Managers’ Marketing Strategy Decision Making During Performance Decline and the Moderating Influence of Incentive Pay

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Abstract

This　paper　focuses　on　managers’　marketing　decision　making　during　performance　decline.　Drawing　on　the　reconciliation　of　theories　of　failure-induced　change　and　threat-rigidity　by　Ocasio　(1995),　we　examine　how　performance　decline　may　result　in　a　rigid　decision-making　process　and　decision　characteristics　that　reflect　the　narrowing　of　attention　and　increased　risk　seeking.　Furthermore,　drawing　on　managerial　compensation　research,　we　consider　how　incentive　pay　may　affect　the　marketing　decision-making　process　and　decision　characteristics　of　managers　during　performance　decline.　Using　a　simulation　game　with　experienced　Chinese　managers,　our　results　indicate　that　performance　decline　decreases　marketing　strategy　process　comprehensiveness　but　increases　reliance　on　short-term　marketing　decisions,　strategic　change,　and　strategic　risk　taking.　Moreover,　incentive　pay　attenuates　the　rigid　decision-making　process　of　managers　but　accentuates　their　heightened　risk　seeking　during　performance　decline.　This　paper　offers　unique　behavioral　insights　into　how　managers　make　marketing　decisions.

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