A Global Market Advantage Framework the Role of Global Market Knowledge Competencies

A global market advantage framework: the role

of global market knowledge competencies

Sengun Yeniyurt, S. Tamer Cavusgil*, G. Tomas M. Hult

The Eli Broad Graduate School of Management, Michigan State University, N370 Business College Complex,

East Lansing, MI 48824, USA

Received 7 January 2004; received in revised form 15 October 2004; accepted 16 October 2004

Abstract

The globalization forces engender companies to develop a new set of competencies that would

enable the generation of abnormal returns in the global marketplace. This article reviews the extant

literature regarding the effect of globalization on organizations and develops a conceptual

framework that underlines the importance of knowledge management competencies in creating

global market advantage. The knowledge management competencies consist of global customer,

competitor and supplier knowledge development, inter-functional coordination and value chain

coordination. The relationship between global market knowledge competencies and global market

advantage is partially mediated by company’s responsiveness. Global market advantage is positively

associated with company’s strategic and financial performance.

q 2004 Elsevier Ltd. All rights reserved.

Keywords: Global companies; Market knowledge; Global competition

Market openness associated with globalization has increased the speed, frequency

and magnitude of access to worldwide markets, including all tangible and intangible

aspects of commerce, by a new and more diverse set of competitors (Wolf, 2000). The

motivations and drivers that engender fundamental changes in the industry structure

include market factors, cost sensitivity, governmental influences, and competitive

considerations (Yip, 1992). These factors have influenced the convergence of consumer

expectations which, in turn, elicit responses to provide for these requirements as

International Business Review 14 (2005) 1–19

www.elsevier.com/locate/ibusrev

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* Corresponding author. Tel.: C1 517 4324 320; fax: C1 517 432 4322.

E-mail address: [email protected] (S. Tamer Cavusgil).

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S. Yeniyurt et al. / International Business Review 14 (2005) 1–192

organizations seek to achieve a sustained advantage in an increasingly competitive and

geographically diverse marketplace. Consequently, having a global orientation is no

longer a luxury, but a necessity for economic survival in a large number of industries.

The primary motivations driving the globalization of the firm are the comparative and

competitive advantages that are gained by the integration of various value-added activities

performed throughout the organization (Kogut, 1985). Yet, inherent organizational

complexity necessitates the development of a new set of competencies that would

engender a global market advantage. Presumably, this global market advantage would be

associated with positive strategic and financial returns. As such, this article employs the

resource based view of the organization and the market orientation—organizational

learning theory to explore the following set of research questions:

†
What are the marketing knowledge competencies required to achieve sustainable
global market advantage?

†
What are the factors affecting the development of these competencies?
†
How can the global market advantage be conceptualized?
†
What is the nature of the link between the global market knowledge competencies and
the global market advantage?

The remainder of this article is organized under five major sections. First, we begin with

a brief review of the relevant literature. Then the theoretical framework encompassing the

market knowledge competencies and their antecedents and consequences is described.

Special attention is given to the description of the global market advantage construct and

its components. Additionally, research propositions derived from extant market

orientation, organizational learning, and the resource-based view literature are presented.

Finally, theoretical and managerial implications are discussed and future research

directions are offered.

1. Theoretical backgrounds and propositions

The implementation of global corporate strategy remains a major challenge for

corporate leadership, when trying to integrate a worldwide organizational structure (Roth,

Schweiger, & Morrison, 1991; Yip, 1992; Zou & Cavusgil, 2002). This implies a degree of

complexity much greater than that of a company which relinquishes much autonomy and

operational freedom to its subsidiaries. Organizations that aim toward globalization are

required to employ radical changes in their processes and organizational structures

(Cavusgil, Yeniyurt, & Townsend, in press). Dependence on global markets has fostered

the increased use of standardized products (Jain, 1989). In order to rationalize the

organization, planning and resource allocation need to be considered on a global basis to

facilitate worldwide manufacturing capabilities which exploit opportunities to implement

a globally integrated strategy (Dunning, 1981; Porter, 1980). Although there has been

much knowledge gained about these particular aspects of doing business from a geocentric

perspective, a theoretical framework that encompasses the competencies required for

S. Yeniyurt et al. / International Business Review 14 (2005) 1–19 3

a successful global strategy implementation and the outcomes associated with such

competencies constitutes a major gap in the literature.

