European Journal of Innovation ManagementThe role of technological and organizational innovation in the relation between marketorientation and performance in cultural organizationsCamarero Carmen Garrido María José

Article information:To cite this document:Camarero Carmen Garrido María José, (2008),"The role of technological and organizational innovation inthe relation between market orientation and performance in cultural organizations", European Journal ofInnovation Management, Vol. 11 Iss 3 pp. 413 - 434Permanent link to this document:http://dx.doi.org/10.1108/14601060810889035

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The role of technological andorganizational innovation in the

relation between marketorientation and performance in

cultural organizationsCamarero Carmen and Garrido Marıa Jose

University of Valladolid, Valladolid, Spain

Abstract

Purpose – This paper aims to provide evidence of the mediating effect of technological andadministrative innovation on the link between market orientation and the economic and socialperformance of museums.

Design/methodology/approach – Building on extensive literature, a model of the relationships isdeveloped and empirically tested using survey data collected from 276 museums (135 Spanish and 141French). Data are analyzed through structural equation modeling and/ or path modeling.

Findings – In the present study, evidence is found to support the positive and significant linkbetween market orientation and the economic and social performance of museums. The paperstatistically shows that although the linkage between market orientation and performance issignificant, what best accounts for enhanced performance is technological and organizationalinnovation.

Practical implications – This study has implications for museums aiming to increase theirperformance and innovativeness. The study suggests that museum managers should includetechnological and organizational innovation in models of market orientation to enhance theexplanations of the economic and social performance. This study suggests the innovation is importantmediator.

Originality/value – The paper suggests that museum managers need to consider the impact oftechnological and administrative innovations on achievement of organizational performance.

Keywords Market orientation, Innovation, Museums, Performance management,Non-profit organizations, Spain

Paper type Research paper

1. IntroductionScholars have concluded that market orientation is, whilst a necessary condition,insufficient to gain sustainable competitive advantage (Day, 1994a; Slater and Narver,1995; Dickson, 1996; Han et al., 1998; Baker and Sinkula, 1999; Baker and Sinkula,2002). There is a recent line of research which affirms that organizations who merge apropensity to innovate – innovativeness – with market orientation achievesustainable competitive advantage (Han et al., 1998; Santos et al., 2000; Matear et al.,2002; Agarwal et al., 2003; Leskiewicz and Sandvik, 2003; Berthon et al., 2004; Hult andKetchen, 2001; Hult et al., 2004; Verhees and Meulenberg, 2004; Aldas-Manzano et al.,2005; Woodside, 2005; Zheng et al., 2005; Menguc and Auh, 2006; amongst others). Theprevious argument may be justified in the light of the resource-based theory

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European Journal of InnovationManagement

Vol. 11 No. 3, 2008pp. 413-434

q Emerald Group Publishing Limited1460-1060

DOI 10.1108/14601060810889035

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(Wernerfelt, 1984). According to this theory, firms gain competitive advantage bychanneling resources towards the development of new products and processes. Theseinnovations represent firms’ proactive response to changes in the environment. Thus,the organization is able to obtain some kind of advantage, which translates intosuperior outcomes.

Although various authors have concurred in pointing out the necessary relationbetween market orientation and innovativeness in for-profit organizations, this relationis yet to be evidenced in the case of nonprofits and more specifically for culturalorganizations. This study aims to provide evidence of the mediating effect oftechnological and administrative innovation on the link between market orientationand the economic and social performance of museums. Previous research into thenonprofit sector has focused on the following areas:

. exploring the connection between market orientation and performance(Balabanis et al., 1997; Caruana et al., 1998b; 1999; Bennet, 1998; Voss andVoss, 2000; Wood et al., 2000; Cervera et al., 2001; Vazquez et al., 2002; Gainer andPadanyi, 2002, 2005; Seymour et al., 2006; Shoham et al., 2006; Camarero andGarrido, 2007; amongst others);

. examining the differences in the innovation process between for-profit andnon-profit organizations (Barczak et al., 2006; Hull and Lio, 2006); and

. exploring the link between innovation and performance (Burt and Taylor, 2003;Voss et al., 2006).

From this review, we can conclude that empirical research into market orientation,innovation and their impact on performance in nonprofit organizations remains sparseand incomplete, and that exploring the role of innovativeness in nonprofit culturalorganizations such as museums proves interesting and necessary.

The other contribution of this work is the analysis of innovativeness and marketorientation in a special context such as museums and cultural organizations. To makethem more accessible to a wide audience and to attract funds from donors andsponsors, museums are organizing an increasing number of large-scale events and areinvesting in improving exhibitions and scenography, as well as in technical resources(digital catalogues, software applications, educational programs, virtual visits, andweb publications). Moreover, significant changes have been introduced into somemuseums’ organizational structure to include staff from a range of trainingbackgrounds (art, history, business management, etc.). Museums are thus adopting aninnovativeness orientation. This application of innovation to museum management,however, has to be interpreted in the context of the museums’ missions: preservingculture and heritage by custody and research and fostering an interest in culture andeducation. Museums are constantly striving to achieve a trade-off between remainingmission-driven, while at the same time borrowing marketing strategies from for-profitbusinesses.

The work is organized as follows. We first review the literature on the mainconcepts of this research: market orientation, innovation and performance and specifythe hypotheses of the model reflected by the interrelations between the proposedvariables. We then empirically compare the hypotheses for a sample of Spanish andFrench museums. The final sections of the work offer the conclusions and implicationsfor managers in nonprofit organizations.

