Three essays examining marketing capabilities, environmental influences, firm performance and shareholder value

My dissertation consists of three essays examining marketing capability's interactions with environmental influences, other functional sectors of the firm, and their impacts on firm performance and shareholder value. The first essay studies how firm capabilities may function differently under different environmental forces. In this study, three environmental factors are considered: munificence, representing the growth opportunities of an industry; dynamism, reflecting the rate of environment change; and complexity, representing the concentration and competitive intensity of an industry. Essay one investigates the moderating relationships between two types of firm capabilities, marketing capability and operations capability, and the three environmental factors. This essay finds that marketing capability, as a firm competence directly linked to external environments, has significant interactions with dynamism and complexity. High marketing capability will better utilize dynamic external conditions and achieve relatively high firm performance. In the competitive environment, marketing capability also functions more effectively. However, operations capability, because of its internal-oriented nature, has less power when facing the dynamic environment and has no significant effect in the complex environment.;The second essay builds a link between an important marketing concept, marketing capability, and the current "hot topic" of finance, firm idiosyncratic risk (stock price volatility). It proposes that marketing capability may help a firm decrease its idiosyncratic risk, and further, the presence of marketing capability will moderate the relationships between two strategic drivers, operations capability and R&D intensity, and firm idiosyncratic risk. The empirical work of the second essay strongly confirms those hypotheses. Marketing capability not only reduces firm idiosyncratic risk by itself, but also helps other strategic factors to deal with firm risk. By both comparing the models in which these factors predict risk alone and those that predict return adjusted risk, essay two also finds that investors place more emphasis on salient factors such as R&D intensity to evaluate a firm. Marketing capability will also generate significant benefits for the firm when both risk and return are considered.;My third essay, by using two effective econometric tools, the VAR (Vector Autoregressive Models) and the IRF (Impulse-Response Functions), examines both the long-term dynamic effects of marketing capability on a series of firm performance metrics and models the feedback effects from performance to marketing capability. Furthermore, essay three executes simulations by randomly shocking marketing capability and builds a longitudinal pattern showing how fast the effects of marketing capability will travel through the time line. As a result, it shows that marketing capability's effects on performance exhibit a "buildup and decay" pattern, in which its impacts will first increase before reaching a peak and then declining. The results of this study confirm the hypotheses that marketing capability has long-term impact on firm performance. And more importantly, this study shows that firms are learning entities that improve their capability when they observe previous bad performance.