The resource based view of the firm (Wernerfelt, 1984) specifically pertaining to the

application of a firm’s idiosyncratic abilities in the attainment of a sustained competitive

advantage (Barney, 1991) in a global marketplace provides a strong theoretical foundation

for the exploration of global market knowledge competencies and their relative effect on

firm performance. The premise of this perspective is that a firm is a unique bundle of

idiosyncratic resources (Wernerfelt, 1984) and, in order for it to gain and sustain a

competitive advantage in the marketplace, the conditions of heterogeneity, ex post limits

to competition, imperfect resource mobility, and ex ante limits to competition must be

met, as they are both necessary and interdependent (Peteraf, 1993). In this view, the bundle

of resources that the firm controls has a significant impact on the strategies and the

business objectives of the firm (Amit & Schoemaker, 1993; Barney, 1991; Wernerfelt,

1984). The heterogeneity (i.e. valuable, rare, imperfectly imitable, and non-substitutable)

and imperfect mobility of the resources are sources of competitive advantage (Barney,

1991). Global expansion can be regarded as a strategic choice that has as an objective the

enlargement of the resource base and the exploitation of the existing one. Therefore, the

knowledge competencies required to successfully implement a global strategy remain to

be explored.

1.1. Knowledge competencies

Information is imperfect and costly, constituting an important comparative advantage

for competition (Hunt & Morgan, 1995). As such, information can be regarded as an

intangible resource that enables the organization to produce market offerings for its

customers (Hunt & Morgan, 1995). Strategy is linked to internal competencies of the firm,

the quality of knowledge possessed by the organization determining the range of paths that

can be followed (Zack, 1999). Likewise, market sensing competency is accepted as a

critical capability associated with market oriented organizations (Day, 1994).

Kohli and Jaworski (1990) define market orientation from a market intelligence

perspective, encompassing intelligence generation, intelligence dissemination and

responsiveness. They analyze the market orientation at the activity level in the

organization. On the other hand, according to Narver and Slater (1990) market orientation

should be regarded as an aspect of the organizational culture. They measure market

orientation at a behavioral level, and define its dimensions as customer orientation,

competitor orientation, and inter-functional coordination. These two distinct approaches

are incorporated in our framework by defining the market knowledge competencies with

respect to the focus of the information process: customer and competitor. Additionally,

considering the importance and difficulty of managing the global supply chain (Porter,

1980), supplier orientation is incorporated as a third dimension in the framework.

Moreover, according to the organizational learning theory, the knowledge process has

three steps: information acquisition, interpretation and integration (Huber, 1991; Sinkula,

1994). These steps are also incorporated in our conceptual framework.


1.2. The global company and market knowledge

Under the recently increased pressures towards globalization, there is an ongoing

transformation in the culture, strategies, structure, and processes that the MNCs employ,

rendering a new type of organization, the Global Company (GC) (Douglas & Craig, 1989;

Johansson and Yip, 1994; Kogut, 1985; Levitt, 1983; Ohmae, 1989; Perlmutter, 1969).

Globalization of markets and competition, in combination with advances in information

technology and the Internet, are driving multinational companies toward integration of

business processes across disparate country markets (Yip, 1989). Perhaps for the first time

in their history, multinational companies have to achieve worldwide coordination and

efficiency while optimizing the efficiency, responsiveness and organizational learning

(Bartlett & Ghoshal, 1987). The global company—one that is able to eliminate

redundancy and implement common practices worldwide—will be the organization

that will be the one that will sustain competitiveness (Cavusgil, Yeniyurt, & Townsend,

in press). Yet, even firms that are regarded as being in the mature stages of the

globalization process, such as ABB, Sony, Nestle, and Unilever, fail to meet all of the

features required for achieving an optimum level of globalization (Cavusgil, Yeniyurt,

& Townsend, in press).

The international business literature is relatively rich in articles that examine the

organizational learning aspect of the internationalization process. Special emphasis has

been given to the initial stages of international expansion (e.g. Hitt, Hoskisson, &

Kim, 1997; Ruigrok & Wagner, 2003; Zahra, Ireland, & Hitt, 2000) and market entry

modes (Barkema & Vermeulen, 1998; Vermeulen & Barkema, 2001). The most

influential school of thought regards the internationalization as a process in which the

market-specific experiential knowledge is central (Bilkey & Tesar, 1977; Cavusgil,

1980, 1984; Czinkota, 1982; Eriksson, Johansson, Majkgard, & Sharma, 1997;

Johansson & Vahlne, 1977; 1990). Yet, the research regarding the organizational

learning aspects and knowledge competencies of companies that reached the

multinational level and strive towards becoming global companies is relatively

scarce. The studies have been mainly concerned with the subsidiary level learning

(Birkinshaw, 1997), and knowledge flows among subsidiaries (Gupta & Govindarajan,

1991; Schulz, 2003) and from the headquarter to subsidiaries (Kogut & Zander,

1993). Hence, there is a significant gap in the international business literature

regarding exploration of the development of global knowledge competencies and

understanding their impact on the competitiveness of the organization in the global

marketplace.

