R&D Intensity, Marketing Intensity, and Organizational Performance

Abstract

Companies have recognized that one of the routes to sustainable competitive advantage is to invest in both marketing and RD Walwyn, 2005). Surprisingly, there is little research in the business discipline on the outcomes of investing in both these vital functions. Prior research in marketing and management has been confined to three sets of studies. In the first set of studies, researchers have focused on the impact of marketing and R&D integration on various organizational processes such as new product development, product life cycles, development time, and knowledge diffusion. The second set of studies has focused on the impact of marketing investments or R&D investments on the bottom line without considering the joint impact of these two vital functions (Lee and O'Neill, 2003). Third, earlier studies have been limited to single industries. For example, in a single industry study, Wright, Kroll, Chan and Hamel (1991) have argued that successful firms were those that were efficient marketers, or those which spend relatively heavily on R&D as well as marketing. Lin, Lee, and Hung (2006), likewise, have argued for the joint impact of R&D and commercialization efforts on performance in technology-intensive industries. In today's environment, with increased off-shoring of the manufacturing function by U.S.-based industries to other nations, marketing and R&D have emerged as key functions in the value chain for all major manufacturing and service industries. This study makes two notable contributions to the field. First, it is the first study, to our knowledge, to examine the implications of the joint impact of marketing and R&D investments on organizational performance in a wide range of industries and, second, it employs lagged organizational performance to test the major hypothesis. Based on anecdotal evidence in this area, this study empirically tests the hypothesis that investments in both marketing and R&D are necessary for superior organizational performance. No company exemplifies this argument better than Procter & Gamble, the leading consumer products company. Procter & Gamble has a unique approach to innovation and has based its competitive advantage on understanding customers, acquiring, developing, and applying technology across its broad array of product categories and making connections between consumer wants and what technology can deliver (www.pg.com). Recently, to increase productivity in the R&D and marketing interface, the company has developed a new model for innovation entitled, connect and develop (Huston and Sakkab, 2006). A second company to base its competitive advantage on linking R&D and marketing is Silicon Graphics which obtained input from its customers to incorporate video conferencing into its successful desktop offerings (Andrews, 1999). …

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