International Business Review 14 (2005) 119 www.elsevier.

com/locate/ibusrev

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 companys responsiveness. Global market advantage is positively associated with companys strategic and nancial 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 inuences, and competitive considerations (Yip, 1992). These factors have inuenced the convergence of consumer expectations which, in turn, elicit responses to provide for these requirements as
* Corresponding author. Tel.: C1 517 4324 320; fax: C1 517 432 4322. E-mail address: cavusgil@msu.edu (S. Tamer Cavusgil). 0969-5931/$ - see front matter q 2004 Elsevier Ltd. All rights reserved. doi:10.1016/j.ibusrev.2004.10.002

S. Yeniyurt et al. / International Business Review 14 (2005) 119

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 rm 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 nancial returns. As such, this article employs the resource based view of the organization and the market orientationorganizational 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 ve 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) 119

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 rm (Wernerfelt, 1984) specically pertaining to the application of a rms 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 rm performance. The premise of this perspective is that a rm 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 rm controls has a signicant impact on the strategies and the business objectives of the rm (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 rm, 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) dene 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 dene its dimensions as customer orientation, competitor orientation, and inter-functional coordination. These two distinct approaches are incorporated in our framework by dening the market knowledge competencies with respect to the focus of the information process: customer and competitor. Additionally, considering the importance and difculty 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.

S. Yeniyurt et al. / International Business Review 14 (2005) 119

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 rst time in their history, multinational companies have to achieve worldwide coordination and efciency while optimizing the efciency, responsiveness and organizational learning (Bartlett & Ghoshal, 1987). The global companyone that is able to eliminate redundancy and implement common practices worldwidewill be the organization that will be the one that will sustain competitiveness (Cavusgil, Yeniyurt, & Townsend, in press). Yet, even rms 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 inuential school of thought regards the internationalization as a process in which the market-specic 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 ows among subsidiaries (Gupta & Govindarajan, 1991; Schulz, 2003) and from the headquarter to subsidiaries (Kogut & Zander, 1993). Hence, there is a signicant 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 identied 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.

S. Yeniyurt et al. / International Business Review 14 (2005) 119

Fig. 1. Global market knowledge competencies and global market advantage. 5

S. Yeniyurt et al. / International Business Review 14 (2005) 119

1.3. External and internal antecedents The contemporary debate regarding the convergence of consumer preferences originates with Levitts (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 inuences and competitive considerations (Yip, 1992). Among the market based factors is the inuence 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 inuence of these factors, multinational companies face an increased need for efciency 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 reect 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

S. Yeniyurt et al. / International Business Review 14 (2005) 119

specic 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 rm, as opposed to accentuating nation or market based measures (Ohmae, 1989), and is consistent with Perlmutters (1969) original conceptualization of the geocentric rm. As such, a rms global orientation is an important component of the organizational culture can be considered a signicant resource (Kotter & Heskett, 1992; Zou & Cavusgil, 2002). The implementation of a global strategy requires a rms 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 teams 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 teams 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 procient management in a global environment is a signicant challenge; success in this endeavor results in rm characteristics which exhibit the attributes that dene 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 signied 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, rms 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 signicant contributor of the positional

S. Yeniyurt et al. / International Business Review 14 (2005) 119

advantage of the GC and is positively related to the long term overall rm 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 battleeld 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 rms, 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 dened 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 signicant 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 efciency and synergies. According to the extant international business literature, global sourcing is an important antecedent of rm performance (Kotabe, Murray, & Javalgi, 1998). Therefore, similar to the customer and competitor knowledge competence, the global supplier knowledge process is included in

S. Yeniyurt et al. / International Business Review 14 (2005) 119

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 rm 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 mechanisms 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 exibility and the efciency (e.g. Bartlett & Ghoshal, 1987; Martinez & Jarillo, 1991). The culturalbehavioral perspective of marketing orientation views inter-functional coordination as a dimension of the market orientation of the rm (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 rm, the greater the global market knowledge development competencies, global responsiveness, and global market advantage.

