Page 1 of 11

Journal for Studies in Management and Planning

Available at https://pen2print.org/index.php/jsmap/

ISSN: 2395-0463

Volume 04 Issue 09

September 2018

Available online: https://pen2print.org/index.php/jsmap/ P a g e | 53

Market Orientation and Innovation of Small and Medium

Enterprises in Kano State, Nigeria

Lukman Tajo Siraj, Abuga Isaac and Kabiru Haruna Danja

College of Management and Economics

Kampala International University, Uganda

tslukman@yahoo.com +2348069433344

Abstract

This study investigates the role of market orientation in stimulating firm innovation. A cross

sectional survey using questionnaire was employed to collect data from a sample of 254

manufacturing SMEs operating in Kano state, Nigeria. Data for the study was analyzed using

Pearson correlation and regression analyses. The results suggest that market orientation is a

significant predictor of firm innovation. It’s further indicated that competitor orientation was the

major contributor of firm innovation. Firms should therefore create a competitive intelligence

unit to regularly monitor the activities of competitors and to evaluate the firm’s actions to

conform to the competition.

Key words: Market orientation, Innovation, Competitor orientation, SMEs.

Introduction

In many economies, Small and Medium Enterprises (SMEs) account for a large segment of the

productive population. SMEs serve as a source of employment generation and innovation which

in turn stimulate capacity building and diffusion of skills over the years. SMEs in Nigeria have

been an avenue for job creation and employment of citizens through poverty alleviation and

providing about 70% of all job opportunities and contribute 46% to gross domestic product

(Small and Medium Development Agency of Nigeria, 2012)

The economy of Kano State is driven largely by SMEs sector. The sector is strong and diverse,

and contributes 60 – 70 % of the output and employment (Kano State Investors Handbook,

2013). SMEs in Kano state despite their contribution are facing a changing business environment

mainly due to globalization and the influx of information technology. These factors contribute to

Page 2 of 11

Journal for Studies in Management and Planning

Available at https://pen2print.org/index.php/jsmap/

ISSN: 2395-0463

Volume 04 Issue 09

September 2018

Available online: https://pen2print.org/index.php/jsmap/ P a g e | 54

many issues which need to be addressed and resolved by SMEs such as diminishing trade barrier

which in turn open the new market for SMEs and also invite competition which require SMEs to

enhance their level of innovation.

To optimize innovation, it is very important for firms to understand its consumers and

competitors. This means that firms should be market oriented. Market orientation enables the

firms to adapt a culture, putting the customer as a focal point. It emphasizes the philosophy and

behavior in proactively detecting industrial environment including market information and

competitors’ strategy in order to innovate and respond to the customer needs timely (Im and

Workmen, 2004). This study therefore aimed at investigating the innovation of SMEs in Kano

State through their market orientation.

Literature review

The term market orientation found a broad appeal in the marketing literature. The literature

describes market orientation as a set of behavior and process, or an aspect of culture to create a

superior value. Narver and Slater (1990) defined market orientation as the organization’s culture

that most effectively creates the necessary behavior for the creation of superior value for buying

and thus contribute superior performance for the business. Market orientation is therefore the

capability of an organization to collect customer’s needs and disseminates the obtained

customers and market information within the organization in order to react to the market timely.

According to Narver and Slater (1990), market orientation comprises of customer orientation,

competitor orientation and inters functional co-ordination.

Innovation is a key outcome firms seek through entrepreneurship and is often the source of

competitive success for firms competing in the national and global economy. The concept of

innovation was first introduced in to entrepreneurial process by Schumpeter (1934). He

suggested that innovation was a process of creative destruction where wealth was created when

existing market structures were disrupted by the introduction of new products that shifted

resources away from existing firms and caused new firms to grow. He maintained that

innovation contributes to the growth of the economy because entrepreneurs bring innovation by

the introduction of new or improved products, opening up of a new market, the identification of

new source of supply of raw materials and the creation of new type of industrial organization.

After Schumpeter’s work, the acceptance of entrepreneurship activity as a process stimulating

innovation has received the attention of several authors and the concept has been widely defined,

among which was the Organization of Economic Cooperation Development (OECD, 2005)

which defines innovation as the implementation of a new or significantly improved product,

production process, marketing method or a significant organizational change.

The study of Narver and Slater (1990) appears to be the basis of all other studies in the field of

market orientation. They were the first to highlight and prove the relationship between customer

orientation and performance. Similarly, Slater and Narver (2000) concluded that market

orientation and business performance are positively connected. Shehu (2014) confirms positive

relationship between market orientation and firm performance. Grinstein (2008) examined the

impact of market orientation on performance with emphasis on communicative capabilities. The

Page 3 of 11

Journal for Studies in Management and Planning

Available at https://pen2print.org/index.php/jsmap/

ISSN: 2395-0463

Volume 04 Issue 09

September 2018

Available online: https://pen2print.org/index.php/jsmap/ P a g e | 55

result indicated that market orientation directly or indirectly affects performance through

communicative capabilities.

A market oriented firm which has excellent market information gathering and processing

abilities is able to predict the requirements and changes in markets accurately and quickly,

allowing them to respond quickly and appropriately (Wang & Huang, 2011). They argued that an

organization with market orientation kept it response to market before the competitors enter the

market. In other words, Firms with strong market orientation stress on innovation. For

organizations to achieve superior competitive advantage, they must provide customers with

products with superior value in comparison with its competitors.

Since market oriented firms are skilled at assessing and responding to customer’ latent needs,

they are more likely to be first to market with new generation of existing products (Jain and

Bhatia, 2007), they are more likely to engage in brand and line extensions to new target markets

(Baker and Sinkula, 1999). A significant relation was established between market orientation and

technical and administrative innovations (Han et al, 1998). Firms with strong market orientation

listen to their customers’ manifest needs and react by fine tuning their brand and product line to

meet these needs.

There is a strong theoretical support for a market orientation-profitability relationship. (Hult and

Ketchen, 2001) including effects in small firms. Firms with strong market orientation should be

able to generate higher profits margins than firms with weaker market orientation. Higher profits

are the result of greater synergies between target market selection, product development, pricing

strategies, distribution and promotion, which enables the delivery of products that are customized

to meet the needs of specific target markets. Thus direct effect of market orientation reflects a

broader competency to add value by targeting complete marketing mixes (product, price, place

and product) to specify customer niches.

Hernard and Szymanski (2009) identified positive connection between market orientation and

innovativeness. Salavou et al. (2004) further showed that market oriented SMEs facing strong

competition tended to be more innovative. They found that market orientation increased the

SMEs innovative activities.

In addition to consumer related market orientation, more recent studies have focused in the

critical need for proactive orientation in business-to-business customer relation (Blocker and

Flint, 2007). Customers require that suppliers bring new ideas and solution to them in the

information technology industry, report indicated that some customers terminated supplier

relationships that did not provide value added through forward looking solution (Flint et al;

2011). Other studies showed that need for adaptive foresight versus rear view mirror approach to

customer service as important for building long-term customer value (Narver et al; 2004).

Naidoo (2010) acknowledges that innovativeness lately depends on the firms willingness to

adapt market oriented strategies by generating relevant market information, disseminating the

information and acting up on it. The rationale behind this is that market responsive firms display

a high commitment towards rapidly evolving customers’ needs and constantly seek to ensure