In order to address this gap, this article develops theoretical framework of market

knowledge competencies and distinguishes their effects on the global market advantage

and subsequent performance of the global company. The industry globalization drivers

and the global orientation of the managerial team are identified as the external and internal

drivers of global market knowledge competency development. Fig. 1 provides a graphical

representation of the proposed conceptual framework that utilizes the resource based view

of the organization, the market orientation and organizational learning theories in the

context of the global company.

Fig. 1. Global market knowledge competencies and global market advantage.

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1.3. External and internal antecedents

The contemporary debate regarding the convergence of consumer preferences

originates with Levitt’s (1983) proposition that consumer wants and needs are becoming

more homogenous across geographic and cultural boundaries in response to the increased

globalization of markets. It has been argued that a true global strategy only becomes

possible when worldwide needs and resources are homogenous, and that global business is

possible only through specialty segmentation strategies (Sheth, 1986). In a research

approach designed to identify ‘marketing universals’, it was found that there are few

differences in the use of quality signals across cultures, but only for selected levels of

segmentation (Dawar & Parker, 1994). Yet, it indeed appears that consumer expectations

around the world are beginning to converge in terms of needs and expectations, and

ethnocentric perspectives are beginning to break down (Townsend, Calantone, & Schmidt,

2003). Some believe that there is greater diversity between generations than there is

between geographic or cultural groups (Tapsell, 1999). Further research has begun to show

a general degree of homogeneity across market segments which transcend national

boundaries (Yavas, Verhage, & Green, 1992).

External factors that force the management teams to develop a global mindset and a set

of competencies that will enable the value creation for the global customers can be

categorized as the market factors, cost sensitivity, governmental influences and

competitive considerations (Yip, 1992). Among the market based factors is the influence

of the convergence of consumer expectations, which elicits organizational responses to

provide for these requirements in an increasingly competitive and geographically diverse

marketplace (Yip, 2003). Under the influence of these factors, multinational companies

face an increased need for efficiency and the minimization of information redundancy. In

the past, fundamental impediments to achieving a globalized company were the

geographic distances and cultural boundaries which created an inherent disconnectedness

between organizational units. The advent of facilitating factors has increased the velocity

of the trend of the globalization of multinational companies. These factors include the

improvement of the global information technology infrastructure, together with tools like

electronic data interchange, intranets, and the increased transparency of information

reporting (Boudreau, Loch, Robey, & Straud, 1998). As such, the strength of the

globalization drivers of the industry is expected to have a positive impact on the

development of global market knowledge competencies.

Proposition 1. The stronger the external globalization drivers, the greater the global

market knowledge competence (i.e. customer, competitor and supplier knowledge

processes and inter-functional and value chain coordination).

Internal Factors reflect the transformations occurring at the cultural level in the MNC

under the pressure exerted by the external factors of globalization. Perhaps the most

important change that the management team has to undertake is the development of a

global mindset (Kedia & Mukherji, 1999; Murtha, Lenway, & Bagozzi 1998) and a global

orientation (Workman, Homburg, & Gruner, 1998; Zou & Cavusgil, 2002). Global

leadership and culture foster a relatively centralized structure and decision-making with

high degree of coordination. The development of knowledge competencies requires


specific cultural characteristics such as an inherent learning orientation and a memory

orientation (Hult, Hurley, Giunipero, & Nichols, 2000).

Essentially, a global orientation refers to organizational emphasis on the global success

of the firm, as opposed to accentuating nation or market based measures (Ohmae, 1989),

and is consistent with Perlmutter’s (1969) original conceptualization of the geocentric

firm. As such, a firm’s global orientation is an important component of the organizational

culture can be considered a significant resource (Kotter & Heskett, 1992; Zou & Cavusgil,

2002). The implementation of a global strategy requires a firm’s leadership to possess a

global mindset, where the world is viewed as one market (Murtha et al., 1998; Paul, 2000).

Yet, the implementation of a global orientation remains a major challenge for

leadership, when trying to integrate a global strategy and a global structure (Roth,

Schweiger, & Morrison, 1991; Yip, 1992; Zou & Cavusgil, 2002). Thus supporting

the belief that global orientation is an important component of organizational culture

that can be leveraged to provide a unique competitive advantage in the global marketplace

(Barney, 1991).

