until it has plaining 35% of the variance. This finding is consistent with
past empirical research (Morris and Paul, 1987) as well as grown hostile.
The final linkage between the seven proposed antecedents the theoretical explanations of several authors (Bumm, 1988;
Table 4. Correlation Matrix
Estimated Correlations and Standard Errors for Measurement Constructsa
MO PF PC PE PH EN PM PT PD
MO 1.000 0.076 0.082 0.074 0.070 0.050 0.070 0.079 0.079
PF 0.303 1.000 0.088 0.077 0.074 0.077 0.073 0.082 0.082
PC 0.260 0.164 1.000 0.077 0.079 0.084 0.080 0.090 0.091
PE 0.145 0.278 0.439 1.000 0.065 0.076 0.071 0.079 0.080
PH 0.208 0.097 0.253 0.411 1.000 0.070 0.067 0.075 0.076
EN 0.631 0.252 0.220 0.062 0.213 1.000 0.071 0.079 0.080
PM 0.041 20.054 0.104 20.044 0.099 20.027 1.000 0.072 0.074
PT 20.093 20.195 20.116 20.109 0.072 20.055 0.314 1.000 0.084
PD 0.030 0.107 20.086 0.019 0.064 20.021 20.150 20.121 1.000
aCorrelations appear below the diagonal; standard errors appear above the diagonal.
MO5Market orientation. PF5Organizational performance.
PC5Professional commitment of the senior management team. PE5Professional education of the senior management team. PH5Professional ethics of the senior management team. EN5Organizational entrepreneurship.
PM5Perception of the presence and intensity of competition. PT5Perception of the competition as a threat.
and market orientation is the hypothesized positive relation- ment should seek out factors that influence the level of profes-ship between market orientation and the perception of the sional commitment of the senior management team in pursuit demand as under or over the capacity to serve (H7). Equation of higher performance (here past research is particularly rich (1d) displays the results, which do not support the hypothe- in prescriptive advice, and interested readers are referred to sized relationship (b5 20.06,p50.1401). Again, a possible the work of Hunt, Wood, and Chonko, 1989; Morgan and explanation for this finding lies with the wisdom provided by Hunt, 1994). In addition, organizational entrepreneurship Narver and Slater (1990). seems to facilitate market orientation. This finding indicates Finally, the relationship between market orientation and all that management can influence the level of market orientation the predictor variables combined was investigated in Equation by creating an organizational environment where innova-(1e). Two points are of particular interest here. First, it can tiveness, proactiveness, and constructive risk-taking (the es-be seen that the coefficients in the model do not change signs sence of organizational entrepreneurship) are encouraged and and the majority of statistically significant variables remain. rewarded. Indeed, the belief that entrepreneurship can be Second, the amount of explained variance in market orienta- learned has resulted in numerous organizations and universi-tion increases to 0.38. ties offering programs in entrepreneurship.
The proposed linkage between market orientation and or- Results of this study suggest areas for further research. First ganizational performance is reflected inH8. Results of Equa- is the examination of the organizational performance measure. tion (1f) indicate that market orientation is significantly and To assess the robustness of the relationship between market positively related to organizational performance (b5 0.40, orientation and organizational performance, future studies p5 20.0001) and explains 10% of the variance. This finding should incorporate other organizational performance mea-is consmea-istent with results of past studies (Jaworski and Kohli, sures, such as return on investment, sales growth, market 1993; Narver and Slater, 1990; Slater and Narver, 1994). share, and customer retention. Because performance measures and accounting treatments differ from organization to organi-zation, care should be taken to control for organizational and
Conclusions and Implications
accounting effects.Second, efforts to discover and assess the role of additional This study is an important first step in validating the
relation-factors in determining the level of market orientation in organi-ship between market orientation and hospital performance.
