Kemsa2019 Book AnInvestorSPerspectiveOnMarket Springer SAHEP

Dominik Kemsa
An Investor's
Perspective on
Marketing Excellence
How Objective Marketing Indicants
Can Complement Firm Valuations
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Dominik Kemsa
An Investor’s Perspective
on Marketing Excellence
How Objective Marketing Indicants
Can Complement Firm Valuations
With a foreword by
Prof. Dr. Dr. h.c. mult. Christian Homburg
Dominik Kemsa
Mannheim, Germany
ISSN 2625-3577 ISSN 2625-3615 (electronic)

BestMasters
ISBN 978-3-658-24703-4 ISBN 978-3-658-24704-1 (eBook)
https://doi.org/10.1007/9783658247041
Library of Congress Control Number: 2018963759
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Foreword
Practitioners face tremendous difficulties when it comes to measuring the influence of mar-
keting capabilities on firm performance. This is problematic, since managers need specific
metrics in order to effectively steer their organizations for sustainable success in the market-
place. Similarly, due to the intangible nature and indirect influence of marketing capabilities,
investors are puzzled with regard to their performance impact and need a toolset to compre-
hensively evaluate marketing capabilities as one of the central drivers of firm value.
Recognizing and addressing this crucial challenge in business practice, Mr. Kemsa’s master
thesis develops a conceptual framework, which makes it possible to objectively evaluate a
firm’s marketing capabilities. In his ambitious endeavor, he builds on the recently introduced
concept of marketing excellence, which is the superior ability of a firm to achieve first-rate
marketing and overall firm performance by aligning its marketing capabilities. In a first step,
Mr. Kemsa synthesizes the status quo of academic research regarding strategic, organization-
al, and procedural topics in both management and marketing literature and elaborates on the
concept of marketing excellence. This synthesis builds on a large-scale literature review of
more than 550 academic publications. Subsequently, Mr. Kemsa conceptualizes and evaluates
potential secondary data indicants to measure a firm’s position with respect to marketing ex-
cellence resulting in a comprehensive set of 25 secondary data indicants. Finally, this set of
indicants is aggregated to a marketing excellence dashboard, in which the author finds argu-
ments for potential interdependencies and develops propositions for future research endeav-
ors.
The findings hold valuable insights for both research and practice: First, Mr. Kemsa shows
that existing marketing literature struggles with the objective measurement of marketing ca-
pabilities. Second, the author unveils promising approaches for marketing research to cope
with the challenge of objectively measuring marketing capabilities. More precisely, research-
ers can build on the developed set of indicants in order to empirically assess the influence of
marketing capabilities on long-term firm performance across industries. Third, the marketing
excellence dashboard is of high practical relevance and usability, as investors can comple-
ment their company valuations with forward-looking marketing indicants (e.g., innovation
performance). As a consequence, investors’ valuations can incorporate the target firm’s mar-
keting capabilities and outlook on future performance.
Mr. Kemsa’s master thesis is characterized by a systematic and structured approach, a thor-
ough conceptual pervasion of the topic as well as a creative development of the indicants. The
master thesis provides relevant insights and actionable starting points for both marketing re-
searchers and practitioners, which can contribute to the dialogue between academia and prac-
tice. In a nutshell, the findings of this master thesis make it clear that there is some remedy for
practitioners seeking to capture the performance impact of marketing capabilities as one of
the central drivers of firm performance.
Christian Homburg
Preface
This thesis was written during my studies in the Mannheim Master in Management and was
accepted as master thesis in July 2017. I intend to use the preface to thank the key people in-
volved in both the writing and publishing process and to briefly summarize my motivation for
and the contribution of this master thesis.
First and foremost, I thank Prof. Dr. Dr. h.c. mult. Christian Homburg not only for supervis-
ing this master thesis, but also for recommending it for the Springer BestMasters 2018 Award
and for adding a foreword to it. From a student’s perspective it is highly motivating and satis-
fying to be given the opportunity to publish one’s final thesis. I highly appreciate Professor
Homburg’s efforts in seeking out such opportunities and his strong support in the following
application process. A special thanks goes to Mr. Marcus Theel as the academic advisor of
my master thesis. He has been of tremendous help in the course of this ambitious project. His
competent advice and challenging comments have pushed me to continuously sharpen the
analytical focus and to dig deeper into the concepts. Thank you very much for that. Moreover,
I thank Ms. Nicole Schweitzer as the responsible editor for the publication of this master the-
sis. Especially with respect to the final editing, Ms. Schweitzer’s friendly and helpful com-
ments have made the publishing process uncomplicated and also enjoyable.
Having immersed myself in marketing literature, I find that academics and practitioners alike
emphasize the importance of marketing activities for firm performance. However, they also
point to the lack of marketing accountability. This is also reflected in the finding that inves-
tors do not yet rely too strongly on an evaluation of the firm’s marketing efforts during their
investment decisions. Consequently, there is a need for an objective measurement approach of
marketing effectiveness. That is why I set out to develop a comprehensive framework to ob-
jectively assess a firm’s position with respect to marketing excellence. Drawing on resource-
based theory marketing excellence is conceptualized as a holistic framework of capabilities,
which can be the source of sustained competitive advantage and concomitant superior firm
performance. Conducting a large-scale literature review and synthesizing the findings from
different research areas, this master thesis finds that marketing excellence can be measured
with the help of a set of 25 secondary data indicants, which are aggregated to a marketing
excellence dashboard. Based on theoretical reasoning and previous empirical results, it is pro-
posed that the marketing excellence dashboard allows investors to make inferences about the
future performance and value of a firm. Therefore, it is recommended that the marketing ex-
cellence dashboard is used in the course of an investor’s due diligence to complement the firm
valuation and, thereby, to improve the investment decision. Furthermore, this study outlines
avenues for future research, which are identified in the course of the dashboard development
process.
Dominik Kemsa
Table of Contents
List of Figures .......................................................................................................................... XI

List of Tables ......................................................................................................................... XIII
List of Abbreviations .............................................................................................................. XV
1 Introduction ............................................................................................................................. 1
1.1 Relevance ......................................................................................................................... 1
1.2 Research Questions .......................................................................................................... 2
1.3 Thesis Structure ................................................................................................................ 3
2 Theoretical and Conceptual Background ................................................................................ 5
2.1 Resource-Based Theory and Marketing Excellence ........................................................ 5
2.1.1 Foundations of Resource-Based Theory ................................................................... 5
2.1.2 The VRIO Framework............................................................................................... 7
2.1.3 Derivation of MEXC Capabilities Framework ......................................................... 8
2.2 Role of Marketing in Investment Decisions ................................................................... 11
3 Research Process ................................................................................................................... 13
3.1 Identification of Relevant Literature .............................................................................. 13
3.2 Description of Conceptualization ................................................................................... 15
4 Development and Evaluation of Secondary Data Indicants .................................................. 19
4.1 Functional Capabilities ................................................................................................... 19
4.1.1 Managerial Levers ................................................................................................... 19
4.1.2 Innovativeness ......................................................................................................... 21
4.1.3 Quality Delivery ...................................................................................................... 22
4.1.4 Profit Focus ............................................................................................................. 24
4.1.5 Interim Conclusion and Recommendation .............................................................. 27
4.2 Structuring Capabilities .................................................................................................. 28
4.2.2 Team Structure ........................................................................................................ 29
4.2.3 Marketing Hub ........................................................................................................ 31
4.2.4 Agile Processes........................................................................................................ 33
4.3 Cultural Capabilities ....................................................................................................... 38
4.3.2 Customer Value Orientation.................................................................................... 40
4.3.3 Productive and Receptive Working Environment ................................................... 43
4.3.4 Internal Promoters ................................................................................................... 45
X Table of Contents
4.4 Relational Capabilities ................................................................................................... 49

4.4.2 Customer Networks ................................................................................................. 50
4.4.3 Distal Networks ....................................................................................................... 52
4.5 Change Capabilities........................................................................................................ 55
4.5.2 Intelligence Acquisition .......................................................................................... 56
4.5.3 Organizational Learning .......................................................................................... 59
4.5.4 Reconfiguring .......................................................................................................... 62
5 Aggregation of Developed Indicants to MEXC Dashboard .................................................. 65
5.1 Stage I: Final Set of Indicants ........................................................................................ 65
5.2 Stage II: Propositions on Interdependency Structure ..................................................... 67
5.3 Stage III: Linking Dashboard Measures to Firm Performance and Value ..................... 71
5.4 MEXC Dashboard and Its Practical Application ........................................................... 73
6 Conclusion ............................................................................................................................. 77
6.1 Summary of Main Findings............................................................................................ 77
6.2 Limitations and Avenues for Future Research ............................................................... 77
Appendix .................................................................................................................................. 79
References ................................................................................................................................ 97
List of Figures
Figure 1-1: Research Questions ............................................................................................... 2

Figure 1-2: Thesis Structure .................................................................................................... 3
Figure 2-1: MEXC Capabilities Framework Fulfilling VRIO Requirements ....................... 10
Figure 3-1: Iterative and Incremental Development of Secondary Data Indicants ............... 16
Figure 5-1: Propositions on Interdependency Structure ........................................................ 68
Figure 5-2: Linking Dashboard Measures to Firm Performance and Firm Value ................. 72
Figure 5-3: MEXC Dashboard .............................................................................................. 73
List of Tables
Table 3-1: Overview of Knowledge Contribution from Different Research Areas ............. 14
Table 3-2: Top 10 Periodicals along the Timeline of Publication Dates .............................. 15
Table 3-3: Data Usage along the Timeline of Publication Dates ......................................... 15
Table 3-4: Evaluation Framework for Secondary Data Indicants ........................................ 17
Table 4-1: Evaluation of Indicant #1 for Innovativeness ..................................................... 21
Table 4-2: Evaluation of Indicants #2 and #3 for Quality Delivery .................................... 23
Table 4-3: Evaluation of Indicants #4 and #5 for Profit Focus ............................................ 26
Table 4-4: Overview and Data Availability of Indicants for Functional Capabilities .......... 27
Table 4-5: Evaluation of Indicant #6 for Team Structure .................................................... 30
Table 4-6: Evaluation of Indicants #7 and #8 for Marketing Hub ....................................... 33
Table 4-7: Evaluation of Indicants #9, #10, and #11 for Agile Processes ........................... 36
Table 4-8: Overview and Data Availability of Indicants for Structuring Capabilities ......... 38
Table 4-9: Evaluation of Indicants #12 and # 13 for Customer Value Orientation .............. 42
Table 4-10: Evaluation of Indicants #14 and #15 for Working Environment ....................... 45
Table 4-11: Evaluation of Indicants #16 and #17 for Internal Promoters ............................. 47
Table 4-12: Overview and Data Availability of Indicants for Cultural Capabilities .............. 48
Table 4-13: Evaluation of Indicant #18 for Customer Networks ........................................... 51
Table 4-14: Evaluation of Indicants #19 and #20 for Distal Networks ................................. 54
Table 4-15: Overview and Data Availability of Indicants for Relational Capabilities .......... 55
Table 4-16: Evaluation of Indicants #21 and # 22 for Intelligence Acquisition .................. 58
Table 4-17: Evaluation of Indicants #23 and #24 for Organizational Learning .................... 61
Table 4-18: Evaluation of Indicant #25 for Reconfiguring .................................................... 63
Table 4-19: Overview and Data Availability of Indicants for Change Capabilities ............... 64
Table 5-1: Overview of Dashboard Measures: Final Set of Indicants ................................. 66
List of Abbreviations
AMJ Academy of Management Journal

B2B Business-to-Business
B2C Business-to-Consumer
CA Competitive Advantage
CE Customer Equity
CCI Customer Cooperation Intensity
CI Customer Intimacy
CLV Customer Lifetime Value
CMI Corporate Memory Index
CMO Chief Marketing Officer
CMOI CMO Importance
CRM Customer Relationship Management
CRSP Center for Research in Security Prices
CSR Corporate Social Responsibility
D&B Dun & Bradstreet
DEC SCI Decision Sciences
EBIT Earnings before Interest and Taxes
EC Esprit de Corps
E&M Empowerment & Motivation
EPS Earnings per Share
ES Efficiency Score
FASB Financial Accounting Standards Board
FDA Food and Drug Administration
FSI Fertile Soil for Innovation
HR Human Resources
IASB International Accounting Standards Board
ICV Internal Corporate Venture
IP Innovation Performance
IT Information Technology
JAMS Journal of the Academy of Marketing Science
JB Journal of Business
JCF Journal of Corporate Finance
JF Journal of Finance
XVI List of Abbreviations
JM Journal of Marketing
JMR Journal of Marketing Research
JMAN Journal of Management
KDI Knowledge Dissemination Index
KPI Key Performance Indicator
MAI Market Awareness Index
MAN SCI Management Science
MEXC Marketing Excellence
MKT SCI Marketing Science
OCM Open Communication Mentality
PPSI Profit Pool Search Intensity
QI Quality Investment
QS Quality Score
RBT Resource-Based Theory
RBV Resource-Based View of the Firm
R&D Research & Development
RDI Recruiting Diversity Index
RI Reconfiguring Intensity
RM Role Model TMT
ROS Return on Sales
SCA Sustained Competitive Advantage
SFE Stochastic Frontier Estimation
SIC Standard Industrial Classification
SMJ Strategic Management Journal
SMU Strategic Marketing Unit
S&P Standard & Poor’s
VHB German Academic Association for Business Research
VRIO Value, Rarity, Imitability, and Organization
TMT Top Management Team
TSI Team Structure Index
USPTO United States Patent and Trademark Office
1 Introduction
1.1 Relevance
The achievement of sustained competitive advantage (SCA) and superior performance is the
most crucial task of every business endeavor, because it is the sine qua non for the enter-
prise’s long-term survival (Drucker 1954, p. 3; Porter 1985, p. xv; Schumpeter 1942, p. 82).
Due to the ever-changing nature of the business environment, a firm’s attention to the market
developments and the continuous adaptation of the firm’s strategy is of decisive importance
for keeping pace with customers and succeeding against competitors (Christensen 2001, pp.
105; D’Aveni 1995, pp. 45; Wiggins and Ruefli 2005, pp. 887). Fuelling the entire organiza-
tion with market insights and orchestrating all customer- and competitor-directed activities,
marketing plays an essential role in securing a firm’s SCA and survivability (Feng, Morgan
and Rego 2015, pp. 13; Krush, Sohi, and Saini 2015, pp. 32; Kumar et al. 2011, pp. 16; Slater
and Narver 1995, p. 66).
In their seminal article published in the Journal of Marketing Moorman and Day (2016) syn-
thesize the findings of 25 years of academic research on marketing organization and introduce
the concept of Marketing Excellence (MEXC). Following Moorman and Day (2016, p. 6),
this master thesis understands MEXC as a “superior ability to perform essential customer-
facing activities that improve customer, financial, stock market, and societal outcomes.” Im-
portantly, MEXC is an ongoing process, which requires the entire firm to continuously re-
spond and adapt to market developments in order to achieve superior performance (Moorman
and Day 2016, p. 11).
In practice, many firms are on the quest for MEXC in the sense of Moorman and Day (2016).
Most conspicuously, in recent years numerous firms have launched holistic marketing strate-
gy initiatives aiming at reconfiguring and sharpening the firm’s profile in order to deliver su-
perior value to customers and superior performance to investors:1 E.g., Allianz Group’s “Re-
newal Agenda”, Philips’s “Accelerate!”, Siemens’s “Vision 2020”, and Volkswagen’s
“Transform 2025+” (Allianz 2015; Philips 2017; Siemens 2014; Volkswagen 2016). As these
strategic transformations intend to improve long-term firm performance, it is of high im-
portance for investors to understand the impact of these marketing-related initiatives more
closely (Rao and Bharadwaj 2008, pp. 16). Therefore, investors should not only rely on my-
opic, i.e., short-term, merely accounting-based performance measures as e.g., return on sales
(ROS) or earnings per share (EPS),2 but also consider long-term marketing-based perfor-
mance measures as e.g., customer lifetime value (CLV) or customer equity (CE)3 (McKinsey
2017, pp. 3; Mizik 2010, pp. 594; Wiesel, Skiera, and Villanueva 2008, pp. 1).
1
In the following, the term investor refers to institutional and strategic investors, because they are considered to
have both the resources and competencies to conduct extensive analyses of a firm’s marketing position.
2
For a detailed description of ROS and EPS refer to Krause (2016).
3
For a detailed description of CLV and CE refer to McCarthy, Fader, and Hardie (2017) or Kumar and Shah
(2009).

D. Kemsa, An Investor’s Perspective on Marketing Excellence, BestMasters,
https://doi.org/10.1007/978-3-658-24704-1_1
2 1 Introduction
Renowned institutions such as e.g., the Marketing Accountability Standards Board, practi-
tioners, and researchers have emphasized the need for practicable marketing indicants to
properly evaluate a firm’s marketing position and its intangible assets (Bayer, Tuli, and Skiera
2017, pp. 239; Gregory and Moore 2013, pp. 17; McGovern et al. 2004, pp. 73; Srinivasan
and Hanssens 2009, pp. 293). However, in contrast to other disciplines as for instance finance
and economics, a comprehensive framework of objective performance indicants based on
secondary data is still missing in marketing (Hanssens, Rust and Srivastava 2009, p. 117;
Houston 2004, p. 154; Moorman and Day 2016, pp. 12). “Secondary data are data that have
been collected from respondents (individuals or organizations), for purposes other than the
research situation at hand” (Houston 2004, p. 155). Following this logic, besides publicly
available information, this study subsumes firm-internal data, which has been collected inde-
pendent of the investor’s analysis, under secondary data (see also Houston 2004, p. 155).4
Due to the plethora of publicly accessible databases, public communication of companies, and
professional data services, the availability of analyzable secondary data can be considered
fairly high (Davenport and Harris 2007, pp. 153; Wedel and Kannan 2016, pp. 97).
1.2 Research Questions

Addressing this research gap and seizing the potential of the rich data availability, this master
thesis has the clear mandate to develop a comprehensive framework of objective marketing
indicants to measure MEXC. In order to accomplish this, this master thesis is guided by three
main research questions as shown in figure 1-1.
FIGURE 1-1
Research Questions
Possibility 1 Can MEXC be conceptualized by objective indicants which are measurable by secondary data?
Feasibility 2 Which specific data is needed to measure the indicants and what are the key sources investors can
refer to in order to efficiently acquire it?
Practical Use 3 What is the resulting benefit for investors and how can they best seize it?
Source: Own illustration
First, this thesis investigates whether it is possible to conceptualize MEXC as a comprehen-

sive and analyzable framework. The conceptualization will focus on secondary data measures
due to their objectivity and rigor as opposed to primary data measures as e.g., scales based on
survey data, which are often associated with bias concerns (Day and Montgomery 1999, p.
10; Rindfleisch et al. 2008, pp. 261). Furthermore, secondary data can be easily obtained by
investors (Houston 2004, p. 155). Second, it is highlighted which data is needed to calculate
the developed indicants and where to retrieve it from. Third, this thesis elaborates on the ad-
vantages of the proposed framework and gives practical guidance for investors on how to best
use it. Besides answering these main research questions, this study additionally contributes to
marketing research by developing propositions for future investigation that evolve from the
central findings of this research.
4
The key criterion for the purposes of this master thesis is the data’s objectivity. This means that the data’s
authenticity should not hinge on the investor’s intended usage of it.
1 Introduction 3
1.3 Thesis Structure

Figure 1-2 shows how the thesis is structured alongside the three research questions.
FIGURE 1-2
Thesis Structure
Research Dashboard
Progression of Master Thesis
Questions Development
Chapter 1: Introduction
Chapter 2: Theoretical and Conceptual Background
Chapter 3: Research Process
Methodological Framework for Main Analysis
Chapter 4: Development and Evaluation of Secondary Data Indicants Conceptual

Framework
4.1 Functional Capabilities
for Main
4.2 Structuring Capabilities Analysis
1 2
4.3 Cultural Capabilities Stage I
4.4 Relational Capabilities
4.5 Change Capabilities
3 Chapter 5: Aggregation of Developed Indicants to MEXC Dashboard Stages II & III
Chapter 6: Conclusion
Extending the basic notion of MEXC as laid out in subchapter 1.1, chapter 2 draws on re-
source-based theory (RBT) and, thereby, develops a comprehensive theoretical framework of
MEXC consisting of five distinct capabilities. Furthermore, chapter 2 briefly discusses the
current role of marketing in investment decisions and puts further emphasis on the fact that
investors are in need of an analytic framework to assess a firm’s marketing performance.
Chapter 3 presents the methodological approach of this master thesis. First, it introduces the
operational procedure to identify the relevant literature and to develop the secondary data
indicants. Second, it sheds light on the rules and guidelines relied upon during the conceptual-
ization process of the indicants.
Adapting Pauwels et al.’s (2009, pp. 180) five-stage process for the development of a com-
prehensive performance measurement system, in this context a MEXC dashboard, the re-
mainder of the master thesis is structured alongside the resulting three stages: Stage I: “Select-
ing the Key Metrics,” Stage II: “Establishing Relationships Between the Dashboard Items,”
and Stage III: “Connecting to Financial Consequences.” The main analysis in chapter 4 corre-
sponds to Stage I. Being endowed with the theoretical and methodological foundation from
the previous chapters, the main analysis tackles MEXC alongside the five capabilities. First,
the managerial levers of the respective MEXC capability are presented. Second, the secondary
data indicants for each managerial lever are presented and evaluated. Furthermore, the data
required to calculate the indicants and the key data sources for obtaining it are presented. Fi-
nally, a recommendation concerning the measurement of the respective MEXC capability is
given. This procedure is applied to each of the five MEXC capabilities.
4 1 Introduction
Chapter 5 incorporates Stages II and III. After a concise overview of the final set of indicants
research propositions regarding the interdependencies between the indicants are worked out.
Moreover, the link of MEXC to firm performance and firm value is elaborated on. Subse-
quently, the practical implementation and application of the resulting MEXC dashboard is
explained. Chapter 6 completes the master thesis by summarizing the main findings and an-
swers to the research questions raised in the introduction. Moreover, the limitations of the
study at hand are pointed out and avenues for future research are highlighted.
2 Theoretical and Conceptual Background
This chapter builds the theoretical foundation for the main analysis by substantiating the con-
cept of MEXC. Specifically, subchapter 2.1 resorts to RBT to derive five distinct capabilities,
which constitute MEXC. Additionally, the attributes of the five MEXC capabilities are out-
lined, so that the way is paved for the main analysis in Chapter 4. Subsequently, subchapter
2.2 points to the striking discrepancy between the conceptually established importance of
marketing for firm performance and the still scarce consideration of marketing in investment
decisions. Consequently, the need for bridging the gap between theoretical insights and prac-
tical implementation is shown and the purpose of this master thesis strengthened.
2.1 Resource-Based Theory and Marketing Excellence
2.1.1 Foundations of Resource-Based Theory

The resource-based view of the firm (RBV) was introduced by Wernerfelt (1984), who was
among the first to break with the at that time predominant paradigm that a firm’s economic
success depends on outside factors such as industry characteristics, especially competitive
intensity (Kozlenkova, Samaha, and Palmatier 2014, pp. 2; Porter 1979, p. 138). The RBV
shifts the focus from an “outside-in” or industry-specific perspective to an “inside-out” or
firm-specific perspective by analyzing the firm’s internal resources for explaining a firm’s
success (Srivastava, Fahey, and Christensen 2001, p. 778; Wernerfelt 1984, p. 172). Subse-
quently, especially Barney (1986, 1991) advanced the RBV by further demarcating it from the
prevalent emphasis on industry-level factors and by defining the principles and key concepts
such as resources and competitive advantage (CA) (Kozlenkova, Samaha, and Palmatier
2014, p. 3). Since its commencement as an upcoming perspective on organizational perfor-
mance, the RBV has evolved into a full-fledged and influential theory, namely RBT, whose
importance to and reference in marketing research has strongly increased in recent years
(Barney 2014, p. 24; Barney, Ketchen, and Wright 2011, pp. 1300; Kozlenkova, Samaha, and
Palmatier 2014, p. 1).
RBT intends to explain the emergence and characteristics of the key dependent variables CA
and sustained competitive advantage (SCA) (Barney and Clark 2007, p. 24). Peteraf and Bar-
ney (2003, p. 314) define CA as a firm’s ability to “create more economic value than the mar-
ginal (breakeven) competitor in its product market.” Economic value created by a firm is the
“difference between the perceived benefits gained by the purchasers of the good and the eco-
nomic cost to the enterprise” (Peteraf and Barney 2003, p. 314). For a CA to be sustained,
other firms must not be able to imitate the strategy implemented by the firm (Barney 1991,
pp. 102; Barney and Clark 2007, p. 52). Importantly, it follows from the inimitability re-
quirement that SCA cannot be simply acquired on open markets, but needs to be build up
from the firm’s very own base of resources and capabilities (Barney 1991, p. 117; Dierickx
and Cool 1989, pp. 1509). That is why RBT focuses on a firm’s resources and capabilities to
explain the achievement of SCA (Kozlenkova, Samaha, and Palmatier 2014, p. 3).

https://doi.org/10.1007/978-3-658-24704-1_2
6 2 Theoretical and Conceptual Background
Resources are defined as “tangible and intangible assets firms use to conceive of and imple-
ment its strategies” (Barney and Arikan 2005, p. 138). E.g., resources can be tangible assets
such as raw materials, machines, and products, but also intangible assets such as brand reputa-
tion, teamwork among employees, and patents (Barney and Hesterly 2010, p. 66; Hult, Ketch-
en, and Slater 2005, p. 1174). Capabilities are special types of resources. They are organiza-
tionally embedded and non-transferable and have the purpose to improve the capacity of the
firm’s other resources (Makadok 2001, p. 389). Capabilities are “information-based, tangible
or intangible processes that enable a firm to deploy its other resources more efficiently and
therefore enhance the productivity of those resources” (Kozlenkova, Samaha, and Palmatier
2014, p. 5). A firm’s marketing skills or software development skills are typical examples of
capabilities (Barney and Hesterly 2010, p. 66; Makadok 2001, p. 389). In a nutshell, a capa-
bility can be understood as an intermediate firm-specific resource or process, which facilitates
the overall effectiveness and efficiency of the firm’s other resources (Day 1994, p. 38; Ko-
zlenkova, Samaha, and Palmatier 2014, p. 5; Makadok 2001, p. 389). Teece, Pisano, and
Shuen (1997, p. 515) extend the notion of capabilities by the aspect of dynamism. Dynamic
capabilities refer to a firm’s ability to “continuously create, extend, upgrade, protect and keep
relevant the enterprise’s unique asset base” in a competitive and changing environment
(Teece 2007, p. 1319).
RBT relies on two fundamental assumptions to argue why firm resources and capabilities can
be the reason for SCA and how they can persist within a specific firm for a long time (Barney
2001, p. 54; Kozlenkova, Samaha, and Palmatier 2014, p. 3). First, the resource heterogeneity
assumption postulates that although firms operate in the same industry, they do not necessari-
ly have the same resources at their command and, as a result, show different levels of compe-
tence for certain tasks (Barney 2001, pp. 49; Day 2011, p. 185; Kozlenkova, Samaha, and
Palmatier 2014, p. 3; Peteraf 1993, pp. 180). Hence, differences in the amount of economic
value generated arise (Peteraf and Barney 2003, p. 317). E.g., Apple can be considered more
skilled at product design than its competitors and Harley-Davidson’s brand reputation sets it
apart from its competitors (Barney and Hesterly 2010, p. 67). Second, the resource immobility
assumption supposes that it is very costly for firms to develop or acquire the necessary re-
sources for success, because they cannot be easily traded or transferred from one company to
another (Barney and Hesterly 2010, p. 67; Peteraf 1993, pp. 183). Consequently, the differ-
ences in resources among firms may be persistent over time (Barney and Arikan 2005, p.
141). For instance, even though their competitors are well aware of their disadvantages, Apple
and Harley Davidson continue to enjoy their superior position (Barney and Hesterly 2010, p.
67). Taking these two assumptions together, resources and capabilities can be seen as the in-
dependent variables explaining a firm’s SCA and the resulting market position (Barney 1991,
pp. 116; Day 1994, p. 40; Krasnikov and Jayachandran 2008, p. 2).
In the following, the analysis will focus on capabilities, because they allow a conceptualiza-
tion of MEXC that incorporates organizational embeddedness, firm processes, and dynamism.
Moreover, in contrast to ordinary resources, capabilities have the potential to accurately cap-
ture the overarching and inherently firm-specific nature of MEXC. According to its definition
MEXC needs to be continuously built and, therefore, cannot be easily transferred from one
2 Theoretical and Conceptual Background 7
firm to another, which is a distinctive characteristic of capabilities (see also Makadok 2001,
pp. 388). As a result of these considerations, MEXC will be conceptualized as a framework of
capabilities.
For the purposes of this master thesis, a MEXC capability is defined as a continuously updat-
ed, idiosyncratic, and organizationally embedded process or skill set enabling and facilitating
a combination of firm resources, which empowers a firm to perform certain business tasks
effectively and efficiently. This understanding of MEXC capabilities builds on Makadok’s
(2001, p. 389) definition and incorporates Teece’s (2007, p. 1319) notion of dynamic capa-
bilities, too. Consequently, MEXC capabilities account for the aspect of dynamism, which is
emphasized by Moorman and Day (2016, p. 11): “[MEXC] is a continuous process that leaves
no room for complacency.”
However, not all capabilities have the potential to be sources of SCA and concomitant superi-
or performance (Kozlenkova, Samaha, and Palmatier 2014, p. 3). Therefore, it is necessary to
examine whether MEXC capabilities can indeed generate SCA in order to factor in the per-
formance aspect as included in Moorman and Day’s (2016, p. 6) definition of MEXC: “[...]
improve customer, financial, stock market, and societal outcomes.” The next section intro-
duces a theoretical construct to analyze whether a capability can be a source of SCA in gen-
eral, before subchapter 2.1.3 applies it to the MEXC capabilities.
2.1.2 The VRIO Framework

The pivotal concept to understand which capabilities can be sources of SCA is the VRIO
Framework, which postulates that resources and capabilities need to fulfill four conditions
regarding value, rarity, inimitability, and organization (Barney and Clarke 2007, pp. 57; Bar-
ney and Hesterly 2010, pp. 68). First, a capability needs to be valuable, meaning it has to
make it possible for the firm to seize an external opportunity and/or to neutralize an external
threat (Barney and Hesterly 2010, pp. 69). Second, the capability in question must not be pos-
sessed by most competitors, i.e., it has to be rather exclusive than common (Barney and Hes-
terly 2010, pp. 75). Third, competitors must not be able to easily imitate the capability; in-
stead they should face considerable costs or practical hindrances when attempting to obtain
the same capability (Barney and Hesterly 2010, p. 76). Finally, the firm’s organization must
be set up in a way such that the full potential of the capability in question can be exploited,
i.e., the mere possession of the capability is not sufficient, the organization must also be able
to leverage it (Barney and Clark 2007, p. 67; Barney and Hesterly 2010, pp. 81; Kozlenkova,
Samaha, and Palmatier 2014, p. 5). Kozlenkova, Samaha, and Palmatier (2014, p. 12) explic-
itly recommend and emphatically call for the use of the VRIO Framework in the context of
marketing. The two most prevalent approaches of applying the VRIO Framework in market-
ing research are references to empirical results from prior studies and logical arguments by
the researchers themselves (Kozlenkova, Samaha, and Palmatier 2014, p. 11). This study will
resort to both approaches.
This master thesis does not address a case study with concrete examples of firm capabilities
as for instance the book by Barney and Hesterly (2010) does. To enhance applicability,
MEXC is considered as a holistic capabilities framework irrespective of the specific industry

setting. Due to this general perspective, it is deemed too vague a basis to argue whether a sep-
arate MEXC capability is valuable, rare, inimitable, and organizationally enabled. Especially
with respect to the evaluation of the rarity requirement it is necessary to benchmark the com-
pany at hand with its competitors and, thereby, account for industry characteristics (Barney
and Clark 2007, p. 59; Barney and Hesterly 2010, p. 93). E.g., for a chemical company a cer-
tain capability might be considered very rare, whereas for a fast moving consumer goods
company the same capability could be seen as commonplace and, thus, only source of com-
petitive parity increasing the probability of the firm’s survival (Barney and Hesterly 2010, p.
75). Nevertheless, the VRIO Framework offers important insights as to which conditions the
whole construct of MEXC needs to fulfill in order to be a source of SCA. As a result, the der-
ivation of the separate MEXC capabilities will only account for those single aspects of the
VRIO Framework, which can be reasonably inferred and ideally additionally confirmed by
empirical evidence. Ultimately, the whole framework of MEXC, i.e., all capabilities com-
bined, should give sufficient reason to assume that it satisfies all four conditions of the VRIO
Framework and, therefore, can be a source of SCA from an RBT perspective.
2.1.3 Derivation of MEXC Capabilities Framework

