Where does pride lead? Corporate managerial hubris and strategic emphasis

Original Empirical Research

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.

Keywords

Corporate managerial hubris Advertising R&d Strategic emphasis 

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Copyright information

© Academy of Marketing Science 2017

Authors and Affiliations

  1. 1.School of Business AdministrationUlsan National University of Science and Technology (UNIST)UlsanRepublic of Korea
  2. 2.Whitman School of ManagementSyracuse UniversitySyracuseUSA
  3. 3.College of BusinessHankuk University of Foreign StudiesSeoulRepublic of Korea

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