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2. Conceptual model and hypothesis2.1 Market orientation and performance in cultural organizationsThe two definitions of market orientation to achieve widest acceptance in the literatureare those proposed by Narver and Slater (1990), who stress the cultural perspective ofmarket orientation, and Kohli and Jaworski (1990) who focus on the behavioralperspective. According to Narver and Slater (1990), market orientation is founded onthree constructs: consumer orientation, competitor orientation and interfunctionalcoordination. For their part, Kohli and Jaworski (1990) base market orientation on threeelements: the organization’s creation of a market intelligence, dissemination of thatintelligence through all departments, and organizational response selecting marketsand designing products and services to meet present as well as future needs. Cadoganand Diamantopoulos (1995) point out that the three components of market orientationproposed by Narver and Slater (1990) overlap with those proposed by Kohli andJaworski (1990) in various conceptual and operative aspects. Indeed, as Varadarajanand Jayachandran (1999) state, both approaches prove equally useful and reconcilable.

However, in the case of nonprofit organizations, Liao et al. (2001) feel that theconcept of market orientation should be replaced by social orientation, which should befounded on: stakeholder orientation, competitor orientation, cooperation orientation,and interfunctional coordination. They argue that in this type of organization, morethan a concern for satisfying short-term consumer needs, the focus is on achievinglong-term benefit for society. Adopting a similar perspective, Alvarez et al. (2002) feelthat cultural market orientation should promote external orientation to the relevantpublic, internal integration and coordination of the various departments, areas oremployees, and long-term management of relations.

On the basis of these works we consider that market orientation in the context ofmuseum and cultural activities management involves:

. Customer or visitor orientation. Understanding the needs and wishes of thevisitor and aiming to satisfy them is at the heart of the financial and social goalsof cultural organizations.

. Donor orientation. In arts and cultural organizations the involvement of thevarious stakeholder groups such as donors, employees, volunteers orgovernment is important. Aiming for a multi-faceted approach covering allthese groups is vital, although of particular relevance is donor orientation andvisitor orientation since they constitute the two cornerstones through which thefinancial goals of these organizations can de achieved. It should not be forgottenthat donation, patronage and sponsorship play a major role in maintaining artsinstitutions and are indispensable to keep arts institutions alive(Stokburger-Sauer and Wetzels, 2007).

. Competitor orientation. Competitor orientation in the cultural context involvescontemplating the possibility of the organization’s cooperating with other similarorganizations as well as with the public and private sector (Liao et al., 2001).Competitors should not be perceived as a threat but rather as a source ofcooperation, with a view to generating a joint competitive response to satisfyboth beneficiaries and resource providers (Alvarez et al., 2002).

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. Interfunctional coordination. Through interfunctional coordination, informationis shared amongst all members of the organization, thus creating synergieswhich enable objectives to be accomplished.

Several authors have explored the importance of market orientation in nonprofitorganizations and its impact on performance (Stewart, 1991; Balabanis et al. 1997;Bennet, 1998; Caruana et al., 1998b, 1999; Voss and Voss, 2000; Cervera et al., 2001;Gainer and Padanyi, 2002, 2005; Vazquez et al., 2002; Camarero and Garrido, 2007). Asstated, our study is framed within the context of museums, as one type of culturalorganization. A clarification of what we mean when we refer to museum performance isthus essential. Andreasen and Kotler (2002), and Mottner and Ford (2004) point out thatany measure of efficiency in museums must take into consideration both educational aswell as financial goals. In the same vein, McMillan et al. (2005), and Gainer and Padanyi(2005), feel that the results to emerge from a marketing strategy applied to museumsmust be assessed in economic and non-economic terms. Following on from theseapproaches, in our study we consider two types of performance: economic and social.The economic perspective, in addition to including the acquisition of resources, shouldbear in mind other aspects, such as boosting visitor numbers, increasing the number offriends, generating funds through temporary exhibitions or job creation. All of theseeconomic goals are aimed at safeguarding the museum’s survival and profitability. Forits part, the social perspective of performance deals with the benefits obtained byindividuals or the community as a whole, for instance, aspects such as visitor education,their satisfaction, the standard of living of local residents or the area’s image.

As regards the impact of market orientation on nonprofits’ performance, in the light ofthe meta-analysis carried out by Shoham et al. (2006) to assess the impact of marketorientation on the performance of nonprofit organizations (voluntary and nonprofitorganizations – VNPOs), market orientation affects VNPOs’ organizational performancepositively and the market orientation-performance link is stronger in VNPOs than infor-profits. In the case of museums and cultural organizations, various studies estimatethat customer orientation, concerned with determining the needs, interests andpreferences of visitors, and designing programs, activities and experiences to try tosatisfy them, will lead to a superior economic performance (Pelham and Wilson, 1996;Gainer and Padanyi, 2005; Woodside, 2005). Interesting exceptions worthy of note are theworks of Voss and Voss (2000), in the theater industry, and Wood et al. (2000), inhospitals, which find a low and non-significant correlation between market orientationand performance. Voss and Voss (2000) examine the impact of customer orientation on avariety of subjective and objective economic performance measures in the nonprofitprofessional theater industry. Their findings indicate that a customer orientation isnegatively associated with financial performance. Wood et al. (2000) have also failed tofind a non-significant relationship. A management approach more oriented towards anawareness of the needs and interests of donors and others providing funds is alsoexpected to lead to superior economic performance. As for competitor orientation, thereis little research analyzing the effect of competitor orientation on performance innonprofit contexts (Voss and Voss (2000)). However, previous works have supported thepositive effect of competitor orientation on economic performance in profit contexts(Gatignon and Xuereb, 1997; Day and Nedungadi, 1994; Lukas and Ferrell, 2000). Finally,empirical evidence supports the positive association between interfunctional

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coordination and performance (Atuahene-Gima, 1996). As such, Voss and Voss (2000)proposed that interfunctional coordination exerts a direct, positive effect on artorganizations’ performance. A summary of the main findings to emerge from these andother works is detailed in Table I.