Researchers have identified different marketing capabilities (e.g., Day 1994, 2011; Moorman
and Day 2016), which firms need to build up in order to achieve MEXC. Based on prior work
by Homburg, Theel, and Hohenberg (2016), this study posits that MEXC encompasses five
distinct capabilities, namely functional, structuring, cultural, relational, and change capabili-
ties.
First, a firm needs to build up functional capabilities in order to successfully manage its mar-
keting operations (Moorman and Day 2016, p. 12). Hence, a firm’s functional capabilities
facilitate the execution and completion of the main business model tasks (Day 2011, p. 191).
A business model describes a firm’s value creation and subsequent profit generation (Day
2011, p. 191). The firm needs to have effective processes and skill sets readily available to
identify customer needs, develop and create a valuable product or service, and profitably pre-
sent and sell it to customers (Amit and Zott 2001, pp. 511; Chandy et al. 2006, p. 495; Day
1994, pp. 41; Day 2011, p. 191; Dutta, Narasimhan, and Rajiv 1999, p. 566). It seems reason-
able to assume that functional capabilities are valuable to the firm, because they constitute the
very heart of economic activity within the firm. E.g., they enable the firm to seize opportuni-
ties with respect to new products, i.e., generate profits from successful innovations (Pauwels
et al 2004, pp. 143).
Second, structuring capabilities refer to the firm’s organizational setup (Day 2011, p. 191;
Homburg, Theel, and Hohenberg 2016, p. 16). The firm needs to be structured in a way that
aligns it with the market requirements, allows employees to fully exploit their potential, and
ultimately enhances efficient decision-making and overall task fulfillment (Day 2011, p. 192;
Felin et al. 2012, pp. 1364). Central facets of structuring capabilities are the mastery of cross-
functional collaboration including the dissolution of intra-firm boundaries, interface manage-
ment, flexible and quick working routines and the consequential abolition of silo-thinking and
organizational inertia (Day 2011, p. 192; Dutta, Narasimhan, and Rajiv 1999, pp. 548; Hom-
burg, Jensen, and Krohmer 2008 p. 149; Houston et al. 2001, pp. 30). Clearly, structuring
capabilities directly concern the firm’s organization. Hence, it can be logically inferred that
structuring capabilities help firms to organizationally enable and leverage the full potential of
its other capabilities.
Third, cultural capabilities relate to the firm’s organizational culture, which can be defined as
“the pattern of shared values and beliefs that help individuals understand organizational func-
tioning and thus provide norms for behavior in the organization” (Deshpandé and Webster
1989, p. 4). Consequently, a firm’s cultural capabilities comprise aspects such as leadership
behavior, experimentation encouragement and error acceptance, and receptiveness for new
ideas (Deshpandé, Farley, and Webster 1993, p. 25; Stock, Six, and Zachrias 2013, pp. 283;
Wei et al. 2013, pp. 1029; Wei, Samiee, and Lee 2014, pp. 51). Cultural capabilities inherent-
ly pertain to the firm itself, because they are deeply rooted in the firm’s history, peculiarities
and specific characteristics, as well as employee behaviors (Fiol 1991, p. 196; Grewal and
Slotegraaf 2007, p. 454; Trice and Beyer 1993, p. 5; Hofstede et al. 1990, p. 286). As a con-
sequence, it is postulated that a firm’s cultural capabilities are inimitable for competitors
(Barney and Clark 2007, pp. 85; de Brentani, Kleinschmidt, and Salomo 2010, p. 146; Wei et
al. 2013, p. 1029).
Fourth, relational capabilities concern a firm’s processes and skill sets in place to build,
maintain, and extend its relationships with external partners (Homburg, Theel, Hohenberg
2016, p. 25; Moorman and Day 2016, p. 12). These partnerships can take the form of vertical
relationships, in which the firm teams up with customers or suppliers inside the value chain,
and horizontal relationships, in which the firm cooperates with other firms outside the value
chain, but at a comparable level of the respective value chain (Swaminathan and Moorman
2009, p. 52). Additionally, the relationships can also reach beyond the business sphere, e.g.,
when the firm stands in dialogue with political and societal actors (Hillman 2005, pp. 464;
Zheng, Singh, and Mitchell 2015, pp. 1615). By establishing all these kinds of relationships, a
firm can tap new sources of knowledge, learn from other firms, and build up a network of
diverse partners (Johnson, Sohi, and Grewal 2004, pp. 21; Srivastava, Shervani, and Fahey
1998, p. 7). As a result, relational capabilities can be considered valuable, because they do not
only help the firm to identify new opportunities, e.g., by gaining insights and expertise from
other industries (Cui and O’Connor 2012, p. 25), but also to neutralize threats, e.g., by lobby-
ing efforts to prevent unfavorable and induce favorable political decisions (Faccio, Masulis,
and McConnell 2006, pp. 2627).
Fifth, change capabilities enable the organization to sense trends and developments in the
market environment, internalize and disseminate the perceptions throughout the organization,
and finally act upon the gained insights, i.e., make adaptations within the firm (Morgan,
Slotegraaf, and Vorhies 2009, p. 285; Narasimhan, Rajiv, and Dutta 2006, pp. 510; Rindova
and Kotha 2001, p. 1277; Slater and Narver 1995, pp. 65). Firms need to have strong change
capabilities in order to prevent holding onto obsolete and inefficient business practices and
missing the latest developments in customer needs, and ultimately falling behind competitors
(Teece 2007, pp. 1319). Consequently, change capabilities are valuable for firms, because
their very own purpose is to timely and accurately identify and enable seizing opportunities as
well as recognizing and neutralizing threats.
Consistent with the suggestions and approaches of prior research (Capron and Hulland 1999,
pp. 50; Kozlenkova, Samaha, and Palmatier 2014, p. 18; Palmatier, Dant, and Grewal 2007,
pp. 185) MEXC is conceptualized as a holistic framework integrating these five distinct capa-
bilities. Arguably, the combination of these capabilities and especially a high manifestation of
each of them can be considered rare. Importantly, this does not necessarily mean that only
one firm in an industry may achieve MEXC for the rarity requirement to hold (Barney and
Clark 2007, p. 59). In fact, it may be possible for more than one firm in an industry to attain
MEXC, still fulfill the rarity requirement, and achieve SCA, as long as the number of firms
that obtain MEXC is still less than the number of firms required to set free perfect competi-
tion dynamics in that industry (Barney and Clark 2007, p. 59).
Taken together, the emerging MEXC framework cumulatively fulfills the four conditions of
value, rarity, inimitability, and organization. As a result, MEXC can be a source of SCA and
concomitant superior performance, which is shown in figure 2-1.
FIGURE 2-1
MEXC Capabilities Framework Fulfilling VRIO Requirements
Capabilities VRIO MEXC Capabilities Framework VRIO Outcome
(1) Functional Value (2)

Structuring Sustained
Competitive
(2) Structuring Organization Advantage
(1)
Functional
(3)
Cultural
Value
(3) Cultural Inimitability
Rarity
Inimitability

(4) Relational Value
Organization

Superior
(5) (4) Performance
Change Relational
(5) Change Value
However, it is important to note that MEXC is conceptualized as a comprehensive and indi-

visible framework, whose capabilities might not be sources of SCA separately. Consequently,
it is necessary to examine MEXC and its five capabilities universally, not partly. Given impe-
tus by the insight that MEXC can be a source of SCA and superior performance, the next sec-
tion shows the strikingly scarce consideration of marketing in investment decisions and em-
phasizes the need for the development of a practicable MEXC measurement approach.
2.2 Role of Marketing in Investment Decisions

The vast majority of investment decisions is based on financial indicators and models, which
do not include marketing metrics and, therefore, fail to correctly account for intangible assets
such as customer satisfaction or brand equity (Aksoy et al. 2008, p. 105; Fornell, Morgeson,
and Hult 2016, pp. 92; Mizik and Jacobson 2009, pp. 137; Srinivasan and Hanssens 2009, pp.
293). However, there is ample evidence that these mainly marketing-driven intangible assets
have a significant impact on firm value and shareholder wealth (Bharadwaj, Tuli, and Bonfrer
2011, pp. 101; Edeling and Fischer 2016, p. 531; Madden, Fehle, and Fournier 2006, pp. 232;
Rego, Billett, and Morgan 2009, p. 55). Marketing research has shown that forward-looking
customer metrics lower the uncertainty faced by investors (Bayer, Tuli, and Skiera 2017, p.
253), consumer-based brand equity significantly lowers firm risk (Rego, Billett, and Morgan
2009, pp. 55) and increases creditworthiness (Fischer and Himme 2017, p. 150), and that
marketing actions have a positive impact on shareholder wealth by increasing expected sales
and enhanced operating efficiency (Rao and Bharadwaj 2008, p. 23). Moreover, marketing
researchers have begun to build valuation models based on customer data (Gupta, Lehmann,
and Stuart 2004, pp. 8; McCarthy, Fader, and Hardie 2017, pp. 22; Schulze, Skiera, and
Wiesel 2012, pp. 19; Wiesel, Skiera, and Villanueva 2008, pp. 4). Despite these first ap-
proaches and the strong indications of marketing’s relevance for investors, the explicit inclu-
sion of marketing in investment decisions remains very scarce, if not limited to commercial
due diligences (Niederdrenk and Müller 2012, pp. 14).
Being closely related to, but decisively extending the scope of financial due diligences, com-
mercial due diligences involve a thorough analysis of the target company including its market
position, customer base and competitors (Niederdrenk and Müller 2012, p. 17). A crucial
component of a commercial due diligence is its interface with the financial due diligence,
which examines the firm’s financial position concerning profitability, capital structure, and
business plan validity (Niederdrenk and Müller 2012, pp. 19). While the financial due dili-
gence focuses on the consistency of the planned numbers, the main goal of the commercial
due diligence is to scrutinize and evaluate the target company’s business plan with respect to
today’s and the expected future performance, especially growth opportunities arising from its
customer base and competitive position (Niederdrenk and Müller 2012, pp. 17). However,
commercial due diligences are still not performed standardly in the course of investment deci-
sions, but are expected to gain importance in the near future, especially to strategic investors
(Niederdrenk and Müller 2012, p. 237). Additionally, the concept of commercial due dili-
gence is not yet fully elaborated, leaving room for improvement and the inclusion of further
aspects to scrutinize. Particularly more operative aspects such as the different firm functions
as e.g., procurement, marketing, sales, and research and development (R&D) are to be includ-
ed (Niederdrenk and Müller 2012, p. 240).
With respect to MEXC, commercial due diligences cover a firm’s functional and relational
capabilities, but do not consider the comparably harder to grasp structuring, cultural, and
change capabilities (Niederdrenk and Müller 2012, p. 42). Most probably, the main reason
why investors do not rely too strongly on marketing aspects in the course of their investment
decisions is the lack of marketing accountability and objective marketing measures
(Hanssens, Rust, and Srivastava 2009, pp. 116; Kumar and Shah 2009, pp. 133). Widely ne-
glecting the compelling evidence presented by researchers, most investors probably consider
marketing’s impact on firm performance and value rather vague and hard to quantify
(Hanssens, Rust, and Srivastava 2009, p. 115; Srinivasan and Hanssens 2009, p. 294). Conse-
quently, there is a need to endow investors with a strong logical connection between a firm’s
marketing position and firm performance as well as an accountable and feasible measurement
approach thereof (Hanssens, Rust, and Srivastava 2009, p. 117; Hanssens and Pauwels 2016,
pp. 173; Rust et al. 2004, pp. 76). That is exactly where this master thesis comes into play.
Having demonstrated the potential of MEXC to create SCA and superior firm performance,
this master thesis has already established a reasonable link between a firm’s marketing posi-
tion and its performance. Moreover, the conceptualization of MEXC as a manageable and
graspable framework of capabilities makes it also attractive from a practical point of view.
That is why this thesis is devoted to developing a MEXC dashboard, which enables investors
to objectively, comprehensively, and practically assess a firm’s marketing position. The next
chapter presents the methodology of this master thesis and explains the specific steps under-
taken to develop the MEXC dashboard.
3 Research Process
Subchapter 3.1 describes how the relevant literature for conceptualizing the five MEXC capa-
bilities with the help of objective indicants was identified. Moreover, descriptive statistics of
the resulting literature database are shown to both convey an impression of the comprehen-
siveness and richness of the basis for the analysis and to allow for intriguing insights concern-
ing the origins and characteristics of the utilized studies. Subsequently, subchapter 3.2 de-
scribes the conceptualization process of the indicants and sheds light on the requirements re-
spectively the evaluation criteria for the developed indicants.
3.1 Identification of Relevant Literature

This master thesis is primarily based on academic literature, but also resorts to practice-
oriented publications to conceptualize and develop the objective marketing indicants measur-
ing the MEXC capabilities. In line with other literature reviews and also meta-analytic studies
(Eisend 2015, pp. 26; Kirca, Jayachandran, and Bearden 2005, p. 27; Lamberton and Stephen
2016, pp. 147; Palmatier et al. 2006, p. 141; Rubera and Kirca 2012, p. 136; Short, Payne, and
Ketchen 2008, pp. 1058), five steps were performed to arrive at an initial overview of relevant
studies.
First, electronic databases (EBSCO and ABI/INFORM) and the Internet (using Google and
Google Scholar) were systematically searched by using keywords with respect to MEXC in
general (“marketing organization,” “marketing and firm performance,” “marketing and firm
value,” also combined with “secondary data,” “secondary approach,” and “objective meas-
urement”) and each MEXC capability in particular (“business model,” “value proposition,”
“organizational structure,” “organizational culture,” “firm networks,” “customer relationship
management,” “change management,” “market sensing,” also combined with “secondary da-
ta,” “secondary approach,” and “objective measurement”). Second, major marketing and
management journals (Journal of Marketing, Journal of Marketing Research, Academy of
Management Journal, Academy of Management Review, and Strategic Management Journal)
were manually checked for relevant studies respectively special issues (e.g., “MSI and Emory
University Special Section on Marketing Strategy and Wall Street” in Journal of Marketing
2009, Volume 73, Number 6). Third, literature reviews and meta-analyses were consulted for
relevant studies. Fourth, the online catalogue of the University of Mannheim’s library was
searched for books and dissertations using the abovementioned keywords. Finally, company
websites were scrutinized to locate annual reports, strategy papers, and other public corporate
documents containing information about strategic marketing programs or transformations.
In the course of the investigation the literature search via the abovementioned sources was
continued with progressively detailed search terms in order to complement and deepen the
initial results. The underlying procedure will be explicated in depth in subchapter 3.2. Over-
all, 566 publications were identified, not counting books, annual reports, and other public
corporate documents, covering the research areas accounting (ACC, approx. 2% of the total
number of articles), finance (FIN, 2%), information systems (INF, 1%), management (MAN,
35%), marketing (MKT, 50%), operations management (OPM, 3%), practice-oriented publi-

https://doi.org/10.1007/978-3-658-24704-1_3
14 3 Research Process
cations (PRA, 7%), and other research areas (1%). Table 3-1 summarizes how the different
research areas contribute knowledge to this study.
TABLE 3-1
Overview of Knowledge Contribution from Different Research Areas
Part of the Study # ACC # FIN # INF # MAN # MKT # OPM # PRA # Other Σ %
General Information 3 5 0 7 26 1 8 0 50 9%
RBT and MEXC 0 0 0 23 9 0 1 0 33 6%
Research Process 0 0 0 2 9 1 0 0 12 2%
Functional Capabilities 2 0 0 15 51 7 10 0 85 15%
Structuring Capabilities 1 0 3 50 28 1 2 1 86 15%
Cultural Capabilities 4 0 0 47 51 1 5 3 111 20%
Relational Capabilities 1 3 0 15 37 0 0 0 56 10%
Change Capabilities 0 1 3 34 29 4 4 0 75 13%
Dashboard Aggregation 0 1 0 5 45 0 7 0 58 10%
Σ 11 10 6 198 285 15 37 4 566 100%
% 2% 2% 1% 35% 50% 3% 7% 1% 100% –
Most conspicuously, marketing and management research contribute the largest share of
knowledge to this study. Management research provides the theoretical foundation of MEXC
in the form of RBT, which is backed up by marketing studies applying RBT to the field of
marketing. Management research’s contribution to the conceptualization of the structuring
capabilities is also considerably high, which seems reasonable because of its high interest in
organizational structure. Marketing research and practice-oriented publications help building
up the empirical and conceptual foundation for the aggregation of the MEXC dashboard.
Marketing and management research contribute to the conceptualization of each MEXC ca-
pability continuously, whereas accounting, finance, information systems, and operations man-
agement literature rather intermittently back up the conceptualization of the five MEXC capa-
bilities.
According to the VHB-JOURQUAL3 Rating (VHB 2017), 321 articles (approx. 57% of the
total number of articles), were published in A+-journals, 129 articles (23%) came in A-
journals, 57 articles (10%) appeared in B-journals, 34 articles (6%) were released in C-
journals, and 25 articles (4%) appeared in journals which have not been rated. Table 3-2 gives
a concise overview of the most important periodicals covering relevant topics concerning
MEXC and the corresponding timeline of publication dates.
3 Research Process 15
TABLE 3-2
Top 10 Periodicals along the Timeline of Publication Dates
TOP 10 Periodicals # 1950-79 # 1980-89 # 1990-99 # 2000-09 # 2010-17 Σ %
Journal of Marketing 1 9 20 71 53 154 27%
Journal of Marketing Research 1 1 6 17 19 44 8%
Strategic Management Journal 0 2 6 16 9 33 6%
Academy of Management Journal 0 0 7 10 7 24 4%
Organization Science 2 2 3 12 2 21 4%
Harvard Business Review 0 0 2 4 15 21 4%
Journal of the Academy of Marketing Science 0 1 6 7 5 19 3%
Marketing Science 0 0 4 8 6 18 3%
Journal of Product Innovation Management 0 0 0 4 12 16 3%
Management Science 1 3 0 11 0 15 3%
Other 2 14 28 72 85 201 36%
Σ 7 32 82 232 213 566 100%
% 1% 6% 14% 41% 38% 100% –
Notably, the vast majority of the studies (> 75%) was published between the years 2000 and
2017. This shows that the scientific findings referred to in this master thesis are comparably
recent. Moreover, as can be inferred from table 3-3, more than 90% of the studies using sec-
ondary data were conducted between the years 2000 and 2017, which gives further reason to
assume that the empirical results and approaches referred to in this master thesis provide an
up-to-date basis for the conceptualization of MEXC. In total, 163 studies (approx. 29% of the
total number of studies) use secondary data in their models, 51 studies (9%) resort to a mixed
approach employing both primary and secondary data, and 352 studies (62%) collect primary
data, conduct a literature review, or work conceptually.
TABLE 3-3
Data Usage along the Timeline of Publication Dates
Data Usage # 1950-79 # 1980-89 # 1990-99 # 2000-09 # 2010-17 Σ %
Secondary Data 0 1 15 79 68 163 29%
Mixed Approach 0 2 6 15 28 51 9%
Primary Data/Literature Review/Conceptual Work 7 29 61 138 117 352 62%
Σ 7 32 82 232 213 566 100%
% 1% 6% 14% 41% 38% 100% –
3.2 Description of Conceptualization

The conceptualization process of the secondary data indicants is composed of two intercon-
nected workstreams and follows an iterative and incremental development logic. The first
workstream concerns the development and systematization of the secondary data indicants in
the conceptualization table, which is presented in Appendix A. The second workstream com-
prises the identification, systematic compilation, and subsequent review of the relevant litera-
ture, which constitutes the purpose of the literature table as shown in Appendix B. The con-
ceptualization itself consists of a five-step procedure, which is visualized in figure 3-1.
FIGURE 3-1
Iterative and Incremental Development of Secondary Data Indicants
DEVELOPMENT
STEP Workstream 1: Conceptualization Table Workstream 2: Literature Table STATUS
Required
MEXC capabilities Initial Refinement
1
framework search terms
Identification,
Initial
2 systematization, and
literature search
review of studies
Screening and subsequent

compilation of most Refined
3
adequate indicants search terms
Advanced Further integration

4 literature search and refinement
Level of
Conceptualization
5 Back to step 3 NO granularity YES Degree of
sufficient?
completed
Concretization
First, the derived MEXC capabilities framework was transferred into the conceptualization
table and subsequently used as a starting point to work out initial search terms for the identifi-
cation of relevant literature. Second, the literature search was started utilizing the defined
search terms as described in subchapter 3.1. The identified studies were systematically re-
viewed and searched for measurement concepts and indicators. The results were synthesized
in the literature table. Third, the most adequate measurement concepts and indicators from the
literature table were transferred into the conceptualization table, which was continuously re-
viewed and updated. The conceptualization table in turn served as a basis to amend and speci-
fy the search terms for a more targeted literature search, i.e., to iteratively refine the indicators
themselves. Fourth, the updated search terms were used to find additional studies analyzing
the individual concepts in question. Based on the additional findings, the literature table was
continuously updated and complemented. Fifth, steps three and four were iterated until there
were no significant additional insights respectively refinements anymore.
Concerning the guidelines during the conceptualization of the indicants, this master thesis
resorts to Wiesel, Skiera and Villanueva (2008), the International Accounting Standards
Board’s (IASB) (1989, 2005, 2010), and the Financial Accounting Standards Board’s (FASB)
(1980) financial reporting criteria. The criteria are adapted to the context of marketing in or-
der to develop a systematic evaluation framework for the secondary data indicants, which is
shown in table 3-4. The financial reporting criterion of reliability is split up into the MEXC
3 Research Process 17
indicants criteria of reliability and validity, because the original characteristics already include
aspects of both concepts as defined by Churchill (1979) for marketing purposes.
TABLE 3-4
Evaluation Framework for Secondary Data Indicants
Financial Qualitative Characteristics and Derived Criteria for Qualitative Characteristics and
Reporting Criteria Definitions MEXC Indicants Definitions
“The capacity to influence the economic
decisions of users by helping them evaluate Impact on overall firm
(1) Relevance (1) Relevance
past, present, or future events or confirming performance reasonably inferable
or correcting their past evaluations.”
“Information has the quality of reliability Freedom of random error:
when it is free from material error, faithfully (2) Reliability
controllability and traceability
(2) Reliability represents that which it either purports to Freedom of systematic error:
represent or could reasonably be expected to (3) Validity face validity, objectivity, and
represent, and is free from bias.” discriminant validity
“The quality of information that enables
users to identify similarities in and Wide applicability across
(3) Comparability differences between two sets of economic (4) Comparability
industries, companies, and time
phenomena.”
“The quality of information that enables Clearness, conciseness, and

(4) Understandability (5) Understandability
users to readily understand its significance.” parsimony
Efficiency in calculation and data

(5) Benefit > Cost N/A” (6) Execution Efficiency
collection
Source: Based on Wiesel, Skiera, and Villanueva (2008, p. 3)
First, indicants need to display relevance, i.e., their logical connection to future firm perfor-
mance must be reasonably inferable, so that they can make a difference in decisions (FASB
1980, p. 2). Second, they should exhibit reliability, i.e., the measurement results must be free
of random error (Churchill 1979, p. 65; O’Leary-Kelly and Vokurka 1998, p. 394). Conse-
quently, the measurement process must be controllable and traceable and repeated measure-
ments must lead to the same result (FASB 1980, p. 2). Third, the developed indicants need to
satisfy the requirement of validity, i.e., the measurement results have to be free of systematic
error (Churchill 1979, p. 65). For the purposes of this investigation, validity encompasses the
facets face validity, objectivity, and discriminant validity. To fulfill face validity, it must be
reasonably inferable that the indicant faithfully represents what it is supposed to measure
(Churchill 1979, p. 69). The indicant does not evoke issues with objectivity, if the measure-
ment process is independent of the analyzing individual and does not display any bias towards
a predetermined result (Ailawadi, Dant, and Grewal 2003, pp. 28; FASB 1980, pp. 2; Leh-
mann and Reibstein 2006, pp. 40). Discriminant validity requires the indicant at hand to
measure another construct than the other indicants employed (Churchill 1979, p. 70; Houston
2004, p. 157; O’Leary-Kelly and Vokurka 1998, p. 399). Fourth, the indicants must ensure
comparability, i.e. they should be widely applicable across industries, companies, and time
(Wiesel, Skiera, and Villanueva 2008, p. 4). Fifth, the indicants need to satisfy the prerequi-
site of understandability, i.e., they should be clear and concise and, therefore, rely on an ap-
propriate number of inputs (Wiesel, Skiera, and Villanueva 2008, p. 4). Finally, to display
execution efficiency, the calculation and data collection required for the indicant should re-
quire reasonable effort (Wiesel, Skiera, and Villanueva 2008, p. 4). Put differently, the indi-
cant’s benefit should outweigh its cost (Wiesel, Skiera, and Villanueva 2008, p. 3).
Throughout the conceptualization possible indicants were assessed alongside this evaluation
framework. The six criteria were rated on a three-point scale encompassing “low,” “medium,”
and “high.” “High” means that the indicant fully satisfies the respective criterion. “Medium”
implies that the indicant’s rating with respect to the criterion is not definite, but depends on
certain conditions. Therefore, a medium rating hints at potential issues. “Low” means that the
indicant does not fulfill the criterion in question. Consequently, a low rating points at definite
issues. By continuously applying this rating scheme, it was feasible to exclude indicants
showing considerable deficiencies from further investigation and focus on the most promising
candidates. The following analysis presents the best rated and most adequate indicants. Re-
sorting to and integrating the theoretical, conceptual, and methodological foundations devel-
oped in the previous chapters, the next chapter presents the main analysis, which corresponds
to Pauwels et al.’s (2009) Stage I: “Selecting the Key Metrics” of the dashboard development
process.
4 Development and Evaluation of Secondary Data Indicants
This chapter gradually develops and evaluates secondary data indicants alongside the five
MEXC capabilities. A subchapter is devoted to each of the MEXC capabilities. Within these
subchapters the logical structure is as follows: first, a brief overview of the literature streams
concerning the specific capability is presented to describe managerial levers, which are spe-
cific decision fields and influenceable aspects within the capability in question. Subsequently,
the identified managerial levers serve as the starting point for the development of the second-
ary data indicants. Finally, an interim conclusion synthesizes the main findings and makes a
recommendation regarding the measurement of the capability at hand.
4.1 Functional Capabilities
4.1.1 Managerial Levers

Since a firm’s functional capabilities concern its main business model tasks, it seems reasona-
ble to locate managerial levers alongside the core value-creating marketing activities (Brettel,
Strese, and Flatten 2012, p. 87; Chesbrough and Rosenbloom 2002, pp. 533; Day 1994, p. 41;
Moorman and Day 2016, p. 12). Therefore, functional capabilities involve the fundamental
value proposition, operating activities, and profitability (Day 2011, p. 191; Feng, Morgan, and
Rego 2017, p. 79). Functional capabilities can be considered “spanning capabilities,” because
they encompass the outside-in perspective, which focuses on detecting customer needs and
delivering customer value, the internal perspective concerning the firm’s operations, and the
inside-out perspective referring to the firm’s sales process and revenue generation (Day 1994,
p. 41).
First, there is an important stream of literature investigating the innovativeness of firms, i.e.,
their ability to successfully invent, develop, and introduce new products to the market, and
thereby, offer value to the customers (e.g., Baker and Sinkula 2005; Bayus, Erickson, and
Jacobson 2003; Chandy et al. 2006; Chaney, Devinney, and Winer 1991; Dutta, Narasimhan,
and Rajiv 1999; Feng, Morgan, Rego 2017; Mallapragada, Grewal, and Lilien 2012;
Ramaswami, Srivastava, and Bhargava 2009; Rubera and Kirca 2012; Sorescu, Shankar, and
Kushwaha 2007). As Rubera and Kirca (2012, p. 130) point out, “firm innovativeness refers
to a firm’s receptivity and inclination to adopt new ideas that lead to the development and
launch of new products.” There is consensus among academics and practitioners that new
products significantly contribute to the long-term financial success of a firm (Bayus, Erick-
son, and Jacobson 2003, p. 197; Rubera and Kirca 2012, p. 130; Sorescu, Shankar, and
Kushwaha 2007, p. 468; Warren and Sorescu 2016, p. 1). Innovations are crucial for firms to
succeed in a competitive environment with increasingly faster changing customer needs
(Drucker 1999, p. 124; Li et al. 2013, p. 893; Ogawa and Piller 2006, p. 65). By regularly
introducing new products to address and satisfy the latest customer needs, firms can prevent
their product portfolio from becoming obsolete and secure long-term growth and profitability
(Pauwels et al. 2004, p. 142; Rubera and Kirca 2012, pp. 130). Managers can directly influ-
ence the firm’s innovation strategy, process, and, ultimately, performance (Henard and Szy-
manski 2001, pp. 372; Li et al. 2013, pp. 907). Put another way, managers make decisions

https://doi.org/10.1007/978-3-658-24704-1_4
20 4 Development and Evaluation of Secondary Data Indicants
concerning the firm’s innovation strategy and processes. For instance, managers have to de-
cide how to strongly engage in gathering customers insights, how to intensively try turning
the acquired information into new products, and how to effectively manage the radicality of
innovations (Li et al. 2013, p. 893; Ahuja and Lampert 2001, pp. 539). As a consequence of
these considerations, the first managerial lever for the functional capabilities is a firm’s inno-
vativeness.
Second, a considerable number of academic studies and practice-oriented publications scruti-

nizes the concept of quality delivery, i.e., the extent to which a firm is able to develop and
deliver superior products and services (e.g., Aaker and Jacobson 1994; Bharadwaj, Tuli, and
Bonfrer 2011; Chen and Xie 2005; Chen, Liu, and Zhang 2012; Dixon et al. 2017; Garvin
1983; Golder, Mitra, and Moorman 2012; Kopalle et al. 2017; Kotha, Rajgopal, and Venka-
tachalam 2004; Macdonald, Kleinaltenkamp, and Wilson 2016; Moorman and Slotegraaf
1999; Sethi 2000a; Tellis and Johnson 2007; Zhu and Zhang 2010). Quality has been defined
as a product’s perceived superiority over competing alternatives with respect to dimensions
such as design, performance, workmanship, durability, and reliability (Chen and Xie 2005, p.
221; Garvin 1988, pp. 39; Sethi 2000a, p. 2; Zeithaml 1988, pp. 3). In the context of services,
quality is understood as the service provider’s ability to meet or exceed the customer’s prior
expectations (Parasuraman, Zeithaml, and Berry 1985, pp. 42; Zeithaml, Berry, and Par-
asuraman 1988, p. 36). Importantly, there is broad agreement among researchers and practi-
tioners that quality is a major strategic lever that has a strong impact on firm performance and
stands in the focus of management attention, especially that of marketing managers (Aquilani
et al. 2017, pp. 184; Golder, Mitra, and Moorman 2012, pp. 1; Tellis and Johnson 2007, pp.
768). Hence, quality delivery is the second managerial lever, which predominantly concerns a
firm’s operating processes, i.e., the way the firm fabricates products respectively delivers ser-
vices.
Third, many researchers and practitioners discuss the profit focus of firms, indicating there is
substantial concern about how firms can best seize the full profit potential of their existing
business and tap new profit pools (e.g., Armstrong and Collopy 1996; Brandenburg 2016;
Feng and Fay 2016; Gadiesh and Gilbert 1998a; Gadiesh and Gilbert 1998b; Hanssens and
Pauwels 2016; Hofer, Eroglu, and Rossiter Hofer 2012; Kamakura et al. 2002; Kenyon,
Meixell, and Westfall 2016; Wadhwa, Phelps, and Kotha 2016). Profitability is at the very
heart of every firm’s existence, because a firm permanently operating at a loss will inevitably
go out of business (Drucker 1954, pp. 35; Mankiw and Taylor 2008, p. 331). Consequently, it
is comprehensible that investors and managers very much care about a firm’s profitability
position and take it into account for valuation purposes (Palepu, Healy, and Peek 2016, pp.
194). Basically, there are two main thrusts for managers to influence a firm’s profitability
position: managers can make sure that the existing business is run efficiently and profitably
and they can actively look out for new profit pools respectively business ventures, which have
the potential to secure the firm’s future profitability (Krasnikov, Jayachandran, and Kumar
2009, p. 63; Reinartz and Ulaga 2008, pp. 91; Zook 2007, p. 68). Taken together, the third
managerial lever is a firm’s profit focus, primarily pertaining to the firm’s ability to perform
its business tasks in an efficient manner and to search for new profit pools.
4 Development and Evaluation of Secondary Data Indicants 21
4.1.2 Innovativeness
The first secondary data indicant is called innovation performance (IP). IP measures a firm’s
innovativeness, i.e., whether and to what extent a firm is able to develop new and valuable
offerings to customers. As shown below, IP is defined as a function of the number of patents,
product preannouncements, and new product introductions during a specific time period.
Indicant #1 Innovation Performance (IP)

