Economic Reforms, Marketing Mix and Firm Performance: Evidence from the Manufacturing Sector

Abstract

Economic reforms initiated in 1991 exposed domestic manufacturing firms to foreign competition. These reforms created both new opportunities and threats for domestic firms. In response to the increasing presence of foreign competitors, domestic firms altered not only their product offerings but also their marketing mix strategies to compete more effectively with global competitors. In this context, this study examines the relationship between firm performance and the marketing mix of Indian manufacturing firms following the implementation of economic reforms. By applying a panel data framework to 1,015 Indian manufacturing firms, we study two key periods: the transition phase (1991–2000) and the consolidation and growth phase (2001–2021). The results provide evidence that domestic firms substantially increased their expenditures on marketing mix components during the second sub-period amidst rising competition. Further, the results highlight the positive learning curve of medium-sized firms that effectively leverage marketing investments during the post-reform period. Furthermore, it documents a significant positive relationship between firm performance and marketing mix components during the growth phase, suggesting that reforms improve the efficiency of marketing mix measures during this phase. The results support the dynamic capabilities theory, which holds that firms achieve sustained competitive advantage in dynamic environments by developing internal and external capabilities. From a policy perspective, the results highlight the need to facilitate knowledge sharing and capacity building to help firms reconfigure their marketing mix and maintain competitiveness and profitability. Future research may extend this work by exploring comparative analyses across emerging economies undergoing similar economic transformations.