zations should continue. Although the antecedents in this Not-for-profit hospital administrators who seek to improve
study explain 38% of the variance in market orientation, previ-the quality of care previ-the hospital delivers, increase previ-the revenues
ous research has identified several other antecedents of market and financial position of the organization, and enhance
over-orientation (e.g., ingratiation acceptance, attitude toward mar-all patient satisfaction are advised to give considered attention
keting, management training) that need to be tested (Kohli to the findings of this study. These results indicate that upper
and Jaworski, 1990; Wood and Bhuian, 1993). Likewise, a management’s ability to enhance operational efficiencies of
number of the antecedents in this study deserve further inves-their organization may lie in the focused efforts to develop
tigation. In addition, some variables hypothesized as anteced-and embrace an organization-wide commitment to a market
ents in this study (including organizational entrepreneurship orientation. To complement these efforts, special attention
and professional ethics of the senior management team) also and resource allocation must be committed to the over-all
could be considered consequences of a market orientation. professional education opportunities of organizational
mem-For example, it would be very useful to undertake research bers, including memberships and participation in professional
examining the magnitude and direction of the relationship be-seminars, workshops, conferences, and other development
tween organizational entrepreneurship and market orientation. programs. Organizational entrepreneurship also must be
sup-Third, because environmental factors have not been found ported by actively encouraging new product idea generation,
to have any moderating effect on the relationship between implementation of new methods and techniques in the
deliv-market orientation and organizational performance (Jaworski ery of health-care services. A focus on unique and novel
ap-and Kohli, 1993; Slater ap-and Narver, 1994) nor any direct proaches to achieving patient satisfaction and the proactive
effect on a market orientation (this study), it would be useful search for, and development of, new markets also are
recom-to conduct comparative studies recom-to see the relative effects of mended. Once again, the key to success is achieving an
various orientations (e.g., market, selling, product) on organi-zation-wide market orientation.
zational performance. This research advances a number of variables as significant
Finally, this study is limited by its sample and cross-sec-determinants of market orientation and suggests ways by
tional focus, which suggest additional factors to consider in which managers may enhance the market orientation and
future research efforts. Regarding the sample used in this re-performance of their organizations. Specifically, professional
search, it is limited by its homogeneity. Although it is desirable commitment of the senior management team seems to play
to use a homogeneous sample for early theory development an important role in determining the level of market
Carbone, Robert: Is Fundraising a Profession? Not Yet. Nonprofit should include samples of other health-care institutions and
World8(1) (1990): 30–32. providers, including for-profit organizations. Regarding the
Collins, O., and Moore, D. G.:The Organization Makers, Appleton-study’s cross-sectional focus, the influence of the antecedents
Century-Crofts, New York. 1970. on market orientation or the influence of market orientation
Cruickshank, Ian: Strategies: Word Vision, Canadian Business 62(5) on organizational performance in this study is primarily
re-(May 1989): 103–105. stricted to association (i.e., possible causal relationships are
Day, George S., and Wensley, Robin: Marketing Theory with a Strate-not tested). Future efforts should be geared toward the
devel-gic Orientation.Journal of Marketing47 (Fall 1983): 79–89. opment of longitudinal databases to test the nature of change
Dillman, D. A.:Mail and Telephone Surveys: The Total Design Method, processes involved in the constructs of interest. The
phenome-John Wiley, New York. 1978. non of leading and lagging indicators, where operating results
Downey, H. Kirk, Hellriegel, Don, and Slocum, John W., Jr.: Environ-witnessed during one quarter may be attributable to actions
mental Uncertainty: The Construct and Its Application. Adminis-implemented much earlier in time and even by different man- tration Science Quarterly20 (1975) 613–629.
agement, needs further study (i.e., Does market orientation
Drucker, Peter F.:Managing in Turbulent Times, Harper and Row, drive performance or does robust performance induce man- New York. 1980.
agement to affirm their market orientation? Is a cyclical
pat-Drucker, Peter F.:Innovation and Entrepreneurship, Harper and Row, tern, where each plays the role of a causal factor driving New York. 1985.
the other over time, a truer pattern of the influence?) With
Drucker, Peter F.: What Business Can Learn from Nonprofits.Havard deference to these suggestions, the present study concludes Business Review(July–August 1989): 88–93.
with one important statement: Market-oriented organizations
Ginsberg, A.: Measuring Changes in Entrepreneurial Orientation Fol-tend to have higher performance than nonmarket-oriented lowing Industry Deregulation: The Development of a Diagnostic organizations. Practitioners and academic researchers, alike, Instrument. InProceedings, Annual Meetings, International Council
of Small Business, 1985, pp. 50–57. should not overlook this significant finding.
