Although progress has been made in understanding the development of businesses competencies from a theoretical perspective, relatively few empirical studies have addressed the capabilities needed to become market‐driven and the perfor Mance advantages accruing to firms possessing these capabilities. One of the barriers faced has been in defining what is meant by the term ‘market‐driven’. This study develops a multi‐dimensional measure useful for assessing the degree to which a firm is market‐driven. Evidence is presented in this study that strategically focused market‐driven business units developed higher levels of capabilities than their less market‐driven rivals and significantly outperfor Med these rival business units on four measures of organisational perfor Mance.
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