IPt = IPt(#Patentst, #ProductPreannouncementst, #NewProductIntroductionst)
The approach to measure innovation and business performance by aggregating the number of
patents, product preannouncements, and new product introductions is consistent with the
models used in numerous academic studies, e.g., Bayus, Erickson, and Jacobson 2003, Chan-
dy et al. 2006, Chaney, Devinney, and Winer 1991, and Sorescu, Shankar, and Kushwaha
2007. The required data for the calculation of IP, namely the number of patents, product pre-
announcements, and new product introductions, can be obtained from RELX Group’s Lex-
isNexis database, which compiles newspapers and press releases, the U.S. Patent and Trade-
mark Office Database, and also from market research companies such as the International
Data Corporation as well as from company websites and executive interviews (Bayus, Erick-
son, and Jacobson 2003, p. 202; Dutta, Narasimhan, and Rajiv 1999, p. 554; Moorman and
Slotegraaf 1999, p. 246; Prabhu, Chandy, and Ellis 2005, pp. 118; Sorescu, Shankar, and
Kushwaha 2007, pp. 473). The next paragraph highlights the most important points regarding
the evaluation of IP as shown in table 4-1.
TABLE 4-1
Evaluation of Indicant #1 for Innovativeness
Criterion #1 Innovation Performance
Relevance High Medium Low
Reliability High Medium Low
Validity High Medium Low
Comparability High Medium Low
Understandability High Medium Low
Execution Efficiency High Medium Low
Most importantly, the impact of a firm’s innovation performance on overall firm performance
has been established by academic research (Rubera and Kirca 2012, pp. 138). Consequently,
the relevance of IP can be considered high. Moreover, it seems justifiable to assume that a
firm achieving a high number of patents, product preannouncements, and new product intro-
ductions within a certain period of time displays a high innovation performance. As a result,
IP does not evoke any problems with face validity. However, the comparability of IP must be
regarded with caution, because in some industries the focus on innovation is not very strong,
so that it might be difficult to calculate the indicator due to the lack of a significant number of
patents, product preannouncements, and new product introductions. Consider for instance the
retail industry, in which patent applications are comparably rare, in contrast to the patent-
intensive pharmaceutical industry (European Patent Office and European Union Intellectual
Property Office 2016, p. 58). Therefore, comparability is rated only medium. In sum, IP
seems to be an appropriate and practicable indicant to measure a firm’s position with respect
to innovativeness.
Nevertheless, it is important to bear in mind that firms might try to artificially time the intro-
duction of new products in order to show investors a positive development in the number of
innovations over time (Moorman et al. 2012, p. 935). This phenomenon has been coined “in-
novation ratchet strategy” (Moorman et al. 2012, p. 935). As a consequence, investors are
encouraged to control for such behavior, so that the indicant is not distorted by timing effects.
4.1.3 Quality Delivery

The proposed measures for a firm’s position with respect to quality delivery are quality in-
vestment (QI) and quality score (QS). QI gauges the extent to which the firm is investing and
willing to deliver superior quality for customers. The firm’s R&D expenditures, quality ca-
pacity and quality emphasis during a specific time period are aggregated to QI.
Indicant #2 Quality Investment (QI)

QIt = QIt(R&DExpenditurest, QualityCapacityt, QualityEmphasist)
R&D expenditures are considered a proxy for the firm’s devotion to high quality products and
value creation for customers (Mizik and Jacobson 2003, p. 66). Quality capacity relates to the
size of the firm’s R&D department and quality management department. The rationale behind
quality capacity is that the more staff and the more experts are explicitly working on quality
issues, the higher the firm’s expected dedication to quality delivery. Additionally, quality em-
phasis takes into account how strongly the top management strengthens the firm’s dedication
to high quality standards and implements quality improvement programs. These patterns have
been shown to lead to outcomes at the operational level, e.g., motivating employees to com-
mit to a high work standard (Flynn, Schroeder, and Sakakibara 1995, p. 683; Kull and Nara-
simhan 2010, pp. 104; Naveh and Erez 2004, pp. 1584). Required inputs for the calculation of
QI are the firm’s R&D expenditures, the number of employees working in the R&D and qual-
ity management department, and the top management’s statements on quality aspects. Data on
R&D expenditures can be retrieved from Standard & Poor’s (S&P) COMPUSTAT database
(Luo and Bhattacharya 2009, pp. 204; Mizik and Jacobson 2003, p. 69). Internal documents
such as organizational charts and information on employee responsibilities and job titles from
professional networks such as LinkedIn or XING can serve as data sources to determine a
firm’s quality capacity (for similar approaches see Homburg et al. 2014, p. 631 or Wang,
Gupta, and Grewal 2016, p. 20). Data on quality emphasis is to be found in annual reports,
press releases, executive interviews, and analyst calls.
In addition to the firm-internal indicant QI, quality score (QS) is proposed as a firm-external
measure for a firm’s quality delivery. QS measures the firm’s ability to deliver superior prod-
ucts and services, whose quality is well appreciated by professional experts as well as cus-
tomers. Hence, QS gives a comprehensive assessment of the firm’s quality performance by
taking into account professional reviewers as e.g., product reviews published in the Wall
Street Journal (Tellis and Johnson 2007, p. 762), customer reviews, and social media crawler
analyses.
Indicant #3 Quality Score (QS)

QSt = QSt(ProfessionalReviewScoret, CustomerReviewScoret, CrawlerResultst)
Similar measurement approaches have been used or proposed by e.g., Aaker and Jacobson
(1994), Bharadwaj, Tuli, and Bonfrer (2011), Kotha, Rajgopal, and Venkatachalam (2004),
Naylor, Lamberton, and West (2012), Tellis, Yin, and Niraj (2009), and Zhu and Zhang
(2010). Typically, product reviews do not arrive at comparable numerical ratings, which is
why Tellis and Johnson (2007, p. 763) recommend using a content analysis5 to arrive at nu-
merical ratings. However, social media crawlers such as Brand24 or Brandwatch might offer
an additional and more efficient solution to grasp customer opinions and sentiments (Thomaz,
Stephen, and Swaminathan 2015, p. 3). Social media crawlers are professional service provid-
ers specializing at condensing customer sentiments and attitude towards firms, brands, and
products into key metrics (e.g., Brand24 2017; Brandwatch 2017). Further sources for review
data are the Harris Poll EquiTrend database, Consumer Reports, relevant trade journals, in-
dustry publications, and internet forums (Aaker and Jacobson 1994, p. 193; Bharadwaj, Tuli,
and Bonfrer 2011, p. 93; Chen, Liu, and Zhang 2012, pp. 121; Kopalle et al. 2017, pp. 116;
Tellis and Johnson 2007, p. 763). The evaluations of QI and QS are summarized in table 4-2.
TABLE 4-2
Evaluation of Indicants #2 and #3 for Quality Delivery
Criterion #2 Quality Investment #3 Quality Score

Relevance High Medium Low High Medium Low
Reliability High Medium Low High Medium Low
Validity High Medium Low High Medium Low
Comparability High Medium Low High Medium Low
Understandability High Medium Low High Medium Low
Execution Efficiency High Medium Low High Medium Low
Following a similar line of argumentation as in the case of IP, the comparability of QI might
be limited due to industry differences. E.g., a retail company will most likely not have that
high R&D expenditures and that big a quality management department compared to a con-
sumer goods company. Consequently, the calculation of QI might not be possible for compa-
nies in certain industries. Moreover, the execution efficiency could be negatively affected, if
the investor needs to personally contact the firm in question to get organizational charts for
information on the firm’s quality capacity.
In the case of QS, issues with validity might arise. More specifically, face validity could be
restricted, because customer reviews might not always faithfully represent the firm’s ability to
5
For a detailed description of the content analysis approach refer to Tellis and Johnson (2007) and Tellis, Yin,
and Niraj (2009).
deliver quality products or services due to consumer biases or manipulations by the firm itself
or competitors (Zhu and Zhang 2010, p. 133). However, one possibility to attenuate this prob-
lem might be to use professional reviews to triangulate the results from consumer sources
and, thereby, come up with a consolidated measure. Furthermore, if the investor does not only
rely on social media crawlers, but also does his own systematization of the review data with
the help of a content analysis, the execution efficiency of QS cannot be considered high any-
more.
Nevertheless, both QI and QS display high relevance, since the impact of quality on firm per-
formance is intuitively comprehensible and empirically well-established (Bharadwaj, Tuli,
and Bonfrer 2011, pp. 101; Tellis and Johnson 2007, pp. 768). Overall, the two indicants
seem to be well-suited to endow investors with a more detailed assessment of a firm’s quality
delivery.
4.1.4 Profit Focus

The efficiency aspect of a firm’s profit focus is measured by the indicant efficiency score (ES)
and the efforts to search for new profit pools is captured by the indicant profit pool search
intensity (PPSI). As shown below, ES is calculated as an accounting-based key performance
indicator (KPI) such as return on sales (ROS), return on assets (ROA), or return on capital
employed (ROCE).
Indicant #4 Efficiency Score (ES)

(1)  ESt = ROSt = (EBITt / Salest) × 100
(2)  ESt = ROAt = (EBITt / Total Assetst ) × 100
(3)  ESt = ROCEt = (EBITt / Average Capital Employedt ) × 100
As Palepu, Healy, and Peek (2016) and Krause (2016) elaborate in depth, there are many
more accounting-based KPIs, which might be relevant for investors under certain circum-
stances. However, for the purposes of this master thesis the abovementioned three comple-
mentary efficiency measures were chosen, because they have also been frequently used in
academic studies (Brandenburg 2016; Hofer, Eroglu, and Rossiter Hofer 2012; Homburg,
Artz, and Wieseke 2012; Nath and Mahajan 2008, 2011; Noble, Sinha, and Kumar 2002;
Sheaffer et al. 2009). Investors can calculate multiple of these measures in order to get a com-
prehensive picture of how efficiently a specific firm works with respect to different parame-
ters. As a first option, investors can calculate ROS, which is defined as earnings before inter-
est and taxes (EBIT) in period t divided by sales in period t times 100 (Krause 2016, p. 35).
ROS, which is also referred to as net profit margin, shows which share of the firm’s revenue
eventually translates into profits (Krause 2016, p. 36; Palepu, Healy, and Peek 2016, p. 204).
Second, ROA is calculated as the quotient of EBIT in period t and total assets in period t mul-
tiplied by 100 (Krause 2016, p. 51; Palepu, Healy, and Peek 2016, p. 199). This KPI sheds
light on how efficiently the firm deploys its assets, i.e., how much profit the company earns
per euro of assets invested (Krause 2016, pp. 51; Palepu, Healy, and Peek 2016, p. 199).
Third, investors can compute ROCE, which equals EBIT divided by average capital employed
times 100 (Krause 2016, p. 49). ROCE directly relates the yielded profits to the required capi-
tal and, thus, gives an indication of how much interest was gained from the capital tied up in
the respective firm (Krause 2016, p. 49).
Alternatively, some researchers make use of more sophisticated models to determine a firm’s
efficiency position with respect to certain capabilities respectively value-creating activities.
Most conspicuously, the stochastic frontier estimation (SFE) input-output approach6 is fre-
quently used to calibrate firm capabilities such as marketing and operational capabilities (e.g.,
Dutta, Narasimhan, and Rajiv 1999, p. 560; Dutta, Narasimhan, and Rajiv 2005, pp. 278;
Feng, Morgan, and Rego 2017, pp. 80; Narasimhan, Rajiv, and Dutta 2006, pp. 514). More
specifically, SFE allows to estimate an industry-specific benchmark score based on how well
the most efficient firm in the industry translates its inputs into outputs, i.e., the efficiency
frontier (Feng, Morgan, and Rego 2017, pp. 80; Krasnikov, Jayachandran, and Kumar 2009,
pp. 66). For instance, it could be examined how much R&D expenses and how much quality
management personnel the firm in question needs to achieve a specific quality output in com-
parison to the top players in the industry. However, this approach does not seem to be appro-
priate for practical use by investors, because it requires comparably complex econometric
modeling (Kumbhakar, Wang, and Horncastle 2015, pp. 241; Feng, Morgan, and Rego 2017,
pp. 81; Narasimhan, Rajiv, and Dutta 2006, pp. 515). Additionally, in contrast to the wide-
spread and well-known accounting-based measures as incorporated in ES, the computations
behind and the results from an SFE might not be intuitively comprehensible for non-expert
practitioners (Kumbhakar, Wang, and Horncastle 2015, p. xiii). Clearly, this would cause
problems with the criterion of understandability. Consequently, SFE results could evoke skep-
ticism and rejection among investors, unless they invest a considerable amount of time for
immersing themselves in the method or appoint a professional analyst. Hence, the use of SFE
seems appropriate for researchers and statistics experts, but not for practical application by
non-expert investors.
To sum up, ES conveys a differentiated assessment of a firm’s current profitability and is

comparably easy to apply. The accounting information regarding sales, assets, capital em-
ployed, and EBIT, which is required to calculate ES, can be found in financial statements,
which are compiled in various databases as e.g., Bureau van Dijk’s AMADEUS database,
S&P COMPUSTAT database, and the U.S. Securities and Exchange Commission’s EDGAR
database (Brandenburg 2016, p. 326; Hofer, Eroglu, and Rossiter Hofer 2012, p. 246; Hom-
burg, Artz, and Wieseke 2012, p. 64; Nath and Mahajan 2008, p. 72; Nath and Mahajan 2011,
p. 66; Rajgopal, Venkatachalam, and Kotha 2003, pp. 139).
Apart from the efficiency perspective, a firm must also make sure that its future profitability
is secured by a systematic quest for new profit pools and ventures (Zook 2007, pp. 68), which
is also referred to as the exploitation of new ecosystems (Meffert and Meffert 2017b, pp. 79).
As a consequence, the second indicant profit pool search intensity (PPSI) is defined as a func-
tion of a firm’s new venture existence, the emphasis put on the quest and importance of new
6
For a detailed description of the SFE approach refer to Kumbhakar, Wang, and Horncastle (2015).
ventures, the search capacity and the investment capacity at the firm’s disposal to engage in
new ventures in a certain time period.
Indicant #5 Profit Pool Search Intensity (PPSI)

PPSIt = PPSIt(NewVentureExistencet, NewVentureEmphasist, SearchCapacityt, InvestmentCapacityt)
The rationale behind PPSI is to check whether the firm engages in identifying and seizing
new business opportunities. This might involve corporate venture capital activities, in which
an equity investment is made by a non-financial public company in one or more private entre-
preneurial companies, often referred to as “portfolio companies” (Wadhwa, Phelps, and Kotha
2016, p. 101; Yang, Narayanan and De Carolis 2014, p. 1994). A pre-eminent motive for
large corporations to invest in entrepreneurial firms is to cope with the disruptive changes in
their environments by building closer connections with start-ups and new businesses. There-
by, they can learn about upcoming innovations and new technologies (Yang, Narayanan, and
Zahra 2009, p. 262). Furthermore, the firm’s quest for new business opportunities might also
entail questioning the current profit distribution and monitoring its development within an
industry (Gadiesh and Gilbert 1998a, pp. 140). As a consequence of these activities, a firm
might decide to make adaptations to its current profit generating activities or to tap a com-
pletely new profit pool outside its current value chain (Gadiesh and Gilbert 1998b, pp. 149;
Meffert and Meffert 2017b, pp. 79). That is why the computation of a firm’s PPSI requires
data on the firm’s new ventures, changes of strategy, as well as the existence of and, if any,
size of the business development department.
The needed data can be obtained from the National Venture Capital Association’s Ven-
tureXpert database, LexisNexis (newspapers and press releases), annual reports, executive
interviews, organizational charts, and professional networks such as LinkedIn or XING (job
titles and responsibilities) (Homburg et al. 2014, p. 631; Souitaris, Zerbinati, and Liu 2012, p.
482; Wadhawa, Phelps, and Kotha 2016, p. 101; Yang, Narayan, and Zahra 2009, pp. 266).
Furthermore, information on the maximum amount of capital available for new venture activi-
ties respectively the budget of the business development department could be obtained from
program brochures, internal memos, and strategy papers (Souitaris, Zerbinati, and Liu 2012,
p. 482). The following paragraph highlights the most crucial points regarding the evaluation
of ES and PPSI as depicted in table 4-3.
TABLE 4-3
Evaluation of Indicants #4 and #5 for Profit Focus
Criterion #4 Efficiency Score #5 Profit Pool Search Intensity


Due to the widespread use of the accounting-based KPIs contained in ES, relevance and un-
derstandability are considered high. Since the three complementary measures for ES as de-
fined above are based on pre-interest and pre-tax profits, namely EBIT, they are independent
of the firm’s capital structure and, therefore, can be adequately used for comparisons between
companies (Krause 2016, pp. 49). PPSI can also be rated highly relevant, because there is a
considerable discussion in both practice and academia about industry disruptions, the change
of traditional business models and the need for big players to adapt to the changing environ-
ment and find new business opportunities, as they otherwise might face problems of vital sig-
nificance in the future (Schumacher 2017, pp. 134). However, since a detailed determination
most likely also requires the time-consuming provision of internal documents, PPSI is evalu-
ated only medium with respect to execution efficiency. All in all, ES and PPSI show strong
evaluations and, hence, seem to be appropriate measures for a firm’s profit focus.
4.1.5 Interim Conclusion and Recommendation

As the analysis has revealed, a firm’s functional capabilities can be measured using the indi-
cants innovation performance, quality investment, quality score, efficiency score, and profit
pool search intensity, because the six well-defined criteria for secondary data indicants were
mostly rated high. Furthermore, as shown in table 4-4, the data availability of the indicants is
largely public; only some additional internal documents might be helpful in order to comple-
ment the determination of QI and PPSI.
TABLE 4-4
Overview and Data Availability of Indicants for Functional Capabilities
Indicant Data Availability Key Data Sources

LexisNexis, U.S. Patent and Trademark Office,
#1 Innovation Performance Public Mixed Internal
Delphion, company websites
 COMPUSTAT, annual reports, press releases, inter-
#2 Quality Investment Public Mixed Internal
views, internal documents (e.g., organizational charts)
 Social media crawler, EquiTrend, Consumer Reports,
#3 Quality Score Public Mixed Internal
trade journals, industry publications, internet forums
#4 Efficiency Score Public Mixed Internal  AMADEUS, COMPUSTAT, EDGAR
 VentureXpert, LexisNexis, annual reports, internal

#5 Profit Pool Search Intensity Public Mixed Internal
documents, professional networks (e.g., LinkedIn)
Importantly, the five indicants cover the firm’s core value creating activities and, thus, pro-
vide a comprehensive picture of how effectively and efficiently the main value-creating busi-
ness tasks are fulfilled. Specifically, investors get a detailed assessment of the firm’s ability to
detect and analyze customer needs, translate them into valuable offerings to customers, and
produce and profitably sell new products and services to customers. Moreover, investors de-
termining a firm’s PPSI will also arrive at a detailed assessment of the target firm’s efforts to
rethink and augment its current profitability footprint. Consequently, it is recommended using
the five developed secondary data indicants to measure a firm’s functional capabilities.
For the aggregation of the indicants investors are advised to weight the five indicants accord-
ing to the industry-specific importance of the single managerial levers. E.g., if the industry is
not strongly driven by innovativeness, investors can assign only little weight to IP and put
more emphasis on profitability. Subsequently, the overall score of the firm’s functional capa-
bilities can be calculated as a linear function of the indicants.
4.2 Structuring Capabilities

Structuring capabilities concern the firm’s organizational setup, i.e., the organizational struc-
ture of the firm (Day 2011, p. 191). The fundamental forces putting pressure on firms to con-
tinuously rethink and adapt their organizational setup have been described as “cataclysmic
changes occurring in the environments of organizations” (Illinitch, D’Aveni, and Lewin 1996,
p. 211). Hence, there is broad consensus among researchers that a firm’s structuring capabili-
ties predominantly have to facilitate and allow for adaptability, flexibility, and organization-
wide collaboration in order to make it possible for the firm to cope with the fast and funda-
mental changes in the competitive environment (Day 2011, p. 192; Illinitch, D’Aveni, and
Lewin 1996, pp. 214; Miles and Snow 1986, p. 62; Schreyögg and Sydow 2010, pp. 1251;
Vergne and Durand 2011, p. 366). Moreover, a considerable number of business practitioners
and academics emphasize the importance of organizational structure in marketing (Lee, Ko-
zlenkova, and Palmatier 2015, p. 73).
First, a plethora of academic studies investigates team structures as an important facet of an

adaptive and effective organizational setup (e.g., Aime et al. 2014; Bresman and Zellmer
Bruhn 2013; Bunderson and Boumgarden 2010; DeSanctis and Jackson 1994; Hoegl and
Gemuenden 2001; Hoegl, Weinkauf, and Gemuenden 2004; Liang, Rajan, and Ray 2008;
O’Leary, Mortensen, and Woolley 2011; Patanakul, Chen, and Lynn 2012; Sethi 2000b;
Young-Hyman 2017). A team has been defined as “a collection of individuals who are inter-
dependent in their tasks, who share responsibility for outcomes, who see themselves and who
are seen by others as an intact social entity embedded in one or more larger social systems
(for example, business unit or the corporation), and who manage their relationships across
organizational boundaries” (Cohen and Bailey 1997, p. 241). A team-based structure can be
the catalyst for cross-functional collaboration, flexibility, organizational learning, and motiva-
tion among employees (Bresman, Zellmer-Bruhn 2013, pp. 1135; De Luca and Atuahene-
Gima 2007, p. 107; Hoegl, Weinkauf, and Gemuenden 2004, pp. 51; Lee, Kozlenkova, and
Palamtier 2015, p. 75). More specifically, cross-functional teams can bring down intra-firm
boundaries, which are assumed to restrict organizations in their scope of activities, and, there-
by, abolish counter-productive silo-thinking and organizational inertia (Day 2011, p. 192;
Homburg, Jensen, and Krohmer 2008, p. 149; Schreyögg and Sydow 2010, pp. 1252). For
instance, cross-functional teams have been shown to positively impact the new product devel-
opment process, because they bring together different organizational perspectives, namely
R&D, marketing, and sales, whose interplay is crucial for the new product’s success (Ernst,
Hoyer, and Rübsaamen 2010, pp. 89). As a result, team structure is the first managerial lever
for a firm’s structuring capabilities.
Second, many researchers examine the relative importance of the marketing function in the
firm, its strategic scope and its representation in the top management team (TMT) (e.g., Boyd,
Chandy, and Cunha 2010; Feng, Morgan, and Rego 2015; Germann, Ebbes, and Grewal
2015; Homburg et al. 2014; Homburg et al. 2015; Nath and Mahajan 2008, 2011). As Hom-
burg, Theel, and Hohenberg (2016, pp. 17) point out, it is an important aspect of a firm’s
structuring capabilities whether there is a central, strategic marketing hub within the firm, that
oversees the whole organization and, thereby, orchestrates the firm’s entire marketing agenda.
It has been shown that both the presence of a chief marketing officer (CMO) in a firm’s TMT
and the marketing department power have a positive impact on long-term firm performance
(Feng, Morgan, and Rego 2015, p. 14). Therefore, the second managerial lever concerning a
firm’s structuring capabilities is marketing hub.
Third, on a more granular level, academic studies have identified organizational processes and
routines as critical success factors for firms to meet the challenges of the ever-changing com-
petitive environment (Eisenhardt and Martin 2000; Feldman 2000; Gilbert 2005; Heracleous
and Barrett 2001; Schreyögg and Sydow 2010; Sydow, Schreyögg, and Koch 2009). A central
notion in this context is path dependence, which posits that through singular historical events
or decisions and subsequent self-reinforcing dynamics a firm may end up in an organizational
lock-in (Sydow, Schreyögg, and Koch 2009, p. 690). This means that the number of options,
i.e., alternative courses of action, a firm can choose from in a certain situation gradually be-
comes limited, if not restricted to one standard procedure (Sydow, Schreyögg, and Koch
2009, p. 692). From a managerial perspective, this is an undesirable state, because it stands in
extreme contrast to the requirements of adaptability and flexibility (Eisenhardt and Martin
2000, p. 1113; Sydow, Schreyögg, and Koch 2009, p. 701). Consequently, managers have to
make sure that the firm does not become path dependent, but has agile processes in place
(Schreyögg and Sydow 2010, p. 1252). This entails that organizations no longer exclusively
resort to well-established patterns of problem solving, but engage in ad hoc solutions, improv-
isation, and proactive search for new ways of fulfilling tasks (Gilbert 2005, p. 742; Schreyögg
and Sydow 2010, p. 1252). Moreover, as Sydow, Schreyögg, and Koch (2009, p. 701) empha-
size, path dependence may also be counteracted through a continuous change in organization-
al demography and the conscious prevention of traditional socialization of new employees. In
sum, agile processes (see also Homburg, Theel, and Hohenberg 2016, p. 16) enabling the firm
to keep pace with the changing competitive environment are the third managerial lever for the
structuring capabilities.
4.2.2 Team Structure

The proposed indicant for a firm’s team structure footprint is the team structure index (TSI).
TSI gauges how strongly the firm relies on a team structure for task fulfillment and how deep-
ly the team structure is established in the organization. As shown below, TSI is defined as a
function of team structure entrenchment, team emphasis, cross-functional teams, and team
autonomy within a certain time period.
Indicant #6 Team Structure Index (TSI)

TSIt = TSIt(TeamStructureEntrenchmentt, TeamEmphasist, CrossFunctionalTeamst, TeamAutonomyt)
Team structure entrenchment concerns in how far the firm’s organizational setup intentionally
divides the workforce into teams. This entails to check whether the core value-creating tasks
such as new product development are performed by teams (Sethi 2000b, p. 330). Team em-
phasis relates to the extent to which the firm officially communicates that it organizes its
workforce in teams. It is considered, if a firm stresses its team organization in a business press
article or executive interview or describes a job role in an employment notice as being part of
a team. Cross-functional teams concern whether and, if applicable, how intensely the firm
relies on teams collaborating across department boundaries and how often employees from
different business functions are assembled to a new team. E.g., there could be a joint R&D,
marketing and sales team working together during the new product development process,
which has a positive influence on the new product’s success (Ernst, Hoyer, and Rübsaamen
2010, p. 89). Team autonomy takes into account the degree of freedom teams are granted to
fulfill their tasks. The more freedom a team is granted, the more likely it becomes that the
team members behave and decide in an entrepreneurial and dedicated manner, so that the
work results will be helpful for the firm (Patanakul, Chen, and Lynn 2012, p. 734). Taken
together, TSI serves as a measure to systematically assess a firm’s team structure from four
different perspectives.
To determine TSI, data on the firm’s organizational structure, standard task fulfillment proce-
dures, management opinions, and human resources (HR) strategy is required. The information
can be obtained from annual reports, career websites, job postings, professional networks
such as LinkedIn or XING (e.g., information on the composition of teams and interconnect-
edness of the employees), LexisNexis and Dow Jones & Company’s Factiva database (news-
papers and press releases), executive interviews, and internal documents such as organiza-
tional charts (DeSanctis and Jackson 1994, p. 96; Homburg et al. 2014, p. 631; Huckman,
Staats, and Upton 2009, p. 89; Young-Hyman 2017, p. 186). Most conspicuously, Young-
Hyman (2017, pp. 189) uses archival payroll data to determine a firm’s degree of cross-
functional team collaboration by checking whether employees from different functional back-
grounds have allocated their working hours on the same project. This approach might also be
feasible for investors, if they were granted access to the firm’s administrative archival data.
Table 4-5 summarizes the evaluation of TSI.
TABLE 4-5
Evaluation of Indicant #6 for Team Structure
Criterion #6 Team Structure Index


Due to the broad agreement in both academia and practice that an elaborated team structure
can enable firms to cope with the challenges of the ever-changing business environment and,
thereby, impact firm performance, the relevance of TSI can be considered high (Cohen and
Bailey 1997, p. 239; Emery and Fredendall 2002, p. 226). However, both validity and execu-
tion efficiency of TSI might be impaired, if the investors were not able to get easy access to
internal documents. It will be difficult for investors to comprehensively assess a firm’s team
structure, if they do not have organizational charts at their disposal. Investors would need to
rely on the firm’s official communication and job profiles on professional networks to gauge
the firm’s team structure. This evokes problems with face validity, because the mere commu-
nication of team structure does not necessarily translate into an actual organizational en-
trenchment of teams. Furthermore, the task to identify the different teams and corresponding
individual team members exclusively with the help of a detailed search of professional net-
works would be very time-consuming. In sum, TSI can be considered an appropriate measure
for a firm’s team structure, but its applicability might be limited, if internal documents are not
at the investor’s disposal.
4.2.3 Marketing Hub

To gauge a firm’s marketing hub, the indicants CMO importance (CMOI) and strategic mar-
keting unit (SMU) are introduced. CMOI assesses the top marketing executive’s importance
within the organization and, thereby, gauges her strategic reach to serve as a marketing hub.
As shown below, CMOI takes into account the hierarchical rank of the firm’s top marketing
executive, relative compensation in comparison to other top executives, and responsibility
scope within a certain time period.
Indicant #7 CMO Importance (CMOI)

CMOIt = CMOIt(HierachicalRankt, RelativeCompensationt, ResponsibilityScopet)
Hierarchical rank checks the job title and, thereby, the rank of the highest-ranking marketing
executive, i.e., the CMO. More specifically, the CMO’s title could be in descending order
“president”, “executive vice president”, “senior vice president”, or “vice president” (Feng,
Morgan, and Rego 2015, p. 7). Furthermore, hierarchical rank also involves whether the CMO
is indeed a member of the firm’s TMT and hence involved in top-level decisions (Nath and
Mahajan 2008, pp. 67). Relative compensation compares the CMO’s compensation with that
of the other top executives at the firm. Relative compensation can be seen as an indicator of
the manager’s respectively her department’s importance within the firm and her centrality to
achieving a firm’s goals (Feng, Morgan, Rego 2015, pp. 6). Responsibility scope relates to the
scope of tasks that are controlled by the CMO, which can be inferred from her job title (e.g.,
“Senior Vice President for Marketing and Sales”) (Feng, Morgan, and Rego 2015, p. 7; Nath
and Mahajan 2011, pp. 62).
For the computation of CMOI data on the top executives is required: executive titles, com-
pensation information, and responsibilities. The data can be readily obtained from Bloomberg,
COMPUSTAT, EDGAR (SEC filings), Dun & Bradstreet’s (D&B) Register of Corporations,
annual reports, and company web sites (Boyd, Chandy, and Cunha 2010, pp. 1167; Feng,
Morgan, and Rego 2015, p. 6; Germann, Ebbes, and Grewal 2015, p. 11; Nath and Mahajan
2008, p. 71; Nath and Mahajan 2011, pp. 65).
In addition to the CMO, a firm can have a strategic marketing unit fulfilling and complement-
ing the role of a marketing hub (Krush, Sohi, and Saini 2015, p. 35). Consequently, the se-
cond indicant is strategic marketing unit (SMU). SMU verifies whether there is a strategic
marketing unit and, if applicable, measures its strategic importance and reach within the or-
ganization. SMU is specified as a function of size, hierarchical level, relative compensation
and responsibility scope within a certain time period.
Indicant #8 Strategic Marketing Unit (SMU)

