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international business review

International Business Review 15 (2006) 641659 www.elsevier.com/locate/ibusrev

Interfunctional dynamics and rm performance: A comparison between rms in Poland and the United States
Dana-Nicoleta Lascua,, Lalita A. Manraib, Ajay K. Manraib, Ryszard Kleczekc
Department of Marketing, Robins School of Business, University of Richmond, One Gateway Road, Richmond, VA 23173, USA b Department of Marketing, College of Business and Economics, University of Delaware, Newark, DE 19716, USA c Department of Marketing, Wroclaw University of Economics, Marketing Institute, ul. Komandorska 118/120, 53-345 Wroc!aw, Poland Received 9 December 2004; received in revised form 17 April 2006, 22 September 2006; accepted 27 September 2006
a

Abstract This study compares between rms in the US mature market economy and in the Polish transitional economy. The study found that Polands past as a planned economy may continue to hinder interdepartmental connectedness and act as an obstacle to rms in adopting a market orientation. According to the study, for Polish rms, there is less shared information and cooperation across departments, and less shared responsibility for departmental tasks, compared to US rms. The status of marketing in Poland remains that of a junior department, subordinate to inuences from functional areas such as nance and accounting, which directed production in the former planned economy. The study supports the hypothesis that Polish rms have lower interdepartmental connectedness than US rms and nds strong support for the relationship between interdepartmental connectedness and rm performance. r 2006 Elsevier Ltd. All rights reserved.
Keywords: Comparative international management; Emerging markets; International marketing management; Market orientation

Corresponding author. Tel.: +1 804 289 8586; fax: +1 804 289 8878.

E-mail address: dlascu@Richmond.edu (D.-N. Lascu). 0969-5931/$ - see front matter r 2006 Elsevier Ltd. All rights reserved. doi:10.1016/j.ibusrev.2006.09.004

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1. Introduction Substantial debate and interest center on the use of optimal rm strategies in order to achieve company objectives. The marketing literature converges on the importance of a rm-wide focus on customer needs and on delivering high quality to consumers in the process of achieving company objectives, i.e., on the importance of a market orientation. A market orientation entails the generation of marketing intelligence at the organization level, the dissemination of intelligence across departments, and an organization-wide responsiveness to it (Kohli & Jaworski, 1990; Jaworski & Kohli, 1993). Interdepartmental connectedness is an important aspect of a market orientation, fundamental to the success of marketing strategies, and interaction across functional areas is essential in reaching marketing objectives (Fisher, Maltz, & Jaworski, 1997; Hutt & Speh, 1984; Maltz & Kohli, 2000; Ruekert & Walker, 1987). In the context of Central and Eastern Europes process of transition to a market economy, the development of marketing capabilities and the adoption of a market orientation are of utmost importance for rm success, and coordination between departments in order to achieve company objectives is essential. However, historical factors going back to the prolonged rule of central planning and the dominant role of the government (Chadam & Pastuszak, 2005) continue to obstruct efforts to develop a market-oriented mind set: under socialist state planning, production and distribution have, for decades, been highly centralized and directed by planning ofces at ministerial and state-owned enterprise top-management levels. Since research suggests that centralization is inversely related to interdepartmental coordination (Matsuno, Mentzer, & Ozsomer, 2002; Menon, Jaworski, & Kohli, 1997) and thus inconsistent with a market orientation, a legacy of Communism would be a corporate culture where interdepartmental coordination is encouraged to a lesser degree than in mature market economies. Furthermore, the planning process under Communism stressed production goals, rather than market performance, and resource allocation and reward systems reected this emphasis. Studies suggest that, two decades after the fall of communism, few Polish companies have in fact adopted Western-style management systems that focus on market performance (DeDee & Frederickson, 2004). Consequently, yet another legacy of Communism may be an environment where rms are dominated by the production and engineering departments, and where the marketing department has considerably less inuence across other functional domains than in rms operating in mature market economies. The purpose of this research is to examine the relationship between interfunctional dynamics, and rm performance, comparing between rms operating in a transitional economy in Eastern EuropePolandand rms operating in a mature market economy the United States. In the process of comparing between rms operating in the two countries, we advance a conceptual model relating different aspects of interfunctional dynamics and rm performance, and propose and test-related hypotheses. In the next section, the literature on the relationship between interfunctional dynamics and marketing performance is reviewed. This section addresses the particulars of the Polish transition to a market economy and advances a conceptual model and hypotheses on interfunctional relationships and marketing performance outcomes of rms in Poland and the United States. The third section describes the method including samples, procedure,

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and research instrument used for data collection as well as operationalization of variables. The fourth section addresses the data analysis and presents the results of the hypotheses tests, and the last section provides a discussion of the results and offers directions for future research.

