Deleersnyder, B. Dekimpe, M.G. Steenkamp, J.B.E.M. Leeflang, P.S.H. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
Abstract
Cutting advertising budgets has traditionally been a popular reaction by companies around the globe when faced with a slacking economy. Still, anecdotal evidence suggests the presence of considerable cross-country variability in the cyclical sensitivity of advertising expenditures. We conduct a systematic investigation into the cyclical sensitivity of advertising expenditures in 37 countries across all continents, covering up to 25 years and four key media: magazines, newspapers, radio and television. While our findings confirm that advertising moves in the same direction as the general economic activity, we also show that advertising is considerably more sensitive to business-cycle fluctuations than the economy as a whole, with an average co-movement elasticity of 1.4. Interestingly, advertising’s cyclical dependence is systematically related to the cultural context in which companies operate. Advertising behaves less cyclically in countries high on long-term orientation and power distance, while advertising is more cyclical in countries high on uncertainty avoidance. Further, advertising is more sensitive to the business cycle in countries characterized by significant stock-market pressure and few foreign-owned multinationals. These results have important strategic implications for both global advertisers and their ad agencies.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number
ERS-2007-095-MKT Revision_Date: 2009-07-29.