Several studies have found that appropriate marketing investments will lead to positive outcomes for a firm in terms of sales, market value, growth, profits and shareholder value. These marketing investments are typically considered to be advertising and R&D. Several studies in marketing have examined the impact of advertising and R&D on the firm's financial performance. However, there is a lack of research in identifying the drivers that influence these advertising and R&D decisions. This study, therefore, seeks to identify these drivers and investigate their influence on a firm's advertising and R&D intensity.
Specifically, this study integrates marketing and management theoretical frameworks including Marketing Chain and Productivity, Market Dominance, Agency Theory, Upper Echelon Theory, and Stakeholder Theory. The review of literature resulted in the identification of two main drivers that influence a firm's advertising and R&D decisions: (1) executive; and (2) firm characteristics. Executive characteristics consist of age, tenure, stock ownership and education, while firm characteristics consist of firm size and financial resources. In addition, this study further identified possible moderators such as education major, industry types, and competition.
A series of multiple regression analysis was conducted on a sample of 293 US firms to investigate the relationship between these variables. Thirteen out of twenty-two hypotheses were found to be significant. These findings suggest that executive and firm characteristics can indeed predict a firm’s advertising and R&D intensity. In terms of theoretical contributions, this study integrates different aspects of both marketing and management literature. This integration provides insights into the understanding of the drivers of marketing investment decisions. In terms of managerial implications, this study suggests that firms can have some influence on the intensity of their marketing decisions by selecting their top management team by profile.