Marketing & Policy Studies-Faculty Candidate Seminar
Speaker(s): Hui(Sophia)Feng, Ph.D Candidate, Kelley School of Business, Indiana Unviersity
Date & Time: Sep 28, 2012 9:30 AM - 11 AM (Eastern)
"Marketing Department Power, Marketing Capabilities and Firm Performance"
In the past two decades, many observers have noted a perceived decline in marketing department power within firms, in terms of head count, budget, and status in the boardroom. Yet, over the same time period many firms have been reporting higher and higher earnings. Much of the literature in this domain has therefore focused on the nature and performance consequences of the contribution of the marketing department within firms. However, empirical evidence regarding the impact of a powerful marketing department on firm performance is scarce, with conflicting, and inconclusive results. This study uses a new measure of marketing department power to examine the marketing department power-firm performance relationship across a large and generalizable sample of firms in a longitudinal setting with secondary data. Drawing on the contingency theory perspective, this study examines: (1) whether marketing department power within U.S firms has been declining over the past two decades; (2) whether a powerful marketing department is beneficial to firm performance in terms of short-term financial efficiency (ROA) and long-term effectiveness and shareholder value (total shareholder returns); (3) the moderating role that key internal (short- and long-term slack) and external contingencies (competitive intensity and dynamism) play in the marketing department power-firm performance association; and, (4) how marketing capabilities impact the marketing department power-firm performance relationship.
Using a cross-industry sample containing over 8000 firm/year observations from over 600 different firms across more than 60 industries in 17 years, this study shows that marketing department power within U.S firms has generally been increasing rather than deceasing over the past two decades, thus worries about declining marketing department power are largely unfounded. This study also finds that a powerful marketing department enhances long-term effectiveness regarding shareholder value (total shareholder returns) above and beyond its negative effect on short-term efficiency (ROA). Moreover, these relationships are stronger in firms operating in more competitive and dynamic environments and weaker when firms have greater long-term slack. The findings also reveal that a firm’s marketing asset capability complements a powerful marketing department, but a marketing revenue capability does not. This research provides new guidance for marketing scholars and mangers concerning when investments in building powerful marketing department are most likely to pay off.
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