Culture and its Effect on Management Myopia and Financial Performance: A Comparison of Firms from Short-term and Long-term Oriented Cultures

Abstract

Myopic management has been defined as making decisions based on short-term profitability as opposed to the long-term value. Myopic firms typically cut expenditures in advertising and R&D which result in the destruction of the long-term value of the firm. This paper reports the findings of a study that investigated the impact of culture on myopic management, i.e., do firms from cultures that are short-term oriented behave more myopically than firms from cultures that are long-term oriented? The findings support the hypotheses that firms from long-term oriented cultures spend more on R&D and advertising than firms from short-term cultures which then translates to higher profitability for firms from long-term oriented cultures in comparison to firms from short-term oriented cultures.