2. Literature review, conceptual model, and hypotheses 2.1. Interfunctional dynamics and performance: a mature western market perspective A number of studies have addressed the key role that the interaction between functional areas plays in the process of reaching marketing and overall rm objectives. This research dates back to organization theory research stressing the importance of integration in accomplishing organizational tasks: high integrationdened as the process of achieving unity of effort among subsystems in an organization in accomplishing key organizational tasks leads to better performance than low integration (Lawrence & Lorsch, 1967). More recently, Srivastava, Shervani, and Fahey (1998) highlighted the importance of improving the interface between the marketing and the nance departments to better justify the allocation of resources for marketing initiatives (Maltz & Kohli, 2000). Studies in the area of new product development emphasize the importance of the relationship between the marketing and the research and development departments in the process of developing new products (Fisher et al., 1997; Im & Workman, 2004; Kyriakopoulos & Moorman, 2004; Maltz & Kohli, 2000; Rindeisch & Moorman, 2003). Research studying the relationship between customer service and perceived value addresses the importance of managing the interdependency between marketing and other functional areas in order to attain company performance objectives (Hutt & Speh, 1984; Maltz & Kohli, 2000; Ruekert & Walker, 1987). The ample body of literature on market orientation suggests that interfunctional coordination is a critical antecedent to developing market-oriented organizations (Kohli & Jaworski, 1990; Maltz & Kohli, 2000; Narver & Slater, 1990; Pulendran, Speed, & Widing, 2003; Slater & Narver, 1994, 1995). While there are numerous interpretations of the market orientation concept (e.g., Day, 1994; Deshpande, Farley, & Webster, 1993; Kohli & Jaworski, 1990; Narver & Slater, 1990), there is an agreement that interdepartmental coordination is essential to a market orientation. Interdepartmental dynamics were found to play an important part in determining the level of market orientation of a business; for example, interdepartmental connectedness appears to play a facilitating role in creating a market orientation (Jaworski & Kohli, 1993; Deshpande & Zaltman, 1982). Crossfunctional integration with marketing is enhanced if the marketing department has comparable status to that of other powerful functions within the company (Piercy, 1991; Shipley & Fonfara, 1993). Most importantly, a rms market orientation has been demonstrated to have a positive impact on both business performance and product innovation (Deshpande et al., 1993; Han, Kim, & Srivastava, 1998; Jaworski & Kohli, 1993; Jaworski, Kohli, & Sahay, 2000; Lukas and Ferrell, 2000; Rodriguez-Cano, Carillat, & Jaramillo, 2004); on sales growth and new product success (Slater & Narver, 1994); on return on assets (Narver & Slater, 1990); on relative product quality (Pelham & Wilson, 1996); and on marketing effectiveness, sales growth, market share, and protability (Pelham, 2000).

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The macro environment in the transition economies of Central and Eastern Europe is characterized by a high degree of environmental turbulence (Hooley et al., 2003): increasing competition, a shortening of product lifecycles, a growing power of channels, and increasingly demanding, sophisticated, selective and fragmented customer segments (Cox & Hooley, 1995; Fahey et al., 2000; Hooley, Cox, & Shipley, 1993; Shipley & Fonfara, 1993; Shipley, Hooley, Cox, & Fonfara, 1998), as well as high ination and high, previously unprecedented, unemployment levels (Hooley et al., 2003). In a turbulent environment, the relationship between market orientation and performance is strong (Aldas-Manzano, Kuster, & Vila, 2005; Hooley et al., 2003). Rogers, Ghauri, and George (2005), in a study conducted in Hungary and Slovenia, conrm that the market orientation-rm performance link holds true for rms operating in the respective rapidly transforming market economies. Consequently, engaging in active interdepartmental coordination, and building an inuential marketing department that would spearhead a rm-wide focus on customer needs and on delivering quality would result in a strong overall rm performance. 2.2. Interfunctional dynamics and performance: Central and Eastern European perspective For over a decade, Central and Eastern Europe has experienced an unprecedented degree of economic, political, legal, and social transformation. Until the fall of Communism, rms in the region operated within the dictates of each nation states version of a command economy. While national economic policies varied, with some countries allowing for greater degrees of individual initiative and enterprise than others, all shared an emphasis on production, and, in particular, on achieving efciency through economies of scale at the manufacturing and distribution levels. The only market of special concern to state planners was the international market, which provided much needed hard currency in exchange. Local business clients, distributors, and nal consumers were important only inasmuch as they helped the state-owned enterprise achieve its mandated quotas. Overall, there was little motivation and concern for the acquisition and development of a market orientation. Since the demise of Communism, the process of transition to a market economy, as evidenced by the degree of privatization, reform, deregulation, and foreign direct investment, has succeeded to various degrees in this region. The overall effects of transition to a market economy in terms of aggregate economic growth have been most pronounced in the countries that joined the European Union in the recent years. Such success is documented in the literature, for example, for Poland and Hungary, where markets are undergoing a process of rapid deregulation and where inward investment is encouraged (Roger et al., 2005; Hooley et al., 2003), and for Slovenia (Roger et al., 2005). It was anticipated that liberalization and privatization would result in radical shifts in Polish rm orientations, practices and performances (Lieberman, 1993; Shipley et al., 1998) in response to marketplace demands, and that rms would shift focus to the marketing function, building strong marketing departments, and adopting a market orientation. In reality, having a marketing department did not necessarily imply that a company understood and implemented marketing well (Shipley & Fonfara, 1993). Indeed, to date, few Polish companies have adopted Western-style management systems that focus on market performance (DeDee & Frederickson 2004).

