Marketing investments and firm performance in manufacturing sector: a panel threshold model for China

Abstract

Many firms find it difficult to accurately identify the level of investments in marketing activities that can maximize their profitability. The current work is aimed at helping firms in identifying the optimal level of marketing expenditure. The study has been conducted for 1363 publicly listed firms in China for the period 2008–2017. The current study utilizes threshold panel regression analysis. The study contends that the optimal level of investments in marketing is contingent upon firm’s size. The results confirm the existence of a single threshold value that helps in determining the optimal level of marketing investments. It is found that, for firms that are smaller that the cut-off value of size, high level of investments in marketing is associated with improved firm performance. However, for the firms that are larger than the cut-off value of size, high level of investment in marketing is associated with reduced firm performance.

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