With regard to the link between market orientation and social performance, itshould be stressed that the primary benefit of implementing the marketing concept isgenerally considered to be achieving a high level of customer satisfaction (Agarwallet al., 2003; Gainer and Padanyi, 2005). Some ways in which customer orientation isreflected in museums is via contact with the current audience, through concerts,exhibitions, conferences, or other events, as well as contact with the potential audience,through children’s and school programs, discounts or special free visits. Theseactivities allow the museum to have a direct contact with visitors and non-visitors andincrease the knowledge of the audiences’ expectations. Gainer and Padanyi (2002)demonstrate that when organizations build an understanding of their audience’sinterests into their creation they produce work that leads to higher levels of audiencesatisfaction. Similarly, as pointed out earlier, a donor orientation is expected to lead todonors making a greater financial contribution to the organization, which will helpaccomplish some of the museum’s social goals, such as conservation, restoration, or

Authors Domain of the studyAspects impacted by marketorientation

Stewart (1991) University education system Attracting and retaining students

Balabanis et al. (1997) Charity organizations Achieving short-term andlong-term organizationalobjectives

Bennett (1998) Charity organizations Fundraising

Caruana et al. (1998b Public sector and universityeducation

Achieving enhanced performance

Cervera et al. (2001) Local government Achieving enhanced performance(measured objectively andsubjectively)

Gainer and Padanyi (2002,2005)

Arts organizations Consumer satisfaction andattracting more funds

Vazquez et al. (2002) Private nonprofit organizations Meeting the needs of beneficiariesand the expectations of donorsand fulfilling the organization’smission

Camarero and Garrido (2007) Museums Achieving social performance(visitor satisfaction, education,etc.) and economic performance(revenue, profitability, tourists,etc.)

Voss and Voss (2000) Theater industry No relation found

Wood et al. (2000) Hospitals No relation found

Table I.Impact of market

orientation onperformance innonprofit areas

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even enhancing image or prestige. Moreover, offering the visitor a wider range throughan increased number of other cultural organizations or products or services is likely topromote visitor interest in cultural activities as a whole or have an impact on the area’simage. Therefore, we posit the following hypothesis:

H1. Market orientation in museums is positively linked to economic and socialperformance.

2.2 Innovation in museums and cultural organizationsInnovativeness in business is therefore the degree to which a firm creates new productsand services using accumulated knowledge from consumers, competitors andtechnology (Deshpande et al., 1993). In marketing literature the most widely accepteddefinition of the term refers to breakthrough innovation (Han et al., 1998). However, inmuseums, and in nonprofit organizations in general, the most common innovations arecontinuous or incremental, such as frequent improvements and changes in certainaspects of the services provided (temporary exhibitions, educational programs, friendsprograms, and so on.) and advances in the technology used (digital catalogues, virtualvisits, or web publications). It is also true that new technologies have afforded thepossibility to implement breakthrough innovations, above all those that are marketbased, which through the use of new technologies already tested in other areas(technological developments in the world of image, communication, design, aesthetics,architecture, etc.) help museums to reach new markets or create new expectations,interests and experiences for the visitor.

Barczak et al. (2006) recently stated that the development process for newprograms/products by large nonprofit organizations is characterized by relevance ofsocial objectives, flexibility, the weight of external sponsors and the difficulty inassessing the long-term success of the new program. This kind of organization’saversion to risk has a negative impact on their ability to learn and to create a favorableenvironment for R&D geared towards product innovation. Hull and Lio (2006) thusposit that process innovation more than product innovation best suit the interests ofthis type of organization as they are less risky and less costly. This line embraces anorganizational and management innovation, evidenced in the application of newmanagement styles which adopt a business rather than a custodial approach.Increasingly evident is the concern to generate funds through various marketingpractices. Further, in their policies and planning, museums attach growing importanceto involving the public. Visiting a museum is akin to forming part of a show. In order tomake museums more accessible to a wider audience and particularly to visitors who donot tend to visit traditional museums, there are a growing number of events such asretrospective exhibitions on themes and artists targeting a wider audience. Theconventional role of a museum, which was to focus on its task and exhibit a collectionof art, has changed. Museums are adopting more of a business approach in order tomake the museum and its collections more accessible to the public.

In short, those innovations that are central to current museum management fall intotwo groups:

(1) Technical and technological innovations, such as those linked to technologyapplied to products, services or production processes for such products orservices.

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(2) Organizational and management innovations, such as those linked toorganizational structure or administrative processes. This would also spanall innovations related to the marketing or dissemination of the museum.

2.3 The mediating role of innovationThe impact of innovation as a mediating variable in the relation between marketorientation and performance is one of the newest proposals to emerge in marketorientation research. Although there are no specific works exploring technologicalorganizational and marketing innovation in museums and the link to marketorientation, we can report the results obtained in for-profit service organizations andtranslate them to the area of cultural services.