10

S. Yeniyurt et al. / International Business Review 14 (2005) 119

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 specic comparative advantages in order to achieve efciency 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 interfunctional coordination as dened 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 dened as the ability to react on a global basis to environmental changes, threats and opportunities as they arise. This denition 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. Yips (1992) global strategy framework includes the coordination of global competitive moves. Nevertheless, the global responsiveness construct, as dened 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

S. Yeniyurt et al. / International Business Review 14 (2005) 119

11

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 rm competencies as enablers of competitive advantage (e.g. Barney, 1991). Nevertheless, the extant research had difculties in dening 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 denition and operationalization of the market advantage in the global marketplace will help in identifying the returns of rm resources and competencies, as well as their relative importance. The global market knowledge competencies presented above enable the rm 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 difculty of providing an exhaustive denition 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 reective construct having four rst order constructs. The global brand is dened 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 reect 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 (Koeper, 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

12

S. Yeniyurt et al. / International Business Review 14 (2005) 119

emphasizing global standardization. One of the critical factors for achieving competitive advantage in the global marketplace resides in being present in the countries where GCs 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 signicant 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 nancial performance of the GC. Global partners can also help amortize the xed 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, nd 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 identied above. Each of the factors reects 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 reect the efciencies derived from operating on a global scale. As such, the four dimensions capture different aspects of global market advantage while reecting the same common essence. The global market advantage is expected to have a positive impact on the strategic performance and nancial performance of the rm. 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 nancial performance is more concerned with the past and the short run (Kaplan & Norton, 1992). The nancial performance refers to the rate of global sale increase, the prots from the global operations and the return on investment. Research supports the notion that the rms market share has a positive effect on its protability (Buzzell and Gale 1987; Szymanski, Bharadwaj, & Varadarajan, 1993). The nancial 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 teams 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.

S. Yeniyurt et al. / International Business Review 14 (2005) 119

13

Proposition 10b. The greater the global market advantage, the greater the nancial performance. Proposition 11. The greater the strategic performance, the greater the nancial 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 rms (Workman et al., 1998). The industrial rms 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 signicantly 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 efciency), prospectors (i.e. continuously searching for market opportunities and focusing on innovation rather than efciency), analyzers (i.e. operating in both stable and changing market domains, searching for efciency in the rst 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 nancial 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 nancial outcome. Environmental turbulence. Environmental turbulence has a signicant effect on the market knowledge competenceperformance 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).

14

S. Yeniyurt et al. / International Business Review 14 (2005) 119

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 knowledgeperformance 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 signicant 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 specic hypotheses regarding the role of knowledge competencies in the global company

S. Yeniyurt et al. / International Business Review 14 (2005) 119

15

is developed. The market knowledge competencies required to achieve a sustainable global market advantage are identied 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 identied. 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 denition of the market advantage construct is another major contribution to the resource based view of the organization. In the global context, market advantage is identied 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 reective construct with four rst 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 nancial 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 signicant 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 nancial 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

16

S. Yeniyurt et al. / International Business Review 14 (2005) 119

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 marketplace, the global market advantage construct may be enlarged by including other contributing factors such as the supplier network advantage and operational efciency in order to encompass all the aspects of the supply chain activities.

References
Aaker, D. A. (1991). Managing brand equity. New York: The Free Press. Aaker, D. A. (1992). Managing the most important asset: Brand equity. Planning Review, 20(5), 5658. Amit, R., & Schoemaker, P. J. H. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14(1), 3346. Barkema, H. G., & Vermeulen, F. (1998). International expansion through start-up or aquisition: A learning perspective. Academy of Management Journal, 41(1), 726. Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99120. Bartlett, C. A., & Ghoshal, S. (1987). Managing across borders: New strategic requirements. Sloan Management Review, 28(4), 717. Bartlett, C. A., & Ghoshal, S. (1988). Organizing for worldwide effectiveness: The transnational solution. California Management Review, 31(1), 5474. Bilkey, W. J., & Tesar, G. (1977). The export behavior of smaller sized Wisconsin manufacturing rms. Journal of International Business Studies, 8(1), 9398. Birkinshaw, J. (1997). Entrepreneurship in multinational corporations: The characteristics of subsidiary initiatives. Strategic Management Journal, 18(3), 207229. Boudreau, M.-C., Loch, K. D., Robey, D., & Straud, D. (1998). Going global: Using information technology to advance the competitiveness of the virtual transnational organization. Academy of Management Executive, 12(4), 120128. Buzzell, R. D., & Gale, B. T. (1987). The Pims Principles: Linking strategy to performance. New York: The Free Press. Cavusgil, S. T. (1980). On the internationalization process of rms. European Research, 8, 273281. Cavusgil, S. T. (1984). Organizational characteristics associated with export activity. Journal of Management Studies, 21(1), 322.