SMUt = SMUt(Sizet, HierarchicalLevelt, RelativeCompensationt, ResponsibilityScopet)
Size refers to the number of employees working for the SMU relative to the firm’s total work-
force. It seems reasonable to propose that the greater the share of employees working for the
SMU, the greater its influence within the firm and, thereby, its capacity to fulfill the tasks of a
marketing hub (Krush, Sohi, and Saini 2015, p. 42). Following the same logic as in the case
of CMOI, hierarchical level, relative compensation, and responsibility constitute additional
input variables to assess the SMU’s importance (Feng, Morgan, and Rego 2015, pp. 6). E.g.,
if the SMU is directly attached to the TMT, it can be assumed that its strategic influence and
reach is considerably high or least higher than if it were only part of the firm’s lower echelons
(Feng, Morgan, and Rego 2015, p. 2). Relative compensation seems to be of special im-
portance, because it is not only an indicator of formal power, but might also attract highly
talented employees from within the organization and also from competitors (Feng, Morgan
and Rego 2015, p. 2; Finkelstein 1992, p. 512). Consequently, if the salaries are above-
average, it is reasonable to assume that the SMU has a high standing in the firm and that its
tasks are deemed to be of critical importance (Welbourne and Trevor 2000, p. 763).
The data needed to determine the indicant include information on the number of the SMU’s
employees, its hierarchical position, compensation in relation to other departments respective-
ly teams, and descriptions of its responsibilities. In contrast to CMOI, not all these infor-
mation can be retrieved from publicly accessible sources. Professional networks and job
search engines such as LinkedIn, XING, or Glassdoor offer insights regarding the number of
employees working for a specific department and their salary (e.g., Glassdoor 2017). Howev-
er, not only is the search of these sites time-consuming, but also not reliable, because they are
based on self-reported information from employees (e.g., Glassdoor 2017). Consequently, it is
recommended to resort to firm-internal organizational charts and compensation information or
to consult with industry experts,7 which can yield the required information. Furthermore, the
firm’s annual report and career website can be checked for information on the size, hierar-
7
Although the consultation of industry experts can be considered primary data collection, the yielded data is
assumed to fulfill the key criterion of objectivity. Furthermore, industry experts are never mentioned as the on-
ly data source for the determination of an indicant, but as an additional source to enhance data accuracy. Con-
sequently, it is justifiable to still deem the indicants concerned “secondary data indicants.”
chical level, and responsibility scope of the SMU. Table 4-6 summarizes the evaluations of
CMOI and SMU, which will be explicated in the following.
TABLE 4-6
Evaluation of Indicants #7 and #8 for Marketing Hub
Criterion #7 CMO Importance #8 Strategic Marketing Unit

CMOI shows a very strong evaluation, because comparable approaches have been used in
marketing research and give a detailed blueprint for the proposed procedure, which stresses
reliability, understandability, and execution efficiency (e.g., Feng, Morgan, and Rego 2015,
pp. 6; Germann, Ebbes, and Grewal 2015, pp. 11). Furthermore, the multiple studies under-
score the relevance of the CMO for the firm’s performance and even for firm value (Ger-
mann, Ebbes, and Grewal 2015, p. 19; Boyd, Chandy, and Cunha 2010, pp. 1172). Conse-
quently, the relevance of CMOI can also be considered high.
However, for SMU some caveats are in order. First, it seems unclear whether all companies
indeed have a strategic marketing unit, especially smaller firms. Consequently, comparability
is only rated medium, because for certain industries it might prove difficult to use SMU as an
indicant, although the identification of a top marketing executive and, hence, the use of CMOI
is still possible (e.g., with the help of professional networks, if the company is not listed in
COMPUSTAT). Second, if the investor is not granted access to internal documents such as
organizational charts and salary information, it will be very time-consuming, if not practically
impossible, to hand-collect the needed information on multiple employees from professional
networks, company websites, and press releases (see e.g., Homburg et al. 2014, p. 631). Fur-
thermore, reliability could be affected, if the investor has to solely rely on self-reported job
titles and salaries from professional networks, because it is not verifiable whether the stated
information is true and still relevant.
Taken together, both CMOI and SMU can be deemed appropriate measures for marketing
hub. However, it seems advisable to restrict the use of SMU to those cases in which internal
data are at the investor’s disposal.
4.2.4 Agile Processes

To measure a firm’s use and acceptance of agile processes, three secondary data indicants are
proposed: hierarchy rigidness index (HRI), organizational reaction time (ORT), and internal
corporate venture (ICV). First, HRI gauges how rigid the firm’s hierarchy is with respect to
promotion opportunities and how firmly it sticks to official channels and formalities. HRI is
defined as a function of promotion inflexibility, official channel emphasis, and TMT uni-
formity within in certain time period.
Indicant #9 Hierarchy Rigidness Index (HRI)

HRIt = HRIt(PromotionInflexibilityt, OfficialChannelEmphasist, TMTUniformityt)
The higher the HRI, the less likely is the firm’s use and acceptance of agile processes in day-
to-day business. Promotion inflexibility refers to the formal requirements candidates need to
fulfill in addition to superior performance and competency. E.g., these requirements can entail
minimum age, minimum job tenure, or minimum degree. Furthermore, it also entails whether
the firm exclusively promotes internal candidates or recruits experts from outside (Baron,
Davis-Blake, and Bielby 1986, pp. 248). Official channel emphasis concerns the firm’s com-
munication routines and management’s emphasis on formality. This encompasses aspects
such as management’s insistence on hierarchy-based and official communication channels,
institutionalized reporting procedures, and impersonal interaction (Morand 1995, p. 841). The
rationale behind TMT uniformity stems from upper echelons research and relates to the ob-
servable characteristics of the top executives at the firm including e.g., age, education, prior
career experiences, and socioeconomic roots (Hambrick and Mason 1984, pp. 198; Knight et
al. 1999, pp. 447). It has been argued that TMT homogeneity is merely fitted for routine prob-
lem solving and results in inferior decision making, whereas TMT diversity has been linked
with innovative problem solving and enhanced strategy formation processes (Carpenter,
Geletkanycz, and Sanders 2004, p. 766; Hambrick and Mason 1984, pp. 202). Moreover, it
seems justifiable to assume that the more uniformly the TMT is composed, the less agile and
innovative the recruiting and promotion processes eventually leading to the composition of
the TMT will be.
To determine HRI, data on the firm’s promotion and recruiting procedures, communication
routines, management’s stance on formality, and TMT demographics is required. The infor-
mation can be gathered from employment notices, executive interviews, LexisNexis and Fac-
tiva (newspapers and press releases), company websites, COMPUSTAT, EDGAR, D&B’s
Book of Corporate Managements, S&P’s Registry of Corporate Directors and Executives, and
internal data such as strategic HR presentations, promotion and recruiting policies, memos,
and circular letters to employees (Bertrand and Schoar 2003, pp. 1175; Boeker 1997, pp. 221;
Geletkanyz and Hambrick 1997, p. 664; Gordon et al. 2000, p. 922; Homburg et al. 2014, p.
631; Papadakis and Barwise 2002, p. 85).
Second, organizational reaction time (ORT) scales how quickly the firm adopts helpful new
technology and reacts to market trends. It aims at endowing the investor with the firm’s pro-
pensity to either being an early adopter successfully seizing new technologies and business
opportunities or a laggard being in danger to miss out on important developments (see e.g.,
Srinivasan, Lilien, Rangaswamy 2002, p. 47). Therefore, ORT is defined as a function of
technology adoption time and market trend reaction time within a certain time period.
Indicant #10 Organizational Reaction Time (ORT)

ORTt = ORTt(TechnologyAdoptionTimet, MarketTrendReactionTimet)
Technology adoption time refers to the time the company needs to start using an important
new technology such as more efficient databases, new versions of their standard software
packages, and radically new innovations. The adoption of new technologies is essential for
the firm’s survival, because business history has given many examples of companies, which
have missed this crucial step and eventually went out of business (Srinivasan, Lilien, and
Rangaswamy 2002, p. 47). A similar logic holds true for market trend reaction time, because
if the firm does not react timely to changing customer demands or competitive behavior, it
will also eventually cease to exist (D’Aveni 1995, pp. 45; Meffert and Meffert 2017a, pp. 33).
The specific procedure to determine ORT requires two steps. First, it needs to be figured out
which crucial technological developments and changes in customer and competitor behavior
have taken place in the respective industry. Second, it needs to be pinpointed when these de-
velopments started and how long the firm at hand needed to react to them. Therefore, ORT
provides a measure of how quickly the firm is able to react to external influences, i.e., ORT
measures the agility of the firm’s underlying processes to decide about possible courses of
action in response to changes in the business environment and to finally take action (see e.g.,
Huff and Munro 1985, pp. 328; Hutt, Reingen, and Ronchetto 1988, p. 10).
The data required to calculate ORT include information on the firm’s technology usage and
update policies, specific industry trends and key technologies, and the firm’s processes to
react to changes in the market environment. These can be obtained from industry experts,
internal documents (e.g., inventory, planning documents, and sourcing policies and proto-
cols), LexisNexis and Factiva (trade and industry journals), and executive interviews (e.g.,
Hutt, Reingen, and Ronchetto 1988, p. 10).
Finally, internal corporate venture (ICV) concludes the secondary data indicants proposed to
measure a firm’s agile processes. ICV checks whether the firm engages in internal corporate
venturing and, if applicable, gauges its influence on the firm’s strategy and operating busi-
ness. An internal corporate venture is defined as a firm-internal explorative initiative, which
strives to develop new business opportunities for the parent corporation (Covin et al. 2015, p.
750; Garrett and Neubaum 2013, p. 896). More specifically, this can entail maintaining a cor-
porate incubator or think tank, which has become popular practice even among established
companies such as e.g., Deutsche Telekom AG, Bayer AG, and Commerzbank AG (Wagner
and Wosch 2015, p. 28). ICV is defined as a function of venture scope, venture resources, and
venture endorsement within a certain time period.
Indicant #11 Internal Corporate Venture (ICV)

ICVt = ICVt(VentureScopet, VentureResourcest, VentureEndorsementt)
Venture scope refers to the ICV’s strategic mission, i.e., the specific tasks expected to be ac-
complished by the ICV. This means investors should pay attention to the seriousness and ef-
fectiveness of the attempts and endeavors undertaken by the ICV. Some firms use the ICV
merely as an experimentation laboratory to pursue internally generated ideas, whereas other
companies expect the ICV to search for completely new approaches and ideas in the business
environment (Wagner and Wosch 2015, p. 30). Venture resources concerns the ICV’s strate-
gic endowment such as funding, number and qualification of employees and autonomy from
the parent company (e.g., Garrett and Neubaum 2013, pp. 910; Wagner and Wosch 2015, pp.
31). Venture endorsement checks whether the ICV is supported by the firm’s TMT, which has
been shown to positively impact the ICV’s performance (Garrett and Neubaum 2013, pp.
909). Arguing in a similar way, it is recommended to check the composition of the ICV’s
management team. If it is comprised of top talents and executives from the parent company
and maybe even from the whole industry, this can be an indication of the ICV’s strategic im-
portance and significance for the entire firm.
The data needed to determine ICV is statements about the ICV’s mission and operating activi-
ties, the composition of its management team, the number and qualification of its employees,
and the firm’s top management’s stance regarding the ICV. These pieces of information can
be obtained from company websites (e.g., CoLaborator 2017; hub:raum 2017), LexisNexis
and Factiva (newspapers, press releases, and industry publications), executive interviews,
professional networks (e.g., LinkedIn or XING), and annual reports. Table 4-7 summarizes
the evaluations of HRI, ORT, and ICV.
TABLE 4-7
Evaluation of Indicants #9, #10, and #11 for Agile Processes
Criterion #9 Hierarchy Rigidness Index #10 Organizational Reaction Time #11 Internal Corporate Venture
Relevance High Medium Low High Medium Low High Medium Low
Reliability High Medium Low High Medium Low High Medium Low
Validity High Medium Low High Medium Low High Medium Low
Comparability High Medium Low High Medium Low High Medium Low
Understandability High Medium Low High Medium Low High Medium Low
Execution Efficiency High Medium Low High Medium Low High Medium Low
Although HRI’s impact on firm performance can be logically inferred from its link to superior
strategy formation processes and managerial decision-making (see e.g., Carpenter,
Geletkanycz, and Sanders 2004, p. 766), it might still be too vague and intangible a connec-
tion for some investors. Hence, relevance is only rated medium. The degree of execution effi-
ciency hinges on the data made available to the investor. If the investor is granted access to
comprehensive internal documents as for instance, strategic HR presentations and recruiting
policies, he will be able to comparably fast compile the input needed to determine HRI. Oth-
erwise the investor will need to hand-collect the data and infer the information from other
sources, which is expected to be quite time-consuming. Consequently, execution efficiency is
considered medium.
ORT’s validity depends on the sources relied on to determine and exactly time the critical
technologies and market trends in the respective industry. E.g., issues with objectivity can
arise, if the investor consults with only one industry expert. However, the investor can refer to
multiple experts and additional sources such as trade and industry journals to triangulate the
individual information and, thereby, increase the results’ accuracy (see also Homburg et al.
2012, pp. 594). Therefore, validity is deemed medium. Following this line of argumentation,
it becomes clear that the computation of ORT requires a considerable amount of time and
resources to arrive at reliable results. That is why execution efficiency is rated low.
ICV’s impact on overall firm performance is likely to be incremental and probably not even
completely traceable, because it entails experimentation with new technologies, new products,
and emerging markets. However, from a long-term perspective, the parent corporation is like-
ly to benefit from the knowledge and experience gained with the ICV and, thereby, is enabled
to cope with disruptive changes and radical innovations in its industry (Wagner and Wosch
2015, p. 28). Consequently, relevance is rated high. It is important to note that ICV has to be
precisely demarcated from PPSI as presented in section 4.1.3, which concerns the firm’s
search for new profit pools and therein the deployment of venture capital. Whereas PPSI con-
siders engagements in external ventures, ICV exclusively focuses on internal ventures stem-
ming from and being solely endowed with the focal firm’s resources. ICV’s validity is only
rated medium, because the discriminant validity depends on the quality of information availa-
ble to investors and the efforts made to accurately distinguish between the company’s venture
capital activities. More specifically, investors need to check whether the firm’s business de-
velopment department merely serves as a strategic investment and market monitoring unit or
whether it also starts own self-funded ventures and, therefore, is on the verge of being a cor-
porate incubator itself.
Taken together, the three indicants HRI, ORT, and ICV enable investors to comprehensively
grasp a firm’s position with respect to agile processes. Building on the findings from the
analysis of the three managerial levers, the next subchapter presents a verdict regarding the
measurement of a firm’s structuring capabilities.

A firm’s structuring capabilities can be measured with the help of the secondary data indi-
cants team structure index, CMO importance, strategic marketing unit, hierarchy rigidness
index, organizational reaction time, and internal corporate venture. Largely achieving strong
evaluations with respect to the six pre-defined criteria, the six indicants seem fitted to provide
a coherent guideline and concrete toolset for investors to analyze the firm’s progress in
achieving the central tenets of organizational structure from a MEXC standpoint. It is to be
expected that a firm achieving high ratings on the six indicants will have a high degree of
cross-functional collaboration, interface management, and flexible working routines resulting
in the elimination of silo-thinking and organizational inertia in the sense of MEXC (Day
2011, p. 192; Moorman and Day 2016, pp. 15; Dutta, Narasimhan, and Rajiv 1999, pp. 548;
Homburg, Theel, Hohenberg 2016, pp. 16). Table 4-8 gives a comprehensive overview of the
proposed indicants, their data availability and the most important data sources investors can
refer to.
TABLE 4-8
Overview and Data Availability of Indicants for Structuring Capabilities

 Internal documents (e.g., organizational charts),
#6 Team Structure Index Public Mixed Internal
annual reports, professional networks, job postings
 Bloomberg, COMPUSTAT, EDGAR, Dun & Brad-
#7 CMO Importance Public Mixed Internal
street’s Register of Corporations, annual reports
 Internal documents (e.g., organizational charts, salary
#8 Strategic Marketing Unit Public Mixed Internal
information), professional networks, career website
 LexisNexis, COMPUSTAT, internal documents (e.g.,
#9 Hierarchy Rigidness Index Public Mixed Internal
strategic HR presentations, recruiting policies)
 Industry experts, internal documents (e.g., inventory
#10 Organizational Reaction Time Public Mixed Internal
planning documents), Factiva (e.g., industry journals)
 Company websites, LexisNexis (newspapers, press
#11 Internal Corporate Venture Public Mixed Internal
releases), executive interviews, annual reports
In comparison to the indicants for the functional capabilities, public data availability is not as
high for the structuring capabilities. Intuitively, this is due to fact that a comprehensive pic-
ture of a firm’s structure can only be attained, if detailed internal documents such as organiza-
tional charts are taken into account. However, even if investors are not granted access to these
internal pieces of information, they can draw on the publicly available data to arrive at partly
projected, but comparable ratings and, thereby, at least approximately rank the firms in ques-
tion.
To aggregate the six indicants, a similar approach as in the case of the functional capabilities
is recommended. By assigning weights to the individual indicants and subsequently linearly
adding them up to an aggregate score, the investors are able to account for industry peculiari-
ties. It is important to note that for HRI and ORT the calculated scores have to be coded re-
versely. I.e., the higher the HRI and the ORT, the less favorable for the firm at hand and vice
versa. It is recommended to implement this right from the beginning of the analysis in order
to enhance interpretability and to not confuse the results.
4.3 Cultural Capabilities

Cultural capabilities concern the firm’s set of shared values and beliefs guiding employees
and helping them navigate through organizational functioning and fulfill their tasks, so that
the firm overall can deliver superior customer value (Day 1999, p. 61; Deshpandé and Web-
ster 1989, p. 4; Pettigrew 1979, p. 574; Schein 2010, p. 18; Trice and Beyer 1993, pp. 1;
Webster and White 2010, p. 692; Yarbrough, Morgan and Vorhies 2011, p. 558). Organiza-
tional culture has long been recognized as key to organizational effectiveness and excellence
and, therefore, is of major importance for managers (Boyce et al. 2015, pp. 339; Schein 1984,
p. 3; Yarbrough, Morgan, and Vorhies 2011, pp. 558; Zheng, Yang, and McLean 2010, p.
765). As Hogan and Coote (2014, p. 1609) ascertain, “organizational culture is a powerful
means to elicit desired organizational outcomes.” Moreover, cultural capabilities help firms
cope with the accelerating change in the business environment (Teixeira and Werther 2013, p.
334; Trice and Beyer 1993, pp. 1; Zheng, Yang, and McLean 2010, p. 765). They constitute
an important facet of an organization’s competitiveness especially in the late 20th and early
21st century and are expected to further increase in significance in the near future (Baird, Har-
rison, and Reeve 2007, p. 15; Webster and White 2010, p. 699).
First, there is a multitude of academic publications discussing how organizational culture en-
hances a firm’s customer orientation, i.e., an organizational culture that puts the customer’s
needs and demands into focus and promotes the consequential development and provision of
new products and services (e.g., Deshpandé, Farley, and Webster 1993; Hogan and Coote
2014; Homburg and Pflesser 2000; Kohli and Jaworski 1990; Lukas, Whitwell, and Heide
2013; Narver and Slater 1990; Rindfleisch and Moorman 2003; Stock, Six, and Zacharias
2013). It is crucial for a company to not only be receptive for customer demands, but also to
have a predisposition to proactively develop new products and services in order to not lose
connection to market developments and miss changes in customer attitudes and needs (Day
and Wensley 1988, pp. 12; de Brentani, Kleinschmidt, and Salomo 2010, pp. 146; Klein-
schmidt, de Brentani, and Salomo 2007, p. 423; Narver and Slater 1990, p. 21; Stock, Six, and
Zacharias 2013, pp. 283). Therefore, the first managerial lever of a firm’s cultural capabilities
is customer value orientation (see also Homburg, Theel, and Hohenberg 2016, p. 22).
Second, a considerable number of studies deals with the firm’s working environment includ-
ing e.g., meaning of the job, incentives, internal communication, feedback procedures, and
employees’ self-responsibility (e.g., Brett and Atwater 2001; Ellinger et al. 2013; Jaramillo,
Mulki, and Boles 2013; Hauser, Simester, and Wernerfelt 1994; Men 2014; Rosen, Levy, and
Hall 2006; Schwepker 2013; Whitaker, Dahling, and Levy 2007; Zhang and Bartol 2010). A
firm’s organizational culture is reflected in such aspects and, therefore, cultural capabilities
pertain to the manner and intensity these aspects are orchestrated to effectively create custom-
er value and eventually enhance firm performance by unleashing the full potential of its work-
force and enabling synergies (see also Ellinger et al. 2013, pp. 1124; Moorman and Day 2016,
pp. 22; Rosen, Levy, and Hall 2006, pp. 217; Yarbrough, Morgan, and Vorhies 2011, p. 558).
Hence, a productive and receptive working environment facilitating the employees’ task ful-
fillment is the second managerial lever for a firm’s cultural capabilities
Third, researchers have stressed the importance of leadership behavior towards the firm’s
organizational culture or, more specifically, towards the firm’s set of values and beliefs
(Hartnell et al. 2016, p. 858; O’Reilly et al. 2014, pp. 616). If the company’s management
style and behavior is inconsistent with the corporate culture, it will not be as effective and
cause confusion among employees (Hartnell et al. 2016, p. 858). Moreover, it has been argued
that senior leadership in fact shapes the firm’s culture, which is why organizational culture
and its significance in the eyes of the employees hinges on the top management’s behavior
(O’Reilly et al. 2014, pp. 597; Ouchi and Wilkins 1985, p. 477; Wilderom, van den Berg, and
Wiersma 2012, p. 838; Yadav, Prabhu, and Chandy 2007, p. 85). Leadership behavior can
also foster the employees’ commitment and identification with the firm, which might ulti-
mately culminate in organizational citizenship behavior, i.e., outstanding employee engage-
ment in desirable activities that go beyond the call of duty (Schneider et al. 2005, p. 1019;
Shin et al. 2017, p. 1212; Wieseke et al. 2012, p. 1). Therefore, the third managerial lever is
defined as internal promoters.
Before delving into the development of secondary data indicants for a firm’s cultural capabili-
ties, it seems advisable to comment on the challenges involved with measuring the complex
construct of organizational culture. Despite its virtually undisputed importance, organizational
culture and, hence, cultural capabilities, too, are hard to objectively measure and assess. This
finding is primarily documented by the ubiquity of academic studies relying on primary sur-
vey data (e.g., Boyce et al. 2015; Gregory et al. 2009; Hofstede 1990; Homburg and Pflesser
2000; Stock, Six, and Zacharias 2013) and the contrasting scarcity of secondary data usage to
gauge a firm’s organizational culture (most notably, Noble, Sinha, and Kumar 2002). For in-
stance, a frequently applied approach to idiographically assess a company’s organizational
culture is O’Reilly, Chatman, and Caldwell’s (1991) Organizational Culture Profile, which is
based on a survey that asks respondents to state their opinion on 54 value statements
(O’Reilly, Chatman, and Caldwell 1991, pp. 494; Webster and White 2010, p. 695). However,
keeping in mind the practical feasibility and objectivity demanded by investors, it is necessary
to look out for alternative measurement approaches.
The prevalent conceptualizations of organizational culture (e.g., Hofstede 1990, pp. 291;
Schein 2010, pp. 23) have in common that they define organizational culture as a set of highly
interrelated layers, most notably, values, norms, artifacts, and behaviors in Schein’s model
(Hogan and Coote 2014, p. 1610; Homburg and Pflesser 2000, p. 450). Clearly, these layers
differ in their degree of concreteness (Hofstede 1990, p. 291). Consequently, for the purposes
of this master thesis, it seems most appropriate to zero in on the most concrete layers, behav-
iors and especially artifacts, which allow for the assessment of a firm’s organizational culture
from readily observable items or documents (Hogan and Coote 2014, p. 1610). Artifacts are
the most visible layer of organizational culture and comprise manifest objects, rituals, cere-
monies, and arrangements, typically with a strong symbolic meaning (Homburg and Pflesser
2000, p. 450; Pettigrew 1979, pp. 574; Schein 1984, p. 3; Smircich 1983, p. 344; Trice and
Beyer 1984, pp. 655). As a result, the following analysis will focus on recommending arti-
facts and behavioral patterns related to the identified managerial levers customer value orien-
tation, productive and receptive working environment, and internal promoters. In contrast to
the indicants for the other capabilities, the indicants for the cultural capabilities follow a bina-
ry logic. Therefore, it is necessary to make a judgment whether the respective artifact or be-
havioral pattern does indeed exist at the firm or not. Although this approach inhibits a gradual
assessment of the indicants, it seems most appropriate to cope with both the lack of detailed
objective data and subjectivity in the context of the cultural capabilities.
4.3.2 Customer Value Orientation

To estimate a firm’s footprint with respect to customer value orientation, two indicants are
proposed: fertile soil for innovation (FSI) and customer intimacy (CI). FSI checks whether the
firm explicitly dedicates time and space to innovation activities of its employees. Increased
innovation activities can be considered an indicator of a firm’s efforts to create superior cus-
tomer value and, therefore, a sign of dedication to customer needs (see also O’Cass and Sok
2013, p. 1075). It is recommended that investors look out for institutionalized and regular
corporate gatherings such as innovation competitions, innovation events, and explicit experi-
mentation space, which can be considered organizationally provided creative freedom (Mum-
ford et al. 2002, p. 724), to develop ideas for new products and services at the firm. E.g., firms
might sponsor national and international awards for the most innovative ideas submitted by
employees and eventually recognize even unsuccessful, yet attractive ideas to foster its FSI
(Stock, Six, and Zacharias 2013, p. 294). Additionally, it might also be illuminating for inves-
tors to check whether there is a productive error culture at the firm, i.e., management ensures
that failed or cancelled innovation projects go without sanctions of any kind (de Brentani and
Kleinschmidt 2004, p. 318).
Indicant #12 Fertile Soil for Innovation (FSI)

E.g., (1) Innovation Competitions (yes/no)
(2) Innovation Events (yes/no)
(3) Experimentation Space (yes/no)
Stock, Six, and Zacharias (2013, p. 289) use three items concerning “stories of exemplary
innovation behaviors, areas for informal exchange, and innovation events” in their survey to
measure an innovation-oriented corporate culture. Notably, the researchers find that without
corresponding artifacts, innovation-oriented values and norms do not enhance the firm’s in-
novation performance (Stock, Six, and Zacharias 2013, p. 293). This can be interpreted as a
rigorous affirmation of this master thesis’ approach to infer a firm’s cultural capabilities from
the presence of evidently manifest cultural artifacts.
The information required to determine FSI concerns the firm’s institutionalized innovation
events, policies with respect to innovation competitions, and active encouragement for em-
ployees to openly experiment and come up with ideas for new products. The data has to be
obtained mainly from internal sources. More specifically, the investor needs to review the
firm’s event calendar, obtain reports and executive summaries of the events, and maybe even
visit an innovation event himself 8 in order to get an impression of the extent and quality of
the efforts undertaken at these meetings. At least, some information might be available in
company press releases, newspaper articles, and executives interviews, although it seems rea-
sonable to cast doubt about on the sufficiency and reliability of these sources, because they
seem to be susceptible to exaggerated accounts of the actual proceedings.
In addition to FSI, customer intimacy (CI) is proposed as a measure for customer value orien-
tation. CI evaluates whether the firm encourages employees to get in touch with customers,
shows genuine interest in the customers’ opinions, and has successful platforms and programs
in place to communicate with and retain customers. That is why investors are advised to find
8
Similar to the consultation of industry experts, site visits by the investor himself can be considered primary
data collection. Importantly, site visits are neither necessary nor sufficient to determine the indicants con-
cerned. They are proposed as an additional data source to augment the investor’s database in the light of the
hardly graspable cultural capabilities. Consequently, it is justifiable to still deem the indicants concerned “sec-
ondary data indicants.”
out whether the firm expects and urges its employees to regularly contact customers, e.g., they
might want to elicit the number of customer visits per key accounts or the individual travel
budget granted to employees for customer visits.
Indicant #13 Customer Intimacy (CI)

E.g., (1) Regular Customer Contacts (yes/no)
(2) Customer Complaint Management (yes/no)
(3) Customer Loyalty Program (yes/no)
Challagalla, Venkatesh, and Kohli (2009, p. 84) point out that it can be beneficial for compa-
nies to proactively contact customers after the sale, because they can get direct feedback and
show that they care about the customers, which translates into greater customer satisfaction
and firm reputation. Furthermore, it seems recommendable to check whether the firm has a
systematic customer complaint management in place and fosters a positive attitude to com-
plaint handling (e.g., Homburg and Fürst 2005), maintains an effective customer loyalty pro-
gram (e.g., Verhoef 2003) and a functioning brand community (e.g., McAlexander, Schouten,
and Koenig 2002). The rich insights firms can obtain from the abovementioned habits and
initiatives can be used to identify valuable additions to the product and service portfolio and
at the same time to avoid providing features and services customers do not want and, thereby,
meticulously factor in customer needs and preferences (Lukas, Whitwell, and Heide 2013, pp.
8; Thompson, Hamilton, and Rust 2005, p. 441). Consequently, it seems fruitful for investors
to make use of CI to grasp a firm’s cultural predisposition for customer value orientation.
The data needed to determine CI comprises e.g., customer contact data, information on cus-
tomer events, complaint management, and loyalty programs. Internal company data such as
travel policies and calendars, standard customer visit policies, and also external data such as
company websites, social media, and advertisements can serve as sources to gather the re-
quired information. However, due to the scarcity or, more accurately, the plain lack of aca-
demic studies examining these phenomena with the help of external data, it is to be expected
that investors will have to resort mainly to internal data to perform a detailed analysis. Table
4-9 summarizes the evaluations of FSI and CI.
TABLE 4-9
Evaluation of Indicants #12 and #13 for Customer Orientation
Criterion #12 Fertile Soil for Innovation #13 Customer Intimacy

FSI displays a high degree of relevance, because there is broad acceptance among practition-
ers that an innovative culture is crucial to a firm’s success and has an impact on firm perfor-
mance (Wei et al. 2013, p. 1037). However, objectivity might impose a problem. Investors
process the gathered information about the firm’s FSI subjectively, which implicates that
there is some interpretational leeway as to whether one firm can be considered stronger on
FSI than another one. Consequently, validity is rated only low. Execution efficiency is also
considered low, because the need for internal data and the lack of a standardized reporting
format require the investor to contact or visit the company himself to get access to the neces-
sary information.
Regarding CI, a firm’s internal encouragement and cultural anchoring of customer focus is
undoubtedly of high relevance, because a performance link is not only logically inferable, but
has also been implied by an abundance of academic studies (e.g., Grizzle et al. 2009, p. 1239;
Lukas, Whitwell, and Heide 2013, p. 9; McAlexander, Schouten, Koenig 2002, p. 51; Thomp-
son, Hamilton, and Rust 2005, p. 441). Hence, relevance of CI is rated high. However, objec-
tivity is likely to be an issue gain. The individual interpretations and ratings of the firm’s cus-
tomer intimacy initiatives strongly depend on the executing analyst. Hence, validity is rated
low. Execution efficiency is deemed low, because investors will probably have to rely on the
time-consuming acquisition and analysis of disparate internal data.
Put together, FSI and CI offer a viable approach for investors to gauge a firm’s cultural foot-
print with respect to customer value orientation. A possible way to at least attenuate the short-
comings with respect to objectivity can be the use of a standardized reporting procedure by
the investor and detailed briefings for the analysts. The low degrees of execution efficiency
are arguably offset by the high relevance of the indicants.
4.3.3 Productive and Receptive Working Environment

To arrive at an assessment of a firm’s working environment, the indicants empowerment &
motivation (E&M) and open communication mentality (OCM) are proposed. E&M checks
whether the firm motivates its employees by setting customer value-oriented incentives, en-
courages employees to take ownership of their projects and also endows them with personal
freedom to fulfill their tasks. Therefore, it is suggested that investors take into account the
incentive scheme’s compatibility with customer value creation (e.g., Hauser, Simester, and
Wernerfelt 1994), the existence of a clear ownership mentality at the firm (e.g., Lorinkova,
Pearsall, and Sims 2013), and the presence of task handling leeway, i.e., employee discretion
(e.g., Kelley 1993).
Indicant #14 Empowerment & Motivation (E&M)

