The Role of Market Orientation and Innovation in Business Performance for U.S. Small Firms in Small Towns

The study investigated various aspects of market orientation and innovation performed by small-sized businesses in small towns of the U.S. The objectives for the study were: 1) to examine market orientation in relation to business innovation and business performance and 2) to examine business innovation in relation to business performance in small businesses in small towns. Quantitative data were collected from small business owners/managers operating with less than 20 employees and with annual sales of $1 million or less across the continental U.S. Small businesses located in communities of less than 20,000, counties adjacent and non-adjacent to non-metropolitan areas were chosen for the study. The results of the multiple regression analyses indicated that the competitor and customer market orientation were found to be positive and significant in explaining the variability of business innovation in small town business firms. The small town businesses were more innovative if they were more market-oriented. Among the three variables - business innovation, competitor market orientation, and customer market orientation - customer market orientation had the most significant influence on small business owners/managers’ perceived overall business success. Only business innovation among the three variables significantly influenced small town business firms’ gross profits. Contrary to conventional findings, competitor market orientation and customer market orientation did not significantly affect small businesses’ gross profits with innovation included in the equation. Implications and directions for future research are discussed.