S. Yeniyurt et al. / International Business Review 14 (2005) 119

17

Cavusgil, S. T. (1990). The importance of distributor training at caterpillar. Industrial Marketing Management, 19(1), 19. Cavusgil, S. T., Yeniyurt, S., & Townsend, J. D. (2004). The framework of a global corporation: A conceptualization and preliminary validation. Industrial Marketing Management, 21(1), 711716. Chen, T.-J., Chen, H., & Ku, Y.-H. (2004). Foreign direct investment and local linkages. Journal of International Business Studies, 35(4), 320. Craig, C. S., & Douglas, S. P. (2000). Congural advantage in global markets. Journal of International Marketing, 8(1), 625. Czinkota, M. (1982). Export development strategies: US promotion policies. New York: Praeger. Das, T. K., & Teng, B. (2000). A resource based theory of strategic alliances. Journal of Management, 26(1), 3161. Dawar, N., & Parker, P. (1994). Marketing universals: Consumers use of brand name, price, physical appearance, and retailer reputation as signals of product quality. Journal of Marketing, 58(2), 8196. Day, G. S. (1994). The capabilities of market driven organizations. Journal of Marketing, 58(October), 3752. de Chernatony, L., Halliburton, C., & Bernath, R. (1995). International branding: Demand or supply driven opportunity. International Marketing Review, 12(2), 922. Douglas, S. P., & Craig, C. S. (1989). Evolution of global marketing strategy: Scale, scope, and synergy. Columbia Journal of World Business, fall, 4759. Drew, S. A. W. (1997). From knowledge to action: The impact of benchmarking on organizational performance. Long Range Planning, 30(3), 427. Dunning, J. H. (1981). Explaining international production. London: Unwin Hyman. Eriksson, K., & Chetty, S. (2003). The effect of experience and absorptive capacity on foreign market knowledge. International Business Review, 12(6), 673695. Eriksson, K., Johansson, J., Majkgard, A., & Sharma, D. D. (1997). Experiential knowledge and the cost in the internationalization process. Journal of International Business Studies, 28(2), 337360. Frost, T. S., Birkinshaw, J. M., & Ensign, P. C. (2002). Centers of excellence in multinational corporations. Strategic Management Journal, 23(11), 997. Ghoshal, S. (1987). Global strategy: An organizing framework. Strategic Management Journal, 8(5), 425440. Grosse, R. (1992). Competitive advantages and multinational enterprises in Latin America. Journal of Business Research, 25(1), 2743. Gupta, A. K., & Govindarajan, V. (1991). Knowledge ows and the structure of control within multinational corporations. Academy of Management Review, 16(4), 768792. Hadley, R. D., & Wilson, H. I. M. (2003). The network model of internationalisation and experiential knowledge. International Business Review, 12(6), 697717. Hill, C. W. L. (1996). International business: Competing in the global marketplace. Chicago: Richard D. Irwin. Hitt, M. A., Hoskisson, R. E., & Kim, H. (1997). International diversication: Effects on innovation and rm performance in product-diversied rms. Academy of Management Journal, 40(4), 767798. Huber, G. P. (1991). Organizational learning: The contributing processes and the literature. Organization Science, 2, 88115. Hult, G. T. M., Hurley, R. F., Giunipero, L. C., & Nichols, E. L. Jr. (2000). Organizational learning in global purchasing: A model and test of internal users and corporate buyers. Decision Sciences, 31(2), 293325. Hult, G. T. M., & Ketchen, D. J. (2001). Does market orientation matter? A test of the relationship between positional advantage and performance. Strategic Management Journal, 22, 899906. Hunt, S. D., & Morgan, R. M. (1995). The comparative advantage theory of competition. Journal of Marketing, 59(April), 115. Jain, S. C. (1989). Standardization of international marketing strategy: Some research hypothesis. Journal of Marketing, 53(1), 7079. Javorski, B. J., & Kohli, A. K. (1993). Market orientation: Antecedents and consequences. Journal of Marketing, 57(July), 5370. Johansson, J., & Vahlne, J.-E. (1977). The internationalization process of the rmA model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 2332.

