Marketing intensity and persistence of firm performance: empirical evidence from Indonesia

Abstract

Purpose The purpose of this paper is to examine the degree of persistence of firm performance for publicly listed firms in Indonesia. The study also explores the impact of marketing expenditure on firm’s performance. Design/methodology/approach The data comprise 165 listed firms operating in Indonesia over the period 2007–2016. Dynamic panel regression estimations using Arellano and Bond (1991) and Blundell and Bond (1998) techniques have been deployed to generate the results. Findings The findings show the existence of positive persistence and sub-optimal level of competition in the performance of Indonesian firms. The results highlight that marketing intensity has a positive and significant impact on firm performance. The positive persistence hints at creation of substantial entry and exit barriers by the Indonesian firms and also indicate that Indonesian firms are able to create behavioral inertia among their consumers by properly directing their marketing efforts. Practical implications There is a need on the part of management to strengthen the short-term profit capabilities to nurture long-term benefits of profit maximization. On the regulators part, the authorities should frame the policies to foster long-run competition. Originality/value The current study contributes to the sparse literature on persistence of firm performance in the context of emerging economies like Indonesia. This is the first study on persistence of firm performance for publicly listed firms in Indonesia.