As regards the impact of market orientation on innovation, the bulk of thetheoretical and empirical literature concludes that market orientation entails a constanteffort in innovation (Han et al., 1998; Hurley and Hult, 1998; Lukas and Ferrell, 2000;Santos et al., 2000; Matear et al., 2002; Agarwal et al., 2003; Leskiewicz and Sandvik,2003; Hult et al., 2004; Verhees and Meulenberg, 2004; Aldas-Manzano et al., 2005;Kurtinaitiene, 2005; Menguc and Auh, 2006; amongst others). It is specifically in theseminal work of Zaltman et al. (1973) that the idea of innovativeness as the key tobusiness success takes shape and that it is based on accurate gathering of informationon the market. Jaworsky and Kohli (1993) also state that “market orientation basicallyimplies doing something new or different as a response to market conditions and thismay be perceived as a kind of innovative behavior”. Slater and Narver (1994) suggestthat those firms that are market oriented boost the level of innovation and thereforeenjoy greater success when marketing new products. In this vein, Santos et al. (2000)provide empirical evidence to the effect that, in addition to being more willing toinnovate, firms who are more business oriented, consequently market a greater numberof innovations than their competitors and, also innovate to a higher degree. Lukas andFerrell (2000) have established that a firm’s degree of product innovation variesproportionally with the firm’s involvement in market orientation. Thus, consumerorientation and interfunctional coordination increase the launching of new productswhereas competitor orientation lessens it. Leskiewicz and Sandvik (2003), for the hotelsector, also conclude that market orientation has a more intense positive impact on thecreation of new products for the market. Finally, Atuahene-Gima et al. (2005) examinethe effects of responsive and proactive dimensions of market orientation on newproduct program performance. They find that responsive market orientation is onlypositively related to new product program performance under specific conditions suchas when the strategic consensus among managers is high. On the other hand, thepositive effect of proactive market orientation on new product program performance isfurther strengthened when learning orientation and marketing power are high.

As regards the impact of innovation on performance, the theoretical and empiricalliterature reflects the importance of firms innovating to achieve enhanced performance.In the for-profit sector, recent studies have explored the impact of innovation onperformance (Han et al., 1998; Agarwal et al., 2003; Hult et al., 2004; Zheng et al., 2005;Farhangmehr et al., 2006; Keskin, 2006; amongst others). Han et al. (1998) haveestablished that firms can face environmental challenges and uncertainty throughincorporating technical and managerial innovations in their organizational structure,which will help them to achieve superior performance. Further, the authors posit that

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the two kinds of innovation interact positively and produce a synergetic effect onperformance. Similar findings to those of Han et al. (1998) were reported some yearslater by Agarwal et al. (2003). Hult et al. (2004) concur, pointing out that firms whodisplay a greater ability to innovate will respond more successfully to environmentalchanges and will develop skills enabling them to gain some kind of competitiveadvantage and, hence, better performance. In the same vein, Zheng et al. (2005)evidence that both technical as well as market innovations positively impactperformance, the former having a deeper repercussion than the latter. In recentpublications, Farhangmehr et al. (2006), and Keskin (2006), also manifest the positiveimpact of innovation on performance.

Research into innovation and its impact on performance in the nonprofit sectorremains meager. We have been able to find only two works: Burt and Taylor (2003) andVoss et al. (2006). In the former, Burt and Taylor (2003) examine for the case of twovolunteer organizations how information and communication technologies favorinnovations in this kind of organization. The findings evidence how innovation allowsa better delivery of the services offered and a greater impact of any kind of campaign,in addition to promoting organizational changes standardizing certain activities. Fortheir part, Voss et al. (2006) find that innovation is positively and significantly linked toobjective performance in the theater industry (revenue through royalty, tickets, etc).

With regard to the mediating role of innovation, we find few works that showevidence on different contexts. Han et al. (1998), in the case of banks, find a positive andsignificant effect for each of the components of market orientation on technological andadministrative innovations. The authors feel that innovation plays a mediating rolebetween market orientation and performance. Matear et al. (2002) also provideempirical evidence on the two-fold impact for service firms:

(1) the positive and significant impact of market orientation on performance; and

(2) the mediating role of innovation between market orientation and performance.

Taking the work of Han et al. (1998) as a base, for the hotel service industry, thefindings of Agarwal et al. (2003) bear out this hypothesis: innovation mediates thelinkage between market orientation and performance. To measure performance,subjective measures are used which judge management perception of economic orsocial gain. Menguc and Auh (2006) recently evidenced that in firms where there is awillingness to innovate, market orientation impact on performance is positive, whereasin the opposite case market orientation impact on performance is non-existent(Figure 1). To sum up, based on all of these approaches and on this empirical evidenceit seems reasonable to posit the following hypothesis:

H2. Innovation in museums mediates the link between market orientation andeconomic and social performance.

3. Methodology and results3.1 The survey: the sample and sending the questionnaireThe empirical work is based on the analysis of information provided by museums inthe sample group, gathered from a postal survey forwarded to museum curators. In asubsequent effort to improve the response rate we made a series of phone calls throughwhich we contacted the museum curator directly. Drawing up the questionnaire firstrequired a thorough examination of the particulars of this kind of organization as well

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as holding various meetings with the museum curators. This initial contact enabled usto elaborate a pretest, which after a series of filters, yielded the final questionnaire. Thedomain consisted of 1,900 museums (900 Spanish and 1,000 French) included in therespective Spanish and French Ministry of Culture website. The total number orresponses gathered throughout the process once the incomplete questionnaires hadbeen removed was 276 (135 Spanish and 141 French), representing a response rate of14.5 percent, a percentage that is more or less the same response rate as other researchaimed at similar goals. The only incentive for the curator was the promise of beingforwarded a copy of the findings when the study was concluded.

