In recent years, firms are facing increasing turmoil in the market, which is driven by various factors such as technological innovations, rapid changes in consumer needs, and increasing global competition. Marketing scholars have recognized firm perfo ...
In recent years, firms are facing increasing turmoil in the market, which is driven by various factors such as technological innovations, rapid changes in consumer needs, and increasing global competition. Marketing scholars have recognized firm performance risk as a primary performance indicator in response to this uncertain and dynamically changing market environment (Sorescu and Spanjol 2008; Srinivasan and Hanssens 2009). Therefore, firms must develop capabilities to reduce performance risk, which is critical to the long-term performance and survival in the dynamic market environment (Day 1997; Teece, Pisano, and Shuen 1997). A consensus or implicit assumption has been widely accepted in previous studies regarding the superior benefits of balancing value creation (e.g., R&D) and value appropriation (e.g., marketing such as sales, promotion), compared to specializing in either one, for sustainable long-term success (March 1991; Mizik and Jacobson 2003). Such balance in allocating resources for instance, balance between R&D and marketing, is generally believed to create a synergy to enhance firm performance and reduce performance risk. However, "such consensus [on the benefits of balance in allocating resources] may be somewhat premature and not necessarily logical in all contexts" (Gupta, Smith, and Shalley 2006, p. 694). First, in investigating synergy between value creation and value appropriation, empirical findings were focused on firm performance rather than firm performance risk (e.g., He and Wong 2004; Katila and Ahuja 2002; Lavie and Rosenkopf 2006; Lin, Haibin, and Demirkan 2007). That is, firm performance risk has yet to be examined as firms experience a great difficulty in sustaining its position in the market. Second, a more fundamental question remains open regarding the benefits of specializing in either value creation or value appropriation, compared to the benefits of balancing the two. We addressed these research gaps by examining three questions: 1) how does a firm’s relationship specialization in marketing and in R&D affect firm performance and risk 2) How does a firm’s internal investment specialization in R&D and in marketing moderate this effect 3) How does industry dynamism moderate this effect The empirical analysis of firms in high-tech industries provides important theoretical insights regarding the determinants of firm performance risk. First, this study shows that while relationship specialization in R&D increases firm performance risk, this can be relieved when aligned with internal investment specialization in R&D. Second, specializing both internal investment and relationship in marketing can be an alternative strategy to reduce firm performance risk. Finally, in the dynamic environment, specializing relationships in marketing is effective in reducing firm performance risk. These findings also provide important guidance to reduce performance risk.