Marketing Investment Selection and Effectiveness in Growth-Oriented Private Firms: Source of Capital and Market-Based Assets as Contingencies

Abstract

Despite increasing attention to the financial implications of marketing investments in marketing literature, several aspects of the topic remain underresearched. Building on theories related to marketing investment effectiveness (i.e., corporate goal attainment through marketing investments), sources of capital (used to fund the investments), and market-based assets (e.g., brand equity, customer relationships), the present thesis empirically examines the marketing investments of privately-held firms whose main corporate goal is on business growth. Specifically, the present research addresses both (1) the selection of marketing activities by such firms, and (2) the effectiveness of the selected investment in terms of attaining the business growth goal. The specific research questions are: (1a) What kind of marketing activities do privately-held growth-oriented firms select to invest their external funding in?; (1b) How do (i) the source of funding and (ii) strategic factors such as market-based assets affect the selection of marketing investments?; and (2) What configurations of marketing investments, sources of funding, and strategic factors such as market-based assets are effective in attaining the business growth goal? The research questions are examined with a sample of 200 growth-oriented private firms, merging survey data on their marketing investment selection, and objective data on their financial business performance. The findings reveal how the source of capital and market-based assets as well as other strategic factors (e.g., business-to-consumer [B2C] vs. business-to-business [B2B] profile; business model) affect the selection of marketing investments, and the effectiveness of those investments for growth. Considering the effectiveness, the study indicates, for instance, that a combination of product development (PDM) investment, mass-produced product, debt funding, and extensive stocks of market-based assets was consistently associated with high growth in B2B context, while a combination of PDM investment, customized product, other equity funding (than entrepreneur herself), and modest stocks of domestic assets and assets abroad was associated with high growth in B2C context. Taken together, the findings further advance marketing science and practice by increasing understanding of the financial implications of marketing investments and, specifically, the roles of source of capital and market-based assets in marketing investment selection and effectiveness.