E.g., (1) Incentive Scheme Compatibility (yes/no)
(2) Ownership Mentality (yes/no)
(3) Task Handling Leeway (yes/no)
A firm that ties its salespeople’s incentives to customer metrics such as customer satisfaction
reveals its emphasis on customer centricity and does also enhance the delivery of superior
customer value and service (Banker et al. 1996, pp. 927; Sharma and Sarel 1995, pp. 19).
Ownership mentality and task handling leeway underline the management’s trust and belief in
their employees to fulfill the job duties more creatively and effectively, if they are not perma-
nently supervised and expected to report to their supervisors in short intervals (Kelley 1993,
pp. 105; Lorinkova, Pearsall, and Sims 2013, p. 573). This behavior has been shown to be
beneficial, especially when the employees are working on rather long-term projects and must
quickly adapt to complex and changing conditions (Lorinkova, Pearsall, and Sims 2013, p.
590).
The data needed to appraise a firm’s position with respect to E&M comprises the details of
the incentive scheme, task assignments, meeting and task handling routines. The information
can be obtained from internal documents such as HR databases, meeting protocols, perfor-
mance evaluations, and job role descriptions. Additionally, it might help investors to consult
industry experts and maybe even to conduct interviews with employees of the firm in ques-
tion.9
The second indicant open communication mentality (OCM) is supposed to investigate wheth-
er the firm promotes an open communication policy, i.e., whether employees are encouraged
to openly exchange ideas and express their opinions. Investors are advised to check the office
setup (e.g., Laing, Craig, and White 2011; Ornstein 1989), the way feedback is institutional-
ized and handled (e.g., Rosen, Levy, and Hall 2006), and the presence of open internal com-
munication at the firm (e.g., Jacobs, Yu, and Chavez 2016).
Indicant #15 Open Communication Mentality (OCM)

E.g., (1) Open Space Office (yes/no)
(2) Institutionalized Feedback (yes/no)
(3) Open Discussion Forum (yes/no)
The arrangement of the office space, e.g., whether it is an open space office and whether there
are common areas for employees, has a strong impact on the way employees behave and
communicate, e.g., an open exchange of ideas (Ornstein 1989, pp. 144). An open, cooperative
feedback environment has been found critically important for employee job satisfaction, per-
sonal development and performance (Whitaker, Dahling, and Levy 2007, pp. 585). Open in-
ternal communication and corresponding communication platforms have been deemed cru-
cial, because employees do not want to be kept in the dark about the firm’s goals and policies,
but fully comprehend their merits in order to perform better on the job (Jacobs, Yu, and
Chavez 2016, pp. 62; Tourish and Hargie 1996, pp. 11; Welch 2012, pp. 246; Welch and
Jackson 2007, pp. 188).
To assess a firm’s OCM, detailed information on the firm’s feedback procedures (e.g., meet-
ing guidelines, intervals of feedback sessions), the setup of the office space, and the use and
features of open discussion platforms such as a corporate intranet are needed. It is suggested
to obtain them from internal documents such as floor plans, seating arrangements, HR guide-
lines on feedback sessions, meeting protocols, and the corporate intranet. The evaluations of
the two indicants E&M and OCM is highlighted in table 4-10.
9
Arguing in the same vein as in the case of fertile soil for innovation, interviews with employees of the target
firm are neither necessary nor sufficient to determine empowerment & motivation. They are proposed as an ad-
ditional data source to augment the investor’s database in the light of the hardly graspable cultural capabilities.
Consequently, it is justifiable to still deem E&M “secondary data indicant.”
TABLE 4-10
Evaluation of Indicants #14 and #15 for Working Environment
Criterion #14 Empowerment & Motivation #15 Open Communication Mentality

With respect to E&M it is important to note that if investors resort to interviews with industry
experts or employees, they need to make sure that transcripts of the interviews are available,
so that it is traceable what kind of information was taken into account. Otherwise reliability
would be affected. Consequently, reliability is rated only medium. The remaining evaluation
follows a similar logic as in the case of FSI and CI, because it is to be expected that the issues
with validity and execution efficiency are very similar. That is why validity and execution
efficiency are rated low for both E&M and OCM. However, especially in the case of OCM
the comparably graspable data basis in the form of HR guidelines and floor plans can pave the
way for the use of standardized reporting procedures and scoring models, which could miti-
gate these issues. As a result, the inclusion of both indicants is recommendable and enables
investors to arrive at a systematic assessment of a firm’s ability to create a productive and
receptive working environment.
4.3.4 Internal Promoters

For the measurement of internal promoters the indicants role model TMT (RM) and esprit de
corps (EC) are proposed. RM puts the firm’s TMT under scrutiny and checks whether the
firm’s top managers serve as role models and exemplarily stick to the corporate ideals, show
desirable behaviors with respect to customer contact, and actively promote the firm’s corpo-
rate culture. Consequently, investors are advised to pay close attention to the TMT’s habits
and symbolic actions. E.g., these include regular customer visits or focus on innovations
(Yadav, Prabhu, and Chandy 2007), public statements on organizational culture like putting
emphasis on customer orientation (Noble, Sinha, and Kumar 2002), and the consistency of
their day-to-day conduct and leadership style with respect to corporate ideals and values (Ei-
senbeiss, van Knippenberg, and Fahrbach 2015).
Indicant #16 Role Model TMT (RM)

E.g., (1) Regular Customer Visits (yes/no)
(2) Emphasis on Customer Orientation (yes/no)
(3) TMT Lives up to Corporate Ideals (yes/no)
Importantly, as Yadav, Prabhu, and Chandy (2007, pp. 96) show, the way the top manage-
ment emphasizes innovativeness and shows this by concrete actions or public statements sig-
nificantly impacts the firm’s innovation performance. The consistency of leadership behavior
with corporate ideals and values, e.g., fair and equal treatment of subordinates or openness for
new ideas and change, does not only foster the organizational culture itself and positively
affect employee behavior, but has also been shown to translate into performance outcomes at
the firm level (see e.g., Eisenbeiss, van Knippenberg, and Fahrbach 2015, pp. 638; O’Reilly et
al. 2014, pp. 616). Additionally, Hartnell et al. (2016, pp. 856) point out that top managers
can effectively complement and advance a firm’s organizational culture by stressing and
showing desirable behaviors and attitudes that are yet lacking in the corporate culture and,
thereby, make sure that it remains potent and does not become obsolete (see also Teixera and
Werther 2013, p. 339).
To arrive at a verdict for RM, information on the firm’s set of shared ideals and values, man-
agement statements on desirable employee behavior and TMT’s leadership behavior and day-
to-day habits (e.g., number and frequency of customer visits and employee meetings) are
needed. The data can be obtained from letters to shareholders in annual reports (Noble, Sinha,
and Kumar 2002, p. 31, Yadav, Prabhu, and Chandy 2007, p. 90), press releases, executive
interviews, and internal documents such as executive calendars, emails and letters to employ-
ees, as well as the code of corporate ideals and values. For the analysis of letters to sharehold-
ers, executive interviews, and other written material, Yadav, Prabhu, and Chandy (2007, p.
91) recommend to use a text-analysis tool as e.g., QSR International’s NVivo (formerly N6)
(QSR International 2017) and Digitext’s DICTION (Digitext 2017). Investors can create new
or make use of pre-defined word lists containing words pertaining to the desired behaviors
and aspects and, thereby, systematically search the documents (Yadav, Prabhu, and Chandy
2007, p. 91). It is important to note that similar analyses are common practice in accounting
research (Li 2010, pp. 148). For instance, researchers have used textual analysis to assess the
readability of annual reports (Li 2008) and to detect deceptive statements by executives
(Larcker and Zakolyukina 2012).
In addition to RM, esprit de corps (EC) is proposed as an indicant to measure a firm’s stance
with respect to internal promoters. EC is supposed to analyze whether there is indeed an esprit
de corps throughout the firm, i.e., the existence of team spirit, identification with the organi-
zation and its members, and the perception to fit in the organization (Jaworski and Kohli
1993, p. 60; O’Reilly, Chatman, and Caldwell 1991, pp. 491; Tavares, van Knippenberg, and
van Dick 2016, pp. 36). Organizational rituals are considered “pivotal contributors to social
organization, cohesion, and solidarity” (Smith and Stewart 2011, p. 114). Observable rites and
ceremonies offer a practicable approach to assess a firm’s communal identity and social fabric
(Trice and Beyer 1984, pp. 654). Consequently, investors are advised to look out for the pres-
ence of rituals and ceremonies such as team bonding activities and corporate festivities.
Indicant #17 Esprit de Corps (EC)

E.g., (1) Team Bonding Activities (yes/no)
(2) Corporate Festivities (yes/no)
(3) Display of Brand Insignia (yes/no)
Furthermore, investors should check for the intentional display of symbols such as brand in-
signia at the workplace. It seems reasonable to assume that the emphatic ostentation of corpo-
rate symbols by employees is an indicator of identification with the firm, a sense of belong-
ing, and emotional stake in the firm (see e.g., Löhndorf and Diamantopoulos 2014, p. 321;
Pettigrew 1979, pp. 574). A high degree of organizational identification and commitment
manifested in the abovementioned corporate rituals and symbols is likely to translate into ex-
ceptional employee engagement such as organizational citizenship behavior and can ultimate-
ly account for an increase in overall firm performance (Lange, Boivie, and Westphal 2015,
pp. 1225; Löhndorf and Diamantopoulos 2014, pp. 320; Olkkonen and Lipponen 2006, pp.
212; Shin et al. 2017, p. 1212; Wieske et al. 2012, p. 1).
EC requires information on regular team trainings (e.g., intervals, agendas, and durations),
corporate traditions (e.g., Christmas parties, initiation rituals for new employees, promotion
rituals), employee attitude towards the firm (e.g., brand insignia at the desk or lapel pins), and
“war stories” about former events and traditions. Investors need to resort to internal docu-
ments (e.g., emails and letters to employees, event invitations) and might also benefit from
personal visits of the company site in order to look at the workplaces, talk to employees and
maybe even to witness a corporate ritual themselves. Additionally, investors can consult in-
dustry experts and check employee statements in the press and on social media. Table 4-11
synthesizes the evaluations of RM and EC.
TABLE 4-11
Evaluation of Indicants #16 and #17 for Internal Promoters
Criterion #16 Role Model TMT #17 Esprit de Corps

The relevance of RM is deemed high, because the TMT’s behavior and enhancement of the
corporate culture has been linked to firm outcomes and performance (Eisenbeiss, van Knip-
penberg, and Fahrbach 2015, pp. 638; Yadav, Prabhu, and Chandy 2007, pp. 96). RM’s ob-
jectivity hinges on the rigor of the techniques applied to arrive at a verdict. If the investor
makes use of a systematic text-analysis software in contrast to a hand-coded analysis or mere-
ly intuitive review of the gathered material, objectivity does not impose a problem (see e.g.,
Yadav, Prabhu, and Chandy 2007, p. 91). Consequently, validity is rated medium. Execution
efficiency is rated only low, because the acquisition of internal data in addition to annual re-
ports is expected to be time-consuming.
EC’s reliability might be affected by the reaction to the investor’s request to visit the compa-
ny site or to be part of a corporate festivity. Potentially, employees might feel obliged to be-
have differently than they normally would and the management might try to manipulate the
company site to convey a more positive image. Consequently, there might be an observation
bias (see e.g., Grove and Fisk 1992, pp. 218). As the investor can neither ensure the accuracy
nor produce an exact documentation of his observations, controllability and traceability im-
pose a problem in the case of company visits. As a result, reliability is rated only medium.
Validity is rated low, because the evaluation of company events seems to be especially prone
to subjective verdicts. However, the use of a standardized rating scale might again mitigate
this problem. The execution of site visits and the review of non-systematic internal data are
estimated to be costly and, therefore, execution efficiency is considered low.
Taken together, RM and EC are recommended to measure the internal promoters of a firm,
because there are remedies for their deficiencies with respect to validity and they display high
relevance due to their performance implications (see e.g., Eisenbeiss, van Knippenberg, and
Fahrbach 2015, pp. 638; Löhndorf and Diamantopoulos, pp. 320; Yadav, Prabhu, and Chandy
2007, p. 96). Integrating the findings from the previous paragraphs, the next section concludes
the discussion of the cultural capabilities and recommends a feasible aggregation approach.

As the analysis has revealed, a firm’s cultural capabilities can be measured with the help of
the indicants fertile soil for innovation, customer intimacy, empowerment & motivation, open
communication mentality, role model TMT, and esprit de corps. In contrast to the indicants
for the functional and structuring capabilities, the indicants for the cultural capabilities show
considerably more deficiencies in their evaluations, especially with respect to execution effi-
ciency. This can be mainly ascribed to the need for internal data, which table 4-12 firmly sup-
ports.
TABLE 4-12
Overview and Data Availability of Indicants for Cultural Capabilities

 Internal documents (e.g., event calendar), site visits,
#12 Fertile Soil for Innovation Public Mixed Internal
and maybe press releases and executive interviews
 Company websites, social media, internal documents
#13 Customer Intimacy Public Mixed Internal
(e.g., travel calendars, customer visit policies)
 Internal documents (e.g., HR databases, job role de-
#14 Empowerment & Motivation Public Mixed Internal
scriptions, performance evaluations), industry experts
 Internal documents (e.g., floor plans, HR guidelines
#15 Open Communication Mentality Public Mixed Internal
on feedback, meeting protocols, corporate intranet)
 Annual reports, executive interviews, internal
#16 Role Model TMT Public Mixed Internal
documents (e.g., emails, calendars)
 Internal documents (emails and letters to employees,
#17 Esprit de Corps Public Mixed Internal
event invitations), site visits, industry experts
However, based on the far-reaching outcome and performance implications it seems justifia-
ble to claim that the extra effort is worth the investor’s while. In addition to the already dis-
cussed performance implications, it is also important to highlight the importance of organiza-
tional culture for the recruitment of new employees (e.g., Judge and Cable 1997, pp. 386),
which seems especially important from a long-term perspective. The firm will only be able to
attract the most qualified and motivated talents, if the organizational culture is perceived to be
desirable and promises a fulfilling career perspective (e.g., Ferguson and Morton-Huddleston
2016, pp. 47). Consequently, investors should pay close attention to the proposed indicants,
because their long-term implications are essential. However, investors have to be aware of the
potential pitfalls of the indicants (e.g., validity issues), so that they can put effective means in
place to take remedial action right from the beginning (e.g., standardize reporting procedures
beforehand). Although a single indicant might appear lost and frail in the broad field of organ-
izational culture, the whole set of the six proposed indicants has the potential to endow the
investor with a systematic and comprehensive assessment of a firm’s cultural capabilities.
Furthermore, it is important to note that the proposed measurement approach exhibits a high
degree of flexibility. Depending on the concrete setting at hand, investors can adapt the cul-
tural artifacts and behavioral patterns to be looked out for. Thereby, investors can make sure
that industry and firm specifics are considered.
Investors are advised to thoroughly review the collected data and make a decision based on
pre-defined criteria whether the firm shows sufficient proof of e.g., innovation competitions
and experimental space, so that the fertile soil for innovation can be testified. Consequently,
the aggregation of the indicants leads to six yes or no judgments, which endow the investor
with an indication as to whether the firm’s cultural capabilities can be expected to enhance the
overall achievement of MEXC and superior firm performance. As noted before, this binary
approach does not allow for a gradual assessment of the individual indicants. Investors can
still weight the indicants based on certain criteria as e.g., industry or data availability. E.g., it
seems reasonable to deem fertile soil for innovation especially important for a technology
company, whose success mainly depends on new products. Conversely, for a professional
services firm, which decisively depends on the performance of its employees, empowerment
& motivation might be considered particularly critical for success. Moreover, if the data
availability for a certain indicant was considerably low, the investor might want to discount
its weight.
4.4 Relational Capabilities

Relational capabilities refer to a firm’s ability to establish, maintain, and benefit from rela-
tionships with external partners (Homburg, Theel, Hohenberg 2016, p. 25; Moorman and Day
2016, p. 12). Cooperation between firms and firm networks are extremely important for com-
panies today, because they allow firms to more effectively cope with the dynamic competitive
environment than single firms being limited to their own resources and capabilities (Achrol
and Kotler 1999, pp. 146; Dyer and Singh 1998, pp. 661; Fang et al. 2008, p. 80; Lawson
2009, p. 158; Palmatier, Dant, and Grewal 2007, p. 172; Ross and Robertson 2007, p. 108).
Marketing research has shown that strong interfirm relationships and cooperation can directly
enhance sales and profits (Palmatier et al. 2006, pp. 139), improve a firm’s new product de-
velopment performance (Lawson et al. 2009, p. 166), and reduce costs (Cannon and Homburg
2001, p. 39). Moreover, the stock market reacts positively to the announcement of marketing
alliances (Swaminathan and Moorman 2009, p. 65).
In their seminal article Dwyer, Schurr, and Oh (1987) stress the need for firms to shift from a
merely transactional perspective, i.e. a short-term focused and discrete handling of customer
relationships, to a relational perspective, i.e., a long-term focused and continuous handling of

customer relationships. Driven by this impetus, research on relationship marketing (see e.g.,
Morgan and Hunt 1994) evolved and started to examine customer relationships extensively,
resulting in broad acceptance among academics and practitioners that strong customer rela-
tionships are an important driver of firm performance (Palmatier 2008, p. 76). Probably the
most prominent area of close vertical cooperation between manufacturers and customers is
new product development, because manufacturers can take explicit customer requirements
into account and, thus, arrive at specifically tailored solutions, which best address customer
needs (Bstieler and Hemmert 2010, pp. 485). Moreover, a diverse portfolio of R&D coopera-
tion with customers has been linked to the development of radical innovations, indicating that
it is advantageous for firms to maintain R&D partnerships with multiple customers (Wuyts,
Dutta, and Stremersch 2004, p. 98). It is important to note that it can be highly beneficial for
firms to have multiple ties with customers, e.g., not only an R&D cooperation, but also an
alliance in marketing. Multiple ties allow firms to intensify the mutual exchange and, thereby,
acquire even more useful customer insights and build up a sense of mutual commitment and
solidarity, which fosters a long-term relationship (Palmatier 2008, p. 78; Tuli, Bharadwaj, and
Kohli 2010, pp. 36). As a result, the first managerial lever is defined as customer networks,
which enable firms to seize the full potential of their customer relationships.
Besides customer relationships, firms should also cultivate horizontal relationships with part-
ners outside their own value chain. On the one hand, researchers emphasize the benefits of a
set of diverse business partners, which is also referred to as an alliance portfolio, because it
endows firms with insights from other industries, unveils alternative approaches to fulfill
business tasks, gives access to new markets and customers, and, thereby, strongly enhances
firm performance (Cui and O’Connor 2012, p. 25; Lavie 2007, p. 1206; Swaminathan and
Moorman 2009, pp. 64). On the other hand, firms also profit from relationships with non-
business partners such as public and non-profit institutions as well as political actors. For ex-
ample, it has been shown that the presence of politicians on the board of directors has a posi-
tive effect on firm performance (Hillmann 2005, p. 477) and that political connections can
lead to preferential treatment by the government (Faccio, Masulis, and McConnell 2006, pp.
2627). As a result, distal networks (see also Homburg, Theel, Hohenberg 2016, p. 25) are the
second managerial lever for a firm’s relational capabilities. Guided by the identified manage-
rial levers, the next sections consecutively develop and evaluate secondary data indicants to
measure a firm’s relational capabilities.
4.4.2 Customer Networks

The proposed indicant for customer networks is customer cooperation intensity (CCI). CCI
measures on how broad a scale the firm engages in cooperation with its customers. CCI is
defined as a function of the number of customer partnerships, number of repeat partnerships,
level of institutionalization, and relationship multiplexity in a certain period of time.
Indicant #18 Customer Cooperation Intensity (CCI)

CCIt = CCIt(#CustomerPartnershipst, #RepeatPartnershipst, Institutionalizationt, RelationshipMultiplexityt)
The number of customer partnerships refers to the frequency of the firm’s customer coopera-
tion, which can be reasonably linked to the firm’s customer cooperation intensity. Repeat
partnerships indicate a higher degree of trust between the partnering entities (Thomaz and
Swaminathan 2015, p. 66) and are also likely to result in cost advantages due to lower qualifi-
cation and monitoring efforts (Wuyts, Dutta, and Stremersch 2004, p. 91). Institutionalization
concerns the level of formalization the partners agree on. It is hypothesized that the more
formally a partnership is institutionalized, the more intense is the customer cooperation. More
specifically, in contrast to a joint venture, a merely contract-based cooperation agreement
does not explicitly entail relational continuity and, therefore, can be considered a less intense
form of customer cooperation (Houston and Johnson 2000, pp. 1). Relationship multiplexity
checks whether the firm cooperates on different topics with single customers and, consequent-
ly, takes into account the number of different types of cooperation between the firm and its
customer (Palmatier 2008, p. 78; Tuli, Bharadwaj, and Kohli 2010, p. 38).
The data required to determine CCI encompasses information on the number of partnerships,
the involved firms, level of institutionalization, and scope of the cooperation. Data sources are
Thomson Reuters’ SDC Platinum database, EDGAR database (SEC filings), Factiva and Lex-
isNexis (alliance announcements in newspapers and press releases), and company websites
(Cui and O’Connor 2012, p. 29; Lavie 2007, p. 1197; Thomaz and Swaminathan 2015, p. 68;
Tuli, Bharadwaj, and Kohli 2010, p. 41). The evaluation of CCI is summarized in table 4-13.
TABLE 4-13
Evaluation of Indicant #18 for Customer Networks
Criterion #18 Customer Cooperation Intensity

As the importance of strong customer relationships is widely acknowledged and their perfor-
mance implications have been empirically demonstrated (see e.g., Palmatier 2008, p. 76; Tuli,
Bharadwaj, and Kohli 2010, p. 46), the relevance of CCI is rated high. However, comparabil-
ity is restricted. This is mainly due to the fact that observable customer cooperation is most
common in business-to-business (B2B) settings and not in business-to-consumer (B2C) mar-
kets (see also Palmatier 2008, p. 76). Consequently, investors analyzing firms involved in
B2C sales such as retailers, hotels, or consumer banks are likely to encounter difficulties find-
ing documented evidence of institutionalized customer cooperation. In this case it is recom-
mended that investors look out for co-creation initiatives, i.e., specific events initiated by the
B2C company aiming at inviting and encouraging consumers to collaborate with the firm in
order to create new products or improve service quality (see e.g., Prahalad and Ramaswamy
2004, pp. 7; Tseng and Chiang 2016, pp. 2314). Hence, even if the original metric CCI is not
applicable in a B2C setting, an alternative approach seems feasible. That is why comparability
is rated medium. Taken together, CCI is recommended for use, because it shows very strong
evaluations with respect to all criteria except for comparability, which can be counteracted by
considering consumer co-creation activities.
4.4.3 Distal Networks

The proposed indicants for distal networks are distal business tie strength (DBTS) and politi-
cal and societal tie strength (PSTS). Strength-of-ties refers to the nature of the bond between
two social actors (Rindfleisch and Moorman 2001, p. 2). The stronger the ties between the
two partners, the higher the levels of closeness, reciprocity, and commitment (Rindfleisch and
Moorman 2001, p. 2). DBTS and PSTS aggregate the strength-of-ties analyses of individual
partnerships to the firm’s overall portfolio of alliances (see e.g., Cui and O’Connor 2012, p.
25; Thomaz and Swaminathan 2015, p. 66). Consequently, the indicants scrutinize whether
the firm as a whole maintains multiple and effective relationships with distal business partners
as well as political and social actors, and therefore, has strong ties with its partner individuals
and institutions.
First, DBTS gauges how broadly and intensively the firm engages in cooperation with distal
business partners, which are outside its value chain. As shown below, DBTS is specified as a
function of the number of distal partnerships, number of repeat partnerships, level of institu-
tionalization, and cooperation diversity in a certain time period.
Indicant #19 Distal Business Tie Strength (DBTS)

DBTSt = DBTSt(#DistalPartnershipst, #RepeatPartnershipst, Institutionalizationt, CooperationDiversityt)
The more distal partnerships a firm engages in, the more ample resources and knowledge
from partners can be accessed and commingled, so that the focal firm’s development of new
technologies and products is likely to be enhanced (Cui and O’Connor 2012, p. 25). Arguing
in a similar way as in the case of CCI, the number of repeat partnerships is understood as a
proxy for increased intensity of the relationships and concomitant economic advantages
(Thomaz and Swaminathan 2015, p. 66; Wuyts, Dutta, and Stremersch 2004, p. 91). Institu-
tionalization accounts for the degree of formality chosen for the partnership and, as a conse-
quence thereof, intended continuity of the agreement (Houston and Johnson 2000, pp. 1). Co-
operation diversity relates to diversification with respect to functional scope (e.g., R&D, mar-
keting), industry, and nationality of the alliance partners, which can positively influence firm
innovation due to a more diverse compilation of resources and knowledge (van Beers and
Zand 2014, pp. 308; Cui and O’Connor 2012, pp. 37; Jiang, Tao, and Santoro 2010, pp.
1137). However, researchers have also expressed reservations regarding this effect. For in-
stance Cui and O’Connor (2012, pp. 37) find that the positive effect is contingent on certain
conditions as e.g., a low degree of market uncertainty and the control structure of the alliance
(the firm needs to have the majority control). Nevertheless, it seems reasonable to take coop-
eration diversity into account, because it has been frequently argued and it is logically infera-
ble that the inclusion of diverse partners and the resulting new combinations of resources and
knowledge enhance innovation and ultimately firm performance (see e.g., van Beers and Zand
2014, pp. 295; Goerzen and Beamish 2005, p. 351; Wuyts, Dutta, and Stremersch 2004 p. 98).
To determine DBTS, investors need to gather information on the number of partnerships,

number of repeat partnerships, level of institutionalization (e.g., sporadic informal agreement,
officially announced strategic alliance, or joint venture), scope of the cooperation (e.g., R&D,
marketing), and characteristics of the partner firm (industry background and country of
origin). The data can be obtained from a variety of secondary sources: SDC Platinum data-
base (alliance announcements and Standard Industrial Classification [SIC] codes), LexisNexis
and Factiva databases (trade journals, press releases), EGDAR database (SEC filings), indus-
try-specific research firms and experts, and company websites (Cui and O’Connor 2012, p.
29; Hoang and Rothaermel 2005, p. 336; Jiang, Tao, and Santoro 2010, p. 1140; Swamina-
than and Moorman 2009, p. 56; Thomaz and Swaminathan 2015, p. 68; Wuyts, Dutta, and
Stremersch 2004, p. 92).
Second, political and societal tie strength (PSTS) helps investors to complete the picture of
the target firm’s distal networks by gauging its political and societal connections. More spe-
cifically, PSTS measures on how broad a scale the firm communicates and cooperates with or
provides financial assistance for political and societal actors outside the business sector. Ties
with political and societal actors are considered “social lubricants,” which ease maneuvering
and coordinating in the competitive environment and, thereby, improve firm performance (Li,
Poppo, and Zhou 2008, p. 395). For instance, political ties can help firms to influence regula-
tory policies in their favor (Sheng, Zhou, and Li 2011, p. 3) and societal ties as e.g., corporate
philanthropy, when a firm donates money to a charity, can enhance the firm’s reputation
(Szőcs et al. 2016, p. 387). PSTS is defined as a function of the firm’s number of non-
business contacts, lobbying efforts, and philanthropic activities within a certain time period.
Indicant #20 Political and Societal Tie Strength (PSTS)

PSTSt = PSTSt(#Non-BusinessContactst, LobbyingEffortst, CorporatePhilanthropyt)
The number of non-business contacts refers to the traceable number of connections the firm
maintains, e.g., former politicians as executives of the firm, politicians on the board of direc-
tors, or top executives of the firm in question serving on the board of non-profit organizations
(see e.g., Hillman 2005, pp. 470; Sun et al. 2015, pp. 1047). Importantly, it has been shown
that the number of politicians on the board of directors can have a positive impact on firm
performance (Hillman 2005, p. 477). Lobbying efforts refer to the systematic use of lobbying
at the firm and, if applicable, the amount of resources devoted to it (e.g., lobbying budget,
donations to political parties). As Chen, Parley, and Yang (2015, p. 472) conclude, lobbying
efforts are positively linked with financial performance. Corporate philanthropy is supposed
to consider the intensity and binding character of the firm’s societal engagement. This en-
compasses the amount of donations to public and non-profit organizations such as charities,
museums, schools and universities, as well as the existence and scope of firm-affiliated foun-
dations (see e.g., Dean 2003, p. 92; Werbel and Carter 2002, pp. 56). In the light of Moorman
and Day’s (2016, p. 6) definition of MEXC, which explicitly includes societal outcomes as a
facet of MEXC, this last component of PSTS gains further significance.
The calculation of PSTS warrants data on the firm’s political and societal contact persons, the
composition of the board of directors and the advisory board, the external affiliations and
board appointments of the firm’s top management, as well as specific societal projects (e.g.,
corporate foundations, donations to museums and schools). The information can be obtained
from company websites, annual reports, Thomson Reuters’ Worldscope database, LexisNexis
and Factiva (newspapers and press releases), internal documents (e.g., details of the lobbyism
activities), country-specific databases and monitoring platforms (e.g., China’s National Bu-
reau of Statistics), Who’s Who-lists (e.g., Who’s Who in Corporate America), executive in-
terviews, and expert interviews (Boubakri, Cosset, and Safar 2008, pp. 658; Faccio, Masulis,
and McConnell 2006, p. 2601; Hillman 2005, p. 470; Sun et al. 2015, p. 1047; Zheng, Singh,
and Mitchell 2015, pp. 1624). Table 4-14 depicts the evaluations of DBTS and PSTS.
TABLE 4-14
Evaluation of Indicants #19 and #20 for Distal Networks
Criterion #19 Distal Business Tie Strength #20 Political and Societal Tie Strength
The relevance of DBTS is considered high, because the open exchange of knowledge and
collaboration with distal partners fuels the firm with new approaches, tools, and ideas and,
thereby, enhances firm performance (see also Cui and O’Connor 2012, p. 25). Due to the rich
data availability from standard databases investors can put controllable and traceable meas-
urement processes in place, which ensure a high degree of reliability. Furthermore, the conse-
quent time-efficient data collection and processing positively affects execution efficiency of
DBTS, which is therefore deemed high.
The performance implications of PSTS are logically inferable and have been empirically
demonstrated (e.g., Li, Poppo, Zhou 2008, p. 395). Additionally, political and societal en-
gagement can be deemed universally important, because virtually every firm is embedded in
and interacts with a political and societal environment. Consequently, the relevance of PSTS
is rated high. However, the degree of execution efficiency depends on the amount of easily
accessible information on lobbying efforts. Although some public records exist on country-
specific databases and monitoring platforms (see e.g., LobbyControl 2017; LobbyFacts 2017),
it seems hardly possible to fully grasp the extent of a firm’s lobbying efforts without any in-
ternal information or the consultation of lobbying experts. Hence, execution efficiency is
deemed medium.
Overall, both indicants show very strong evaluations. Therefore, it is recommended to use
DBTS and PSTS to measure a firm’s position with respect to distal networks.