18

S. Yeniyurt et al. / International Business Review 14 (2005) 119

Johansson, J., & Vahlne, J.-E. (1990). The mechanism of internationalization. International Marketing Review, 7(4), 1124. Johansson, J. K., & Yip, G. S. (1994). Exploiting globalization potential: U.S. and Japanese strategies. Strategic Management Journal, 15(8), 579601. Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecardMeasures that drive performance. Harvard Business Review, 70(1), 7179. Kedia, B. L., & Mukherji, A. (1999). Global managers: Developing a mindset for global competitiveness. Journal of World Business, 34(3), 230251. Kim, K., Park, J.-H., & Prescott, J. E. (2003). The global integration of business functions: A study of multinational businesses in integrated global industries. Journal of International Business Studies, 34(4), 327344. Koeper, E. R. (1989). Strategic options for global market players. The Journal of Business Strategy, 10(4), 4651. Kogut, B. (1985). Designing global strategies: Comparative and competitive value-added chains. Sloan Management Review, Summer, 1528. Kogut, B. (1989). A note on global strategies. Strategic Management Journal, 10(4), 1731. Kogut, B., & Zander, U. (1993). Knowledge of the rm and the evolutionary theory of the multinational corporation. Journal of International Business Studies, 24(4), 625. Kohli, A., & Jaworski, B. J. (1990). Market orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 54(April), 118. Kohli, A. K., Jaworski, B. J., & Kumar, A. (1993). MARKOR: A measure of market orientation. Journal of Marketing Research, 30(4), 467478. Kotabe, M., Murray, J. Y., & Javalgi, R. G. (1998). Global sourcing of services and market performance: An empirical investigation. Journal of International Marketing, 6(4), 1032. Kotter, J. P., & Heskett, J. L. (1992). Corporate culture and performance. New York: The Free Press. Levitt, T. (1983). The globalization of markets. Harvard Business Review, 61, 92102. Martinez, J. I., & Jarillo, J. C. (1989). The evolution of research on coordination mechanisms in multinational corporations. Journal of International Business Studies, 20(3), 489. Martinez, J. I., & Jarillo, J. C. (1991). Coordination demands of international strategies. Journal of International Business Studies, 22(3), 429. Matsuno, K., & Mentzer, J. T. (2000). The effects of strategy type on the market orientationperformance relationship. Journal of Marketing, 64(4), 116. Miles, R. E., & Snow, C. C. (1978). Organizational strategy, structure and processes. New York: McGraw-Hill. Murtha, T. P., Lenway, S. A., & Bagozzi, R. P. (1998). Global mindsets and cognitive shift in a complex multinational corporation. Strategic Management Journal, 19(2), 97114. Narver, J. C., & Slater, S. F. (1990). The effect of a marketing orientation on business protability. Journal of Marketing, 54(October), 2035. Ohmae, K. (1989). Managing in a borderless world. Harvard Business Review, 67(MayJune), 152161. Paul, H. (2000). Creating a global mindset. Thunderbird International Business Review, 42(2), 187200. Perlmutter, H. V. (1969). The tortuous evolution of the multinational corporation. Columbia Journal of World Business, JanuaryFebruary, 918. Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource based view. Strategic Management Journal, 14, 179191. Porter, M. E. (1980). Competitive strategy. New York: The Free Press. Porter, M. E. (1986). Changing patterns of international competition. California Management Review, 28(Winter), 940. Roth, K. (1992). International conguration and coordination archetypes for medium-sized rms in global industries. Journal of International Business Studies, 23(3), 533549. Roth, K., Schweiger, D. M., & Morrison, A. J. (1991). Global strategy implementation at the business unit level: Operational capabilities and administrative mechanisms. Journal of International Business Studies, 22(3rd Quarter), 369402. Ruigrok, W., & Wagner, H. (2003). Internationalization and performance: An organizational learning perspective. Management International Review, 43(1), 6383.

