The Relationships between International Orientations, Capabilities, Strategies and Performance: A Theoretical Perspective

Abstract

Peter Drucker (2008, p. 127) once said, “The best plan is only good intentions unless it leads into work”. However, when carefully examining the scholarly work on strategic orientations, one can easily observe that previous research overlooked the role of the process trough which strategic orientation choices affect the firm’s strategic capabilities and performance. Even the central construct, market orientation, “has not been investigated from a strategy implementation perspective” (Homburg et al. 2004, p. 1332). This is a lacuna in the literature, as strategic orientations do not automatically lead to superior performance.

In line with previous calls for the identification of the underling action components in order to understand how strategic orientations work (Zhou et al. 2005, Ketchen et al. 2007), our proposed theoretical model focuses mainly on the link between strategic orientations and strategic capabilities from the implementation point of view. Specifically, this model follows the viewpoint that “at the core of the strategy implementation approach is the recognition that different types of capabilities, organizational processes, and systems need to be adjusted in order to implement the selected strategy” (Homburg et al. 2004, p. 1331) by demonstrating that different kinds of strategic orientations lead to different kinds of strategic capabilities.

Our theoretical model makes several contributions to the extant literature. First, a new framework to classify strategic orientations is presented. Accordingly to this framework, outside-in orientations (focus on customers and competition) enhance the development of marketing capabilities while inside-out orientations (focus on entrepreneurial and innovation) lead to the development of technological capabilities. Amazon and Apple, respectively, represent these bipolar approaches. Second, our model explores the role of a new high order moderator: the ability to implement (ATI) strategic orientations into capabilities. This construct combines three dimensions: learning orientation, organizational inertia and strategic flexibility. High levels on this construct reflect a firm’s ability to transform the firm’s strategic orientations into strategic capabilities. In contrast, lower levels reflect a firm’s tendency to resist the transformation of strategic orientations into strategic capabilities. Our model gives a special attention to identifying which set of capabilities is most strongly associated with superior firm performance in general. More specifically, we posit that marketing and technological capabilities affect international marketing strategy adaptation levels. By doing so, we emphasizes the notion that international firms need to look carefully not only at which strategic orientations they select, but also at their organizational ability to implement these orientations and acquire new capabilities as the latter might impact their international marketing strategy and future export performance.