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Innovation pathway to profitability: the role of entrepreneurial orientation and marketing capabilities

A Correction to this article was published on 19 February 2018

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Abstract

Drawing from the marketing capabilities and innovation literatures, we identify aprocess by which a firm’s entrepreneurial orientation impacts profits and show that it is dependent on marketing capabilities. Using a half-longitudinal design we integrate survey data with performance metrics over two time periods, from a sample of 190 firms. While the effect of entrepreneurial orientation (EO) on innovation is enhanced by architectural marketing capabilities, the effect of innovation outcomes on profits is enhanced by specialized marketing capabilities. Ultimately, the pathway from EO to performance, mediated by innovation, is positively significant at higher levels of both marketing capabilities. The results uncovered using Bayesian conditional process modeling, are robust to alternate model specifications, endogeneity tests, and provide insights into the capabilities-based understanding of entrepreneurism-marketing interface. We discuss resource allocation implications for managers as they attempt to maximize profits through innovation.

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Change history

  • 19 February 2018

    The original version of this article unfortunately contained mistake.

Notes

  1. We distinguish between EO and innovation in our study. We consider innovation an outcome that is based on organizational responses to “environmental opportunities” and is captured by the number of new products and services and major alterations to existing products developed and implemented by firms. We consider EO the firm’s entrepreneurial focus or intent.

  2. We thank a reviewer for pointing out this important issue.

  3. We thank the AE for providing this direction.

  4. We thank the AE and review team for recommending test of these extensions.

  5. We thank reviewer 3 for raising this point on mediation and providing guidance on several additional models reported in the next section.

  6. We sincerely thank Reviewer 3 for guiding us on additional model estimations.

  7. We thank the review team for this comment. Estimates and graphical plots are available upon request.

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Acknowledgements

The authors appreciate constructive comments from Professors Kersi Antia, Hari Sridhar, and Stephen Kim, and research assistance from Pallavi Jha. The authors also thank comments from doctoral students David Correll, Linlin Chai, and Inmyung Choi. Finally, the authors thank Shanti and Jackie for copy editing a previous version of the manuscript.

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Correspondence to S. Arunachalam.

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The original version of this article was revised: The equation under “Profile deviation analysis” section was corrected.

Rajkumar Venkatesan served as Area Editor for this article.

Appendices

Appendix 1

Table 5 Representative studies on the innovation pathway to profitability*

Appendix 2

Table 6 Measurement scales

Appendix 3

Table 7 Additional model results

Appendix 4

Table 8 Configuration analysis / profile deviation analysis

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Arunachalam, S., Ramaswami, S.N., Herrmann, P. et al. Innovation pathway to profitability: the role of entrepreneurial orientation and marketing capabilities. J. of the Acad. Mark. Sci. 46, 744–766 (2018). https://doi.org/10.1007/s11747-017-0574-1

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Keywords

  • Marketing capabilities
  • Innovation
  • Pathway to profitability
  • Moderated mediation