In this article, global orientation is conceptualized as the top management team’s

ability to view the entire world as the marketplace of the organization, not relying on

individual markets or regions. The managerial team must be willing to make the resource

commitments necessary to achieve global activities which transcend traditional

boundaries. Hence, the global orientation encompasses the managerial team’s mindset

(Murtha et al., 1998), along with their commitment to globalization and willingness to

deploy the necessary resources for worldwide marketing activities (Zou & Cavusgil,

1996). Developing an orientation which engenders proficient management in a global

environment is a significant challenge; success in this endeavor results in firm

characteristics which exhibit the attributes that define a core competency. Such a core

competency is expected to have a positive impact on the development of global market

knowledge competencies of the company.

Proposition 2. The stronger the industry globalization drivers, the stronger the global

orientation of the managerial team.

Proposition 3. The stronger the global orientation of the managerial team, the greater the

global market knowledge competence.

1.4. Global customer knowledge competence

The hallmark of the globalization of markets is the advent of the global consumer. This

is signified by the expectation of standardized goods and services with a corresponding

level of consistency in service, quality and performance across nations and regions; further

indicated by the convergence of international and domestic pricing. Yet, technology

appears to be the engine of customer globalization, fueled by increased personal contact.

The result is a new level of segmentation of customer requirements, which transgress

traditional political and cultural boundaries. In response, firms must learn to operate as if

the world is one large market, and segment worldwide on the basis of commonality of

preferences (Levitt, 1983). Market orientation is a significant contributor of the positional


advantage of the GC and is positively related to the long term overall firm performance

(Hult & Ketchen, 2001). Therefore, global organizations should possess the capability of

acquiring, interpreting, and integrating intelligence (Huber, 1991; Sinkula, 1994)

regarding the global trends in customer preferences in order to be able to identify present

and future commonalities. They should be also able to monitor the environmental changes

(e.g. regulatory, economic, socio-political) and estimate their impact on the commonalities

present in the customer base. The successful development of a global customer knowledge

management process will have a positive impact on the performance of the company

(Kohli & Jaworski, 1990; Narver & Slater, 1990).

Proposition 4. The greater the global customer knowledge competence, the greater the

global responsiveness and the global market advantage (i.e. brand value, distribution

base, market coverage, global partnerships).

1.5. Global competitor knowledge competence

In a global industry, the competitive position in one country is dependent on the

position present in other countries (Porter, 1980; Zou et al., 2002). Moreover,

organizations pursuing a global strategy are facing both global and local competition.

Consequently, GCs have to coordinate their competitive moves on a global basis,

competitive battlefield constituting the entire world. Also, companies often use

competitors as sources for benchmarking and best practice transfer (Drew, 1997).

Therefore, the competitive market knowledge process constitutes a key capability for

these firms, the amount, timeliness and accuracy of competitor intelligence constraining

the ability to respond to competitive moves globally. Similar to the customer knowledge

competence, competitor knowledge competence is defined as the ability to acquire,

interpret, and integrate information regarding the global competitive environment. The

competitor knowledge process is one of the global market knowledge competencies

required to succeed in the global marketplace (Kohli & Jaworski, 1990; Narver & Slater,

1990) and it is expected to have a significant positive impact on the performance of the

company.

Proposition 5. The greater the global competitor knowledge competence, the greater the

global responsiveness and the global market advantage.

1.6. Global supplier knowledge competence

Multinational companies aspiring to become truly global companies concentrate their

supply chain activities in certain locations around the world in such a way that the unique

comparative advantages of different countries (Hill, 1996) are utilized on a global scale

(Porter, 1986; Roth et al., 1991; Zou & Cavusgil, 1996, 2002). Such a strategy enables

them to reduce redundancy, and achieve efficiency and synergies. According to the extant

international business literature, global sourcing is an important antecedent of firm

performance (Kotabe, Murray, & Javalgi, 1998). Therefore, similar to the customer and

competitor knowledge competence, the global supplier knowledge process is included in


the global market knowledge competence framework and includes the three information

processing steps. The supplier knowledge process has the characteristics of an

organizational capability and it is expected to have a positive impact on firm performance

by constituting a competitive advantage in the global marketplace (Barney, 1991).

Proposition 6. The greater the global supplier knowledge competence, the greater the

global responsiveness and the global market advantage.

