Marketing with (or without) research and development: strategic investment drivers of sustained firm performance

How can companies balance marketing and research and development (R&D) to sustain competitive advantage through performance? Although these resources are widely recognized as key strategic investments, it remains unclear under what conditions and time frames they generate sustained impacts on firm performance. This study aims to examine the individual and combined impacts of marketing and R&D on market share and profitability over time, while accounting for prior performance levels. Using 18 years of panel data, the authors examine how marketing and R&D investments affect market share and return on assets over a four-year period and under four distinct prior performance conditions. Marketing yields rapid market-share gains but loses strength over time, whereas R&D offers slow yet steady improvements in market share and profitability. Joint investments yield modest but consistent profit gains, particularly when firms previously had low market power and high profit efficiency. Marketing, either alone or in combination with R&D, enhances future profitability for firms that previously had weak market power and efficiency, whereas firms strong in both dimensions face diminishing returns. The evidence clarifies how marketing and R&D investments dynamically shape firm performance, offering a more precise understanding of their interaction and sustainability. Managers can use these insights to allocate financial resources strategically, thereby optimizing both short-term and long-term performance. Empowering companies to harness sources of competitive advantage improves sustained performance, thereby enhancing firm-level competitiveness and the persistence of profitability over time. This research uniquely integrates marketing and R&D investment strategies, demonstrating how their interplay, contingent on prior performance, sustains long-term competitive advantage.