S. Yeniyurt et al. / International Business Review 14 (2005) 119

19

Samiee, S., & Roth, K. (1992). The inuence of global marketing standardization on performance. Journal of Marketing, 56(2), 117. Sarkar, M. B., Echambadi, R., Cavusgil, S. T., & Aulakh, P. S. (2001). The inuence of complementarity, compatibility, and relationship capital on alliance performance. Journal of Academy of Marketing Science, 29(4), 358373. Sawhney, M., & Zabin, J. (2002). Managing and measuring relational equity in the network economy. Journal of Academy of Marketing Science, 30(4), 313332. Schmid, S., & Schurig, A. (2003). The development of critical capabilities in foreign subsidiaries: Disentangling the role of the subsidiarys business network. International Business Review, 12(6), 755782. Schultz, D. E. (2000). Understanding and measuring brand equity. Marketing Management, Spring, 8. Schulz, M. (2003). Pathways of relevance: exploring in ows of knowledge into subunits of multinational corporations. Organization Science, 14(4), 440. Sheth, J. (1986). Global markets or global competition? The Journal of Consumer Marketing, 3(2), 912. Sinkula, J. M. (1994). Market information processing and organizational learning. Journal of Marketing, 58, 3545. Steenkamp, J.-B.E.M., Batra, R., & Alden, D. A. (2003). How perceived brand globalness creates brand value. Journal of International Business Studies, 34(1), 5365. Szymanski, D., Bharadwaj, S. G., & Varadarajan, P. R. (1993). An analysis of the market shareprotability relationship. Journal of Marketing, 57(3), 118. Tapsell, S. (1999). One worldReady or not. Management, February, 4045. Townsend, J. D., Calantone, R., & Schmidt, J. B. (2003). Foreign impact: A longitudinal study of the liability of foreignness in the U.S. motion picture market. Paper presented at American marketing association summer educators conference, Chicago. Vermeulen, F., & Barkema, H. (2001). Learning through acquisitions. Academy of Management Journal, 44(3), 457476. Wernerfelt, B. (1984). A resource based view of the rm. Strategic Management Journal, 5(2), 171180. Wolf, C. Jr. (2000). Globalization: Meaning and measurement. Critical Review, 14(1), 110. Workman, J. P., Homburg, C., & Gruner, K. (1998). Marketing organization: An integrative framework of dimensions and determinant. Journal of Marketing, 62(3), 2141. Yavas, U., Verhage, B. J., & Green, R. T. (1992). Global consumer segmentation versus local market orientation: Empirical ndings. Management International Review, 32, 265272. Yip, G. S. (1989). Global strategy.in a world of nations? Sloan Management Review, Fall, 2941. Yip, G. S. (1992). Total global strategy: Managing for worldwide competitive advantage. New Jersey: Prentice Hall. Yip, G. S. (2003). Total global strategy II. Upper Saddle River, NJ: Prentice-Hall. Zack, M. H. (1999). Developing a knowledge strategy. California Management Review, 41(3), 125145. Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new venture rms: international diversity, mode of market entry, technological learning, and performance. Academy of Management Journal, 43(5), 925950. Zou, S., & Cavusgil, S. T. (1996). Global strategy: A review and an integrated conceptual framework. European Journal of Marketing, 30(1), 5269. Zou, S., & Cavusgil, S. T. (2002). The GMS: A broad conceptualization of global marketing strategy and its effects on rm performance. Journal of Marketing, 66(4), 4056.