1.7. Inter-functional coordination

The international business literature is particularly rich in articles focusing on the

coordination mechanisms employed by the multinational companies (for a full literature

review please see Martinez & Jarillo, 1989). Although extant research is mainly concerned

with the structural and formal mechanisms of coordination (Martinez & Jarillo, 1989),

recent studies emphasizes importance of informal inter-functional coordination mechan-

isms for the multinational companies. These mechanisms include: lateral relations,

informal communication supplements and the organizational culture (Martinez & Jarillo,

1991). Under the pressure of the forces of globalization, the mechanisms for centralizing

the decision-making authority and the integration of activities across national boundaries

are essential (Roth et al., 1991).

Global organizations should aim towards achieving an optimum balance between

central authority and responsiveness to local preferences (Bartlett & Ghoshal, 1988;

Johansson & Yip, 1994; Roth et al., 1991). They also must employ modern information

technology and communication systems to allow for free exchange of ideas, data and best

practices (Boudreau et al., 1998). Coordination mechanisms include interconnectedness

(i.e. linking electronically geographically dispersed parts of the organization via intranets,

extranets, etc.) (Boudreau et al., 1998), best practice repositories, and lead centers of

excellence (Frost, Birkinshaw, & Ensign 2002). Only by utilizing formal and informal

inter-functional coordination mechanisms organizations are able to achieve global

responsiveness while balancing the flexibility and the efficiency (e.g. Bartlett & Ghoshal,

1987; Martinez & Jarillo, 1991).

The cultural–behavioral perspective of marketing orientation views inter-functional

coordination as a dimension of the market orientation of the firm (Narver & Slater, 1990).

Inter-functional coordination is related to the capability of sharing information and

strategic integration of all functions in the process of creating customer value. In addition

to the three steps of information processing, the accumulated customer, competitor and

supplier knowledge base should be disseminated across various functions of the business

unit (Kohli & Jaworski, 1990; Narver & Slater, 1990). Therefore, the inter-functional

coordination is incorporated in the framework as a market knowledge capability that is

expected to provide the company a market advantage in the global marketplace.

Proposition 7. The greater the inter-functional coordination within the firm, the greater

the global market knowledge development competencies, global responsiveness, and

global market advantage.


1.8. Value-chain coordination

Although not included in the original market orientation construct (Narver & Slater,

1990), global value-chain coordination is one of the critical competencies that a GC has to

posses (Craig & Douglas, 2000; Kogut, 1985; Porter, 1986; Roth, 1992; Roth et al., 1991;

Zou et al., 2002). Coordination of the value adding activities across the globe allows the

GC to exploit country specific comparative advantages in order to achieve efficiency and

effectiveness (Bartlett & Ghoshal, 1987; Craig & Douglas, 2000; Ghoshal, 1987; Kogut,

1989). A recent study by Kim, Park, and Pescott (2003) revealed that in multinational

organizations human resource management and information systems play a crucial role in

the coordination of business activities. Therefore, the global value chain coordination (i.e.

capability of sharing information and strategic integration of geographically dispersed

subsidiaries in the process of creating customer value across geographical space) is

included in the conceptual framework as a component of the coordination competencies.

Value chain coordination captures the geographic dimension that is missing in the inter-

functional coordination as defined by Narver and Slater (1990).

Proposition 8. The greater the value chain coordination across the globe, the greater the

global market knowledge development competencies, global responsiveness, and global

market advantage.

1.9. Global responsiveness

In addition to information generation and dissemination, Javorski and Kohli (1993)

incorporate the responsiveness dimension in their market orientation framework. In this

view, responsiveness is related to the ability of initiating actions based on the information

generated and disseminated across the organization (Kohli, Jaworski, & Kumar, 1993).

While the global knowledge competencies incorporate the ability to generate and

disseminate information across the global organization, the initiation of the response,

which is related to the actual use of the information, is included as a separate construct. In

our framework, global responsiveness is defined as the ability to react on a global basis to

environmental changes, threats and opportunities as they arise. This definition resides on

both the market orientation literature (Javorski & Kohli, 1993) and the globalization

literature (Yip, 1992). Although Javorski and Kohli (1993) present responsiveness as a

dimension of the market orientation, assuming no causal relationship between construct and

information generation and dissemination, we hypothesize that global knowledge

competencies are its antecedents. Yip’s (1992) global strategy framework includes the

coordination of global competitive moves. Nevertheless, the global responsiveness

construct, as defined above, includes not only the responses related to competition but

also other changes in the global environment such as the trends in customer wants and needs

and the supplier status.