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In general, the incidence of marketing departments is higher among larger Polish companies, which tend to have more resources, and for rms involved in export (Shipley & Fonfara, 1993) and/or in joint ventures, which have a greater exposure to Western business philosophies. For these rms, marketing has primary responsibility for marketing research, competitor analysis, sales forecasting, and promotion (Shipley & Fonfara, 1993). For service-related rms, often no responsibility is assigned for customer complaints; moreover, after-sales service and responsibility for distribution is primarily allocated to the sales department (Shipley & Fonfara, 1993); yet those service rms where marketing holds a central role are the most successful, consistently reporting better market and nancial performance than low market orientation (Hooley et al., 2003). Research conducted with Polish rms suggests that privatized rms and those with foreign participation have a stronger market orientation; privatized rms appear to have a higher degree of customer orientation, a higher incidence of new-product development and of quality offerings, and to be more likely to build a competitive advantage based on company and brand reputation than state-owned enterprises (Shipley et al., 1998). Similarly, rms with foreign participation were found to have greater marketing capabilities (Fahey et al., 2000). Polands ascension to the European Union in May 2004 may in fact contribute to a more rapid transformation and adoption of a market orientation. At present, however, state-owned enterprises continue to play an important role in many sectors of Polands economy (The Economist, 2004), and that role will continue as companies which have a strategic signicance for Poland and those that are undergoing restructuring have been excluded from privatization through 2006 (Ratajczik, 2004). It is believed that the effectiveness of marketing in this transition environment also rests on the tasks performed by other functions such as manufacturing, research and development, purchasing and sales; as such, there is a need for strong interfunctional coordination (Liu, Luo, & Shi, 2003; McKenna, 1991; Shipley & Fonfara, 1993; St. John & Hall, 1991). In the more market-oriented rms in Poland, planning is led by a top management that is market-driven and the marketing function has sufcient status and inuence to at least match other departments, thus stimulating close harmony with and cooperation from the other functions (Shipley & Fonfara, 1993). 2.3. Interfunctional dynamics, and rm performance: hypotheses and conceptual model Research suggests that, in general, internal company information in Poland does not ow freely within many rms (West & Paliwoda, 1996), as it does in mature market economies. In the past, information was used frequently as a weapon against individuals by the former Communist regime, and many of the same bureaucrats are still in place, even though they may now be endorsing a market economy. In fact, it is still common for many companies not to share sales information by product within the company (Muth, 1995) or even know which product of the company is the most protable (Muth, 1995; West & Paliwoda, 1996). In the past, sharing such information was not necessary since all enterprises belonged to the state, which controlled production (West & Paliwoda, 1996). It should be mentioned that access to information does not automatically imply that the shared information will be used. That is, information could be available for the marketing department; however, the marketing department may ignore its existence, or decide not to

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make use of the information. However, for the information to be used, it must be shared, and herein we suggest that marketing departments in Poland have less access to information in Polish rms, as follows: H1a. Marketing departments in Polish rms are likely to have less access to other departments information than marketing departments in US rms. H1b. Non-marketing departments are likely to have greater access to marketing information in US rms than in Polish rms. In general, Poles are skeptical of planning because the government over-planned the economy into bankruptcy in the past. Many rms continue to consider marketing as the means of getting rid of production through sales and retain a primary focus on the product as the only marketing variable that merits consideration, believing that products should be sold based on their own merit without support from sales or advertising (Muth, 1995). As such, sales planning, is more likely to remain within the domain of the sales department, as compared to the US. Moreover, since, in general, it is likely that there is less access to information across departments, there may also be less shared responsibility for sales planning across departments in Polish rms, compared to US rms. Finally, research has found that there is very limited cooperation between marketing and other functional departments in the countries of Eastern Europe (Marinov et al., 1993), and that the different departments in the company focus on their own objectives. H2. There is likely to be less shared responsibility for sales planning in Polish rms than in US rms. It was found that cross-functional integration with marketing is enhanced if the marketing department has comparable status to that of other powerful functions within the company (Piercy, 1991; Shipley & Fonfara, 1993). In the case of Poland, in the past, the function of the sales department was primarily to take orders. With the onset of capitalism, which mandated a full reorganization of the rm, marketing has been subjugated to sales in the rms new organizational structures in Poland (Muth, 1995), as in the rest of Eastern Europe (Hooley, Cox, Shipley, Beracs, & Kolos, 1995). Moreover, unlike other functional departments, marketing departments in Poland tend to be understaffed, or staffed primarily with new university graduates with minimal work experience (Muth, 1995), and thus not likely to have the authority and stature of marketing departments in the United States. This is not uncommon in the new market economies of Eastern Europe: while most rms have a sales department, very few, proportionately, have a marketing department (Hooley et al., 1995). H3. The status of the chief marketing executive is likely to be lower in Polish rms than in US rms. In the transition economies of Eastern Europe, companies may organize for marketing in ways that may not necessitate having a marketing department. For example, they may employ marketing managers in other departments, or organize for company-wide marketing participation (Shipley & Fonfara, 1993). As such, it may be that production or even the nance department inuence budgeting decisions. Even if the company has a formal marketing department, it often is a junior department, staffed with new hires,