Graham, Nancy O.:Quality Assurance in Hospitals Strategies for Assess-ment and ImpleAssess-mentation, Aspen, Gaithersburg, MD. 1990.
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Appendix A. Measures of Research Constructs
Coefficient
Alpha Sample Items
0.89 Market Orientation
Relative to other hospitals in your market area, how much time and effort is spent by your hospital in . . . (anchors: much more time than others/about the same time as others/much less time than others)
1. understanding patients’ needs.
2. understanding how environmental factors (e.g., government regulations, technology) influence patients’ needs. 3. understanding how the marketing programs of competitors influence patients’ expectations and service preferences. 4. utilizing as many means as possible to generate market information (e.g., interaction with patients, in-house market
research, patient satisfaction surveys).
5. ensuring that market information is communicated to all relevant departments in the hospital. 6. conducting interdepartmental meetings to discuss market trends and developments.
7. disseminating data on patient satisfaction to all relevant departments.
8. developing goods and services based on information concerning patients’ needs.
9. developing systems to promote, deliver, and price your goods and services based on information concerning pa-tients’ needs.
10. utilizing marketing techniques (e.g., market segmentation, product differentiation, competitive analysis) to develop new goods and services.
11. utilizing marketing techniques (e.g., market segmentation, product differentiation, competitive analysis) to develop systems to promote, deliver, and price goods and services.
0.66 Professional commitment of the senior management team
Please read the following statements and circle the response that most closely matches your feelings (anchors: strongly agree/strongly disagree).
1. I don’t think of my work as just a job, it is something much more important.
2. The senior management personnel of my hospital are very dedicated to their careers in the health-care management field.
3. I would remain in this profession even if I were offered more pay from some other profession (outside the health-care management field).
0.84 Professional education of the senior management team (anchors: strongly agree/strongly disagree)
1. I strongly believe in the importance of continuing professional education (e.g., attending seminars, workshops, and conferences on various issues concerning professional development).
2. The senior management personnel of my hospital strongly believe in continuing professional education.
3. My hospital encourages and supports the involvement of senior management personnel in professional development programs.
0.84 Professional ethics of the senior management team (anchors; strongly agree/strongly disagree)
1. I always place the interests of my patients before my own self-interest.
2. The senior management personnel of my hospital always place the interests of our patients before their own self-interests.
0.89 Organizational entrepreneurship
Relative to other hospitals in your market area how active has your hospital been in . . . (anchors: much more active than others/about the same as others/much less active than others)
1. introducing new goods and services for patients. 2. opening new markets.
3. introducing new methods and techniques of delivering services. 4. seeking unique and novel ways to satisfy patients.
5. performing R&D activities (e.g., new goods/service development, new facility development, new market develop-ment, new delivery systems development).
6. searching for new markets.
7. taking risks in items of environmental uncertainty. 8. taking risks in general.
Appendix A. continued
Coefficient
Alpha Sample Items
0.86 Perception of the presence and intensity of competition
Please read the following statements and circle the response that most closely matches your feelings (anchors: strongly agree/strongly disagree).
1. The patients my hospital serves have numerous alternative health-care organizations that provide services similar to ours.
2. My hospital faces intense competition for patients.
3. The competition for patients in my hospital’s market area is growing. 0.70 Perception of competition as a threat
Most of the senior management personnel of my hospital perceive the competition for . . . 1. patients as . . . (anchors: a threat to long-term prosperity/not a threat to long-term prosperity). 2. patients as . . . (anchors: a threat to short-term prosperity/not a threat to short-term prosperity). —— Perception of demand as under or over the capacity to serve
Please circle the response that most closely matches your feelings
(anchors: below that we can serve/about equal to what we can serve/more than what we can serve). 1. The current level of demand for my hospital’s goods and services is . . .
0.72 Organizational performance Over the last 3 years . . .
(anchors: strongly agree/strongly disagree).
1. the quality of care offered by my hospital has improved.
2. the revenues (e.g., reimbursement from medicate, insurance, etc.) of my hospital have increased. 3. the financial position of my hospital has improved.