According to our proposed framework, global responsiveness is expected to partially

mediate the relationship between global knowledge competencies and global market

advantage (i.e. the direct effects from global market knowledge competencies to global


market advantage are smaller than the indirect effect, as mediated by global

responsiveness).

Proposition 9. Responsiveness partially mediates the relationship between global market

knowledge competencies and global market advantage.

1.10. Global market advantage

The resource based view considers firm competencies as enablers of competitive

advantage (e.g. Barney, 1991). Nevertheless, the extant research had difficulties in

defining and measuring competitive advantage. Some scholars proposed the use of an

indirect conceptualization through a culture based second order positional advantage

factor (e.g. Hult & Ketchen, 2001). An accurate definition and operationalization of the

market advantage in the global marketplace will help in identifying the returns of firm

resources and competencies, as well as their relative importance.

The global market knowledge competencies presented above enable the firm to create a

global market advantage, when compared with the competition. Considering the

complexity of the GC and of the environment in which it operates, the difficulty of

providing an exhaustive definition of the global market advantage is understandable. Yet,

according to the globalization literature (de Chernatony, Halliburton, & Bernath, 1995;

Ghoshal, 1987; Grosse, 1992; Samiee & Roth, 1992; Sarkar, Echambadi, Cavusgil, &

Aulakh, 2001; Steenkamp, Batra, & Alden, 2003), four dimensions stand out: global brand

value, global distribution base, market coverage, and global partnerships. Hence, the

global market advantage is conceptualized as a second order reflective construct having

four first order constructs.

The global brand is defined as one that is marketed across the world, preserving the

same core essence across countries, although the execution of the marketing activities are

more or less adapted to local marketing needs (de Chernatony et al., 1995). Brand equity is

regarded having four dimensions: awareness, associations, perceived quality and brand

loyalty (Aaker, 1991). These dimensions reflect the price differential that can be charged

in comparison with alternative products (Schultz, 2000). Therefore, a company that

possesses a high brand value can avoid price competition (Aaker, 1992). Moreover, the

brand name is a universal signal for product quality (Dawar & Parker, 1994).

A global distribution base composed of a worldwide network of distributors, agents,

and representatives enables the GC to reach its target global customers regardless of their

geographic location. By engaging in strategic partnerships with local distribution

companies, GCs can secure access, approval, preferred treatment in indigeneous markets

(Koepfler, 1989). According to managerial ratings, a strong global distribution network

constitutes an important competitive advantage for US based MNCs (Cavusgil, 1990;

Grosse, 1992). At least, the GC should be able to cultivate a distribution network that

ensures market presence in all the countries that are considered critical from a competitive

point of view.

Market coverage is related to the extent to which the GC operates on a truly global

basis, securing presence in strategically important markets of the world. According to

Samiee and Roth (1992), market coverage is an important consideration for companies


emphasizing global standardization. One of the critical factors for achieving competitive

advantage in the global marketplace resides in being present in the countries where GC’s

global customers and competitors are present.

In an era of globally networked economy, partnership equity is a fundamental

component of the relational equity that a company possesses (Sawhney & Zabin, 2002).

Global partnerships are a significant source of competitive advantage, allowing the

enlargement of the available resource base through the addition of complementary

resources (Sarkar, Echambadi, Cavusgil, & Aulakh, 2001). Global partners that possess

complementary resources will have an important impact on the performance of the

partnership (Das & Teng, 2000), and eventually, the strategic and financial performance of

the GC. Global partners can also help amortize the fixed costs (Ohmae, 1989).

Embeddedness in local networks enables companies to gain access to distinct inimitable

resources (Chen, Chen, & Ku, 2004; Schmid & Schurig, 2003). GCs engage in global

partnerships in order to procure the best inputs for its system-wide operations (e.g. quality,

price and delivery conditions). Therefore, the GC should be able to track, find and build

partnering relationships on a global basis, without being restrained by the cultural or

geographical differences. The global partnership base should include the customers,

competitors and suppliers.

The global market advantage is conceptualized as a second order construct that

includes the four dimensions identified above. Each of the factors reflects a different aspect

of the market advantage a global company can achieve and utilize in order to gain

performance returns. Further, all four dimensions have a common core: they reflect the

efficiencies derived from operating on a global scale. As such, the four dimensions capture

different aspects of global market advantage while reflecting the same common essence.

The global market advantage is expected to have a positive impact on the strategic

performance and financial performance of the firm. Strategic performance refers to the

competitive position of the GC in the global marketplace (Zou et al., 2002). The global

market share is accepted as an indicator of the strategic performance of the company.