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rather than an established department. As a result, it is likely that non-marketing departments will have a greater inuence on marketing budget decisions than in comparable rms in the United States. H4. Non-marketing departments are likely to have a greater inuence on marketing budget decisions in Polish rms than in US rms. Compared to a free-market economy, under socialist state planning, production and distribution were highly centralized and directed by planning ofces at ministerial and state-owned enterprise (SOE) top-management levels. A legacy of Communism in Poland may be a mindset that is likely to encourage centralizationand centralization is believed to be inversely related to interdepartmental coordination (Matsuno et al., 2002; Menon et al., 1997). H5. Polish rms are likely to be characterized by lower interdepartmental connectedness than US rms. Interfunctional coordination is essential to the development of a market-oriented organization (Kohli & Jaworski, 1990; Narver & Slater, 1990; Slater & Narver, 1994, 1995; Maltz & Kohli, 2000; Hernandez-Espallardo & Arcas-Lario, 2003), in that interdepartmental connectedness is an important facilitator of a market orientation (Kohli & Jaworski, 1993; Deshpande & Zaltman, 1982). Clearly, increased intelligence generation, dissemination, and responsiveness provide a more unifying vision for the rm, and thus results in greater customer satisfaction, and, ultimately, in better rm performance (Rogers et al., 2005). The link between market orientation and business performance has been amply documented in the international business literature (Akimova, 2000; Appiah-Adu, 1998; Han et al., 1998; Hooley et al. 2000; Lado & Maydeu-Olivares, 2001; Rogers et al., 2005; Pitt, Caruana, & Berthon, 1996; Narver & Slater 1990). In the context of Eastern Europe, it was found that high market-orientation rms are more likely to exceed their targets, to show improvements in performance, and to outperform their sectoral competitors (Hooley et al., 2000). We do note that we cannot attribute performance solely to interdepartmental connectedness; however, herein, we suggest that it is an important contributor to higher sales, increased market share, prot, and ROI. H6. The greater the interdepartmental connectedness, the better the rm performance in terms of sales, market share, prot, and ROI. Based on the above discussion, Fig. 1 identies the proposed relationships between interfunctional dynamics and rm performance. The model is predicated on the inuential role of the marketing department and the inuential role of other departments on marketing. An important aspect of such inuential roles is access to information (Jaworski & Kohli, 1993; Narver & Slater, 1990)the marketing departments access to other departments information as an indicator of the inuential role of marketing, and the other departments access to marketing information as an indicator of the inuential role of other departments, respectively. Yet another indicator of the inuence of the marketing department is the status of the chief marketing executive relative to that of other chief departmental executives. The extent to which the marketing department has comparable status to that of other powerful functions within the companyas evidenced by the status of the chief marketing

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Mktg. Dept.s Access to Other Depts. Information Status of Chief Marketing Executive Relative to other CEOs Sharing of Responsibility for Sales Planning Influence of other Depts. On Marketing Budget

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Influential Role of Marketing Department

Interdepartmental Connectedness

Firm Performance

Other Depts. Access to Marketing Dept. Information

Influential Role of Other Departments

Fig. 1. Interfunctional dynamics and rm performance: a conceptual model.

executiveis an important determinant of the inuential role of the marketing department in the organization. And it is an indication of successful cross-functional integration (Piercy, 1991; Shipley & Fonfara, 1993) and interdepartmental connectedness. In addition to other departments access to marketing information, another indicator of the inuential role of other departments on the marketing department is the extent to which other departments have input into marketing department decisions, such as determining the marketing budget, which provides additional evidence of functional integration in overall rm strategy (Narver & Slater, 1990). Based on the premise that creating value for buyers is much more than a marketing function, and that a sellers creation of value for buyers is analogous to a symphony orchestra in which the contribution of each subgroup is tailored and integrated by a conductory with a synergistic effect (Narver & Slater, 1990, p. 22), individual departments are expected to not only have input, but actually share responsibility for planning tasks of other departments. In the case of the marketing department, for example, other departments would be expected to share responsibility for sales planning; this would be yet another factor that would contribute to interdepartmental connectedness. Finally, interdepartmental connectedness, in the process of playing a facilitating role in creating a market orientation (Jaworski & Kohli, 1993; Deshpande & Zaltman, 1982), is likely to have a positive impact on rm performance in terms of sales, market share, prot, and return on investment, among others (Deshpande et al., 1993; Jaworski & Kohli, 1993; Jaworski et al., 2000; Han et al., 1998; Lukas & Ferrell, 2000; Narver & Slater, 1990; Pelham, 2000; Slater & Narver, 1994). 3. Method 3.1. Sampling and procedure The survey instrument was developed in Polish and English based on the relevant dimensions identied in earlier research. The English version was pretested by

