Pravin Nath & Vijay Mahajan
Executive Summary
The presence of a chief marketing officer (CMO), an executive in charge of marketing in the firm’s top management team (TMT), is a strong indicator of marketing’s influence at the level of corporate strategy. Recent estimates, however, suggest that fewer than 50% of the Fortune 1000 companies have a CMO in their TMTs. The authors explain this phenomenon by exploring factors associated with CMO presence/absence in the TMT. Because CMO presence represents an important facet of marketing’s influence in the TMT, such an investigation sheds light on differences across firms in marketing’s role at the highest level of the firm. In addition, the authors also test whether CMO presence/absence in the TMT affects firm performance.
The authors argue that CMO presence in the TMT is directly related to the level of TMT complexity in critical marketing domains. They also posit that CMO presence is linked to power dynamics, in relation to control over marketing assets, and to homophily within the TMT. They then identify various strategic, structural, and environmental factors that have a bearing on complexity, power, and homophily in the TMT and, in turn, are related to CMO presence. These factors are innovation or research-and-development intensity, differentiation or advertising intensity, the firm’s branding strategy, its level of diversification, the functional experience in the TMT, whether the chief executive officer is an outsider or an insider, and market concentration. To test these theoretical arguments, the authors observe CMO presence/absence in the TMTs of a multi-industry sample of 167 publicly listed U.S. firms for a five-year period (2000–2004). They use various secondary sources of data, including firms’ 10-Ks or proxy reports, annual reports, and Standard and & Poor’s COMPUSTAT, for measuring CMO presence/absence and other relevant variables.
In support of their theoretical arguments related to TMT complexity in critical marketing domains, they find that CMO presence is more likely as innovation increases, as differentiation increases, in firms with a corporate branding strategy than in firms with either a mixed branding or a house-of-brands strategy, when the chief executive officer is an outsider rather than when he or she an insider, and as diversification increases in relatively large firms. In relatively small firms, they find that as diversification increases, CMO presence becomes less likely, suggesting that top executives seem to be reluctant to give up power over marketing assets to a CMO. Evidence of homophily is observed in a weaker finding of CMO presence being more likely as TMT marketing experience increases. Finally, using various measures of performance, the authors find that CMO presence has neither a positive nor a negative impact on firm performance in models. Notably, however, CMO presence is positively correlated with Tobin’s Q, a market-based measure of performance. Regardless, the findings from this research have implications for practice because firms themselves make decisions regarding CMO presence. An awareness of the factors associated with the choice of CMO presence, especially those that increase TMT complexity in the marketing domain should aid TMT decision making in this structural choice.
Biography
Pravin Nath is Assistant Professor of Marketing in Drexel University’s LeBow College of Business. He received his PhD in Marketing from the University of Texas at Austin’s McCombs School of Business. He also holds a Master’s Degree in Marketing and a Bachelor’s Degree in Engineering from the University of Bombay. Before his PhD, Pravin spent approximately five years working in reputed firms in India, where he acquired valuable experience in sales and marketing, market research, and client servicing. Pravin’s research interest is in the role of marketing in the firm.
Vijay Mahajan, former dean of the Indian School of Business, holds the John P. Harbin Centennial Chair in Business in the McCombs School of Business at the University of Texas at Austin. He has received several lifetime achievement awards, including the American Marketing Association Charles Coolidge Parlin Award for visionary leadership in scientific marketing. The American Marketing Association also instituted the Vijay Mahajan Award in 2000 for career contributions to marketing strategy. In 2006, he received the Distinguished Alumnus Award from the Indian Institute of Technology (Kanpur) for his contribution to management research and education. Mahajan is author or editor of nine books. He is one of the world’s most widely cited researchers in business and economics. He served as editor of Journal of Marketing Research and has delivered research presentations in more than 100 universities and research institutes worldwide.
Journal of Marketing, Vol. 72, No. 1, January 2008
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