With reference to the preceding analysis it can be summarized that a firm’s relational capa-
bilities can be measured with the help of the indicants customer cooperation intensity, distal
business tie strength, and political and societal tie strength. The evaluations of the indicants
showed very strong results and did not evoke any issues with reliability or validity. Further-
more, as table 4-15 underscores, the data availability for the calculation of the indicants is
largely public.
TABLE 4-15
Overview and Data Availability of Indicants for Relational Capabilities

 SDC Platinum, Factiva and LexisNexis (alliance
#18 Customer Cooperation Intensity Public Mixed Internal
announcements), EDGAR, company websites
 Industry-specific research firms and experts, SDC
#19 Distal Business Tie Strength Public Mixed Internal
Platinum, Factiva, and LexisNexis company websites
 Company websites, annual reports, Worldscope,
#20 Political and Societal Tie Strength Public Mixed Internal
country-specific monitoring tools, internal documents
The global economy increasingly requires firms to form and maintain cooperative relation-
ships with customers, other companies, and political as well as societal entities in order to
compete effectively and achieve superior performance (Ross and Robertson 2007, p. 108;
Sheng, Zhou, and Li 2011, p. 3). Hence, investors need to have a practicable measurement
approach to examine the target firm’s embeddedness in business and societal networks. For
this purpose, investors are advised to use the proposed indicants CCI, DBTS, and PSTS to
measure a firm’s position with respect to relational capabilities. To aggregate the results from
the single indicants to an overall score for a firm’s relational capabilities it is proposed to use
a linearly additive function with individual weights assigned to the three indicants. This pro-
cedure allows investors to account for the peculiarities of the firm’s environment. For in-
stance, investors analyzing firms in emerging economies or highly regulated and bureaucratic
countries might want to pay special attention to political connections (e.g., Li, Poppo, and
Zhou 2008, p. 383) and, therefore, assign a higher weight to PSTS.
4.5 Change Capabilities

To stay competitive, firms should continually question and probe their processes, products,
and services and, thereby, verify whether they still meet the requirements of the marketplace
(Barwise and Meehan 2010, p. 63). Change capabilities help firms stay abreast of shifts and
disruptions in the marketplace by facilitating the acquisition of information about market de-
velopments, internalizing and disseminating the gathered insights throughout the entire organ-
ization, and consequently adapting to the new conditions (Biedenbach and Söderholm 2008,
pp. 123; Eshima and Anderson 2017, pp. 771; Morgan, Slotegraaf, and Vorhies 2009, p. 285;
Rindova and Kotha 2001, p. 1277; Slater and Narver 1995, p. 65).
First, there is a considerable amount of studies analyzing a firm’s ability to gather crucial in-
formation about customers, competitors, new technologies, and further developments in the
business environment (e.g., Bucklin and Gupta 1999; Davenport, Harris, and Kohli 2001; Jain
2016; Morgan, Anderson, and Mittal 2005; Morgan, Slotegraaf, and Vorhies 2009; Narasim-
han, Rajiv, and Dutta 2006; Song, Almeida, and Wu 2003). For instance, it has been shown
that the systematic collection and analysis of customer information can enhance cross-selling
(Kamakura et al. 2003, p. 64) and that the close monitoring of competitors and other firms in
the business environment enables firms to engage in benchmarking activities, which help
firms achieve superior business performance (Vorhies and Morgan 2005, pp. 88). Therefore,
the first managerial lever is intelligence acquisition.
Second, researchers investigate a firm’s capacity to integrate the gathered information into the
organization and to ensure knowledge diffusion throughout the entire organization (e.g.,
Banerjee, Prabhu, and Chandy 2015; Grant 1996; Iyengar, Sweeney, and Montealegre 2015;
Leonardi 2007; Moorman and Miner 1998; Purvis, Sambamurthy, and Zmud 2001; Slater and
Narver 1995). Importantly, firms should store information in a systematic manner, so that
previous insights are not tied to individual experiences and likely to be forgotten, but retained
and cumulatively integrated into the organizational memory (Argote and Miron-Spektor 2011,
p. 1130; de Holan and Philips 2004, pp. 1605; Moorman and Miner 1997, pp. 93). Moreover,
firms need to ensure high permeability of information and new ideas and to not shy away
from questioning current practice, which is of vital importance to seize opportunities and neu-
tralize threats in dynamic and fragmenting markets (Slater and Narver 1995, p. 71). As a re-
sult, organizational learning is defined as the second managerial lever.
Third, practitioners and academics likewise agree that firms must be responsive to the gath-
ered insights, proactively implement organizational transformations and, thereby, adapt to the
changing environment and ensure future competitiveness and profitability (e.g., Ahearne et al.
2010; Ates and Bititci 2011; Gulati and Oldroyd 2005; Homburg, Grozdanovic, and Klar-
mann 2007; Huy 2001; Rindova and Kotha 2001; Sarin, Challagalla, and Kohli 2012; Ye,
Marinova, and Singh 2007). Hence, the successful execution of strategic change programs
and the consequential reconfiguration of the organization to stay competitive are key man-
agement tasks. For instance, it has been suggested that the management’s framing and sense-
making of a change program play a pivotal role for the program’s success (Fiss and Zajac
2006, pp. 1183). Therefore, the third managerial lever is reconfiguring (see also Homburg,
Theel, and Hohenberg 2016, p. 27).
4.5.2 Intelligence Acquisition

The proposed indicants for intelligence acquisition are recruiting diversity index (RDI) and
market awareness index (MAI). RDI measures on how broad a scale the firm hires people
from outside the organization to tap the knowledge and experience from competitors and oth-
er industries. Furthermore, RDI gauges how diverse the new hires’ backgrounds are with re-
spect to nationality, industry, and academic background. Therefore, RDI is defined as a func-
tion of number of external hires and new hire diversity in a certain time period.
Indicant #21 Recruiting Diversity Index (RDI)

RDIt = RDIt(#ExternalHirest, NewHireDiversityt)
External hires help firms cope with change and new technological development, because they
bring in completely new knowledge and expertise and, thereby, prevent obsolescence and
stimulate learning processes (Jain 2016, p. 1668; Song, Almeida, and Wu 2003, pp. 351). Ad-
ditionally, firms recruiting employees from external sources such as competitors and other
industries benefit from disruption to routine, which reduces organizational inertia and dead-
lock, stimulates change to processes, and ultimately ensures the firm’s competitiveness (Jain
2016, pp. 1683). To further gauge the munificence of knowledge in the company’s workforce,
new hire diversity checks the national, professional, and academic backgrounds of the newly
recruited employees (see also Faems and Subramanian 2013, p. 1625; Hoisl, Gruber, and
Conti 2017, p. 1463; Joshi and Roh 2009, pp. 612).
However, the results of Hoisl, Gruber, and Conti (2017) give reason to utter some precautions
regarding workforce diversity’s performance impact. According to a recent study of R&D
team diversity in a hypercompetitive setting, diversity in itself does not seem to be a panacea,
because it does not unlimitedly increase team performance, but rather follows an inverted U-
shaped function, indicating that there is an inflection point at which the positive effect on
team performance starts diminishing (Hoisl, Gruber, and Conti 2017, p. 1473). To remedy
this possible complication, investors are advised not to simply follow the reasoning the “more
diverse, the better.” Rather, investors should benchmark the initial RDI score and, thereby,
check whether the target firm measures up to top-performing competitors in acquiring
knowledge from external hires and the diverse backgrounds of new hires. Subsequently, in-
vestors can come up with a revised RDI score, which shows how the firm in question relates
to the top performers.
The data required to determine RDI encompasses information on recruiting activities and the
national, professional, and academic backgrounds of newly hired employees. Additionally, it
might be helpful for investors to gather information about the recruiting activities of the main
competitors and top players in the respective market for benchmarking purposes. The infor-
mation can be obtained from the company’s career website, job postings, professional net-
works (e.g., LinkedIn or XING), HR consultancies, public research institutions, and industry
experts (see also Faems and Subramanian 2013, pp. 1626; Hoisl, Gruber, and Conti 2017, p.
1462).
In addition to the firm’s intelligence acquisition via recruiting, it is proposed to scrutinize the
firm’s market research activities with the help of the market awareness index (MAI). MAI
measures the extent to which a firm is able to absorb market information such as market
trends, customer needs, and changes in competitor behavior. Hence, MAI accounts for the
size of the market research department, the scope of market research conducted at the firm,
and, if applicable, the intensity of the firm’s benchmarking activities within a certain time
period.
Indicant #22 Market Awareness Index (MAI)

MAIt = MAIt(MarketResearchCapacityt, MarketResearchScopet, BenchmarkingActivitiest)
Market research capacity is used as a proxy for the extent of market research activities con-
ducted at the firm. If the firm wants to implement sophisticated customer data analysis tools,
e.g., in order to enhance the cross-selling volume (Kamakura et al. 2003) or to detect new
offering opportunities from implicit customer needs (Kumar and Shah 2011), this requires a
considerable monetary budget for external agencies and/or a significant number of own em-
ployees devoted to market research. Market research scope refers to the responsibilities offi-
cially assigned to the market research department as well as the analytical depth and rigor of
the tools used to gather and analyze market information (see also Morgan, Anderson, and Mit-
tal 2005, pp. 137). Importantly, a firm’s ability to acquire market information has been posi-
tively linked to the revenue growth rate and is considered to provide valuable input to other
“value selection, creation, and delivery processes” (Morgan, Slotegraaf, and Vorhies 2009, p.
291). Additionally, investors are advised to take into account the firm’s benchmarking activi-
ties. Vorhies and Morgan (2005, pp. 88) point out that firms should closely monitor their top
competitors’ statuses with respect to the most important marketing capabilities in order to
identify improvement potential for their own capabilities. The benchmarking results can serve
as starting point for transformative marketing capability changes (Vorhies and Morgan 2005,
p. 89). Therefore, it becomes clear that MAI measures an integral part of a firm’s change ca-
pabilities.
The input required to compute MAI includes data on the market research department’s budg-
et, its number of employees in relation to the whole workforce, its analytical tools and as-
signed responsibilities. Unfortunately, as the lack of secondary data approaches indicates,
these information are not publicly available, but have to be painstakingly collected from in-
ternal sources (see also Vorhies and Morgan 2005, p. 82). Investors are advised to resort to
internal documents such as budgeting documents, market research agency assignments, or-
ganizational charts, market research reports, and benchmarking documents. It could be helpful
to obtain information on the firm’s data analysis tools to gauge their degree of sophistication.
Additionally, although it does not seem to be fruitful in every case, investors can also scan
annual reports for statements on marketing research and benchmarking activities. Table 4-16
presents the evaluations of RDI and MAI.
TABLE 4-16
Evaluation of Indicants #21 and #22 for Intelligence Acquisition
Criterion #21 Recruiting Diversity Index #22 Market Awareness Index


It can be logically inferred that RDI has a positive impact on firm performance, because an
adequate level of external and diverse knowledge acquisition helps the organization keep up
with new developments in the market environment (see also Jain 2016, p. 1671; Faems and
Subramanian 2013, p. 1631). Hence, relevance is rated high. However, reliability issues are
likely to arise due to the absence of standardized databases for data collection. Investors can
neither check the correctness of every LinkedIn profile they refer to nor whether the firm’s
actual recruiting activities match the contents of the career website. Hence, reliability depends
on the inclusion of presumably more reliable sources such as HR consultancies and industry
experts and is deemed only medium. Execution efficiency is deemed medium, because it de-
pends on the investor’s approach to determine RDI. If he conducts extensive benchmarking
activities to identify the optimal level of diversity and if he consults with an HR consultancy,
it is plausible to expect that the required time and cost will be quite high.
Since there is broad agreement among academics and practitioners about the performance
implications of systematic market sensing and monitoring (e.g., Davenport, Harris, and Kohli
2001, pp. 63; Day 2011, pp. 188; Slater and Narver 1995, pp. 64), the relevance of MAI is
rated high. Objectivity imposes a problem, if the investor does not ensure a systematic proce-
dure to assess the probably disparate internal documents. It is recommended to prepare a
standardized reporting format beforehand, so that the analyst does not make a decision simply
based on his gut feeling. Hence, validity is rated medium. Execution efficiency is deemed
low, because both the data collection and analysis are probably quite time-consuming due to
the lack of external data sources.
Although it shows only low execution efficiency, MAI represents a pivotal aspect of a firm’s
change capabilities, which justifies the required efforts. Moreover, the contingent reliability
and validity issues of RDI and MAI can be attenuated. Consequently, both RDI and MAI are
recommended to measure a firm’s position with respect to intelligence acquisition.
4.5.3 Organizational Learning

The corporate memory index (CMI) and knowledge dissemination index (KDI) are proposed
to assess the status of an investment target concerning organizational learning. CMI measures
to which extent the firm systematically learns from new and past information. The indicant is
defined as a function of internal information technology (IT) use, the firm’s reporting rou-
tines, and KPI reliance within a certain time period.
Indicant #23 Corporate Memory Index (CMI)

CMIt = CMIt(InternalITUset, ReportingRoutinest, KPIReliancet)
The use of IT is considered a learning mechanism, because it enables the capture, storage, and
retrieval of information and knowledge (Iyengar, Sweeney, and Montealegre 2015, pp. 619).
It is proposed that investors look out for graspable artifacts indicating internal IT use such as
an advanced and unified database, a comprehensive document management system, public
emphasis of the importance of modern IT systems, and regular IT trainings for employees
(see also Moorman and Miner 1997, p. 93; Purvis, Sambamurthy, and Zmud 2001, p. 120;
Wedel and Kannan 2016, p. 117). Moreover, a “Wiki-based intranet,” in which employees
collaboratively create and continuously improve the content, can also be deemed an effective
knowledge management tool (Majchrzak, Wagner, and Yates 2013, p. 455). Reporting rou-
tines can be considered an embodiment of a firm’s organizational memory (Argote and
Miron-Spektor 2011, p. 1130; Moorman and Miner 1997, pp. 92). Reporting routines consti-
tute standard operating procedures and secure the persistent storage of information in a stand-
ardized way, so that other firm members can easily retrieve and reuse it (see also Argote and
Miron-Spektor 2011, p. 1130; Rerup and Feldman 2011, p. 579). KPI reliance refers to the
firm’s ability to structure and compress the vast amount of information available (“Big Data”)
and arrive at understandable and storable indicators (see also Wedel and Kannan 2016, pp.
108).
The data needed to determine CMI comprises information on the company’s use of IT in day-
to-day business (e.g., use of an advanced and unified database) and standardized report for-
mats and routines (e.g., regular post-project reviews). Furthermore, data on the format and
regularity of IT trainings, as well as scope and depth of KPI usage to aggregate and store in-
formation is to be obtained. Data sources are internal documents (e.g., memos, project re-
views, training material, and standardized reports), but also public information in the form of
newspapers, industry reports, and trade journals (can be retrieved via LexisNexis and Facti-
va), consultancy publications, and executive interviews (see also Majchrzak, Cooper, and
Neece 2004, p. 177; Moorman and Miner 1998, p. 716). Additionally, investors can consult
with industry experts to complement and triangulate their findings.
The knowledge dissemination index (KDI) measures how proactively the firm manages and
promotes the diffusion of knowledge throughout the entire organization. More specifically,
KDI is supposed to shed light on the firm’s ability to intentionally design processes such that
the permeability of ideas and knowledge is enhanced and, as a consequence thereof, inter-
departmental understanding and synergies are nurtured. KDI is defined as a function of the
number of job rotations, the number of cross-functional presentations, and training frequency
within a certain time period.
Indicant #24 Knowledge Dissemination Index (KDI)

KDIt = KDIt(#JobRotationst, #CrossFunctionalPresentationst, TrainingFrequencyt)
Job rotation is understood as the practice of assigning employees to a new position in a differ-
ent department, business function, or geographical location after a few years, which has been
associated with both employee and firm learning (Ortega 2001, pp. 1361). Job rotation, cross-
functional presentations, and training frequency can be considered formal information trans-
mission processes (Moorman 1995, p. 320). Consequently, the more an organization inten-
tionally relies on multifunctional activities, the more effective is the firm’s process interfacing
and predisposition for knowledge permeability (Slater and Narver 1995, p. 65). This in turn
stimulates faster and effective decision-making, facilitates the product development process,
and improves information quality (Slater and Narver 1995, p. 65).
Information on job rotation policies, the existence and frequency of cross-functional presenta-
tions, and training routines are required to compute KDI. The information can be gathered
mainly from internal sources. Internal HR databases, job rotation policies, presentation and
training documentation (e.g., functional diversity of the audience, frequency of the meetings),
but also annual reports, executive interviews, job postings, and manager biographies (different
responsibilities during career) from company websites can serve as data sources (see also
Nalbantian and Guzzo 2009, pp. 82). Table 4-17 depicts the evaluations of CMI and KDI.
TABLE 4-17
Evaluation of Indicants #23 and #24 for Organizational Learning
Criterion #23 Corporate Memory Index #24 Knowledge Dissemination Index

CMI displays high relevance, because the impact of effective knowledge management on firm
performance is readily inferable and has been underscored by empirical studies. For instance,
Iyengar, Sweeney and Montealegre (2015, pp. 633) demonstrate that an organization’s use of
internal IT to enhance employee learning impacts financial performance. Moorman and Miner
(1997, pp. 99) find evidence for organizational memory’s positive impact on new product
developments. However, execution efficiency is rated only medium, because it depends on
the richness of information contained in public sources and the availability of concise internal
documents. If investors need to hand-collect and meticulously analyze disparate internal doc-
uments to arrive at a verdict with respect to CMI, execution efficiency is expected to be quite
low.
Due to the graspable positive effects of knowledge diffusion and process interfacing with re-
spect to e.g., decision-making and new product development (Slater and Narver 1995, p. 65),
KDI’s relevance is deemed high. As the determination requires extensive internal data, execu-
tion efficiency is rated low. Investors need to get access to the relevant internal documents
and subsequently distill the relevant information. This seems especially demanding, if the
information has to be gathered from each department separately, e.g., due to the absence of a
company-wide job rotation policy and an aggregate HR database with the relevant training
information.
To sum up, both CMI and KDI are recommended to grasp a firm’s position with respect to
organizational learning. Encompassing the comprehensive and cohesive compilation, storage,
re-usability, and dissemination of knowledge, organizational learning represents a pivotal
aspect of a firm’s competitiveness and can enhance financial performance (Di Milia and Birdi
2010, p. 492; Slater and Narver 1995, p. 71). Despite the high relevance of the underlying
construct, investors need to be aware of the potentially required time exposure to determine
the indicants CMI and KDI.
4.5.4 Reconfiguring
The proposed indicant for the third managerial lever, namely reconfiguring, is reconfiguring
intensity (RI). RI measures how strongly the firm works on continually questioning and re-
shaping its status quo (e.g., business models, processes, and organizational structure). The
indicant is defined as a function of change initiatives, change management trainings, TMT
framing, and consultancy employment.
Indicant #25 Reconfiguring Intensity (RI)

RIt = RIt(ChangeInitiativest, ChangeManagementTrainingst, Framingt, ConsultancyEmploymentt)
Aiming at adapting the current status quo of the firm, change initiatives are crucial for firms
to stay competitive and keep up with the evolving market conditions (Biedenbach and Söder-
holm 2008, p. 139). E.g., such an initiative could be the reconfiguration of the firm’s business
model, implementing changes in marketing strategy, or incremental improvements of the
firm’s processes (see e.g., Rindova and Kotha 2001; Sarin, Challagalla, and Kohli 2012). In-
vestors are advised to check whether the firm requires its employees to participate in change
management trainings. Typically, these workshops have the purpose to make the employees
more open to change, willing to take action and ultimately more effective at implementing
change (Dhugga 2016, pp. 3). Framing refers the firm’s efforts to explain, communicate, and,
thereby, make sense of the changes to be implemented (Fiss and Zajac 2006, p. 1174). Moti-
vating employees to actively participate in the change efforts and informing other stakehold-
ers such as stockholders about the firm’s strategic direction, framing is considered an im-
portant cornerstone of successful organizational change (Dhugga 2016, pp. 3; Fiss and Zajac
2006, pp. 1183). Many companies rely on external consultancies to develop and subsequently
implement strategic change programs (Fincham 1999, p. 342). Consequently, it is proposed
that investors examine whether the target firm frequently mandates consulting firms to help
bring about organizational change. More specifically, investors could check the number of
projects initiated and the amount of consultancy fees paid.
The information required to determine RI encompasses details about change initiatives (e.g.,
scope, frequency), change management training practices, official framing of organizational
change (e.g., top management’s involvement and sensemaking), and engagements of external
consultancies (e.g., scope of projects, frequency and duration of engagements). Investors are
advised to resort to both public and internal data sources. Annual reports, LexisNexis and
Factiva (press releases, industry publications, and newspapers), executive interviews, industry
experts, and internal data such as memos, strategy papers and presentations, training materi-
als, and consultancy bills can be used by investors (see also Fiss and Zajac 2006, pp. 1179;
Gebhardt, Carpenter, and Sherry 2006, p. 40; Kranz, Hanelt, and Kolbe 2016, p. 489; Rindova
and Kotha 2001, pp. 1265). Table 4-18 presents the evaluation of RI.
TABLE 4-18
Evaluation of Indicant #25 for Reconfiguring
Criterion #25 Reconfiguring Intensity

The relevance of RI is deemed high, because the continuous and timely adaptation to new
market conditions is of utmost importance for firms to stay competitive (Rindova and Kotha
2001, p. 1263). However, due to RI’s inclusion of consultancy employment, face validity
might impose an issue. Investors need to make sure that the transformation program is not
only prepared by the consultants, but also implemented eventually. If the transformation pro-
gram is simply presented to the management but not put into practice, the component consul-
tancy employment captures that the firm is questioning the status quo, but not that it actually
implements changes. Therefore, it is recommended that investors pay attention to the level of
concretization of the consultancy projects in order to avoid an overstated rating of RI. Hence,
validity is considered medium. Finally, the compilation of the necessary data can be quite
time-consuming, if the search of standardized databases (e.g., LexisNexis) and easily accessi-
ble annual reports does not yield enough information. In this case, investors would have to
rely on internal information, which decreases execution efficiency. Consequently, execution
efficiency is rated medium.
Overall, RI shows a strong evaluation and is therefore recommended for use. Moreover, the
inclusion of RI is considered especially important, because it directly relates to a central facet
of MEXC, namely its continuously responding and adapting nature (Moorman and Day 2016,
p. 11). Consequently, investors are advised to thoroughly assess RI in order to diagnose a
firm’s stance with respect to the achievement of MEXC.

As the analysis has depicted, a firm’s change capabilities can be measured with the help of the
indicants recruiting diversity index, market awareness index, corporate memory index,
knowledge dissemination index, and reconfiguring intensity. Taken together, the indicants
showed strong evaluations. However, the public data availability for the computation of the
indicants is rather restricted, which is depicted in table 4-19.
TABLE 4-19
Overview and Data Availability of Indicants for Change Capabilities

 Career website, professional networks (e.g., LinkedIn
#21 Recruiting Diversity Index Public Mixed Internal
or XING), HR consultancies, industry experts
 Internal documents (organizational charts, market
#22 Market Awareness Index Public Mixed Internal
research and benchmarking reports)
 Internal documents (database information, project
#23 Corporate Memory Index Public Mixed Internal
reviews), trade journals, industry experts
 Internal documents (job rotation policies, training
#24 Knowledge Dissemination Index Public Mixed Internal
documentation), annual reports, company websites
 Annual reports, LexisNexis and Factiva (e.g. press
#25 Reconfiguring Intensity Public Mixed Internal
releases), internal documents (e.g., strategy papers)
Considering the high importance of the change capabilities in the face of ever-changing mar-
ket conditions documented by virtually unanimous agreement among researchers and practi-
tioners (e.g., Barwise and Meehan 2010, pp. 63; Biedenbach and Söderholm 2008, p. 124;
Rindova and Kotha 2001, p. 1277; Ye, Marinova, and Singh 2007, p. 156), investors are ad-
vised not to shy away from the collection of internal documents to complement the data input.
It is strongly recommended to seize the benefits of the fully equipped set of indicants. Special
attention should be paid to RDI and RI. RDI’s effect on firm performance and contribution to
the aggregated result of change capabilities is not as straightforward as in the case of the other
indicants. Impact and optimal level of diversity can differ depending on the concrete setting
(Hoisl, Gruber, and Conti 2017, pp. 1473). Consequently, it is necessary to point out that in-
vestors potentially need to adjust RDI after they compared it with that of top competitors in
the industry. Afterwards, RDI can be aggregated with the other measures. RI is of pivotal sig-
nificance, because it measures the firm’s actual efforts and actions to continuously adapt its
status quo, which is a central tenet of MEXC in the sense of Moorman Day (2016, p. 11).
For the aggregation of the indicants, investors are again advised to use a weighted linear func-
tion. Thus, it is possible to account for industry specifics. Due to its significance, investors are
encouraged to assign an over-proportionate weight to RI, so that a relatively weak score can-
not be easily offset by another indicant, but seriously affects the rating of the firm’s change
capabilities. Conversely, in case investors should not be able to collect sufficient input data
for one indicant, they can decrease its weight and, thereby, weaken its influence on the aggre-
gated score.
5 Aggregation of Developed Indicants to MEXC Dashboard
This chapter completes Pauwels et al.’s (2009, pp. 180) process for the development of a
dashboard, which has been adapted for the purposes of this master thesis. First, sub-chapter
5.1 synthesizes the findings from the preceding analysis in chapter 4 and presents the final set
of indicants and, thereby, completes Stage I: “Selecting the Key Metrics.” Second, sub-
chapter 5.2 develops propositions regarding the interdependencies between the dashboard
indicants, which corresponds to Stage II: “Establishing Relationships Between the Dashboard
Items.” Third, the link between MEXC as measured by the dashboard items and firm perfor-
mance and value is established in sub-chapter 5.3, which is in accordance with Stage III:
“Connecting to Financial Consequences.” Finally, sub-chapter 5.4 presents the resulting
MEXC dashboard and gives guidance on how to best utilize it in practice.
5.1 Stage I: Final Set of Indicants

As chapter 4 has revealed, the five MEXC capabilities can be measured by a set of 25 second-
ary data indicants. Investors are advised to make use of the complete set of indicants, so that
the MEXC capabilities framework is comprehensively assessed. This is especially important,
because chapter 2.1 has shown that a firm needs to display strong positions with respect to all
MEXC capabilities in order to achieve SCA. Consequently, an assessment of only a subset of
the MEXC capabilities does not allow profound inferences about SCA and concomitant supe-
rior performance, which investors are looking for.
However, it is important to note that there are significant differences between the data availa-
bility of the individual indicants. Moreover, their evaluations also show strong variations
ranging from virtually flawless assessments (e.g., efficiency score and CMO importance) to
more cautious verdicts identifying potential and definite difficulties (e.g., fertile soil for inno-
vation and esprit de corps). Table 5-1 gives a comprehensive overview of the identified indi-
cants, their data availability and potential as well as definite issues raised during the evalua-
tions.
The richest public data availability is found for the functional, structuring, and relational ca-
pabilities. Seven indicants thereof can be computed using exclusively public data sources and
the remaining other seven indicants require supplementary internal documents (e.g., organiza-
tional charts and strategic HR presentations), which seem to be obtainable and objectively
analyzable for investors. The firm in question will most probably not hold back the infor-
mation, especially if the investor is willing to make a significant investment and agrees to a
confidentiality agreement (see also Scharfman 2012, pp. 106). Moreover, the internal data to
be gathered for the functional, structuring, and relational capabilities is still easy to obtain and
contains hard facts, which are comparably easy to process (e.g., organizational charts, recruit-
ing policies).

https://doi.org/10.1007/978-3-658-24704-1_5
66 5 Aggregation of Developed Indicants to MEXC Dashboard
TABLE 5-1
Overview of Dashboard Measures: Final Set of Indicants
# Indicant Name Data Availability Potential and Definite Issues from the Evaluations*
Functional Capabilities
1 Innovation Performance Public Mixed Internal  Comparability
2 Quality Investment Public Mixed Internal  Comparability, Execution Efficiency
3 Quality Score Public Mixed Internal  Face Validity, Execution Efficiency
4 Efficiency Score Public Mixed Internal –
5 Profit Pool Search Intensity Public Mixed Internal  Execution Efficiency
Structural Capabilities
6 Team Structure Index Public Mixed Internal  Face validity, Execution Efficiency
7 CMO Importance Public Mixed Internal –
8 Strategic Marketing Unit Public Mixed Internal  Reliability, Comparability, Execution Efficiency
9 Hierarchy Rigidness Index Public Mixed Internal  Relevance, Execution Efficiency
10 Organizational Reaction Time Public Mixed Internal  Objectivity, Execution Efficiency
11 Corporate Incubator Public Mixed Internal  Discriminant Validity, Comparability
Cultural Capabilities
12 Fertile Soil for Innovation Public Mixed Internal  Objectivity, Execution Efficiency
13 Customer Intimacy Public Mixed Internal  Objectivity, Execution Efficiency
14 Empowerment & Motivation Public Mixed Internal  Reliability, Objectivity, Execution Efficiency
15 Open Communication Mentality Public Mixed Internal  Objectivity, Execution Efficiency
16 Role Model TMT Public Mixed Internal  Objectivity, Execution Efficiency
17 Esprit de Corps Public Mixed Internal  Reliability, Objectivity, Execution Efficiency
Relational Capabilities
18 Customer Cooperation Intensity Public Mixed Internal  Comparability
19 Distal Business Tie Strength Public Mixed Internal –
20 Political and Societal Tie Strength Public Mixed Internal  Execution Efficiency
Change Capabilities
21 Recruiting Diversity Index Public Mixed Internal  Reliability, Execution Efficiency
22 Market Awareness Index Public Mixed Internal  Objectivity, Execution Efficiency
23 Corporate Memory Index Public Mixed Internal  Execution Efficiency
24 Knowledge Dissemination Index Public Mixed Internal  Execution Efficiency
25 Reconfiguring Intensity Public Mixed Internal  Face Validity, Execution Efficiency
* As described in chapter 3, a medium rating implies potential issues and a low rating hints at definite issues
In contrast, public data availability for the cultural and change capabilities is rather restricted.
Only one indicant can be computed solely with the help of public data, four indicants require
supplementary internal data, and the remaining six indicants force the investor to gather and
systematize disparate internal documents (e.g., event calendars, HR guidelines on feedback
procedures, and event invitations). That means, after the investor is granted access to the
firm’s internal documents, he still has to consolidate the different pieces of information,
which is expected to be methodically demanding and time-consuming. As a result, the meas-
urement of the cultural and change capabilities is likely to cause the most difficulties.
5 Aggregation of Developed Indicants to MEXC Dashboard 67
This finding is further underscored by the fact that the indicants for the cultural capabilities
show definite issues with objectivity and execution efficiency. The hardly graspable con-
structs and the limited public data availability can make it hard and time-consuming for inves-
tors to find manifest and objectively analyzable evidence for the determination of the indi-
cants. Nevertheless, it seems justifiable to assume that the proposed measurement approach
still offers the investors a more objective way to analyze a firm’s cultural capabilities than the
collection of primary data (e.g., with the help of a survey). Additionally, the objectivity issues
can be mitigated with the help of standardized reporting procedures and scoring models.
The indicants for the change capabilities do not evoke definite issues with objectivity, but the
compilation and subsequent analysis of the required internal data (e.g., market research re-
ports, database information, and job rotation policies) negatively affect execution efficiency.
However, the strong performance implications and the resulting high relevance of the indi-
cants justify the required efforts in order to arrive at a reliable and objective assessment of a
firm’s change capabilities. Additionally, as the overall importance of a firm’s change capabili-
ties is underscored by both academics (see e.g., Rindova and Kotha 2001, pp. 1263) and prac-
titioners (see e.g., Welch 2005, pp. 133), investors are well-advised not to put the assessment
of the change capabilities in second place. Rather, they should carefully gather the data need-
ed to determine the indicants and, thereby, arrive at a thorough and reliable judgment of the
target firm’s ability to adapt to and keep pace with the competitive environment.
5.2 Stage II: Propositions on Interdependency Structure