Similarly, a global leadership position would enable the GC to enjoy a competitive

advantage in the future. Therefore, the strategic performance is evaluated on a long run

basis, while the financial performance is more concerned with the past and the short run

(Kaplan & Norton, 1992). The financial performance refers to the rate of global sale

increase, the profits from the global operations and the return on investment. Research

supports the notion that the firm’s market share has a positive effect on its profitability

(Buzzell and Gale 1987; Szymanski, Bharadwaj, & Varadarajan, 1993). The financial

performance is expected to be driven by the strategic performance of the company (Zou

et al., 2002). Additionally, in the long run, the global market advantage and the overall

market performance of the company is expected to further increase the managerial team’s

commitment to globalization, having a positive effect on the global orientation, and

facilitate the development of global market knowledge competencies and the global

responsiveness.

Proposition 10a. The greater the global market advantage, the greater the strategic

performance.


Proposition 10b. The greater the global market advantage, the greater the financial

performance.

Proposition 11. The greater the strategic performance, the greater the financial

performance.

1.11. Moderators

Industry type. The extant literature indicates that a systematic difference exists on the

importance given to the marketing function across the customer and industrial firms

(Workman et al., 1998). The industrial firms tend to disperse the marketing activities

across the organizations, implying a more intense cross-functional and value chain

coordination (Workman et al., 1998). Therefore, the market knowledge competency

development, and the inter-functional and value chain coordination and their effect on the

responsiveness of the company are expected to differ significantly between the

organizations that are business to business oriented and the organizations that serve

directly the end customer. We incorporate this view in our framework by hypothesizing a

moderation effect of industry type.

Proposition 12. Industry type moderates the relationships among the drivers (external

and internal), global market knowledge competencies, global responsiveness, and the

global market advantage.

Strategy type. Miles and Snow (1978) proposed four strategy types: defenders

(i.e. having a narrow product-market domain and focusing on efficiency), prospectors

(i.e. continuously searching for market opportunities and focusing on innovation rather

than efficiency), analyzers (i.e. operating in both stable and changing market domains,

searching for efficiency in the first and innovation in the later), and reactors (i.e. not being

able to respond to changes effectively). The strategy type employed by the organization

has a moderating effect on the market orientation performance relationship (Javorski &

Kohli, 1993; Kohli & Jaworski, 1990; Matsuno & Mentzer, 2000). The effect of the market

knowledge competencies on strategic performance is expected to be higher for prospectors

than either defenders or analyzers. On the other hand, the effect of market knowledge

competencies on financial performance is expected to be higher for defenders than for

prospectors or analyzers (Matsuno & Mentzer, 2000).

Proposition 13. Strategy type moderates the relationships between the global market

knowledge competencies, global responsiveness, global market advantage and the

strategic and financial outcome.

Environmental turbulence. Environmental turbulence has a significant effect on the

market knowledge competence–performance relationship (Javorski & Kohli, 1993;

Narver & Slater, 1990). Environmental turbulence has two dimensions: technological

turbulence and market dynamism. Technological turbulence is related to the extent to

which production/service technology in your principal market has changed over the last

years (Narver & Slater, 1990). In industries that are subject to high technological

turbulence, technological changes provide big opportunities (Javorski & Kohli, 1993).


In such industries, the organizations will enjoy abnormal returns from other opportunities

than those created by their market knowledge competencies. Therefore, the technological

turbulence will inhibit the global market knowledge–performance relationship. On the

other hand, market dynamism is related to the rate of change of the customer preferences,

market segments, and demand patterns (Javorski & Kohli, 1993; Narver & Slater, 1990).

In such industries, the organizations have to adapt faster to the changing customer

demands. In a dynamic global market, the companies will need to develop stronger global

market knowledge competencies, especially focusing on the global customer knowledge

process and on the global responsiveness in order to succeed. Hence, the environmental

turbulence, both technological and market, are expected to have a significant impact on the

market knowledge competence development and utilization of the global company.

Proposition 14. Environmental turbulence moderates the relationships among the drivers

(external and internal), global market knowledge competencies, global responsiveness,

and the global market advantage.

Competitive intensity. Another moderator that has been incorporated in the previous

market orientation and learning frameworks is the competitive intensity present within an

industry (Javorski & Kohli, 1993; Narver & Slater, 1990). In the absence of strong global

competition, the global company may perform well even if does not develop the global

market knowledge competencies or the global responsiveness because customers do not

possess alternatives. On the other hand, in industries with intense global competition

companies will be forced to be extremely responsive on a global scale, being able to

acquire, interpret and integrate the market knowledge, coordinate the marketing efforts on

a global basis in order to create higher value for their customers. We take a similar

approach and we hypothesize that the strength of the competition has a moderation effect

on the relationships among the drivers, the knowledge competencies and the market

advantage.

