Essays on The Effects of Marketing and R&D Capabilities in the Grocery Industries

Sales incentive expenses have been controversial. Empirical studies on this issue have been limited because direct measures of sales incentives have not been available to the public. Also, even though the grocery manufacture industry has various sub-industries, the literature generally assumes homogenous industry circumstances. Finally, current literature largely focuses on business-to-business and business-to-consumer relations, thereby neglecting the shareholders' perspectives.;This dissertation advances the literature in important ways. Not only does it use actual dollar-value measures of sales incentives based on the Financial Accounting Standards Board's (FASB) new regulations of 2001, but in analyzing data it employs two advanced analytical methodologies that permit the analysis of heterogeneity in firm behaviors to solve the endogeneity problem. I also consider shareholders' perspectives in one of my essays; these shareholders are only interested in stock returns regardless of what grocery manufacturers spend on marketing expenditures and R&D expenses. My objective is to develop the effects of market power and signaling variables on sales incentives in manufacturer perspectives. Furthermore, another purpose is to analyze the effects of marketing expenditures, R&D, and a firm's specific characteristics on stock returns in shareholder perspectives.;In the first essay, managers in public companies must improve financial performance and communicate firms' value through sales incentives, advertising, R&D, and firm-specific characteristics. This paper investigates the impact of such actions on stock returns using a panel quantile regression with an instrument variable. This study further integrates existing knowledge on how marketing actions such as advertising, sales incentives, and R&D affect firms' value. These marketing actions have key functions. Interestingly, this paper finds that marketing actions affect stock returns on a more positive level compared with R&D at all quantile levels.;In the second essay, this paper generalizes the empirical model for shelf-space variables such as advertising, R&D, and firm characteristics to account for firm-specific heterogeneity. Our empirical results indicate that there is substantial firm-specific heterogeneity in shelf-space variable parameters, and this heterogeneity is associated with differences in initial market competitiveness. Sales incentives constitute a large part of the marketing budgets of consumer grocery firms. Despite over three decades of research, confusion persists about the causes and consequences of sales incentives. One part of the problem is due to the lack of data regarding the dollar value of sales incentive payments made by firms. A second part of the problem is determining whether sales incentives are explained by market power and/or signaling theories. Furthermore, only a few studies consider industry characteristics such as industry concentration and industry heterogeneity. This paper addresses both of these problems. It analyzes data on sales incentives disclosed by firms pursuant to the FASB requirements in 2001. It looks beyond the market power, signaling and channel arguments to include managerial considerations. It also uses analytical models that allow for parameter heterogeneity, thus incorporating a measure of diversity for situations faced by firms in their industries.;The third essay investigates the advertising, Selling General and Administrative (SGA), and R&D expenses on the phenomenon of sales incentives. Also this paper addresses whether a vendor's sales incentive is a product of market power or a signaling of market process. The findings suggest that prevailing distinctions between power and signaling effects may be simplistic. Contrary to the conventional wisdom, I find that signaling rather than market power is a determining factor for sales incentives.;Furthermore, the findings reconcile the two competing arguments regarding whether the causal relationship between advertising and sales incentives is substitutive (Desai, 2000) or complementary (Sudhir and Rao, 2006). This paper finds that the impact of advertising is negative on sales incentives at low quantile levels, while from middle to upper quantiles sales incentives act as a complement for advertising. In general, effects of SGA and R&D expenditures are positive at all quantiles.;In this dissertation, I run a panel quantile regression with an instrument variable to comprehend the empirical relationships between marketing and R&D capabilities and stock returns in the first essay. I also propose advanced analyses such as a panel quantile regression with instrument variables and a functional coefficient model to understand the empirical links between market power and signaling schools and sales incentives in the second and third essays. Overall from three essays I could accomplish that signaling theory under asymmetric information is more effective than a market power school in the grocery manufacture industries. Also, marketing capabilities are more effective on stock returns when compared with R&D capabilities and firm characteristics from the first essay. Furthermore, advertising expenditures have more impact on sales incentives to compare with R&D expenses in the second and third essays. (Abstract shortened by UMI.)...