Market‐oriented value creation in service firms

A fundamental proposition in marketing strategy is that a market orientation is positively related to firm performance. However, the mechanisms of this relationship have yet to be explored in detail, especially in service industries where intangible assets are relatively more important. This paper addresses this issue by proposing a model that identifies important intermediate variables between a market orientation and increased firm value. The model posits that a market orientation guides investment in market‐based assets and other asset types, that these assets may be levered to create a competitive advantage and value for customers, and that this results in loyalty and easier customer attraction. Quicker and more extensive market penetration, shorter sales cycles, and decreased marketing and sales costs enhance the cash flow of a market‐oriented firm. This may be recognised in higher valuations, which ultimately translate into higher share prices and wealth creation for the owners of the firm.