What makes more, better? An exploratory study on the effects of firm-level commercial operations attributes on pharmaceutical business performance

Scholars in marketing develop new and better techniques for allocating marketing expenditures. Implicit in this endeavor is the belief that it matters both how much and well marketing and sales spending is deployed. This exploratory research study provides estimates of the contributions of the quantity and quality of expenditures on commercial operations to business performance by using a unique, company-level dataset that contains the internal marketing expenditures of 26 pharmaceutical firms from 2005 to 2011. As expected, the empirical results reveal that increasing marketing and sales expenditures positively affects business performance. However, consistent with the notion that the quality of spending matters in addition to the spending level, commercial organizational attributes that are positively related to expenditure quality (innovation and execution in commercial operations) interact synergistically with marketing expenditures, increasing the return on expenditures. Further, changes in commercial operations innovation and execution operate synergistically to affect business performance. We provide specific managerial recommendations that demonstrate the importance of formulating a strategic vision that governs not only how much to spend in commercial operations support, but also investing in advanced employee skills and processes that foster a culture of innovation excellence and execution prowess in marketing and sales and departments.