Market orientation and R and D effectiveness in high-technology firms: An empirical investigation in the biotechnology industry

There seems to be lack of consensus among informed scholars about the importance a of market orientation for high-technology firms. This paper gives a comprehensive review of existing empirical studies on the relationship between market orientation and innovation performance and pinpoints two limitations in this research stream that might be at the origin of such controversy. First, extant research often overlooked key innovation outcomes for high-technology firms, such as those related to research and development (R&D) performance. Second, organizational conditions that can ensure an optimal integration of market knowledge in the innovation process have been less analyzed in the case of these firms. Against this background, the present study contributes to the literature by providing a test of the effect of market orientation on R&D effectiveness and the moderating role of knowledge integration in this relationship, using a sample of Italian biotechnology firms. The study's objectives are addressed in two steps. The first one consists of an in-depth qualitative study based on semistructured interviews in five biotechnology firms. The second step consists of a follow-up survey of 50 biotechnology firms. Results from hierarchical multiple regression analysis show that the different dimensions of a market orientation have diverse effects on R&D effectiveness of high-technology firms: whereas interfunctional coordination has a positive main effect, the effect of customer orientation is moderated by knowledge integration, and competitor orientation has no effect on R&D effectiveness. Post hoc analyses also show two additional results involving a broader set of dependent variables. First, R&D effectiveness mediates the effects of customer orientation and interfunctional coordination on organizational performance. Second, market orientation does not appear to significantly affect R&D efficiency. The present study contributes to current literature in two main respects. First, it adds to previous work on market orientation and innovation by proposing a new dependent variable - R&D effectiveness - which offers a better perspective to understand the impact of market orientation on innovation performance in high-technology contexts. Second, while part of the current debate on the role of market orientation in high-tech markets seems to be polarized by positions that sustain its potential drawbacks or, on the contrary, its advantages, this study's findings on the moderating role of knowledge integration shed light on important contingency factors, such as organizational capabilities. The authors discuss the study's limitations and provide directions for future research. © 2010 Product Development & Management Association.