Museums in the sample spanned different thematic areas: archaeology, contemporaryart, decorative art, fine arts, science and technology, natural sciences, ethnographyanthropology or history (see Table II). As regards the size of the museums, 21.5 percentreceive below 5,000 visitors per year, 18.2 percent between 5,000 and 10,000, 20.2 percentbetween 10,000 and 20,000, 20.7 percent between 20,000 and 50,000, 10.9 percent between50,000 and 100,000 and 8.5 percent over 100,000. Finally, with regard to the question ofownership, 77.3 percent are publicly managed and the rest privately (includingfoundations and a small percentage run by the Catholic Church).

3.2 MeasuresAs regards the measures of the various concepts, we adopted those existing scalespreviously validated by other authors, adapting the items to the area of museums.

Figure 1.Proposed model

ManagementType of museum n % n %

Archaeological 77 (27.9) Public 213 (77.2)Contemporary art 31 (11.2) Church 7 (2.5)Decorative art 41 (14.9) Foundations 24 (8.7)Fine arts 76 (27.5) Private 32 (11.6)House-centre 5 (1.8)Science and technology 22 (8.0)Natural sciences 27 (9.8)Place 16 (5.8)Specialised 28 (10.1)Ethnography and anthropology 65 (23.6)History 73 (26.4)Other 28 (10.1)

Table II.Sample distribution

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To measure market orientation we followed the scale proposed by Narver and Slater(1990), added to which we also considered the works exploring the importance of donororientation (Liao et al., 2001; Alvarez et al., 2002). We therefore structured marketorientation of museums and arts centers into four dimensions: visitor orientation(measured using five indicators), donor orientations (five indicators), competitororientation (two indicators) and interfunctional coordination (three indicators). Toadapt the indicators to the setting of museums we had to take into account the work ofBalabanis et al. (1997), and Caruana et al. (1998a, b). Items were measured on afive-point scale where 1 indicates “Strongly disagree” and 5 indicates “Strongly agree”.In order to validate this multidimensional scale of market orientation, we carried out asecond order confirmatory factorial analysis (Lisrel 8.7), the outcomes of which areshown in Table III.

Likewise, innovativeness was considered a multidimensional concept covering twofundamental aspects in the case of museums: technological innovation andorganizational innovation. To measure technical innovation we used a reflectivescale of five indicators that indicate the level of involvement and interest shown by themuseum in adopting new resources and technologies for museum management, indisplaying exhibits or in attention to visitors. Organizational innovation is reflected ona scale of three indicators that refer to organizational changes, particularly theexistence of a multidisciplinary management approach with a greater presence in areasof business management. The scales used to measure this kind of innovation are drawnfrom the works of Dalton (1968), Daft (1982), Damanpour (1991), Perri 6 (1993), Hanet al. (1998) and Agarwal et al. (2003). Once again, for the validation of innovativenesswe considered a second order confirmatory factorial model. The finding shown inTable IV bears out the validity of the proposed scale.

In order to analyze the reliability of the scales, we evaluate the Cronbach’s alpha, thecomposite reliability and the average variance extracted (AVE) of each latentconstruct. All the values are acceptable, except for the case of organizationalinnovativeness (Table V). Although the AVE of this constructs is questionable, thecomposite reliability is near of the recommended threshold (0.7), therefore, we considerit reliable. Discriminant validity is established by comparing the square root of AVEwith the correlations among latent variables. We prove for each reflective constructthat the square root of its AVE is greater than its correlation with any other construct.

Finally, a second-order formative scale was used in order to measure performance.Economic performance was measured using two scales. The first considers theevolution of the museum’s performance in recent years (Day and Wensley, 1988;Siguaw et al., 1998; Agarwall et al., 2003), whereas in the second a comparison wasdrawn with the results from other similar museums. To measure the socialperformance, a scale was created which covered the achievements related to visitorsatisfaction and interest, reputation and prestige, impact on residents and on the areaor conservation and enhancement of the collection (Mottner and Ford, 2004). Table VIsums up the measures. The three performance dimensions are measured as formativefirst-order models, therefore reliability is not meaningful. However, several authorssuggest testing the external validity of formative constructs. Diamantopoulos andWinklhofer (2001) recommend using a MIMIC model in order to test the validity of aformative scale, or, alternatively, estimating the indicators’ correlations with anexternal variable (Jarvis et al., 2003; Diamantopoulos et al., 2008). These methods

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Latent variables and indicators Mean SD Loadingsa t-value

Visitor orientationMuseum strategy is based on those aspects whichwe feel may create value for the visitor 4.07 0.997 0.822 naThe museum’s goals are geared towards visitorsatisfaction 4.24 0.978 0.907 18.44We endeavour to keep abreast of changes so as toassess their impact on visitors’ needs 3.99 1.027 0.813 15.98Seeking to pinpoint visitors’ needs andexpectations is a constant process 3.79 1.116 0.735 13.76Strategies aimed at gaining an advantage overother museums when seeking resources are basedon an understanding of visitors’ needs 3.60 1.145 b

