The impact of marketing capabilities and market knowledge on business performance

In the strategy field, much attention has recently focused on the dynamic capabilities (DC) approach to understanding business performance. The DC approach suggests that resource heterogeneity is a necessary but not sufficient condition for explaining inter-firm performance differences, and that it is the capabilities by which available resources are combined and transformed to match marketplace conditions that is key to understanding competition and firm performance (e.g., Teece, Pisano, and Shuen 1997). Drawing on the DC approach, this study examines the role of marketing in driving firm performance as the deployment of market knowledge resources through complementary marketing capabilities. Marketing capabilities are defined as the specialized and architectural processes by which available resources are combined and transformed into value offerings for target market(s) (e.g., Moller and Antilla 1987; Day 1994; Madhavan and Grover 1998). We develop measures of specialized marketing capabilities based around the classical "marketing mix" of activities concerned with product, pricing, communications and distribution (Hunt and Morgan 1995) and Architectural marketing capabilities, concerned with the activities of marketing strategy development and execution and marketing program management (e.g., Bonoma 1985; Kerin, Mahajan, and Varadarajan 1990). We conceptualize and measure market knowledge as the extent to which firm's generate and internally share market intelligence. Data were collected using a mail survey from 230 businesses in a broadly-based sample.