Customer orientation and SME performance: the role of networking ties

The purpose of this paper is to examine the moderating effect of networking ties on the relationship between customer orientation and firm performance.

This study adopted a survey approach to collect data from 251 respondents in the Mangaung Metropolitan Municipality in the Free State province, South Africa. Scales for data collection were operationalised from prior studies. A hierarchical regression analysis was used to examine the moderating effect of networking ties on the relationship between customer orientation and firm performance.

The results showed that customer orientation had a significant positive association with firm performance, thus supporting the existing calls for examining the unique contributions of customer orientation to firm performance. Furthermore, this study hypothesised that business, political, and social network ties positively moderated this association. However, the results showed that only business and social network ties had a positive and significant moderating effect, with the influence of customer orientation on firm performance being more pronounced for firms with high as opposed to low business and social network ties. Nevertheless, all the three types of network ties showed a positive and significant direct relationship with firm performance, thus supporting the consolidated literature on the positive impact of network ties on firm performance.

The practical implications are twofold. First, it encourages business owners to develop a customer-oriented approach as a key strategic objective in their pursuit for optimal business performance. Second, business owners and managers should increasingly exploit their business and social network ties to accumulate vital resources for effectively exploiting their customer-oriented capabilities as a means to improve their performance.

Even though customer orientation is a valuable internal strategic capability, its benefit on firm performance might be limited in small and medium enterprises (SMEs) when the businesses are unable to respond quickly to customer needs. This is more common when the SME is faced with resource limitations required for exploiting the new market opportunities. However, this study showed that SMEs can mitigate this issue by depending on their business and social network ties for valuable resources to effectively exploit opportunities that emerge from identified customer needs.