Journal of international business and economics Vol. 13, No. 3 (2013) 215 THE EFFECTS OF MARKET ORIENTATION ON SERVICE QUALITY AND NEW SERVICE SUCCESS Kanchana Sukanthasirikul Suranaree University of Technology, THAILAND Wannee Trongpanich Rajamangala University of Technology Isan, THAILAND ABSTRACT This research shows how linking the market-oriented firms in service sector can lead to service quality and performance benefits of new service. Data are collected from 276 marketing managers of hotel firms in Thailand. Results show a strong positive relationship between market orientation and service quality. Service quality is also show a strong positive effect on the new service success. The findings shows that service firms that are more likely to focus on both market orientation and service quality, in turn, higher new service success. Managerial implications and limitations are discussed. Keywords: Market Orientation, Service Quality, New Service Success, Service Firms 1. INTRODUCTION The market offering’s value is primary concern when a firm’s customers are service-sensitive. Service firms more oriented to their markets are likely to make changes to meet or exceed customer expectations through service quality (Chang and Chen, 1998). As such, market orientation and service quality is essential for service firms in the ways that match the market conditions faced in order to drive firm performance in today’s competitive environment. Although the role of market orientation as an antecedent of firm performance has been extensively investigated in various contexts (Deshpandé and Farley, 2004; Cano et al., 2004; Voss and Voss, 2000), rarely research studies concerning the market orientation and firm performance relationship in service firms (Chang and Chen, 1998; Van Egeren and O’Connor, 1998; Matear et al., 2002; Ramaseshan et al., 2002). Recent researches provide the needed theoretical framework both market orientation and service quality moderate offering and have a positive impact on firm performance and also show some empirical support (e.g., Jaworski and Kohli, 1993; Kohli and Jaworski, 1990; Narver and Slater, 1990; Chang and Chen, 1998; Ramaseshan et al., 2002; Slater and Narver, 1994; Voon, 2006). A subsequent question is how market orientation and service quality are related. Market orientation construct with the appropriate dimensions and respective items must be empirically identified and developed to benefit service firms. Service is the competitive tool for differentiation that is difficult to be imitated by rivals (Zeithaml and Bitner, 2000). Service quality needs to be strategically managed for competitive advantage. Market-oriented service behavior is one of the tools in delivering quality service (Parasuraman et al., 1983). As such, market orientation needs to incorporate the service elements in line with service quality for serving the target market more effectively (Voon, 2006). There were empirically supports for service quality and performance relationship (Buzzell and Gale, 1987; Phillips et al., 1983). While there have been a number of studies linking market orientation, service quality and performance in business and industry (Chang and Chen, 1998), there is a little empirical studies to support the role of market orientation and service quality on firm performance (Ramaseshan et al., 2002) especially, in service sectors. While previous studies emphasized on the importance of customer focus for the success of new service performance (e.g., Matthing et al., 2004,Alam and Perry, 2002; Atuahene-Gima, 1996, 1995), there are rarely researches on new service success. To be survival in today’s competitive environment, new service is essential for the long term growth and prosperity of service firms. Notably, new services account for over 30 to 40 percent of firms’ profits ( Booz-Allen, 1982) if they are designed to satisfy perceived customer needs (Ramaseshan et al., 2002).While the focus of much of the work on service quality has been on firm performance (e.g., González et al., 2007; Woo and Ennew, 2005; Witkowski and Wolfinbarger, 2002; Parasuraman, 2002), the link between service quality and new service success has been rarely research consideration in service sector.