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administering it to 18 part-time MBA students in the United States who had full-time jobs and had easy access to the marketing or sales manager at their jobs. The respondents were asked to ll out the questionnaire and to comment on the side on the data collection instrument based on conversations with marketing or sales managers at their jobs. Pretest respondent feedback indicated that the questionnaire was clear and easy to use. Data were collected from marketing managers in Poland and the United States. In Poland, the data were collected by a marketing research agency from a systematic random sample of rms selected from the research companys Polish database. It was decided to collect data in Poland rst and, subsequently to create a matched sample in the United States, as previous research (West & Paliwoda, 1996) cautioned that conducting market research in Poland presents problems because people are naturally secretive, rather than open, about information. It was also believed that approaching marketing managers in person, rather than via mailing would result in a higher response rate and in more reliable responses. A total of 195 marketing managers were approached in person and 67% agreed to complete the questionnaire. The data collection resulted in 105 usable questionnaires, or a 54% response rate. In the United States, an attempt was made to match the rms in terms of size and industry sector: the questionnaires were administered in person to manufacturing and service rms on the East Coast of the United States, selected from the lists available at the chambers of commerce in select cities. We have an excellent industry match, and a satisfactory match on rm size, as the United States rms tended to be somewhat larger than the corresponding Polish rms. We do note the challenge of achieving a perfect match of the samples due to differences in the economic and political environment: Poland is a transition economy facing extensive macro-economic restructuring, whereas the United States is a mature market economy. However, we also argue that this would be the case for any comparison between a transition economy and a mature market economy. After an extensive screening process, a total of 244 marketing managers were approached, and 98 agreed to complete the questionnaire, for a total of 98 usable questionnaires, or a 40% response rate. 3.2. Research instrument/operationalization of variables The research instrument comprised of a survey questionnaire. The specic questions asked to collect data on different operational variables and performance measures are described below. 3.2.1. Marketing departments access to other departments information The respondents were asked to indicate the extent to which the marketing department has access to the following types of information from other departments: product costs, marketing costs, investment plans, production schedules, and R&D projects. The responses to the four items were obtained on a 5-point scale with 1 being no access and 5 being full access. 3.2.2. Other departments access to marketing department information The respondents were asked to indicate the extent to which the non-marketing departments have access to the following types of marketing information: market studies, client reports, sales plans, marketing plans, and new product plans. The responses to the

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ve items were obtained on a 5-point scale with 1 being no access and 5 being full access. 3.2.3. Sharing of responsibility for sales planning This variable was measured by asking the respondents to indicate the degree to which the responsibility for sales planning was shared by the following departments: marketing, nance/accounting, production, and R&D. The responses to the four items were obtained on a 5-point scale with 1 being no responsibility and 5 being full and sole responsibility. 3.2.4. Status of chief marketing executive relative to other CEOs The respondents rated the status of the chief marketing executive in relation to the following executives: the chief production executive, the chief nance/accounting executive, and the chief sales executive.1 The responses to the three items were obtained on a 5-point scale with 1 being much lower status and 5 being much higher status. 3.2.5. Inuence of other departments on marketing department budget The respondents were asked to indicate how much inuence the following other departments have on the size of the marketing budget: nance/accounting, production, and R&D. The responses to the three items were obtained on a 5-point scale with 1 being none and 5 being very high. 3.2.6. The performance measures Four measures of performance were included in this study, i.e., sales, market share, prot, and return on investment. For each of these four performance measures, the respondents were asked to indicate whether the changes in performance for the most recent year in comparison with the previous year showed an increase or a decrease. 4. Data analysis and results 4.1. T-test of mean differences for operational variables For each of the ve operational variables, i.e., marketing departments access to other departments information (a 0.7190, Table 1), other departments access to marketing department information (a 0.8576, Table 1), sharing of responsibility for sales planning (a 0.6121, Table 2), status of chief marketing executive relative to other CEOs (a 0.5419, Table 2), inuence of other departments on marketing budget (a 0.5286, Table 2), and, mean scores for the component items as described above were computed and compared for rms in the US versus Polish rms using t-tests, which we deemed to be the statistical method that is tting for testing our hypotheses. The overall scores for each of these ve variables were also computed by taking average scores across the respective sets of component items included in the variables. The overall variables scores were compared for rms in the United States versus Polish rms using t-tests. These results are given in Tables 1 and 2.
They were asked to mention if any of the positions did not exist, or if two of the positions were held by the same individual.
1

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D.-N. Lascu et al. / International Business Review 15 (2006) 641659 Table 1 Access to information: t-tests of mean differences Items Means US (n 98) Marketing department access to other departments information Access to product cost info. Access to marketing cost info. Access to investment plans info. Access to production schedules info. Access to R&D info. Mktg. dept.s access to other depts. informationaverage across items Access of other departments to marketing department information Non-mkt. dept. have access to mkt. studies Non-mkt. dept. have access to client reports Non-mkt. dept. have access to sales plans Non-mkt. dept. have access to mkt. plans Non-mkt. dept. have access to mkt. budgets Non-mkt. dept. have access to new product plans Average access of other depts. to mktg. dept. information Poland (n 105) t-value p-value 651

4.44 4.77 3.14 4.01 3.92 4.06 3.58 3.53 3.75 3.83 3.06 3.96 3.62

3.77 4.63 3.57 3.79 4.12 3.98 3.55 3.15 3.71 3.46 2.88 3.01 3.29

4.10 1.36 2.43 1.49 1.20 0.76 0.14 1.93 -0.25 2.29 1.03 5.51 2.43

0.00 0.18 0.02 0.14 0.23 0.45 0.89 0.05 0.80 0.02 0.30 0.00 0.02

Table 2 Sharing sales planning responsibility, status of marketing chief executive, and inuence of other departments on the marketing budget: t-tests of mean differences Items Means US Poland (n 105) (n 98) Sharing of sales planning responsibility With marketing With nance/accounting department With production department With research and development Sharing of sales plang., responsibilityaverage across items Status Status Status Status Status of chief marketing executive relative to other chief executives of chief mkt. exec. vs. production exec. of chief mkt. exec. vs. chief n./acct. exec. of chief mkt. exec. vs. chief sales exec. of chief mktg. exec. relative to other CEOsaverage across items t-value p-value

