Business strategy: a study on cost stickiness behavior

This paper examined the effect of firm-level business strategies on the stickiness of Selling and Administrative cost in manufacturing firms. It applied business strategies scoring model developed by Bent-ley et al. (2013). This model transforms the firm’s financial data into business strategy classification based on Miles and Snow typology. This paper focused on prospectors and defender business strategy and its behavior regarding expense stickiness. Prospectors are characterized as innovation-oriented firms and tend to modify their product market-mix rapidly, while defenders are characterized as a more stable company that compete on the basis of price, and focusing on a narrow product base. This paper found that defender (less innovative) business strategy reduces the expense stickiness on Selling and Administrative expense. Such findings add the explanation in respect of asymmetric cost behavior such as the expense stickiness phenomenon. Keywords: Business strategy, defender, expense stickiness, prospector