Impact of relative compensation to executive directors with marketing experience on marketing performance: toward an integrative framework

Purpose This paper aims to combine the agency theory and efficiency wage theory to explore the effects of relative compensation for executive directors with marketing experience on two marketing outcomes (marketing efficiency and market share) and the moderating roles of ownership type (private vs state-owned enterprises) and market concentration in this process. Design/methodology/approach A total of 2,753 firm-year observations from Chinese listed companies (from 2010 to 2014) were retrieved from China Stock Market and Accounting Research database and analyzed using firm random-effects with industry, year and region fixed effects. Findings Relative compensation has a positive effect on both marketing efficiency and market share, and these effects are moderated by ownership type and market concentration. Specifically, the positive effect of relative compensation on marketing efficiency and market share are stronger for central state-owned enterprises (SOEs) compared to local SOEs and private-owned enterprises but the results are mixed for market concentration. Research limitations/implications This study shows that paying higher compensation to the executive directors with marketing experience can enhance marketing performance, but the data does not allow identification of the actual actions taken by these directors for this. Practical implications This study highlights the importance of appropriate compensation for directors with marketing experience to motivate them to make better marketing decisions to overcome the challenges posed by market concentration and agency conflicts. Originality/value This paper points out the importance of having directors with marketing experience and paying them suitable compensation to motivate them to be more effective.