Donor orientationMuseum strategy is designed taking into accountthose aspects which we feel may create value fordonors of resources 3.34 1.185 0.858 naThe museum’s goals are geared towards donorsatisfaction 3.14 1.203 0.876 19.55We endeavour to keep abreast of changes so as toassess their impact on the expectations of thosewho provide resources 3.34 1.102 0.871 19.28Seeking to pinpoint donors’ needs and expectationsis a constant process 3.09 1.134 0.855 18.69Strategies aimed at gaining an advantage overother museums when obtaining resources arebased on an understanding of donors’ expectations 2.95 1.189 b

Competitor orientationWe make an effort to cooperate with other forms oftourism or leisure which complement what we haveto offer 3.85 1.205 0.858 naWe cooperate with other cultural or leisureinstitutions to provide alternatives for visitors or tooffer joint initiatives 3.96 1.220 0.918 15.84

Interfunctional coordinationStaff in the various departments work closelytogether 3.76 1.165 0.875 naThe museum is concerned with ensuring that theactivities of all the departments are wellcoordinated 3.87 1.140 0.980 24.26All departments are involved in drawing up themuseum’s plans 3.61 1.209 0.796 17.14

Market orientationVisitor orientation 0.877 13.21Donor orientation 0.541 8.09Competitor orientation 0.787 11.58Interfunctional coordination 0.797 12.61

Notes: Goodness of fit: x 2 (58) ¼ 184.586 (p ¼ 0.000); RMSEA ¼ 0.081; GFI ¼ 0.915; AGFI ¼ 0.867;CFI ¼ 0.976. aStandardized loadings; bDelated items

Table III.Market orientation.

Descriptive statistics andsecond order CFA

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involve including reflective indicators or a global measure summarizing the essence ofthe construct (valid criterion). As we have not included reflective indicators or validcriterion, we evaluated the multicollinearity of the indicators. Multicollinearity is anundesirable property in formative models as it causes estimation difficulties becausethe formative measurement model is based on a multiple regression (Diamantopoulosand Winklhofer, 2001). The variance inflation factors (VIF) for each indicator indicatethe possible presence of collinearity. In this study, all VIFs are less than 2.3, whichindicate no multicollinearity (see Table VI). Once the multicollinearity was evaluated,the first-order constructs (economic performance, comparative performance, and socialperformance) were reduced to a single index and were introduced in the structuralmodel as formative indicators of the global construct (performance).

3.3 Estimation of the modelHaving reduced the first order reflective scales (visitor orientation, donor orientation,competitor orientation and interfunctional coordination) and the formative scales(economic performance, comparative performance and social performance) to a singleindex (arithmetic mean) in order to simplify the final structural model, we estimated

Latent variables and indicators Mean SD Loadingsa t-value

Technological innovationAt the museum we are deeply committed toadopting new technologies and resources aimed atenhancing management and administration

3.70 1.164 0.679 na

At the museum we are deeply committed to usingnew resources and technologies to assist thevisiting public

3.63 1.142 0.730 17.88

In general, we have incorporated numeroustechnical innovations at the museum in recentyears

3.18 1.261 0.919 13.37

We are one of the leading museums in the use oftechnical resources

2.80 1.223 0.911 13.30

We cooperate with other institutions or firms toimprove the technology and innovationsimplemented at this museum

3.03 1.325 0.733 11.08

Organizational innovationIn general, in recent years significant changes havebeen introduced into the museum’s organizationalstructure

3.21 1.432 0.479 5.99

The museum management has a background andtraining in company management

2.83 1.400 0.699 na

The museum management strives to take on stafffrom a range of training backgrounds

3.17 1.395 0.656 7.14

InnovativenessTechnological innovation 0.741 7.45Organizational innovation 0.809 9.73

Notes: Goodness of fit: x 2 (18) ¼ 56.067 (p ¼ 0.000); RMSEA ¼ 0.087; GFI ¼ 0.951; AGFI ¼ 0.902;CFI ¼ 0.978c; aStandardized loadings

Table IV.Innovative orientation.Descriptive statistics,reliability and secondorder CFA

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Visitor

orientation

Donor

orientation

Com

petitor

orientation

Interfunctional

coordination

Technological

innovation

Organizational

innovation

Visitor

orientation

0.8

20a

Donor

orientation

0.486

0.8

65

Com

petitor

orientation

0.667

0.459

0.8

14

Interfunctional

coordination

0.708

0.388

0.629

0.8

86

Technological

innovation

0.270

0.157

0.309

0.363

0.8

00

Organizational

innovation

0.342

0.207

0.205

0.261

0.603

0.6

18

Cronbach’salpha

0.873

0.894

0.844

0.886

0.883

0.582

Com

positereliability

0.891

0.922

0.796

0.916

0.898

0.645

Averagevariance

extracted

0.674

0.748

0.662

0.786

0.641

0.382

Note:aIn

thediagonal

appears

thesquared

root

ofAVE

Table V.Correlation matrix and

reliability

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the proposed model. Our model includes reflective and formative constructs, we optedfor the Partial Least Squares (PLS) approach as the estimation model. This approachalso allows us to work with variables not normally distributed and is robust forsmall-to-moderate sample sizes. The model was estimated using SmartPLS (Ringleet al., 2005). The level of statistical significance of the coefficients of both themeasurement and the structural models was determined through a booststrapre-sampling procedure (500 sub-samples).

