The aim of this paper is to investigate the differential effect of customer orientation and future market focus on organization inertia and firm innovativeness of small and medium‐sized enterprises (SMEs) in the business‐to‐business service industry. It is motivated by the observation that small and medium‐sized service firms' proxy to customers may lead to incremental service improvement in response to customer requests for customization and improvement, but may derail programs for more innovative services.
A survey among 217 small and medium‐sized service firms is used to test the hypotheses developed. The data are analyzed using a path model and Lisrel software.
The results show that customer orientation breeds inertia, whereas future market focus increases the willingness to cannibalize existing technology, service portfolio and routines, which in turn stimulates firm innovativeness.
The results suggest that it is important to distinguish between customer orientation and future market focus, and that particularly small and medium‐sized firms may require both orientations for sustained firm performance. Future research may be directed at developing tools for monitoring against inertia and helping managers to decide more objectively when to listen to their current customers and when not to.
The results suggest managers should complement customer orientation with activities and management attention geared towards developing future market vision.
This study is one of the first to simultaneously investigate the role of customer orientation and future market focus for small and medium‐sized firms in the service industry.