The mere computation of the indicants does not yet suffice to understand causal relationships
between the measures and their individual performance impacts (Pauwels et al. 2009, p. 181).
However, the examination and consequential understanding of the underlying interdependen-
cy structure of the indicants decisively enriches analytic rigor and quality and is an integral
part of the aggregation to the MEXC dashboard (Pauwels et al. 2009, p. 181).
From a practical point of view, three main benefits arise from the attribution of cause-and-
effect relationships. First, the MEXC dashboard moves beyond a simple presentation of in-
formation. It becomes a decision support system and allows for a deeper understanding of the
target firm’s marketing activities (Pauwels et al. 2009, p. 181). Second, investors can check
the consistency of their results. For instance, consider the case in which a strong positive rela-
tionship between two indicants has been established. If the causing indicant displays a high
score and the affected indicant displays a low score, this casts doubt on the consistency of the
results. Consequently, such a constellation raises a red flag, encouraging the investor to re-
view the quality of the input data and verify the correctness of the underlying calculations.
Third, investors can better cope with situations of limited data availability. The knowledge
about the indicants’ interrelationships can help investors to extrapolate indicants for which
data is missing and, thereby, still arrive at an assessment of a firm’s position with respect to
MEXC.
As a result, it seems promising to investigate the interrelationships between the developed

indicants. In the following, research propositions regarding the interdependency structure will
be logically derived. As the sheer amount and complexity of the presumptive interrelation-
ships between the 25 indicants inhibit an exhaustive depiction of all possibilities, the devel-
opment of propositions will be limited to exemplary interdependencies. More specifically, the
cultural capabilities will be examined, because they are proposed to take on a special role
within the MEXC capabilities framework. Additionally, the links to the functional capabilities
will be scrutinized, because the other capabilities’ impact on the fulfillment of the main busi-
ness model tasks seems to be an especially intriguing object of investigation for future re-
search. Figure 5-1 graphically depicts the proposed relationships, which the next paragraphs
present in a clockwise direction.
FIGURE 5-1
Propositions on Interdependency Structure
(1) Functional Capabilities (2) Structuring Capabilities

#1 Innovation Performance #6 Team Structure Index
P2: (+)
#2 Quality Investment #7 CMO Importance
#3 Quality Score #8 Strategic Marketing Unit
#4 Efficiency Score #9 Hierarchy Rigidness Index

P3: (+)
#5 Profit Pool Search Intensity #10 Organizational Reaction Time
#11 Corporate Incubator
#12 Fertile Soil for Innovation #14 Empowerment & Motivation #16 Role Model TMT
P1: (+) (3) Cultural Capabilities P1: (+)

#13 Customer Intimacy #15 Open Communication Mentality #17 Esprit de Corps
P4: (+)
(4) Relational Capabilities (5) Change Capabilities

#18 Customer Cooperation Intensity
P6: (+) #21 Recruiting Diversity Index
P5: (+)
#19 Distal Business Tie Strength #22 Market Awareness Index
#23 Corporate Memory Index

#20 Societal and Political Tie Strength
#24 Knowledge Dissemination Index
#25 Reconfiguring Intensity
Key: Direct influence of a single indicant Moderating influence of the cultural capabilities
First, a firm’s cultural capabilities are assumed to have a central position within the MEXC
capabilities framework. Cultural capabilities permeate the whole organization (e.g., Desphan-
dé and Webster 1989, p. 4; Hofstede et al. 1990, p. 286) and, therefore, are likely to have an
overarching and supportive impact on the firm’s other capabilities. More precisely, it seems
justifiable to assume that the more appropriate the firm’s internal context is set for MEXC, the
more likely the firm shows high manifestations of the other MEXC capabilities. Additionally,
as organizational culture has been associated with organizational effectiveness and perfor-
mance (e.g., Boyce et al. 2015, p. 339; Denison and Mishra 1995, p. 220; Yarbrough, Mor-
gan, and Vorhies 2011, pp. 558), cultural capabilities are proposed to strengthen the other
capabilities and, thereby, their impact on firm performance. For example, a retail bank heavily
emphasizing customer intimacy is expected to continuously develop innovative banking ser-
vices and establish flexible digital processes to conveniently serve its customers (see also
Siebelt 2017, p. 101). Furthermore, it seems reasonable to assume that such a bank maintains
strong customer relationships and enjoys customer affection, which in turn can be expected to
translate into increased customer loyalty (Yim, Tse, and Chan 2008, p. 753). Consequently,
cultural capabilities are expected to have a positive moderating influence on both the manifes-
tations of the other capabilities and their impact on firm performance. Thus,
P1a: Cultural capabilities increase the probability that the firm’s other capabilities will
show high manifestations.
P1b: Cultural capabilities strengthen a positive relationship between the firm’s other ca-
pabilities and firm performance.
Second, it is hypothesized that the CMO importance, which is part of the structuring capabili-
ties, enhances a firm’s quality investment. If the CMO has an influential position in the top
management team, it seems justifiable to assume that marketing-related topics and quality
investments will receive more attention. For example, if an automotive manufacturer has a
high-ranked chief marketing executive, it can be expected to not only rely on cost-efficient
procurement and production, but also to make significant investments in product quality and
brand building (e.g., Handelsblatt 2013). Thus,
P2: The CMO importance has a positive influence on the quality investment.
Third, it is hypothesized that the organizational reaction time, included in the structuring ca-
pabilities, enhances a firm’s efficiency score. It seems reasonable to assume that the faster a
firm seizes the potential of new technologies and market trends, the more efficiently it can
fulfill its main business tasks. For instance, if a new production technology becomes availa-
ble, in some industries early adopting companies will most probably have a cost advantage.
Furthermore, an insurance company promptly reacting to the customers’ need for digital solu-
tions and less complex contract closing procedures is likely to save a substantial amount of
sales commissions. Thus,
P3: The organizational reaction time has a positive influence on the efficiency score.
Fourth, the market awareness index, which pertains to the change capabilities, is proposed to
facilitate a firm’s innovation performance. It seems reasonable to assume that the more in-
tensely the firm gathers and effectively utilizes market insights (e.g., customer needs, new
technologies), the better it can develop new offerings for customers. For instance, if a con-
sumer goods company meticulously elicits customer needs and detects new market trends, it
will probably come up with successful innovations and develop new sought-after products.
Consequently, the collected market information is expected to deliver important input for the
firm’s innovation efforts. Thus,
P4: The market awareness index has a positive influence on the innovation perfor-
mance.
Fifth, the corporate memory index, which belongs to the change capabilities, is proposed to
positively impact a firm’s quality score. The systematic gathering, compilation and reporting
of crucial performance metrics such as quality ratings from customers is likely to make re-
sponsible managers aware of shortcomings and subsequently act on them. Consequently,
room for improvement is continuously identified and the firm will most likely improve in
quality ratings, if it addresses the problematic issues. Moreover, standardized reporting proce-
dures and easily accessible databases can be expected to avoid making the same mistake
twice. For instance, if customers rate the quality of a certain service low and the firm docu-
ments this insight, it can adapt the specifics of the offering and, thereby, improve future quali-
ty ratings. Thus,
P5: The corporate memory index has a positive influence on the quality score.
Finally, a firm’s distal business tie strength, included in the relational capabilities, is proposed
to enhance the profit pool search intensity. If the firm has close relationships with partners
from different industries, it is likely to identify new business opportunities and, thereby, tap
new profit pools. Consider for example a car maker cooperating with an insurance company
to offer comprehensive mobility and insurance services to the customers (e.g., Volkswagen
Financial Services 2017). As a result of this partnership, the car maker can generate profits
from insurance products, which otherwise could not have been realized. Thus,
P6: The distal business tie strength has a positive influence on the profit pool search in-
tensity.
After the exemplary research propositions have been presented, further remarks about the
benefits and issues related to a potential empirical examination seem in order. Most im-
portantly, as the developed indicants can be calculated with the help of secondary data, it is
possible to conduct a longitudinal analysis of the hypothesized relationships, which enhances
causal inferences (Rindfleisch et al. 2008, p. 262). Researchers emphasize that temporal order
is a key marker of causality (Rindfleisch et al. 2008, p. 263). More specifically, for a certain
indicant to causally influence another indicant, its change must temporally precede the other
indicant’s change (Rindfleisch et al. 2008, p. 263). However, besides temporal order, there are
two further important markers of causality, which should be taken into account. First, the two
indicants need to covary, i.e., there should be correspondence in variation between the value
of the presumably causing indicant and the value of the presumably affected indicant (Rind-
fleisch et al. 2008, p. 264). Second, the alleged causal relationship should conform to theoret-
ical and logical expectations, which is referred to as coherence (Rindfleisch et al. 2008, p.
264).
As the propositions have been logically derived, it seems justifiable to assume that the re-
quirement of coherence is fulfilled. In order to take the prerequisite of covariation into ac-
count, it is necessary to empirically test and validate the whole MEXC capabilities frame-
work. Hence, this is a clear call to action for researchers to populate the dashboard with data
and analyze the interdependencies by means of e.g., structural equation modeling and linkage
analysis10 (Pauwels et al. 2009, p. 181). With the help of such analyses researchers can com-
10
For a detailed description and application of structural equation modeling and linkage analysis refer to Kama-
kura et al. 2002 and Schneider et al. 2005 respectively.
prehensively examine the proposed relationships and draw further inferences about the under-
lying assumptions. Ultimately, researchers are called upon to conduct an extensive time series
analysis of the proposed relationships to allow for causal inferences about the indicants’ in-
terdependency structure.
Importantly, in the course of such an analysis internal and external contingency factors should
be taken into account, because they can significantly alter results (e.g., Pauwels et al. 2009, p.
185; Stock, Six, and Zacharias 2013, pp. 293). For instance, Stock, Six, and Zacharias (2013,
pp. 293) point out that an innovation-oriented culture is less decisive in markets with dynami-
cally changing customer preferences than in technologically turbulent settings. Therefore, it
seems highly recommendable to consider external contingency factors such as e.g., industry
branch, characteristics of the competitive landscape, market dynamics, and cultural influences
(e.g., Beck, Chapman, and Palmatier 2015, p. 2; Pauwels et al. 2009, p. 185; Stock, Six, and
Zacharias 2013, p. 292). Additionally, internal contingency factors such as e.g., firm size,
characteristics of the customer base, and geographical dispersion should be included (e.g.,
Chang and Taylor 2016, p. 60; Homburg, Jozić, and Kuehnl 2017, p. 392; Pauwels et al.
2009, p. 185).
After the interdependency structure has been highlighted and exemplary propositions have
been derived, investors are well-informed about the comprehensiveness and multiplicity of
analytic opportunities arising from the MEXC dashboard. However, they might still be skep-
tical about the MEXC dashboard’s meaningfulness with respect to the target firm’s invest-
ment attractiveness. Therefore, the next sub-chapter presents the third dashboard development
stage, which links the dashboard measures to firm performance and value.
5.3 Stage III: Linking Dashboard Measures to Firm Performance and Value
This development stage moves the analysis one level higher. It connects a firm’s marketing
activities and investments as reflected in the MEXC capabilities measured by the indicants to
financial consequences and, thereby, aligns MEXC with corporate goals and the investor’s
perspective (Pauwels et al. 2009, p. 182). As explicated in chapter 2.2, investors do not yet
strongly rely on marketing aspects in their investment decisions, most probably because they
consider marketing’s impact hardly graspable and measurable (Hanssens, Rust, and Srivasta-
va 2009, p. 115; Srinivasan and Hanssens 2009, p. 294). The developed secondary data indi-
cants enable investors to objectively and comprehensively measure MEXC. This makes it
possible to examine the impact of a firm’s position with respect to MEXC on firm perfor-
mance and value with the help of time series data. Thereby, profound causal inferences about
the relationship between MEXC and firm performance and value can be drawn, which can be
expected to significantly increase marketing accountability from an investor’s perspective.
This study puts forwards three central arguments as to why the developed MEXC capabilities
framework can be expected to have a significant impact on firm performance and value. First,
arguing from a theoretical standpoint as elaborated in chapter 2, a firm showing high manifes-
tations of all five MEXC capabilities is expected to benefit from SCA and concomitant supe-
rior performance. Therefore, it seems reasonable to assume that an investment target display-
ing high scores on the developed indicants for the MEXC capabilities can be expected to
show strong performance and increase in value in the future. Second, introducing a conceptu-
al argument, the proposed 25 indicants were chosen on the basis of their inferable impact on
firm performance. Consequently, the overall construct of MEXC, which is represented by
these indicants, is also deemed a predictor of firm performance. Third, in addition to the theo-
retical and conceptual impetus from this study, there is a plethora of empirical studies present-
ing compelling evidence for the impact of marketing activities and investments on financial
performance and firm value (e.g., Edeling and Fischer 2016; Fischer and Himme 2017; Joshi
and Hanssens 2010; Kim and McAlister 2011; Krasnikov, Mishra, and Orozco 2009; Luo
2008; Mizik 2014). Morgan, Vorhies, and Mason (2009, p. 916) find that interfirm perfor-
mance differences can be explained by different levels of marketing capabilities. These em-
pirical findings give further reason to assume that the proposed relationship between MEXC
and firm performance and value is likely to exist. Consequently, the empirical investigation of
this link constitutes an intriguing research object for the future. Figure 5-2 summarizes the
resulting conceptual framework.
FIGURE 5-2
Linking Dashboard Measures to Firm Performance and Firm Value
MEXC
#1 #2 #3 #4 #5 #6 #7 #8 #9 #10 #11
Long-Term
Firm Performance
E.g., measured by:
(1) Functional Capabilities (2) Structuring Capabilities •  Total Shareholder Return
•  Customer Equity (Aggregated
Customer Lifetime Values)
•  Market Share Development
#12 #13 #14 #15 #16 #17 (+)
SCA
(+) (3) Cultural Capabilities (+) Firm Value
E.g., measured by:
•  Market Value of Equity
(Multiple, DCF, and Abnormal
Earnings Valuation Approaches)
•  Tobin’s q
•  Share Price
#18 #19 #20 #21 #22 #23 #24 #25
Independent Variable Dependent Variable

Key: Direct influence of MEXC Moderating influence of the cultural capabilities
Considering the theoretical, conceptual, and empirical hints at the performance and value im-
plications of MEXC, investors seem well-advised to assess a firm’s position with respect to
MEXC in order to grasp its investment attractiveness. Furthermore, researchers are called on
to empirically assess the proposed relationship between MEXC and firm performance and
value.
Probably the most crucial benefit of MEXC as a performance predictor is its future orienta-
tion. Whereas purely accounting-based performance measures are backward-looking, focus
on rather short-term horizons and neglect valuable intangible assets of the firm (Mizik 2010,
pp. 594; Skiera, Bermes, and Horn 2011, p. 128), an assessment of MEXC is forward-
looking, allows investors to draw inferences about the firm’s long-term performance and ex-
plicitly accounts for the firm’s intangible assets. Importantly, as Feng, Morgan, and Rego
(2015, p. 12) find, it is to be expected that if a firm is currently investing in building long-
term marketing capabilities, short-term performance will go down initially, but long-term
performance will increase significantly. As a consequence, the consideration of a firm’s posi-
tion with respect to MEXC seems to be especially beneficial for investors intending to make a
long-term investment in the firm. Conversely, short-term focused or even speculative inves-
tors will most likely not benefit from a detailed assessment of MEXC, because any projected
increase in firm performance and value will expectably not materialize in due time.
5.4 MEXC Dashboard and Its Practical Application

Consolidating the findings from the preceding chapters, figure 5-3 presents a mock-up version
of the resulting MEXC dashboard.
FIGURE 5-3
MEXC Dashboard
(1) Functional Capabilities (2) Structuring Capabilities

Innovativeness (#1) Team Structure (#6)
75% Long-Term Firm
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 65% Performance
Quality Delivery (#2, #3) Marketing Hub (#7, #8) E.g., measured by:
•  Total Shareholder Return
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 •  Customer Equity (Aggregated
Profit Focus (#4, #5) Agile Processes (#9, #10, #11) Customer Lifetime Values)
•  Market Share Development
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
(3) Cultural Capabilities

4/6 50
25 75
Customer Value Orientation Working Environment Internal Promoters
#12
#14
#16 X 0 100
#13
#15
#17 X Don’t
Invest
Invest

Customer Networks (#18) Intelligence Acquisition (#21, #22) 80%
Firm Value
0 1 2 3 4 5 6 7 8 9 10
0 1 2 3 4 5 6 7 8 9 10 E.g., measured by:
Organizational Learning (#23, #24) •  Market Value of Equity
(Multiple, DCF, and Abnormal
Distal Networks (#19, #20) 45% 0 1 2 3 4 5 6 7 8 9 10 Earnings Valuation Approaches)
Reconfiguring (#25)
•  Tobin’s q
•  Share Price
0 1 2 3 4 5 6 7 8 9 10
0 1 2 3 4 5 6 7 8 9 10
Key: Weak Capability (≤ 50%)

Mediocre Capability (50% < X < 75%) Strong Capability (≥ 75%)
Existing X Not existing
The left-hand side of the dashboard depicts the individual assessments of the respective firm’s
MEXC capabilities and, on a more granular level, the results for each managerial lever. As
recommended in chapter 4, the scores for the functional, structuring, relational, and change
capabilities are aggregated with the help of linearly additive functions, whereas the cultural
capabilities are evaluated on a binary basis. For instance, the individual scores for innovative-
ness, quality delivery, and profit focus have been weighted in such a way that the aggregated
score for the functional capabilities is 75%.
The right-hand side of the dashboard depicts the overall recommendation resulting from the
firm’s position with respect to MEXC. The higher the value on the speedometer, the stronger
is the firm’s position with respect to MEXC, the more suitable is its predisposition to achieve
superior long-term performance, and the more likely is the firm value to increase. The trans-
formation of the granular results on the left-hand side into an overall score on the “investment
speedometer” endows the investor with additional degrees of freedom. For instance, if the
investor deems certain MEXC capabilities especially important in the industry setting at hand,
he can set threshold values, which a target needs to surmount in order to be considered an
attractive investment. That way, investors can calibrate the “investment speedometer” accord-
ing to aspects such as e.g., their individual risk profile, investment experience, and industry
characteristics. It is important to note that investors need to be aware of potential confounding
factors. Therefore, the consideration of control variables such as competitive intensity, firm
size, and disruptive developments in the firm’s environment is recommended in order to avoid
distorted results (e.g., Feng, Morgan, and Rego 2015, pp. 8).
The dashboard endows investors with a concise and neat overview of a firm’s position with
respect to MEXC. Thus, they can identify potential weak spots and discuss them with the
firm’s management and experts. The overall evaluation can be individually tailored to the
investors’ needs and preferences and furthermore incorporates their investment expertise, so
that the result on the “investment speedometer” is not generic and superficial, but specific and
profound. Consequently, the MEXC dashboard can decisively complement the due diligence
process and offer rich insights with respect to the firm’s expected future performance and
value.
Apart from investors the MEXC dashboard and especially the metrics on its left-hand side are
also of interest for marketing managers (see also Clark, Abela and Ambler 2006, pp. 19; Mil-
ler and Cioffi 2004, pp. 237). Managers can rely on the MEXC dashboard to measure the ef-
fectiveness of their own marketing initiatives and at least partly analyze the position of com-
petitors. The benchmarking opportunities are restricted to the analysis of publicly available
data, since competitors most likely will not exchange internal documents. However, external
consultancies could help marketing managers benchmark their MEXC positions with com-
petitors by bridging the data gap and bringing in industry expertise. Furthermore, the MEXC
dashboard helps managers to continuously learn about the functioning of the marketing pro-
cesses, so that their understanding of marketing initiatives and marketing decision-making
will be improved (Pauwels et al. 2009, p. 184). Importantly, literature suggests that the use of
a comprehensive set of marketing metrics enhances marketing and overall firm performance,
strengthens marketing accountability and, thereby, fortifies marketing’s standing within the
boardroom (e.g., Mintz and Currim 2013, p. 32; O’Sullivan and Abela 2007, p. 90).
As a result, both investors and managers are well-advised to make use of the MEXC dash-
board. The dashboard enables investors to obtain a detailed assessment of a firm’s position
with respect to MEXC and, thereby, the expected future firm performance and value. Market-
ing managers can increase the analytic rigor and probably the quality of their decision-
making, so that marketing performance and their standing within the firm is likely to improve.
In a nutshell, the MEXC dashboard reduces the complexity of scattered, hardly graspable, and
far-reaching marketing activities to a concise and understandable set of indicants, which can
be computed with the aid of objective data. Furthermore, multiple weighting options make it
possible to individually factor in specific industry, firm, and other characteristics of the situa-
tion at hand, making the MEXC dashboard a virtually universally applicable blueprint.
6 Conclusion
6.1 Summary of Main Findings
With reference to the introduction, the first research question concerns the possibility of an
objective measurement of MEXC. More specifically, it was to be investigated whether
MEXC can be conceptualized by objective indicants which are measurable by secondary data.
The answer is yes. Based on resource-based theory, MEXC is conceptualized as a holistic
framework consisting of five distinct capabilities, which can be the source of SCA and con-
comitant superior firm performance. As the main analysis in chapter 4 has revealed, there is a
comprehensive set of 25 secondary data indicants which is proposed for an objective meas-
urement of the five MEXC capabilities and, thereby, allows for an assessment of a firm’s
overall position with respect to MEXC.
Second, it was to be examined which specific data is needed to measure the indicants and
what key sources investors can refer to in order to efficiently acquire it. The data needed to
determine the indicants can be considered extensive and diverse. Each of the five MEXC ca-
pabilities concerns a different aspect of a firm’s marketing position and, therefore, requires
additional data. For instance, whereas the efficiency score is computed with the help of finan-
cial statement positions, the determination of empowerment & motivation requires infor-
mation on incentive schemes and task handling routines. Consequently, there are significant
differences with respect to data availability. The functional, structuring, and relational capa-
bilities can be largely assessed with the help of publicly available data (e.g., from the COM-
PUSTAT and LexisNexis databases), while the cultural and change capabilities mainly re-
quire internal data (e.g., from internal documents such as HR policies and project documenta-
tions). Overall, the data collection for the proposed measurement approach is considered fea-
sible.
Third, the question of the resulting benefit for investors and its exploitation was raised. With
the help of the developed indicants, investors can comprehensively and objectively assess a
firm’s position with respect to MEXC. It is recommended to aggregate the indicants to the
MEXC dashboard, which concisely presents the results from the calculation of the indicants.
In contrast to backward-looking accounting-based measures, the MEXC dashboard is future-
oriented and enables investors to make profound inferences about the target firm’s expected
future performance and value. Hence, the MEXC dashboard has the potential to decisively
complement firm valuations and, therefore, is recommended for inclusion in the investor’s
due diligence process.
6.2 Limitations and Avenues for Future Research

This study is not without limitations. However, these limitations offer rich opportunities for
future research. First, this master thesis does not empirically validate the proposed measure-
ment approach. As a consequence, researchers are encouraged to check the consistency of the
proposed indicants and the predicted relationships. With the help of actual data, the construct
validity of the indicants should be assessed more closely in order to support or challenge the
qualitative evaluations of the indicants from this study. Following this logic, it is necessary to

https://doi.org/10.1007/978-3-658-24704-1_6
78 6 Conclusion
empirically test whether the correlations between the measures themselves as well as between
the measures and firm performance and value are plausible. Moreover, it seems especially
promising to conduct a longitudinal analysis with the help of an extensive panel data set in
order to assess the model’s predictive validity and to draw causal inferences about the pro-
posed relationships.
Second, this study is based on published articles from major business journals, which might
be subject to a publication bias (Harrison et al. 2017, p. 420). “Publication bias is the system-
atic suppression of research findings due to small magnitude, statistical insignificance, or con-
tradiction of prior findings or theory” (Harrison et al. 2017, p. 401). Therefore, the derivation
of secondary data indicants from published research findings might fail to consider counter
evidence and, therefore, potentially misjudge or overstate the influence of certain factors.
Again, this limitation is a clear call to action for researchers to empirically validate the pro-
posed framework with the help of actual data, so that potential problems with the measures
can be exposed and remedied.
Finally, this master thesis assumes a general and industry-spanning significance of MEXC for
firm performance and value. However, as already presumed in chapter 4, there might exist
considerable differences between the importance and predictive power of the MEXC indi-
cants across industries. Consequently, future research could investigate the significance of the
proposed relationships for different industry settings. Such studies could help underscore the
allegedly wide applicability of the MEXC dashboard, but also point out settings, in which the
assessment of MEXC is not as much informative for investors.
Appendix A: Excerpt from Conceptualization Table
Appendix
Associated Secondary Description/ Required Data Key References Potential Issues/

MEXC Data Indicant Rationale (Key Data Sources) Comments
Capability
Functional Innovation • Measures the firm’s innovativeness, i.e., • Number of patents (country- and indus- • Bayus, Erickson, • Comparability could be limited in
Capabilities Performance whether and to what extent the firm is able try-specific databases, e.g., USPTO) and Jacobson less patent-intensive industries
(IP) to develop new and valuable offerings for • Number of product preannouncements (2003) • Innovation ratchet strategies
customers and number of new product introduc- • Chandy et al. (Moorman et al. 2012) have to be
• Considers patents, product preannounce- tions (LexisNexis, company websites) (2006) kept in mind
ments, and new product introductions • Sorescu, Shankar,
and Kushwaha
(2007)
Functional Quality • Gauges the extent to which the firm is • R&D expenditure (COMPUSTAT) • Kull and • Comparability could be limited due
Capabilities Investment (QI) investing and willing to deliver superior • Staff and experts working on quality Narasimhan to industry differences in R&D ex-
quality to customers issues (organizational charts, profes- (2010) penditures
https://doi.org/10.1007/978-3-658-24704-1
• Takes into account the firm’s R&D ex- sional networks) • Luo and • Execution efficiency could be
penditures, quality capacity, and quality • Management emphasis on quality Bhattacharya constrained if investor needs to
emphasis (annual reports, press releases, execu- (2009) gather internal data to determine
tive interviews) • Mizik and quality capacity
Jacobson (2003)
Functional Efficiency • Delivers a comprehensive picture of how • Information from the financial state- • Brandenburg N/A
Capabilities Score (ES) efficiently the firm works with respect to ment such as e.g., sales, assets, capital (2016)
different parameters employed, and EBIT (AMADEUS, • Homburg, Artz,
• Considers accounting-based key perfor- COMPUSTAT, EDGAR) and Wieseke
mance indicators such as e.g., return on (2012)
sales (ROS), return on assets (ROA), and • Krause (2016)
return on capital employed (ROCE)
Structuring CMO • Assesses the importance of the top market- • Executive titles (D&B’s Register of • Feng, Morgan, N/A
Capabilities Importance ing executive within the firm and, thereby, Corporations, COMPUSTAT, compa- and Rego (2015)

(CMOI) gauges her strategic reach to serve as a ny websites) • Germann, Ebbes,
marketing hub • Executive compensation information and Grewal

• Considers the hierarchical rank of the (COMPUSTAT, annual reports) (2015)
firm’s top marketing executive, her relative • Executive responsibilities • Nath and
compensation in comparison to other top (COMPUSTAT, company websites) Mahajan (2008)
executives, and her responsibility scope
80

Capability
Structuring Hierarchy • Measures how rigid the firm’s hierarchy is • Promotion and recruiting procedures • Carpenter, • Link to firm performance could be
Capabilities Rigidness Index with respect to promotion opportunities (employment notices, promotion and Geletkanycz, and considered too vague and circui-
(HRI) and how firmly it sticks to official channels recruiting policies) Sanders (2004) tous
and formalities • Communication routines (memos, • Knight et al. • Execution efficiency could be
• Considers promotion inflexibility, official circular letters to employees) (1999) constrained, if the investor does not
channel emphasis, and top management • Management’s stance on formality • Morand (1995) get access to comprehensive inter-
team (TMT) uniformity (executive interviews) nal documents
• TMT demographics (D&B’s Book of
Corporate Managements, S&P’s Regis-
try of Corporate Directors and Execu-
tives)
Structuring Organizational • Scales how quickly the firm adopts helpful • Technology usage (inventory, planning • Huff and Munro • Validity hinges on the sources
Capabilities Reaction Time new technology and reacts to market trends documents) (1985) referred to, e.g., if the investor con-
(ORT) • Takes into account technology adoption • Update policies (sourcing policies and • Hutt, Reingen, sults with only one industry expert,
time and market trend reaction time protocols, executive interviews) and Ronchetto this will probably result in con-
• Industry trends (LexisNexis, Factiva) (1988) strained objectivity of the data
• Key technologies (company websites, • Srinivasan, • Execution efficiency is low, be-
industry experts) Lilien, and cause the exact and objective de-
• Processes to react to changes in the Rangaswamy termination of ORT is time-
market environment (executive inter- (2002) consuming
views, industry experts)
Structuring Internal • Checks whether the firm engages in inter- • Mission (company websites, annual • Covin et al. • Discriminant validity is an im-
Capabilities Corporate nal corporate venturing and, if applicable, report) (2015) portant aspect, because ICV has to
Venture (ICV) gauges its influence on the firm’s strategy • Operating activities (company web- • Garrett and be accurately demarcated from
and operating business sites, LexisNexis, annual report) Neubaum (2013) PPSI
• Considers venture scope, venture re- • Composition of management team • Wagner and • Comparability could be con-
sources, and venture endorsement (company websites, LexisNexis) Wosch (2015) strained, because not every firm
• Management’s stance regarding the engages in internal corporate ven-
ICV (executive interviews, LexisNex- turing
is)
Cultural Fertile Soil for • Evaluates whether the firm explicitly dedi- • Information on institutionalized inno- • de Brentani and • Objectivity imposes a problem,
Capabilities Innovation cates time and space to innovation activi- vation events, policies with respect to Kleinschmidt because the gathered information is
(FSI) ties of its employees innovation competitions, and active en- (2004) processed subjectively
• Takes into account institutionalized and couragement of employees (LexisNex- • Mumford et al. • To remedy this problem, investors
regular corporate gatherings such as e.g., is, Factiva, executive interviews, event (2002) can make use of a standardized re-
innovation competitions, innovation calendar, site visits) • Stock, Six, and porting format
events, and experimentation space Zacharias (2013) • Execution efficiency is low, be-
cause the investor needs to collect
and process disparate internal data
Appendix
Appendix
Capability
Cultural Customer • Checks whether the firm encourages em- • Customer contact data (travel policies • Lukas, Whitwell, • Objectivity imposes a problem,
Capabilities Intimacy (CI) ployees to get in touch with customers, and calendars, customer visit policies) and Heide (2013) because the gathered information is
considers customers’ opinions, and has • Information on customer events, com- • Thompson, processed subjectively
successful platforms and programs in place plaint management, and loyalty pro- Hamilton, and • To remedy this problem, investors
to communicate with and retain customers gram (company websites, social media, Rust (2005) can make use of a standardized re-
• Considers customer contact points such as LexisNexis) • Verhoef (2003) porting format
e.g., number of customer visits per key ac- • Execution efficiency is low, be-
count, customer complaint management, cause the investor needs to collect
and customer loyalty program and process disparate internal data
Cultural Empowerment • Evaluates whether the firm motivates its • Details of incentive scheme, task as- • Hauser, Simester, • Reliability is an important aspect,
Capabilities & Motivation employees by setting customer value- signments, as well as meeting and task and Wernerfelt because it requires the investor to
(E&M) oriented incentives, encourages employees handling routines (HR databases, meet- (1994) document the interviews with ex-
to take ownership of their projects and also ing protocols, performance evaluations, • Lorinkova, perts
endows them with personal freedom to ful- job role descriptions) Pearsall, and • Issues with objectivity and execu-
fill their tasks Sims (2013) tion efficiency analogous to pre-
• Takes into account incentive scheme com- • Sharma and Sarel ceding indicants of cultural capa-
patibility, ownership mentality, and task (1995) bilities
handling leeway
Cultural Code of Ethics • Checks whether the firm has an explicit • Details of code of ethics (company • Vitell and • Relevance imposes a problem,
Capabilities (not included in code of ethics and expects its employees to websites, executive interviews, firm- Singhapakdi because the link between code of
final set of comply with it internal data) (2008) ethics and firm performance, if any,
indicants) • Considers the presence of and, if applica- • Quality of code of ethics (Ethisphere • Klemm Verbos et seems rather weak
ble, the characteristics of and compliance Magazine, firm-internal data) al. (2007) • Discriminant validity requires to
with the code of ethics • Alignment of processes and working • Erwin (2011) accurately demarcate the code of
routines with code of ethics (company ethics from CSR efforts
websites, firm-internal data) • Issues with objectivity and execu-
tion efficiency analogous to pre-
ceding indicants of cultural capa-
bilities
Cultural Corporate • Checks whether and to what extent the firm • CSR activities (company websites, • Eisingerich et al. • Relevance could be constrained,
Capabilities Social engages in CSR activities LexisNexis, Factiva, annual reports) (2011) because the impact of CSR on firm
Responsibility • Takes into account the firm’s CSR activi- • CSR rating (CSR rating agencies and • Luo and performance is ambiguous
(CSR) Efforts ties as well as the scope and effectiveness magazines) Bhattacharya • Face validity will be impaired, if
(not included in of the CSR activities • Rating on social indices (KLD, (2009) the methodologies of the indices
final set of FOOTSE4good, Dow Jones Social In- • Scalet and Kelly and rating agencies do not properly
indicants) dex) (2010) capture those CSR activities the
firm mostly engages in
• Furthermore, this also causes diffi-
culties with comparability
81
82

