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Measuring the effects of advertising on green industry sales: a generalized propensity score approach

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  • Yajuan Li
  • Marco A. Palma
  • Charles R. Hall
  • Hayk Khachatryan
  • Oral Capps

Abstract

This article estimates the effects of advertising expenditures on annual gross sales of green industry firms using a quasi-experimental framework. In order to account for potential selection bias, a generalized propensity score and a dose-response function are used to estimate advertising treatment effects. The method used allows us to investigate the relationship between the dose (advertising expenditures) and the response (firm sales). We use data from the National Green Industry Surveys of 2009 and 2014 to conduct the analysis. To further investigate potential heterogeneous advertising effects of the size of the firms, we separate the sample into small firms and large firms, according to their annual gross sales. The results indicate that the magnitude and shape of the response function depend on the size of the firm. For small firms, increasing advertising spending yields to higher sales within a range of advertising spending. Beyond this range, advertising spending increases do not impact sales any more. Thus, small firms’ management should carefully monitor advertising input. For large firms, on the other hand, the current evidence does not support a positive relationship between advertising spending and sales since the marginal treatment effect is insignificant almost over the entire range of adverting spending.

Suggested Citation

  • Yajuan Li & Marco A. Palma & Charles R. Hall & Hayk Khachatryan & Oral Capps, 2019. "Measuring the effects of advertising on green industry sales: a generalized propensity score approach," Applied Economics, Taylor & Francis Journals, vol. 51(12), pages 1303-1318, March.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:12:p:1303-1318
    DOI: 10.1080/00036846.2018.1527448
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    Cited by:

    1. Dooyoung Choi & Ha Kyung Lee, 2020. "Beneficiary Foci Types and Performance Appeals in Green Advertising," Sustainability, MDPI, vol. 12(15), pages 1-15, August.
    2. Kim Kiman & Yu Jongmin, 2022. "Linear or Nonlinear? Investigation an Affect of Public Subsidies on SMEs R&D Investment," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2519-2546, September.
    3. Shreya Biswas, 2021. "She Innovates- Female owner and firm innovation in India," Papers 2109.09515, arXiv.org.
    4. Cui, Xin & Ji, Xinyuan & Meng, Wei & Song, Qi, 2023. "Product market competition and corporate advertising expenditure: Evidence from a natural experiment," Research in International Business and Finance, Elsevier, vol. 64(C).
    5. Xuan Wei & Hayk Khachatryan & Alan Hodges & Charlie Hall & Marco Palma & Ariana Torres & Robin Brumfield, 2023. "Exploring market choices in the US ornamental horticulture industry," Agribusiness, John Wiley & Sons, Ltd., vol. 39(1), pages 65-109, January.

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