ABSTRACT 

Start-up firms play a major role in the economy, but little is known about how they allocate their scarce resources, in general, or whether or not they should invest in marketing, in particular. We develop a conceptual model integrating insights from managerial interviews with signaling theory that indicates how investing in conducting systematic marketing affects firm valuation, and how the firm’s stage of development (early versus late) and primary customer-type (B2B versus B2C) moderates the marketing-firm valuation. Our empirical analysis reveals marketing affects firm valuation positively for some firms and negatively for others, depending on the noted moderators. Further, we find more than half of early-stage B2B and B2C start-ups in our two datasets are making incorrect decisions on whether to allocate resources to marketing.