The effects of past financial performance on firms’ short-term and long-term marketing strategies

Abstract

When firms experience unfavorable financial performance, how do they respond? Using a resource-advantage theoretic lens, this study examines how past firm performance affects firms’ future marketing strategies. In particular, the dissertation investigates the effects of past financial performance on firms’ both short-term and long-term marketing strategies. Using a multi-source dataset of 159 S&P 500 companies from 2007-2013, the study finds that (1) a firm’s past financial performance influences its both short-term and long-term marketing strategies but in different ways. Specifically, a firm’s short-term marketing investment is a positive function of its past financial performance, while there is a negative relationship between past financial performance and long-term marketing investment; (2) This process is influenced by a firm’s internal environment (e.g., top management entrepreneurial orientation and resources slack) and external environment (e.g., industry competition and industry growth rate). This dissertation contributes to the existing literature by linking performance back to marketing strategies. Also, by combining a firm’s internal and external factors, this dissertation provides a more comprehensive theoretical foundation for explaining a firm’s strategic change process. These findings have implications for managers interested in understanding the conditions under which their organizations should make changes to their marketing strategies.

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