How does market orientation contribute to service firm performance? : An examination of alternative mechanisms

This study utilises the inter‐relationship between market orientation and innovation in order to examine alternative mechanisms through which market orientation contributes to service firm performance. Three mechanisms (direct, mediated and moderator) are examined using regression analysis and structural equation modelling in a sample of 231 firms which develop new services. Market orientation is found to contribute to performance through a dual mechanism in that it contributes both directly and through innovation, with innovation mediating the contribution. These results emphasise that researchers should consider the inter‐relationships between multiple sources of advantage in seeking explanations of firm performance.