In order to satisfy the mediating effect of innovativeness, we followed the proceduresuggested by Baron and Kenny (1986). The first step in the analysis was to fit a directeffects model that estimated the direct path of market orientation and innovativenessto performance, with no mediating paths (Model 1 in Table VII). As we can observe,both effects are significant. Next, we estimated the mediating model, with no directeffect from market orientation to performance (Model 2 in Table VII). Although we donot have goodness of fit indices, the results indicate that this model improves the R 2

value and achieves a greater explanation of performance. The final model examines thedirect effect of market orientation on performance, including the mediating effect(Figure 2). We observe that the three paths are significant and that this model increases

Variables Indicators Mean SD VIF

Economic performance Over the last three years the centre’s own revenuehas increased

3.10 1.373 1.583

Over the last three years jobs have been created 2.87 1.576 1.126Over the last three years the number of visitors hasrisen

3.38 1.364 1.554

Over the last three years our centre has fullyaccomplished its financial goals

3.15 1.218 1.238

Comparative performance With regard to other similar museums:Our museum’s financial results are better 2.72 1.160 1.877Our museum receives more visitors 3.30 1.276 1.368Our museum obtains more revenue through visitorsand private donors

2.60 1.224 1.952

Our museum is more competitive in business terms 2.55 1.181 2.071

Social performance Over the last three years our centre has enhanced itsreputation and prestige

3.90 0.998 1.588

Visitors display enthusiasm and satisfaction aftertheir visit

4.33 0.709 1.822

Many visitors return or recommend a visit to others 4.14 0.869 2.266Our centre is contributing to an improvement in thestandard of living of local residents

3.45 1.132 1.358

Over the last three years our centre has fulfilled itsobjectives regarding conservation or improvementof the collections it houses

3.84 1.057 1.418

The centre has contributed to a greater awarenessamongst the community of the exhibits it displays

4.01 0.915 1.759

The centre contributes to increasing visitor interest(they are keen to know more after the visit)

4.04 0.866 1.885

Our centre has become a cultural reference point forthe area

3.85 1.096 1.633Table VI.Performance. Descriptivestatistics

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significantly the explanation of performance (R 2 ¼ 0.40). Further, the results indicatethat the index of performance is formed by economic and social performance, whereasthe weight of comparative performance is not significant. Also, we obtain adequatereliability estimates for the three second-order constructs: market orientation,innovativeness and performance (Table VIII).

Finally, we calculate Sobel mediation test statistic (Sobel test ¼ 3.98, p ¼ 0.000). Itindicates that the indirect effect of market orientation on performance throughinnovativeness is significantly different from zero. As hypothesized, the associationbetween market orientation and performance is significantly reduced by the inclusionof innovativeness in the model.

Figure 2.Estimation of structural

model. Direct andmediating effect ( *)

Model 1 Model 2(Direct effects) (Mediating effect)

Innovativeness Performance Innovativeness Performance

Market orientation 0.32 0.54 0.32 –(t ¼ 5.87) (t ¼ 9.60) (t ¼ 5.87)

Innovativeness – – – 0.56(t ¼ 13.73)

R 2 0.10 0.30 0.10 0.32

Note: aStandardized coefficients

Table VII.Estimation of rival

modelsa

Cronbachs alpha Composite reliability AVE R 2

Market orientation 0.788 0.864 0.620 naInnovativeness 0.749 0.888 0.799 0.103Performance na na na 0.396

Table VIII.Constructs’ reliability and

R 2

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As can be seen from the previous results, we can bear out the mediating effect ofinnovation in the link between market orientation and performance. The estimationindicates that market orientation positively impacts performance (the total effect ofmarket orientation on performance is b ¼ 0.49), supporting H1, although this effectoccurs mainly through innovativeness (H2). When we include the path betweeninnovativeness and performance, the direct link between market orientation andperformance is reduced. This evidences that the best way to account for the outcomesis by considering innovation as a mediating variable.

4. DiscussionMuseums are showing a growing concern to achieve not only their social objectives,but also their financial goals. While social objectives continue to focus onaccomplishing their mission as regards research, education, custody of culture andpassing it on through visitor motivation and satisfaction, financial goals involvegenerating more revenue, which is linked to increased visitor numbers and more jobs.To achieve these objectives, vis-a-vis museum management as well as in terms ofacademic concerns, greater emphasis is being placed on market orientation whichtakes into account visitors, donors, competition and cooperation amongst all themuseum stakeholders and managers.

In the present study we find evidence to support the positive and significant linkbetween market orientation and the economic and social performance of museums.Nevertheless, numerous researchers point to there being intermediate stages betweenmarket orientation and performance. In order to prove effective, market orientationmust perforce be reflected through specific action and strategy. Our work focuses onthe strategy of innovativeness and we have posited innovation in museums andcultural organizations as the necessary route by which market orientation leads to theachievement of objectives. After drawing a distinction between two kinds ofinnovation, technological innovation and organizational and administrativeinnovation, we have evidenced that innovation acts as a mediator between marketorientation and performance. We statistically show that although the linkage betweenmarket orientation and performance is significant, what best accounts for enhancedperformance is technological and organizational innovation.

These results support the findings of previous research in for-profit contexts (Hanet al., 1998; Agarwal et al., 2003; amongst others) and extend these findings to a culturalorganizations domain (museums). A market orientation has been considered to be astarting point for innovation (Hurley and Hult, 1998; Lukas and Ferrell, 2000; Santoset al., 2000; Menguc and Auh, 2006; amongst others) and the results of this studysuggest that a market orientation is important for technological and organizationalinnovation in museums. Moreover, in contrast to other research, this study considersfirm performance more broadly, jointly examining economic and social performancetogether with comparative findings from other museums. These findings indicate thatthe importance of market orientation and innovation for organizational performance isnot restricted to profit organizations but also applies to nonprofit.