Proposition 15. Competitive intensity moderates the relationships among the drivers

(external and internal), global market knowledge competencies, global responsiveness,

and the global market advantage.

2. Discussion and managerial implications

The current article provides a theoretical framework to study the market knowledge

competencies of the global organizations and understand the competitive advantages these

competencies bring. We build on extant research and theoretical developments in market

orientation, organizational learning, and resource based view. As such, this article

contributes to the recent advances in knowledge management and organizational learning

frameworks within the international business literature (Eriksson & Chetty, 2003; Hadley

& Wilson, 2003; Schmid & Schurig, 2003) by focusing on the role of market knowledge

competencies in achieving sustainable global market advantage.

Building on the tenets of the resource based theory, a conceptual framework that posits

specific hypotheses regarding the role of knowledge competencies in the global company


is developed. The market knowledge competencies required to achieve a sustainable

global market advantage are identified as the global market knowledge development, and

global market knowledge coordination. Three global market knowledge development

competencies are conceptualized: global customer, global competitor and global supplier

knowledge processes. The inter-functional coordination and the value chain coordination

are two dimensions of global market knowledge coordination and capture the capability of

sharing information and the strategic integration of all actions across the global company

in the process of creating customer value. The global market knowledge competencies

have a positive impact on global market advantage. This causal relationship is partially

mediated by the global responsiveness of the company.

Further, deriving on extant global company literature, the antecedents of global market

knowledge competencies are identified. The drivers of the market knowledge

competencies are categorized as external and internal. The globalization forces in the

industry constitute the external drivers. The global orientation of the managerial team is

the internal driver. Both drivers are expected to have a positive impact on the development

of market knowledge competencies.

The conceptualization and the operational definition of the market advantage construct

is another major contribution to the resource based view of the organization. In the global

context, market advantage is identified as a construct that mediates the relationship

between market knowledge competencies and organizational performance. The global

market advantage is conceptualized as being a second order reflective construct with four

first order factors: global brand value, global distribution base, market coverage, and

global partnerships. The common variance of these four factors is expected to be

positively associated with the strategic and financial performance of the GC. Moreover, in

the long run, a feedback loop is expected, higher market advantage and performance

leading to a more intense global orientation of the managerial team and development of

global market knowledge competencies and of global responsiveness.

The conceptual framework developed in this article has significant managerial

implications. Identifying the global market knowledge competencies and exploring their

antecedents and consequences will provide a valuable base for understanding the factors

affecting the GC performance. Understanding the nature of the global market advantage

and measuring the intermediate outcomes associated with the global activities is a

powerful managerial tool. Hence, it is appropriate for practitioners to develop a clear

understanding of the antecedents and consequences of the global market knowledge

competencies as well as the processes that have to be developed in order to sustain them.

The successful development of such processes will inherently increase the global

responsiveness of their company resulting in both strategic and financial gains.

3. Conclusion and directions for future research

The framework presented in this article provides a macro level analysis of the

knowledge management competencies and their implications for the GC. Further enhances

in granularity are required in order to develop a thorough understanding of the knowledge

management systems and practices and their implications in a GC. The analysis should be


streamed towards process level, focusing on the value added of market knowledge

competencies in diverse global marketing activities such as research and development,

supply chain management, strategic alliance success, customer relationship management,

and global branding.

A series of limitations of this study remain to be addressed. Follow-up studies should

focus on developing the operationalization and the full-scale validation of the constructs.

The validity of the propositions presented herein should be examined via empirical

research and/or in-depth case studies. The size of the GC and the international experience

are two critical variables that should be accounted for. The issue of whether or not market

knowledge competencies and responsiveness contribute to the market advantage when the

effects of size and experience are controlled for is an exciting research topic that needs

further exploration.

The framework proposed in this article focuses only on global orientation as a cultural

antecedent of the global knowledge competencies. Nevertheless, the number of variables

that may have an impact on the development of such competencies can be enlarged by

including the learning orientation and the memory orientation of the GC (Hult et al.,

2000). Considering the complexity associated with competing in a globalized market-

place, the global market advantage construct may be enlarged by including other

contributing factors such as the supplier network advantage and operational efficiency in

order to encompass all the aspects of the supply chain activities.

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Documents

A Global Market Advantage Framework the Role of Global Market Knowledge Competencies