The relationship between market orientation and marketing effectiveness: The moderating influence of budget slack

The relationship between market orientation and firm performance has been widely studied, but with mixed results. Firm performance has been measured using financial metrics such as return on assets (ROA) or subjective measures such as overall performance. These performance measures raise questions since ROA is difficult if not impossible to measure on a comparative strategic business unit basis and overall performance is so vague as to be meaningless.; This study uses marketing effectiveness, the achievement of sales and market share objectives against which to measure the influence of market orientation. These objectives embody the firm's strategic and financial plans and are used to evaluate managers. The moderating influence of budget slack on the market orientation and marketing effectiveness relationship is assessed. Budget slack is when managers set objectives too low to assure that they are achieved in the face of uncertainty or to assure a bonus or additional compensation. Assessing the moderating influence of budget slack provides insight into the market orientation and marketing effectiveness relationship.; This study also examined the role of information asymmetry and environmental uncertainty on budget participation, the influence of budget participation on budget slack, and the relationship between market orientation and information asymmetry.; A survey was conducted of 169 managers, mainly at Fortune 500 companies, across a variety of industries, using a self-reported questionnaire. Results show a positive relationship between market orientation and marketing effectiveness, (r = .423, p < .0001), and between information asymmetry and budget participation (r = .188, p < .05). The moderating influence of budget slack on the market orientation and marketing effectiveness relationship was not significant.; This research supports the core theoretical construct that market orientation predicts firm performance by generating and disseminating information about customers and competitors and acting on that information to achieve sales and market share objectives. For the researcher, this study offers suggestions to expand the domain of the market orientation construct and to improve the budget slack and environmental uncertainty constructs.