3.11 3.44 3.39 3.74 3.42 3.41 2.71 2.67 2.93 2.50 3.84 3.83 3.39

2.67 3.70 3.81 2.95 3.03 2.70 2.41 2.55 2.55 3.12 3.65 3.67 3.48

2.86 1.66 3.88 4.96 4.07 3.85 1.62 0.78 3.02 3.29 1.26 1.08 0.80

0.00 0.09 0.00 0.00 0.00 0.00 0.10 0.44 0.00 0.00 0.21 0.28 0.42

Inuence of other departments on the marketing budget Inuence of nance/accounting department Inuence of production department Inuence of R&D Inuence of other depts. on mktg. dept.average across items

Hypothesis H1a predicted that marketing departments in Polish rms will have less access to other departments information than marketing departments in US rms. As noted in Table 1, the overall average score for US (4.06) was higher than Poland (3.98), as

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predicted. However, this difference was not signicant at the overall variable level. Further examination of the component items indicates that this hypothesis holds for product cost information (US 4.44, Poland 3.77, t-value 4.10, p 0.00) The results are not signicant for marketing cost information (US 4.77, Poland 4.63, t-value 1.36, p 0.18) and for production schedule information (US 4.01, Poland 3.79, t-value 1.49, p 0.14). As regards the results for the investment plan information and R&D information, the direction of results is opposite to prediction. Overall, these ndings are mixed and provide partial support for Hypothesis H1a at the component items level. Hypothesis H1b predicted that non-marketing departments are likely to have greater access to marketing information in US rms than in Polish rms. As indicated by the results summarized in Table 1, the overall score for US (3.62) was higher than Poland (3.29). The difference was statistically signicant at t-value 2.43, p 0.02. Thus Hypothesis H1b was supported at the overall variable level. A further examination of the component items indicates that this hypothesis holds for client reports (US 3.53, Poland 3.15, t-value 1.93, p 0.05), market plans (US 3.83, Poland 3.46, t-value 2.29, p 0.02), and new product plans (US 3.96, Poland 3.01, t-value 5.51, p 0.00). For the other three component items, i.e., market studies, sales plans, and marketing budgets, the direction of results was as predicted but not statistically signicant. Overall, these results provide partial support for Hypothesis H1 at the component items level. Hypothesis H2 predicted that there is likely to be less shared responsibility for sales planning in Polish rms than in rms in the United States. As indicated by the results summarized in Table 2, the overall average score for US (3.42) was higher than Poland (3.03). This difference was statistically signicant at t-value 4.07, p 0.00. Thus Hypothesis H2 was supported at the overall variable level. A further analysis of its component items indicates that for sharing of sales planning responsibility with marketing, US (3.11) was higher than Poland (2.67) and this difference was statistically signicant at t-value 2.86, p 0.00. For the item, sharing of sales planning responsibility with R&D department, US (3.74) was higher than Poland (2.95) and this difference was statistically signicant at t-value 4.96, p 0.00. For the remaining two items, i.e., sharing of sales planning responsibility with nance/ accounting and with production, the direction of results is opposite to prediction. Overall, these ndings are mixed and provide partial support for Hypothesis H2 at the component items level. Hypothesis H3 predicted that the status of the chief marketing executive is likely to be lower in Polish rms than in US rms. As indicated by the results summarized in Table 2, the overall average score for US (2.93) was higher than Poland (2.55) as predicted. The difference was statistically signicant at t-value 3.02, p 0.00. Thus, Hypothesis H3 was supported at the overall variable level. Further examination of the component items indicates that this hypothesis holds for the comparison between marketing versus production executives (US 3.41, Poland 2.70, t-value 3.85, p 0.00.) The results are marginally signicant for the comparison between marketing versus nance/ accounting executives (US 2.71, Poland 2.41, t-value 1.62, p 0.10). For the comparison between marketing and sales executives, the results are in the predicted direction but not statistically signicant. Overall, the results provide partial support for Hypothesis H3 at the component items level. Hypothesis H4 predicted that non-marketing departments are likely to have a greater inuence on marketing budget decisions in Polish rms than in US rms. As indicated by

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the results summarized in Table 2, the overall average score for US (3.39) was lower than Poland (3.48) as predicted. However, this difference was not statistically signicant. Further examination of component items indicates that this hypothesis holds for the inuence of nance/accounting department (US 2.50, Poland 3.12, t-value 3.29, p 0.00.) For the other two component items, i.e., inuence of production department and inuence of R&D department, the direction of results is opposite to prediction. Overall, the ndings are mixed and provide partial support for Hypothesis H4 at the component items level. 4.2. T-test of mean difference for interdepartmental connectedness The mean scores for the ve operational variables, i.e., marketing departments access to other departments information, status of chief marketing executive relative to other CEOS, sharing of responsibility for sales planning, inuence of other departments on marketing budget, and other departments access to marketing department information were combined to generate the average score for the variable interdepartmental connectedness (a 0.5172, Table 3) or simply interconnectedness, for each of the two countries, namely, US and Poland. The interconnectedness for US versus Poland was compared using t-tests. The Hypothesis H5 predicted that Polish rms are likely to be characterized by lower interdepartmental connectedness than US rms. As indicated by the results summarized in Table 3, the score for US (3.48) was higher than Poland (3.27). This difference was statistically signicant at t-value 3.80, p 0.00. Thus, the Hypothesis H5 was supported. 4.3. w2 test for changes in performance measures Table 4 summarizes the changes in performance, i.e., increase versus decrease for each of the four performance measures, i.e., sales, market share, prot, and return on investment (ROI) for US versus Poland as well as combined for the two countries together. As can be seen, each of the four w2 tests is signicant thereby indicating that the performance of the US versus Polish rms was different.