Capability
Relational Customer • Measures on how broad a scale the firm • Number of customer partnerships, • Thomaz and • Comparability is constrained in
Capabilities Cooperation engages in cooperation with its customers partner firms, level of institutionaliza- Swaminathan B2C settings
Intensity (CCI) • Considers the number of customer partner- tion, scope of the cooperation (SDC (2015) • Alternatively, investors can look
ships, number of repeat partnerships, level Platinum, EDGAR, Factiva, LexisNex- • Tuli, Bharadwaj, out for co-creation initiatives be-
of institutionalization, and relationship is, company websites) and Kohli (2010) tween the firm and its customers
multiplexity • Wuyts, Dutta,
and Stremersch
(2004)
Relational Customer • Checks whether the firm engages in cus- • Description of the firm’s customer co- • Cui and Wu • Data availability is comparably
Capabilities Co-Creation tomer co-creation activities creation activities (LexisNexis, Factiva, (2016) scarce, because there are no stand-
Intensity • Considers the presence of customer co- company websites, firm-internal data, • Prahalad and ardized databases listing customer
(not included in creation activities and, if applicable, fre- industry experts) Ramaswamy co-creation activities
final set of quency, scope, and focus of these initia- (2004) • Objectivity will be constrained, if
indicants) tives • Tseng and only the firm’s own description of
Chiang (2016) the customer-creation initiative is
available
• Discriminant validity will be con-
strained, if customer co-creation is
not explicitly demarcated from CCI
(e.g., B2C settings vs. B2B set-
tings)
Relational Distal Business • Gauges how broadly and intensively the • Number of distal partnerships, number • van Beers and N/A
Capabilities Tie Strength firm engages in cooperation with distal of repeat partnerships, level of institu- Zand (2014)
(DBTS) business partners, which are outside its tionalization, scope of the cooperation, • Cui and
value chain characteristics of the partner firm (SDC O’Connor (2012)
• Takes into account the number of distal Platinum, EDGAR, Factiva, LexisNex- • Goerzen and
partnerships, number of repeat partner- is, industry-specific research firms, Beamish (2005)
ships, level of institutionalization, and co- company websites)
operation diversity
Relational Political and • Measures on how broad a scale the firm • Political and societal contact persons • Chen, Parsley, • It is important to note that the
Capabilities Societal Tie communicates and cooperates with or pro- (LexisNexis, country-specific monitor- and Yang (2015) societal aspect of PSTS has a direct
Strength (PSTS) vides financial assistance for political and ing platforms) • Hillman (2005) link to Moorman and Day’s (2016)
societal actors outside the business sector • Composition of the board of directors • Sheng, Zhou, and definition of MEXC
• Considers the number of non-business and the advisory board (company web- Li (2011) • Execution efficiency could con-
contacts, lobbying efforts, and philanthrop- sites, annual reports) strained due to time-consuming da-
ic activities • External affiliations and board ap- ta collection for lobbying efforts
pointments of the firm’s top manage-
ment (LexisNexis, Who’s Who-lists,
monitoring platforms)
Appendix
Appendix
Capability
Change Recruiting • Gauges on how broad a scale the firm hires • Recruiting activities (company web- • Hoisl, Gruber, • Reliability will be constrained, if
Capabilities Diversity Index people from outside the organization to tap sites, employment notices, HR consul- and Conti (2017) the investor does not include more
(RDI) the knowledge and experience from com- tancies) • Jain (2016) reliable sources such as e.g., indus-
petitors and other industries • National, professional, and academic • Song, Almeida, try experts and HR consultancies in
• Considers the number of external hires and backgrounds of newly hired employees and Wu (2003) his data collection
new hire diversity (professional networks, HR consultan- • Execution efficiency is expected to
cies, industry experts) be constrained, if the investor en-
gages in extensive benchmarking
activities to determine the optimal
level of diversity
Change Market • Measures the extent to which the firm is • Size of market research department, its • Kumar and Shah • Objectivity will be impaired, if the
Capabilities Awareness able to absorb market information such as analytical tools and assigned responsi- (2011) investor does not ensure a system-
Index (MAI) market trends, customer needs, and chang- bilities (organizational charts, market • Morgan, atic procedure to assess the proba-
es in competitor behavior research reports, benchmarking docu- Slotegraaf, and bly disparate internal documents
• Takes into account the size of the market ments) Vorhies (2009) • Execution efficiency is low, be-
research department, the scope of market- • Vorhies and cause the investor needs to resort to
ing research conducted at the firm, and the Morgan (2005) internal documents and endure a
firm’s benchmarking activities time-consuming data collection and
evaluation
Change Change in • Checks whether the firm has changed its • SIC codes (COMPUSTAT) • Berger and Ofek • Relevance could be constrained,
Capabilities Industry industry diversification over time • Relative shares of revenue (annual (1995) because the impact on overall firm
Diversification • Considers the firm’s industry diversifica- reports, firm-internal data, industry ex- • Lavie (2007) performance is ambiguous
(not included in tion according to SIC codes and gauges the perts, analyst calls) • Swaminathan and • It is unclear whether a change in
final set of relative shares of revenue from the respec- Moorman (2009) relative shares of revenue is inten-
indicants) tive industries tional or merely a consequence of
market dynamics
– Customer • Measures the value of the firm’s customer • Number of customers, number of new • Gupta, Lehmann, • Discriminant validity imposes a
(global Equity (CE) base customers, and number of lost custom- and Stuart (2004) problem, because CE is a compre-
measure) (not included in • First, an average customer lifetime value ers (EDGAR, annual reports, firm- • Kumar and Shah hensive measure, which incorpo-
final set of (CLV) needs to be determined internal data, industry experts) (2009) rates all of the firm’s marketing ef-
indicants) • Second, the CLVs are aggregated to CE • Margin, retention rate, retention ex- • Wiesel, Skiera, forts
• Subsequently, the changes in CE over time penditure, acquisition expenditure and Villanueva • Understandability is constrained,
can be compared and interpreted (EDGAR, annual reports, firm-internal (2008) because CE requires comparably
data, industry experts) complex calculations and is not
• Discount rate (standard financial mod- easily interpretable
els such as e.g., the capital asset pricing
CE is proposed as a global meas-
model)
ure to asses long-term firm perfor-
mance
83
84
Appendix B: Excerpt from Literature Table

Associated Author(s) Journal Method of Independent Dependent Secondary Data Secondary Data
MEXC (Year) Analysis Variables Variables Measures Sources
Capability
Functional Aaker and JMR • Regression • Perceived quality • Stock return • Aggregate quality measure • Total Research Corpora-
Capabilities Jacobson analysis • Salience • ROI • Brand awareness tion’s EquiTrend database
(1994) • Advertising • Customer loyalty/satisfaction • Center for Research in
• User satisfaction Security Prices (CRSP)
• Salience database
• Dividend distribution and change in the • Standard & Poor’s (S&P)
market value of the stock COMPUSTAT database
• ROI
• Advertising expenditure
Functional Bharadwaj, JM • Stock • Brand quality • Stock return • Brand quality score • Harris Interactive’s
Capabilities Tuli, and response • Stock risk • Risk measures obtained from Fama and EquiTrend database
Bonfrer model French’s three-factor model • CRSP
(2011) • Risk model • COMPUSTAT
• Kenneth French’s website
Functional Chandy JMR • Logit • Speed • Conversion • Number of days from patenting of drug • Pharmaprojects database
Capabilities et al. (2006) model • Number of promising ability idea to drug approval • Food and Drug Administra-
ideas • Financial • Number of primary drug patents owned tion (FDA) Orange Book
• Expertise performance by the firm, normalized by log(assets) • Delphion
• Idea importance • Overlap in therapeutic areas between • Worldscope
patented drug and firm’s drug portfolio • COMPUSTAT
(number of drugs in respective areas) • Million Dollar Directory
• Total number of forward citations for • Principal International
patented drug Business
• Conversion of patented ideas into
launched drugs (yes/no)
• ROI
Functional Chen and MKT • Normative • Third-party product • Pricing strategy • Third-party product reviews from maga- • PC Magazine
Capabilities Xie (2005) SCI model reviews • Advertising zines • PC World
• Exploratory strategy • Advertising data from magazines • Runner’s World
empirical • Pricing data from magazines • Runner
analysis
Appendix
Appendix
Capability
Functional Chen, Liu, JM • Event study • Valence of third-party • Firm value • Review scores • Internet Movie Database
Capabilities Zhang product reviews • Movie characteristics • The Numbers
(2012) • Pre-review cumulative • Movie advertising expenditures (the-numbers.com)
advertising spending • Stock returns • Yahoo! Movies
• TNS Media Intelligence
• CRSP
• Metacritic
• Crix’ Picks in Variety
magazine
• LexisNexis
Functional Dutta, SMJ • Stochastic • Resources (inputs) • Objective • Technological output (patents) • COMPUSTAT
Capabilities Narasimhan, frontier es- (output) • R&D expenses • U.S. Patent and Trademark
and Rajiv timation • Marketing expenditure Office (USPTO)
(2005) (SFE)
Functional Feng, JAMS • SFE • Marketing capability • Future revenue • SG&A and advertising investments • COMPUSTAT
Capabilities Morgan, • Random • R&D capability growth • Number of trademarks owned • USPTO
and Rego effects • Operations capability • Future profit • Sales revenue
(2017) model • Market munificence growth • R&D expenditures
• R&D and patent stock
• Number of patents
• Cost of labor and capital
• Cost of goods sold
Functional Kotha, JB • Regression • Online buying • Firm performance • Website usability • Gomez.com
Capabilities Rajgopal, analysis experience and competitive • On-site resources • SEC filings
and Venka- advantage • Customer confidence • Yahoo! Finance
tachalam (Tobin’s q) • Relationship services • Bloomberg
(2004) • Price leadership
Functional Krasnikov, JM • SFE • Customer Relationship • Cost efficiency • CRM implementation (yes/no) • Federal Deposit Insurance
Capabilities Jayachan- Management (CRM) • Profit efficiency • Variable cost Corporation
dran, and adoption • Profit • LexisNexis
Kumar • Cost of deposits, labor, marketing, and
(2009) purchased funds
• Further banking-related indicators (e.g.,
price of loans)
85
86
Capability
Functional Kull and DEC • Multi-level • Organizational-level • Workgroup-level • Quality management • National Partnership for
Capabilities Narasimhan SCI structural quality management work perfor- • Cooperative values Reinventing Government
(2010) equation practices mance • Work performance • Office of Personnel
model • Organizational-level Management
cooperative values
• Workgroup-level
quality management
practices
Functional Moorman MKT • Regression • Innovative product • Use of innovation • Number of innovative product introduc- • Datamonitor’s Product
Capabilities et al. (2012) SCI analysis introductions timing strategy tions Launch Analytics
• Stock market scrutiny • Firm value • Number of analysts covering the firm • COMPUSTAT
• Industry market con- • Market share of the four largest firms in a • CRSP
centration firm’s dominant industry (C4) • Kenneth French’s website
• Patent intensity • Ratio of a firm’s patented innovations • Delphion
introduced relative to the total number of • Institutional Brokers’
innovations introduced by that firm • Estimate System
• IRI’s Info Scan and
Marketing Factbook
Functional Prabhu, JM • Distributed- • Acquisitions • Innovation • Number of products in Phase 1 trials • Financial Times Sequencer
Capabilities Chandy, and lag models • Depth of knowledge • Number of acquisitions • Datastream International
Ellis (2005) • Generalized • Breadth of knowledge • Number of approved patents per patent • Federal Trade Commis-
method of • Similarity of subclass sion’s Large Merger Series
moments, knowledge • Number of patent classes shared by the • Moody’s Manual
quasi dif- acquirer and target firm, divided by the • Pharmaprojects
ferenced, total number of patent classes owned by • USPTO
linear feed- the acquirer and target firm combined • World Intellectual Property
back model • Unique patent subclasses held by target Organization
in comparison to patent subclasses held • Delphion
by acquirer
Appendix
Appendix
Capability
Functional Sorescu, JMR • Event study • Product preannounce- • Abnormal stock • Provision of time to introduction or price • LexisNexis
Capabilities Shankar, ment specifity returns of the product (yes/no) • Dow Jones News Service
and • Product preannounce- • Delivery of most recently announced • CRSP
Kushwaha ment reliability preannounced product on time (yes/no) • COMPUSTAT
(2007) • Product preannounce- • Number of press releases or news wires • Kenneth French’s website
ment updating after the preannouncement containing
• Innovativeness information about the preannounced
• Product category product
• Firm size • Degree of innovativeness (radi-
• Spokesperson cal/incremental)
• Product category (software/hardware)
• Assets
• Preannouncement made by CEO/member
of TMT (yes/no)
Structuring Boyd, JMR • Event study • Customer power • Abnormal returns • Presence of a major customer • Dow Jones Newswire
Capabilities Chandy, and • Regression • CMO role-specific • Appointee had prior experience as CMO • Wall Street Journal
Cunha analysis experience • Appointee had prior experience with • PR Newswire
(2010) • CMO firm-specific appointing firm • SEC filings
experience • Number of market segments reported by • Annual reports
• Firm scope appointing firm • COMPUSTAT
• Firm performance • Number of employees within appointing • Hoover’s Online
firm • Bureau of Labor Statistics
• Average five-year sales growth for ap-
pointing firm
Structuring Feng, JM • Principal • Marketing Department • Firm performance • Number of marketing executives • COMPUSTAT
Capabilities Morgan, component Power • Compensation of marketing executives • CRSP
and Rego factor • Firm-level marketing • Hierarchical level of highest-ranking • USPTO
(2015) analysis capability marketing executive • SellingPower.com
• SFE • Responsibilities of marketing executives
• Input-output approach (e.g., expenses-to-
sales and advertising-to-sales invest-
ments in relation to the firm’s market-
based assets)
• ROA
• TSR
87
88
Capability
Structuring Homburg JMR • Two-step • CMO ability • Time until • MBA from prestigious university • CrunchBase database
Capabilities et al. (2014) Heckman- (education, marketing venture capital (yes/no) • SEC filings
type con- experience, industry funding • Number of years working in marketing- • LinkedIn
tinuous experience, start-up related jobs • Company websites
hazard rate experience) • Number of years working in the respec- • Factiva
model tive industry
• Number of years working in start-up jobs
Structuring Huckmann, MAN • Regression • Team familiarity • Output quality • Number of times each pairing of team • Firm-internal data
Capabilities Staats, and SCI analysis • Role experience • Schedule members has worked together on a pro-
Upton adherence ject
(2009) • Effort adherence • Weighted average of job role tenures for
all team members
• Number of post-delivery defects
• Delivery on time and in budget
• Estimated effort minus actual effort
divided by estimated effort
Structuring Nath and JM • Regression • Innovation • CMO presence • R&D intensity • COMPUSTAT
Capabilities Mahajan analysis • Differentiation • Firm performance • Advertising intensity • Competitive Media Reports
(2008) • Corporate branding • Corporate branding strategy (yes/no) • Datamonitor Reports
• Diversification • Entropy measure based on four- and two- • SEC filings
• TMT marketing digit-level segment sales • Company websites
experience • Functional experience in marketing or • Bloomberg
• TMT general manage- marketing-related functions • D&B’s Register of
ment experience • General management experience as head Corporations
• Outsider CEO of a division or region or as a top man-
agement executive
• Outsider CEO (yes/no)
• Tobin’s q
• Sales growth
Structuring Nath and JM • Generalized • Industry instability • CMO power in • Industry sales growth volatility • COMPUSTAT
Capabilities Mahajan estimating • Firm innovation the TMT • Ratio of R&D to sales • SEC filings
(2011) equations • TMT marketing • Sales growth • Ratio of marketing executives in the • Company websites
approach experience • ROS TMT with marketing or marketing- • Bloomberg
• Regression • CMO responsible for related experience • D&B’s Register of
analysis sales • CMO responsible for sales (yes/no) Corporations
• Finkelstein’s measure of structural power
(“percentage with higher titles”)
Appendix
Appendix
Capability
Cultural Noble, JM • Cognitive • Market orientation • ROS • Percentage of signal sentences for differ- • Annual reports
Capabilities Sinha, and mapping dimensions • ROA ent strategic orientations in letters to
Kumar • Linear • Production orientation shareholders
(2002) economet- • Selling orientation
ric models
• Regression
analysis
Cultural Yadav, JM • Textual • CEO future focus • Speed of detec- • Number of future-focused sentences • Internet Archive’s Way-
Capabilities Prabhu, and analysis • CEO external focus tion • Number of words denoting attention to back Machine
Chandy • Proportion- • CEO internal focus • Speed of devel- customers and competitors • Factiva
(2007) al hazard opment • Number of words denoting attention to • Thomson Directory of
model with • Breadth of de- inward, organization-specific issues Internet Banks
covariates ployment of • Registration date of primary domain • Federal Deposit Insurance
technology per- name Corporation
taining to Internet • Date when bank went online with a • Online Banking Report
banking transactional capability • Company websites
• Sum of Internet banking features offered • Compact D/SEC database
to customers
Relational Boubakri, JCF • Regression • Political and judicial • Board of direc- • Tenure of chief executive politician • World Bank privatization
Capabilities Cosset, and analysis environment tors with politi- • Government fractionalization database
Saffar • Economic development cally experienced • Index of judicial independence • Privatization Barometer for
(2008) • Bureaucracy member (yes/no) • Natural log of per capital GDP OECD countries
• Corruption • Number of procedures a start-up needs to • Annual reports
• Firm size, sector, loca- comply with in order to obtain a legal • Country-specific company
tion, and leverage status handbooks
• Residual government • International Country Risk Guide as- • LexisNexis
ownership sessment of the corruption in government • Who’s Who
• Fraction held by for- • Natural log of total sales at the time of • Forbes
eigners privatization • Fortune
• Privatization method • Regulated sector (yes/no) • Government and
parliament websites
89
90
Capability
Relational Cui and JM • Random- • Alliance portfolio • Firm innovation • Rating of firm’s level of innovation on a • Fortune magazine’s
Capabilities O’Connor effects resource diversity scale from 0 to 10 (based on Fortune’s database of the World’s
(2012) model • Functional survey) Most Admired Companies
heterogeneity • Number of unique two-digit codes of the • SDC Platinum
• National dispersion partner firms in the portfolio, divided by • COMPUSTAT
• Majority control portfolio • Hoover’s Online
• Alliance management • Number of pairs of alliances in the port- • Company websites
function folio that do not share any common ac- • Bureau of Census
• Market uncertainty tivities, divided by the total number of • Mergent Online
pairs of alliances in the portfolio
• Unique number of countries of the part-
ner firms, divided by portfolio size
• Majority ownership (yes/no)
• Top management position responsible for
alliance management (yes/no)
• Volatility of the value of shipments
(sales) in the alliance industry
Relational Faccio, JF • Regression • Firm size • Corporate bailout • Logarithm of company’s equity market • “Chiefs of State and
Capabilities Masulis, analysis • Number of employees (yes/no) capitalization Cabinet Members of
and • Business risk • Logarithm of number of employees Foreign Governments”
McConnell • Collateral • Standard deviation of the company’s (U.S. Central Intelligence
(2006) • Firm financial standing monthly stock returns Agency)
• Government stake • Ratio of property, plant, and equipment • Government and parlia-
• Privatized (yes/no) to total assets ment websites
• Corruption • ROA • Worldscope
• Economic development • Leverage • Extel
• Percentage of voting shares held by a • LexisNexis
firm’s home country national and local • SDC Platinum
governments • Fortune 500 Global List
• Country-level index for corruption
• Logarithm of GDP per capita
Relational Hillman JMAN • Regression • Political connections • Firm performance • Number of directors with political • SEC filings
Capabilities (2005) analysis experience on the board of the respective • Who’s Who in Corporate
firm America
• Market capitalization • COMPUSTAT
• Tobin’s q
• ROS
• ROA
Appendix
Appendix
Capability
Relational Hoang and AMJ • Regression • General alliance • Project success • Number of R&D alliances each firm in a • Lifecycle (database main-
Capabilities Rothaermel analysis experience dyad had entered tained by IMS Health)
(2005) • Dyad alliance experi- • Number of prior R&D alliances between • BioScan (industry publica-
ence the pair of firms in a dyad tion)
• FDA and/or EMEA-approved, marketa- • Recombinant Capital data-
ble new drug (yes/no) base
• USPTO
Relational Houston and JMR • Event study • Supplier asset • Announcement of • R&D-to-sales ratio • Wall Street Journal
Capabilities Johnson • Regression specificity a joint venture • Market-to-book ratio • COMPUSTAT
(2000) analysis • Supplier performance versus a contract • Index constructed from within-industry • CRSP
ambiguity agreement global reputation rank (high/low) • Fortune magazine’s
• Reputation • Abnormal market America’s Most Admired
return Corporations
Relational Lavie SMJ • Fixed • Technology, marketing, • Market • Mean value of R&D investments of • SDC Platinum
Capabilities (2007) effects and financial network performance partner firms, advertising investments of • Factiva
models for resources partner firms, and of cash funds available • SEC filings
market per- • Human network to partners • COMPUSTAT
formance resources • Mean number of employees of the part- • CRSP
• Network prominence ner firms
• Relative partner • Percentage of publicly traded partners in
profitability the alliance portfolio
• Relative partner • Mean difference between the ROA of
alternatives partners
• Bilateral competition • Ratio of each partner’s number of alli-
• Multilateral ances with other focal firms to the num-
competition ber of alliances that each focal firm had
with other partners
• Percentage of matches between the
firm’s primary industry segment and the
primary industry segments of its partners
• Sum of squared proportions of partners’
sales in each industry segment
91
92
Capability
Relational Swamina- JM • Event study • Network centrality • Abnormal stock • Number of direct firm partners • SDC Joint Ventures &
Capabilities than and • Market • Network efficiency returns • Number of firm partners in non- Strategic Alliances
Moorman model • Network density overlapping SIC codes • CRSP
(2009) • Fama- • Network reputation • Total number of unique relationships • COMPUSTAT
French • Marketing alliance between a firm’s partners divided by the • Fortune magazine’s
model capability total number of possible ties among its America’s Most Admired
partners Companies
• Average reputation score
• Abnormal returns from marketing
alliances
Relational Thomaz and JM • Event study • Repeat partnership • Idiosyncratic risk • Previous engagement in a strategic alli- • SDC Joint Ventures &
Capabilities Swamina- • Hierar- • Network density • Systematic risk ance (yes/no) Strategic Alliances
than (2015) chical line- • Partner firm network • Number of connections among all firms • CRSP
ar model density in a focal firm’s network divided by the • COMPUSTAT
total number of possible connections • Kenneth French’s website
among these firms
• Number of connections among all firms
in the partner firm’s network divided by
the total number of possible connections
among these firms
• Risk measures based on Carhart-
modified Fama-French model and vari-
ance in returns
Relational Tuli, JMR • Sales • Relationship • Sales growth to a • Logarithm of number of different ties • SEC filings
Capabilities Bharadwaj, growth multiplexity customer between a supplier and a customer • SDC databases
and Kohli model • Customer industry • Sales volatility • Measure based on Herfindahl Concentra- • Company websites
(2010) • Sales competitive intensity from a customer tion Index • Factiva
volatility • Customer industry • Industry average of intangibles calculated • ABI/INFORM
model intangibles intensity as 1 minus average ratio of physical as- • COMPUSTAT
sets to gross total assets
• Logarithm of sales growth to a customer
between two periods
• Logarithm of the coefficient of variation
in sales over time
Appendix
Appendix
Capability
Relational Wang, JMR • Regression • Information reach • Firm performance • Number of relations a firm receives and • COMPUSTAT
Capabilities Gupta, and analysis • Information richness sends out in the network • Company websites
Grewal • Brokerage position and structural hole’s • Hoover’s Online
(2016) measure of the degree to which a firm • LinkedIn
depends on directly connected neighbors • Forbes.com
to connect to others in the networks • LexisNexis
• Tobin’s q
Relational Wuytts, JM • Regression • Technological diversity • Radical • Index of technological diversity • Recombinant Capital data-
Capabilities Dutta, and analysis of a firm’s agreement innovation • Index of repeat partnering base
Stremersch portfolio • Incremental • Cumulative number of incremental inno- • Food and Drug Administra-
(2004) • Repeated partnering innovation vations and of radical innovations tion
• Stock of incremental • Profitability • Total number of new radical drugs that • COMPUSTAT
innovations received FDA approval • USPTO
• Stock of radical • Total number of new incremental drugs
innovations that received FDA approval
• Net income
Relational Zheng, SMJ • SFE • Political ties • Survival • Member of firm’s senior management • China Statistical Yearbook
Capabilities Singh, and • Maximum- • Central ties • Sales growth held or previously held a senior govern- • China Electronics Industry
Mitchell likelihood • Local ties ment or political appointment (yes/no) Yearbook
(2015) probit • Firm efficiency • Appointment at national level (yes/no) • China Electronics News
model • Prior sales growth • Appointment at provincial, city, and • Wanfang Data Company
• Regression county levels (yes/no)
analysis • Ratio of firm’s efficiency to estimated
efficiency frontier based on most effi-
cient firm in the sample
• Percentage change in TV sales revenue in
previous years
• Discontinuation of firm’s operations in
TV manufacturing or overall operations
(yes/no)
• Percentage change in TV sales revenue in
current years
93
94
Capability
Change Banerjee, JM • Regression • Indirect learning from • International • CEO’s educational or work experience • Prowess database
Capabilities Prabhu, and analysis leaders growth in devel- from developed markets • Annual reports
Chandy • Indirect learning from oped markets • Ratio of sum of revenues of developed • Prime Directors
(2015) foreign competitors market competitors to sum of revenues of • Thomson One Banker
• Indirect learning from all competitors in domestic market • Fame
domestic competitors • Sum of revenues from developed markets • Osiris
• Indirect learning from for the top three domestic competitors
global competitors • Sum of revenues of top three global
• Indirect learning from competitors
networks • Product of scale and scope of developed
market revenues of business group mem-
bers
• First difference of the log-transformed
revenues in developed markets
Change Fiss and AMJ • Content • Visibility • Frames of • Total number of German news articles • Daily newspapers
Capabilities Zajac analysis • Ownership strategic change mentioning a firm • Worldscope
(2006) • Regression • Structural change • Returns to • Ownership scale ranging from 0 to 4 • Annual reports
analysis shareholders depending on level of holdings in the
firm
• Use of value-based management, stock-
option plans for company management,
and/or internationally accepted account-
ing standards (yes/no)
• Signaling sentences for specific man-
agement frames in annual reports
• Total stock market returns
Change Hoisl, SMJ • Regression • Experience diversity of • R&D team • Experience gathered in industries other • www.motorsportarchiv.de
Capabilities Gruber, and analysis R&D teams performance than motorsports • F1 yearbooks
Conti • Experience in Championship Auto Rac- • Database at
(2017) ing Teams sport www.motorsport-total.com
• Experience in Formulas other than F1 • Internet searches
• Experience with different F1 constructors
• Experience with car construction for
noncommercial events
• Percentage deviation of their cars’
qualifying time from that of the fastest
car during the qualifying session
Appendix
Appendix
Capability
Change Jain (2016) SMJ • Event • Number of hires • Core change to • Number of hires in an organization • USPTO
Capabilities history • Hire experience organizational divided by the number of scientists • Capital IQ database
methods • Hire distant knowledge knowledge present at the firm
• Regression • Firm age • Number of patents the hired scientist had
analysis already worked on
• Sum of skill vectors of the new hires as a
proxy for distant knowledge
• Time elapsed in years since the firm’s
first patent application
• Change in the composition of group of
the firm’s core technologies
Change Narasimhan, MKT • SFE • Technological • Relative • Domain of expertise according to the • COMPUSTAT
Capabilities Rajiv, and SCI • Content know-how absorbed • profitability different patent classes • USPTO
Dutta analysis • Marketing capability • Know-how drawn on according to the
(2006) • R&D capability patents cited by the firm
• Operations capability • R&D expenditure
• Relative marketing • Marketing expenditure
capability • Stock of innovation
• Relative operations • ROI
capability • Relative capabilities are obtained by
• Relative absorptive subtracting the sample average capability
capacity from the respective firm’s capability
• Relative technological • Technological obsolescence is based on
obsolescence the issue dates of the patents and back-
ward citations
• Relative technological obsolescence is
computed as the difference between the
firm’s technological obsolescence and
the sample average technological
obsolescence
95
96
Capability
Change Song, MAN • Regression • Path dependence • Knowledge • Ratio of the number of self-citations to • USPTO
Capabilities Almeida, SCI analysis • Expertise fit sourced the total number of citations made by a
and Wu • Innovation area hiring firm in each patent technology
(2003) • Domestic mobility • Fit of mobile engineer’s area of expertise
and hiring firm’s core technology areas
(yes/no)
• Fit of patents filed by mobile engineer
with hiring firm’s core technology areas
(yes/no)
• Mobility from a U.S. firm to a U.S.-
based R&D lab of a non-U.S. firm
(yes/no)
• Number of citations each hiring firm
patent makes to any patent from the
mobile engineer’s previous firm
Appendix
References
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Dominik Kemsa

More information about this series at http://www.springer.com/series/13198

ISSN 2625-3577 ISSN 2625-3615 (electronic)

Library of Congress Control Number: 2018963759

List of Figures .......................................................................................................................... XI

4.4 Relational Capabilities ................................................................................................... 49

Figure 1-1: Research Questions ............................................................................................... 2

AMJ Academy of Management Journal

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019

1.2 Research Questions

Source: Own illustration

First, this thesis investigates whether it is possible to conceptualize MEXC as a comprehen-

1.3 Thesis Structure

Chapter 2: Theoretical and Conceptual Background

Chapter 3: Research Process

Methodological Framework for Main Analysis

Chapter 4: Development and Evaluation of Secondary Data Indicants Conceptual

4.5 Change Capabilities

3 Chapter 5: Aggregation of Developed Indicants to MEXC Dashboard Stages II & III

2.1 Resource-Based Theory and Marketing Excellence

2.1.1 Foundations of Resource-Based Theory

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019

2.1.2 The VRIO Framework

MEXC is considered as a holistic capabilities framework irrespective of the specific industry

2.1.3 Derivation of MEXC Capabilities Framework

Capabilities VRIO MEXC Capabilities Framework VRIO Outcome

(1) Functional Value (2)

Source: Own illustration

However, it is important to note that MEXC is conceptualized as a comprehensive and indi-

2.2 Role of Marketing in Investment Decisions

3.1 Identification of Relevant Literature

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019

Source: Own illustration

Source: Own illustration

Source: Own illustration

3.2 Description of Conceptualization

Screening and subsequent

Advanced Further integration

Source: Own illustration

“The quality of information that enables Clearness, conciseness, and

Efficiency in calculation and data

4.1 Functional Capabilities

4.1.1 Managerial Levers

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2019

Second, a considerable number of academic studies and practice-oriented publications scruti-

Indicant #1 Innovation Performance (IP)

4.1.3 Quality Delivery

Indicant #2 Quality Investment (QI)

Indicant #3 Quality Score (QS)

Criterion #2 Quality Investment #3 Quality Score

Source: Own illustration

4.1.4 Profit Focus

Indicant #4 Efficiency Score (ES)

To sum up, ES conveys a differentiated assessment of a firm’s current profitability and is

Indicant #5 Profit Pool Search Intensity (PPSI)

Criterion #4 Efficiency Score #5 Profit Pool Search Intensity

Source: Own illustration

4.1.5 Interim Conclusion and Recommendation

Indicant Data Availability Key Data Sources

#4 Efficiency Score Public Mixed Internal AMADEUS, COMPUSTAT, EDGAR

VentureXpert, LexisNexis, annual reports, internal

Source: Own illustration

4.2 Structuring Capabilities

#4 Efficiency Score Public Mixed Internal  AMADEUS, COMPUSTAT, EDGAR

 VentureXpert, LexisNexis, annual reports, internal