A firm's response to economic volatility is a topic of interest to managers and academics alike. This study examines the relationship between resources for marketing and financial capabilities and performance of firms in recovery from economic crisis in Thailand. The authors researched this timely topic by collecting data from the Thailand market. Marketing capabilities (market orientation & strategic flexibility) and financial capabilities (financial strength & financial diversification) were chosen as independent variables. The results indicated that financial strength and financial diversification, as well as strategic flexibility, had positive influences on firms' performance. However, financial capabilities had greater influences on performance than marketing capabilities. Comparing these two types of capabilities sheds light on the resource allocation decision between the two functional areas when firms operate amid an economic crisis.
In the global economy, domestic and international firms become more susceptible to economic crises, regardless of where they originate. Increased globalization and emergence of the network economy bring more direct and indirect effects of an economic crisis to firms (Achrol & Kotler, 1999). Although the Asian financial crisis, which began in Thailand in 1997, has passed, it continues to impact market conditions and firm performances in Asia and beyond. Among firms that have survived such a difficult time, it seems important to address the question of why some have recovered and now perform well while others do not. What we learn on how they have utilized certain strategies and resources will provide much insight to practitioners and researchers. Here we draw from a resource-based view in strategic management for identifying and justifying key determinants (Morash & Lynch, 2002). An understanding of the importance of the relationship between resources and performance and how these resources can be used to help a firm respond effectively to major crises may shed light on resource allocation decisions between the two functional areas: marketing and financial capabilities. This study also examines whether marketing capabilities play a more critical role than financial capabilities in explaining changes in a firm's recovery from economic crisis.
LITERATURE REVIEW AND HYPOTHESES
Relevant literature on economic crises, marketing capabilities and financial capabilities are reviewed in this section. Economic crises affect the ability of firms to manage a critical event. We use the resource-based view to help us understand how these firms exploit their capabilities to face the challenges of an economic crisis. Comparable effects of marketing and financial capabilities in managing this critical event are also considered.
International economic crises have emerged many times over the past decades. In the Central and South America crisis of 1982-1983, Mexico, Brazil, and Argentina were unable to make regular payments to international creditors. In 1992, a wave of speculation attacked the European Monetary Systems (Kim & Haque, 2002). When the Mexican government devalued its currency against the U.S. dollar in 1997, the crisis had widespread effects on currencies of both Latin and non-Latin American countries (Koo & Kiser, 2001).
The Asian financial crisis which emerged in Thailand in 1997, rapidly affected economic systems and stability in many countries in Asia and beyond (Wong, 2001). It was a surprise to people, managers, and researchers because economic growth of these countries had been fast and showed healthy signs since 1990. This crisis raised many questions. Why had the crisis occurred? How can we prevent an economic crisis from recurring? How do we manage if it recurs? Thus, the emergence of the Asian financial crisis has become an interesting academic study. …