Table 3 Interdepartmental connectedness: Component variables and overall scores t-tests of mean differences Variables Means US (n) Mktg. dept.s access to other depts. info. Status of mktg. CEO wrt. other CEOs Sharing of responsibility for sales plang. Inuence of other depts. on mktg. budget Other depts. access to mktg. dept. info. Interdepartmental interconnectedness (average across variables) (df*): degrees of freedom. 4.06 2.93 3.42 3.39 3.62 3.48 (98) (97) (98) (98) (98) (97) Poland (n) 3.98 2.55 3.03 3.48 3.29 3.27 (105) (105) (105) (105) (105) (105) 0.76 3.02 4.07 0.80 2.43 3.80 (201) (200) (201) (201) (201) (200) 0.45 0.00 0.00 0.42 0.02 0.00 t-value (df*) p-value

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654 D.-N. Lascu et al. / International Business Review 15 (2006) 641659 Table 4 Changes in performance measures in comparison with previous year Changes in sales (w2 8.21; p 0.00) US Increase 93 Decrease 5 Total 98 Poland 86 19 105 Total 179 24 203 Changes in market share (w2 7.36; p 0.01) US 88 10 98 Poland 79 26 105 Total 167 36 203 Changes in prot (w2 14.90; p 0.00) US 90 8 98 Poland 74 31 105 Total 164 39 203 Changes in ROI (w2 3.72; p 0.05) US 78 20 98 Poland 71 34 105 Total 149 54 203

4.4. w2 test for the relationship between interdepartmental connectedness and performance Hypothesis H6 predicted that the greater the interdepartmental connectedness (or interconnectedness) the better the rm performance in terms of sales, market share, prots, and ROI. In order to test this hypothesis, interdepartmental connectedness scores were used to create two groups, namely, low interdepartmental connectedness: a group of rms with below median scores on interconnectedness, and high interdepartmental connectedness: a group of rms with above median score on interconnectedness. The number of rms in the two groups was then cross tabulated with the change in performance measures (increase versus decrease as compared to last year.) The w2 statistics were computed and the results are summarized in Table 5 for the US only, for Poland only, and combined data for the US and Poland. In each category, the data was examined for the directionality of results for low versus high interconnectedness. As a test of the Hypothesis H6, the number of rms should be higher for high interdepartmental connectedness category compared to low interdepartmental connectedness for increase in the performance. Similarly, the number of rms should be higher for low interdepartmental connectedness as compared to high interdepartmental connectedness for decrease in the performance. Thus, for each of the four performance variables there were six comparisons madetwo (increase, decrease) for US only, Poland only, and combined (US and Poland). For sales performance, each of the six comparisons was as expected. The w2 for US only was 1.96, p 0.16. The w2 for Poland only was 3.31, p 0.07. The w2 for combined (US and Poland) was 2.69, p 0.10. For market share performance, each of the six comparisons was as expected. The w2 value for the US only was 1.88, p 0.17. For Poland only, w2 was 5.37, p 0.02. For combined US and Poland, w2 was 2.52, p 0.11. For prot performance, each of the six comparisons was as expected. The w2 value was 2.27 for US only (p 0.13). The w2 value was 0.49 for Poland only (p 0.48). The w2 value was 5.89 for combined US and Poland, p 0.02. For ROI performance, each of the six comparisons was as expected. The w2 for US only was 4.24, p 0.04, the w2 value for Poland only was 0.24, p 0.63. The w2 value for US and Poland combined was 3.49, p 0.06. Overall the results summarized in Table 5 provide strong support for Hypothesis H6.

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D.-N. Lascu et al. / International Business Review 15 (2006) 641659 Table 5 Interdepartmental connectedness and performance measures Changes in sales (w2 1.96; p 0.16) Interconnecta Low High Changes in market share (w2 1.88; p 0.17) Interconnect Low High Changes in prot (w2 2.27; p 0.13) Interconnect Low High Changes in ROI (w2 4.24; p 0.04) Interconnect Low High 655

Data from US rms only Increase 44 48 Decrease 4 1 Total 48 49 Changes in sales (w2 3.31; p 0.07) Interconnecta Low Data from Increase Decrease Total High

41 7 48

46 3 49

42 6 48

47 2 49

34 14 48

43 6 49

Changes in market share (w2 5.37; p 0.02) Interconnect Low High

Changes in prot (w2 0.49; p 0.48) Interconnect Low High

Changes in ROI (w2 0.24; p 0.63) Interconnect Low High

polish rms only 39 47 13 6 52 53 Changes in sales (w 2.69; p 0.10) Interconnecta Low High
2

34 18 52

45 8 53

35 17 52

39 14 53

34 18 52

37 16 53

Changes in market share (w 2.52; p 0.11) Interconnect Low High

2

Changes in prot (w 5.89; p 0.02) Interconnect Low High

2

Changes in ROI (w2 3.49; p 0.06) Interconnect Low High

Combined data from US and polish rms Increase 94 103 87 Decrease 18 10 25 Total 112 113 112
a

97 16 113

84 28 112

99 14 113

77 35 112

90 23 113

Interconnect: Interdepartmental connectedness score for each respondent rm was used to create two groups, i.e., low on interconnectedness: Below median score, and High on interconnectedness: Above median score.

