This addendum offers more details about regression results and discussions on the findings. Tables 1A and 2A exhibit regression results with estimates, standard errors, and P values.
Results for the mediating effects of market and product expansions
Notes: + Significant at 10%;* Significant at 5%; ** Significant at 1%; *** Significant at 1‰.
Industries are not included in the table for save space.
[1] We are sorry that we made a typo in the significance when reporting results in Table 3 of the main body.
Results for the moderating effects of political and business ties
Notes: + Significant at 10%;* Significant at 5%; ** Significant at 1%; *** Significant at 1‰.
Industries are not included in the table for save space.
Table 1A reports results on the mediating effects of market and product expansion strategies. Model 1B reports a positive linkage between MO and firm performance (β = 0.260, p = 0.0001), supporting Hypothesis 1. This finding is consistent with the statement that MO is a key strategic resource that can lead to superior performance (Hult & Ketchen, 2001; Hult et al., 2005), and it is the same as findings of most extant studies and meta-analyses conducted by Ellis (2006) and Kirca et al. (2005). In addition, Model 1B generates a significant increase in R-square at 0.044, indicating that MO can explain 4.4% performance variance. Since firm performance is affected by a wide range of factors, this size effect is acceptable.
Model 2B shows that MO is related to market expansion strategy positively (β = 0.370, p = 0.0000), indicating that MO aids firms in identifying market expansion opportunities and taking market expansion strategy to capture these opportunities (He et al., 2013; Murray et al., 2007). Moreover, Model 2B yields to an additional 0.065 R-square, meaning that MO can explain 6.5% variance among firms in adopting market expansion strategy. As a firm's strategic choice is very complicated that must take a lot of factors into consideration, the explanatory power of MO on market expansion strategy is desirable.
Model 3B reports that MO is positively related to product expansion strategy (β = 0.473, p = 0.000). This finding suggests that MO helps firms identify opportunities for product expansion and supports firm adopting the corresponding strategy to take advantage of them (He et al., 2013; Murray et al., 2007). Moreover, the model shows that MO explains 12.9% variance among firms in adopting product expansion strategy, in that it has an incremental R-square at 0.129.
The results of Model 1D show that product expansion strategy (β = 0.196, p = 0.0009) and market expansion strategy (β = 0.184, p = 0.0164) have positive linkages with firm performance, whereas that of MO to firm performance becomes insignificant (β = −0.017, p = 0.7970). These findings indicate that both product and market expansions are key approaches that enable firms to capture growth opportunities and achieve better performance (Mishina et al., 2004; Murray et al., 2007). In addition, such findings suggest that MO does not directly impact firm performance when taking product and market expansion strategies into consideration, meaning that through enabling firms to pursue growth opportunities generated by MO, product and market expansion strategies serve as conduits by which MO plays its role in firm performance. Thus, Hypotheses 2a and 2b both are supported. Furthermore, the incremental R-square at 0.067 suggests that MO, product and market expansion strategies together explain 6.7% variance in firm performance.
Table 2A reports the results on the moderating effects of political and business ties. Model 4D indicates that political ties have a positive moderating effect on the relationship between MO and market expansion strategy (β = 0.140, p = 0.0352), supporting Hypothesis 3a. As we have indicated, since political ties contribute to overcoming resistance to entering new markets, they help firms take market expansion strategy to capture opportunities generated by MO. Thus, the positive linkage between MO and market expansion strategy is stronger in firms holding strong political ties. Conversely, business ties offer little assistance in overcoming resistance to market expansion strategy, and they generate social obligations that preclude firms from entering new markets (Bock et al., 2012). Accordingly, Hypothesis 3b argues that business ties undermine the advantages of MO for market expansion strategy and they play a negative moderating role in the relationship of MO to market expansion strategy. The findings of Model 4D provide empirical evidence to this argument (β = −0.168, p = 0.0093). Model 4D further reports that 2.2% variance in market expansion strategy is explained by the interactions of MO with political and business ties, in addition to their direct explanations.
Model 5D reports that political ties negatively moderate the relationship of MO to product expansion strategy (β = −0.132, p = 0.0469), supporting Hypothesis 4a. This negative moderating effect is due to two reasons. First, because regulatory resources provided by political ties cannot facilitate developing and launching new products (Shu et al., 2012), political ties contribute little to leveraging the advantages of MO for product expansion strategy. Second, political ties lead to organizational inertia against adopting product expansion strategy. Thus, the positive relationship between MO and product expansion strategy is weaker among firms holding strong political ties. In contrast, when a firm has strong business ties, it is able to overcome the challenges for product expansion strategy through taking advantage of business ties to develop and launch new products in existing markets. Thus, Hypothesis 4b argues that business ties enable the firm to leverage the benefits of MO for product expansion strategy, leading to a strong relationship of MO to product expansion strategy. This argument is supported by findings of Model 5D (β = 0.285, p = 0.0000). In addition, the incremental R-square at 0.023 suggests that MO as well as political and business ties can jointly explain 2.3% variance in product expansion strategy, in addition to their directly explanations. Because a firm's decisions on taking market and product expansion strategies are determined by many factors individually and jointly (Abell, 1980; Ansoff, 1965), the statistically significant additional 2.2% and 2.3% explanatory power generated by Model 4D and Model 5D are both acceptable.
