TY - JOUR
T1 - Where does pride lead? Corporate managerial hubris and strategic emphasis
AU - Kim, Minchung
AU - Xiong, Guiyang
AU - Kim, Kwang Ho
N1 - Funding Information:
Acknowledgements This work was supported by the 2017 Research Fund (1.170022.01) of UNIST (Ulsan National Institute of Science and Technology) and Hankuk University of Foreign Studies Research Fund of 2016. Xiong would like to acknowledge research support from the University of Massachusetts Boston.
Publisher Copyright:
© The Author(s) 2017.
PY - 2017/5/19
Y1 - 2017/5/19
N2 - A firm’s strategic emphasis on value creation versus appropriation, which is typically reflected in its resource allocation between R&D and advertising, is a central corporate decision that significantly influences financial performance. However, the drivers of such decisions remain underexplored. This study identifies a significant predictor of strategic emphasis, namely, corporate managerial hubris, and reveals some of its boundary conditions. Leveraging a unique dataset based on text mining of press releases issued by over 400 firms across 13 years, the authors demonstrate that high corporate managerial hubris predicts low strategic emphasis on advertising relative to R&D. However, this effect is mitigated significantly by firm maturity, corporate governance, and industry-level strategic emphasis. The results provide novel insights into the effects of hubris on firm spending, the situations wherein marketing decisions tend to be subject to managers’ psychological bias, the means of preventing over- or under-investment in marketing strategy, and the recruitment and training of managers.
AB - A firm’s strategic emphasis on value creation versus appropriation, which is typically reflected in its resource allocation between R&D and advertising, is a central corporate decision that significantly influences financial performance. However, the drivers of such decisions remain underexplored. This study identifies a significant predictor of strategic emphasis, namely, corporate managerial hubris, and reveals some of its boundary conditions. Leveraging a unique dataset based on text mining of press releases issued by over 400 firms across 13 years, the authors demonstrate that high corporate managerial hubris predicts low strategic emphasis on advertising relative to R&D. However, this effect is mitigated significantly by firm maturity, corporate governance, and industry-level strategic emphasis. The results provide novel insights into the effects of hubris on firm spending, the situations wherein marketing decisions tend to be subject to managers’ psychological bias, the means of preventing over- or under-investment in marketing strategy, and the recruitment and training of managers.
KW - Advertising
KW - Corporate managerial hubris
KW - R&d
KW - Strategic emphasis
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U2 - 10.1007/s11747-017-0547-4
DO - 10.1007/s11747-017-0547-4
M3 - Article
AN - SCOPUS:85060562698
SN - 0092-0703
VL - 46
SP - 537
EP - 556
JO - Journal of the Academy of Marketing Science
JF - Journal of the Academy of Marketing Science
IS - 3
ER -