5. Discussion and future research The study provides insights into important differences in interfunctional dynamics between transition economies and mature markets, by examining these dynamics and their relationship to rm performance in the Polish transition economy and the US mature market economy. We posited that Polands past as a planned economy may provide a hindrance to interdepartmental connectedness and thus an obstacle to rms adopting a market orientation. We hypothesized that marketing departments in Polish rms are likely to have less access to other departments information than marketing departments in the

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US, as information is less likely to be shared across departments in Polish rms, due to a history of rms and managers protecting company information. We found that this was true in particular for access to product cost, marketing cost, and product schedules information, but, surprisingly, not for R&D information and investment plans. This may be as a result of an overall attempt to have marketing drive future investments and product research. We also hypothesized and found that other departments were likely to have less access to marketing department information in the case of Polish rms, as compared to US rms. Research conducted in Poland suggested that departments rarely share sales information by product, or even information on the most protable product in the company (Muth, 1995; West & Paliwoda, 1996). It is very likely that the limited access to information across departments could potentially create an atmosphere of limited cooperation between the departments and thus less shared responsibility for sales planning across departments in Polish rms, compared to US rms, in general. It is noteworthy that, in the case of the nance, accounting and production, the ndings were reversed: it may be that, in Poland, nance, accounting and production, continue to retain their dominant status from the days of socialist planning, which focused on production and costs, rather than on consumers and their needs. Manufacturing and service rms actively engaged these departments in handling sales planning, since they did not have a marketing department. We hypothesized and found that the status of the chief marketing executive in Poland is lower than in the US when compared to that of the other departmental chiefs in the company. These ndings are not surprising in an environment where marketing is a relatively new activity to which companies assign their unseasoned recruits. With regard to the inuence of other departments on the marketing budget, we hypothesized and found that the inuence is substantially higher for nance and accounting in Polish rms, than in US rms, especially given the important role played by nance and accounting for Polands formerly planned economy. Surprisingly, the production and the R&D departments appeared to have a lesser inuence on the marketing budget in Poland than in the US. These ndings are consistent with the earlier suggestion that there may be a concerted attempt in Polish rms to have marketing drive investments and product research, as is appropriate for companies operating in increasingly competitive and highly volatile environments (Aldas-Manzano et al., 2005). As a result, production and R&D may be important drivers of the new marketing focus, and hence they may exert substantial inuence on the marketing budget. The main focus of the study centered on evaluating the degree of interdepartmental connectedness in Poland, compared to the US. The study hypothesized and found that interdepartmental connectedness is lower for Polish rms than for US rms. While there is an effort to change a highly centralized bureaucracy, rms in Central and Eastern Europe continue to have difculty in changing the mindset of bureaucrats who have operated under a central planning system and low interdepartmental coordination (Matsuno et al., 2002; Menon et al., 1997). In line with earlier research (Deshpande et al., 1993; Han et al., 1998; Jaworski & Kohli, 1993; Jaworski et al., 2000; Lukas & Ferrell, 2000; Narver & Slater, 1990; Pelham, 2000; Pelham & Wilson, 1996; Slater & Narver, 1994), the study found strong support for the positive relationship between interdepartmental connectedness and performance, for US rms alone, for Polish rms alone, and for US rms and Polish rms combined: the greater

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the interdepartmental connectedness, the better the rms performance in terms of sales, market share, prot, and ROI. In spite of almost two decades since the fall of communism, enterprises in the former Comecon countries had comparatively little time to make important changes in their organization and management processes and to make substantial improvements in their effectiveness and competitiveness (Chadam & Pastuszak, 2005). Central planning has guided Polish business for many decades and managers indoctrinated under Marxist-Leninist economic ideology are only slowly learning and adopting a Western management style. Here, we have opened a research stream by hypothesizing and showing that the legacy of communism may have created interfunctional dynamics that impede the adoption of a market orientationan important determinant of rm performance. We conclude with an optimistic assessment: as Poland continues on its path of profound systemic transformation, and as the old organizational practices give way to innovative, market-oriented ones, interfunctional dynamics will change such that information exchange between departments will become the norm, and marketing will become a central player in the market-oriented rm. This assessment is predicated, in the long-term, on the existence, in parallel, of a reasonable level of organizational change capability within the rmsthat is, a suitable foundation for change, the ability to shape change, and the ability (energy) to sustain change (McGuinness & Morgan, 2005). Future research may test the verity of our ndings and evaluate interfunctional dynamics longitudinally in Poland, as such an analysis is more appropriate for the consideration of an organizational characteristic that is as deeply imbedded and slowly evolving as market orientation (Noble, Sinha, & Kumar, 2002), especially for an environment that is undergoing massive structural change. Acknowledgements This research was partially supported by a grant from the Committee on Scientic Research, Poland (Komitet Badan Naukowych, ul. Wspolna 1/3 Warszawa, Poland, Research No.: 1363/402/98/14; 1 HO2D 041 14), and the William Davidson Institute at the University of Michigan. References
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