Powerful marketing departments can influence a firm’s financial management decisions.
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Srinivasan, Raji and Nandini Ramani (2019), “With Power Comes Responsibility: How Powerful Marketing Departments Can Help Prevent Myopic Management,” Journal of Marketing, 83 (3), 108-125.
Managers sometimes engage in myopic management cutting marketing spending or providing lenient credit to customers to improve short-term results. Although marketing is at the center of such myopic management, there are few insights on whether a marketing department can prevent it. Addressing this gap, we examine the role of powerful marketing departments in preventing myopic marketing spending and myopic revenue management. We hypothesize that there are internal and external enablers of marketing department power—a Marketing CEO, the firm’s power over its customers, analyst coverage and institutional stock ownership—that help a powerful marketing department prevent myopic management. We test the hypotheses using a panel of 781 publicly-listed U.S. firms between 2000 and 2015. As hypothesized, when there is a Marketing CEO and the firm has power over its customers, increasing marketing department power decreases the likelihood of myopic marketing spending and myopic revenue management; increasing marketing department power and analyst coverage decreases the likelihood of myopic marketing spending. The findings highlight powerful marketing leadership as a hitherto overlooked way to prevent myopic management and improve firm performance.
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