Author Information : MinChung Kim (School of Business Administration, UNIST, South Korea)
Guiyang Xiong (Whitman School of Management, Syracuse University)
Kwang-Ho Kim (College of Business, Hankuk University of Foreign Studies, South Korea)
Year of Publication : Journal of the Academy of Marketing Science (2018)
Summary of Findings : Companies with hubristic managers tend to over-invest in R&D relative to marketing (e.g., advertising), and such tendency is dependent on certain firm and industry characteristics.
Research Questions : What is the relationship between corporate managerial hubris and firm strategic emphasis?
Under what conditions is the relationship strengthened or weakened?
What we know : Extant research suggests that a firm's strategic emphasis on value creation versus value appropriation is reflected in its resource allocation between R&D and marketing, and that strategic emphasis significantly affects firm financial performance.
Novel Findings : Based on the literature, little is known about the drivers of firm strategic emphasis. Our study shows that corporate managerial hubris is an important driver of strategic emphasis, and identifies the boundary conditions.
Implications for Practice : The findings show that firms' strategic focus can be subject to managers' psychological bias, and suggest possible ways of preventing over- or under-investment in marketing strategy to maximize firm performance.
Full Citations : Kim, MinChung, Guiyang Xiong, and Kwong-Ho Kim (2018), "Where does pride lead? Corporate managerial hubris and strategic emphasis," Journal of the Academy of Marketing Science, Forthcoming.
Abstract : 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.