The implications of this study are two-fold; theoretical and managerial. First, asregards implications for theory, results indicate that market orientation does notoperate in isolation from other sources of advantage and emphasize the need toexamine mechanisms by which market orientation contributes to both economic and

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social performance in firms. Second, with regards to the management implications ofthis study, we can affirm that the interrelationship between market orientation andinnovation has been recognized as one of the key factors in performance. Our studyprovides some support that innovations facilitate the conversion of market-orientedmuseums’ philosophy into superior corporate performance. Formulating an innovationstrategy to complement museums’ market orientation strategy should provide a morecoherent and comprehensive road map for organizations to follow. The concept ofmarket orientation, by which museums aim to develop an offer which creates greatervalue for their donors and visitors, does not restrict innovation strategy, but rather actsas a spur, since an effort is made to become aware of and anticipate the needs ofvisitors and stakeholders in order to adapt innovations to their expectations.

Museum managers are encouraged to allocate human and financial resources toinnovation. This innovation might be reflected in the use of new technologies andforms of management but also by developing new services, or by reformulatingexisting ones. Further, the results of this study suggest that market orientationcontributes to both overall museum performance and innovation. Therefore,performance measurement systems must be able to detect the impact of investmentin market orientation in both of these areas, thus providing an insight into how themuseum works.

5. Limitations and future research directionsOne of the limitations of this research is the fact that the data are taken from only onesource: the museum curator. As Gainer and Padanyi (2005) point out it would beadvisable to draw on different sources of information such as employees or visitors inorder to gain a clearer insight into the link between strategy and performance.Likewise, having measured performance subjectively through the perceptions ofmuseum curators rather than objectively might also be deemed a limitation. The studywas also conducted at one particular moment in time, whereas a longitudinal studymight provide us with a better sequential analysis of the two approaches.

Together with these limitations, which need to be addressed and corrected, futureresearch might explore other antecedents of innovation, such as organizationallearning. This research might benefit from exploring the kind of organizationallearning in place in nonprofit organizations that jointly implement market orientationand innovation. It would also be interesting to explore relations with donors, firms,administration, visitors (friends programs) and with local residents (such aseducational programs) which are needed to produce a market orientation and enableeconomic performance (visits and revenue) as well as social performance (contributingto the spread of culture, for instance) to be achieved. The inclusion of environmentalvariables (competitive intensity, market turbulence, demand uncertainty) which mightmoderate the market orientation-innovation performance relationship could be anotherrelevant contribution.

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The role ofinnovation

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Further reading

Baker, W. and Sinkula, J. (2007), “Does market orientation facilitate balanced innovationprograms? An organizational learning perspective”, Journal of Product InnovationManagement, Vol. 24 No. 4, pp. 316-34.

Camarero, M.C. and Garrido, M.J. (2004), Marketing del patrimonio cultural, Piramide, Spain.

Deng, S. and Dart, J. (1994), “Measuring market orientation: a multi-factor, multi-item approach”,Journal of Marketing Management, Vol. 10, pp. 725-42.

Deshpande, R. and Farley, J.U. (1996), “Understanding market orientation: a prospectivelydesigned meta-analysis of three market orientation scales”, working paper, MarketingScience Institute, pp. 96-125.

Diamantopoulos, A. and Hart, S. (1993), “Linking market orientation and company performance:preliminary evidence on Kohli and Jaworski’s framework”, Journal of Strategic Marketing,Vol. 1, pp. 93-121.

Lado, N. and Maydeu-Olivares, A. (2001), “Exploring the link between market orientation andinnovation in the European and US insurance markets”, International Marketing Review,Vol. 18 No. 2, pp. 130-44.

Lee, T. and Tsai, H. (2005), “The effects of business operation mode on market orientation,learning orientation and innovativeness”, Industrial Management & Data, Vol. 105 No. 3,pp. 325-48.

Preacher, K.J. and Hayes, A.F. (2004), “SPSS and SAS procedures for estimating indirect effectsin simple mediation models”, Behavior Research Methods, Instruments, & Computers,Vol. 36 No. 4, pp. 717-31.

Siguaw, J.P. and Simpson and Enz, C. (2006), “Conceptualizing innovation orientation: aframework for study and integration of innovation research”, Journal of ProductInnovation Management, Vol. 23 No. 6, pp. 556-74.

Voss, Z., Voss, G. and Moorman, Ch. (2005), “An empirical examination of the complexrelationships between entrepreneurial orientation and stakeholder support”, EuropeanJournal of Marketing, Vol. 39 Nos 9/10, pp. 1132-50.

About the authorsCarmen Camarero is Associate Professor of Marketing at the University of Valladolid, Spain. Herresearch, which focuses on business relationships and consumer relationship marketing, hasbeen published in several national and international journals (European Journal of Marketing,Psychology & Marketing, Journal of Services Marketing, Journal Management Development). Atpresent, her main research interests are related to relationship marketing and consumerbehavior. She has written two books and several book chapters. Carmen Camarero can becontacted at: camarero@eco.uva.es

Marıa Jose Garrido is Associate Professor of Marketing at the University of Valladolid, Spain.Her research, which focuses on industrial behavior, internal marketing and cultural marketing,has been published in journals such as Journal of Business & Industrial Marketing, InternationalJournal of Human Resource Management, Journal of Management Development, InternationalJournal of Electronic Business. She has written a book on industrial buying behavior and anotheron cultural heritage marketing and several book chapters.

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