The relationship between market orientation and performance in the hospital industry: a structural equations modeling approach.

There is general consensus in the research literature that market orientation is related to organizational performance. This study examines this relationship in the hospital industry. One unique feature of this study is that both market orientation and performance are conceptualized as being multi-dimensional constructs. Hence the technique of Structural Equations Modeling (SEM) is used to examine the relationship. Analyses were based on market orientation and performance data obtained from 175 hospitals in a five-state region of the United States. The SEM results confirm the multi-dimensional nature of both market orientation and performance, and the strong relationship between the constructs. Interestingly, this relationship is found to be much stronger for smaller hospitals than for larger hospitals. Implications for the hospital industry are discussed.