Where does pride lead? Corporate managerial hubris and strategic emphasis

• Published in: Journal of the Academy of Marketing Science Vol. 46; no. 3; pp. 537 - 556
• Main Authors: Kim, MinChung, Xiong, Guiyang, Kim, Kwang-Ho
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.05.2018; Springer; Springer Nature B.V
• Subjects: Advertising; Advertising campaigns; Analysis; Business and Management; Decision making; Industrial research; Management techniques; Marketing; Organization theory; Original Empirical Research; R&D; Recruitment; Research & development; Resource allocation; Social Sciences; Strategic planning (Business); Studies; Training; R&d; Strategic emphasis; Advertising; Corporate managerial hubris
• ISSN: 0092-0703; 1552-7824
• DOI: 10.1007/s11747-017-0547-4

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.