its research agenda focuses mostly on interfirm competition in terms
of erecting entry barriers and excluding rivals fromopportunities (Adner
and Zemsky, 2006). Particularly under-researched is how demand
diversity such as customer value heterogeneity and decreasing marginal
utility affectsfirms' strategic orientations and subsequent competitive
advantage (Adner and Zemsky, 2006; Desarbo et al., 2001).
To fill this research avoid, this study takes a demand-based
perspective to study how customer value heterogeneity affects afirm's
market orientation, competitive advantage, andfirm performance.
Although market orientation is viewed as a critical way to respond to
market demand and create superior value, the relationship between
market orientation andfirm performance is probably more complicated
than expected (Zhou et al., 2008). In particular, researchers have
suggested that customer and competitor orientations, two focal
components of market orientation, have differential implications for
firm performance. For example,Han, Kim, and Srivastava (1998)indi
cate that customer orientation is perhaps most fundamental element
of market orientation.Deshpande, Farley, and Webster (1993)suggest
that competitor orientation can be antithetical to customer orientation.
Armstrong and Collopy (1996: 197)find competitor-orientation to be
even“…detrimental to profitability.”Lukas and Ferrell (2000)docu
ment that customer and competitor orientations have different
implications for new product performance. Therefore, clarifying why
customer and competitor orientations differ in their effects on perfor
mance is imperative to further understanding of how market orienta
tion contributes to performance.
This study tests a model (seeFig. 1) that links customer value,
market orientation, competitive advantage andfirm performance.
Building on a demand-based perspective (Adner and Zemsky, 2006),
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