Measuring Firms’ Market Orientation Using Textual Analysis of 10-K Filings
79 Pages Posted: 12 Dec 2017 Last revised: 6 Nov 2018
Date Written: September 8, 2018
Market-oriented firms are committed to understanding their customers’ evolving expectations and meeting their needs, while outwitting competitors, to achieve a sustainable competitive advantage and improve performance. This paper develops a measure for market orientation based on textual analysis of 10-K filings. It utilizes a bag-of-words approach to identify critical information from the management’s disclosure that underpins the corporate traits measured by the MKTOR scale, a renowned survey instrument for measuring market orientation. Unlike previous studies that rely extensively on small-scale survey data, this novel method of measuring market orientation leverages instead on the use of big public archival data. The study empirically establishes strong construct validity for the measures of market orientation and its components, namely customer orientation and competitor orientation. Further analyses demonstrate that firms’ performance is positively affected by market orientation and that this relationship is more pronounced in competitive environments. Overall, this paper contributes to the literature by developing an appealing measure of market orientation, which allows for conducting large-scale longitudinal analyses of its antecedents and consequences.
Keywords: Market Orientation, Customer Orientation, Competitor Orientation, MKTOR, Firm Performance, Textual Analysis
JEL Classification: G30, M14, M31
Suggested Citation: Suggested Citation