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Advertising Intensity and R&D Intensity: Differences across Industries and Their Impact on Firm's Performance

Author

Listed:
  • Trina Larsen Andras

    (Department of Marketing, Drexel University, U.S.A.)

  • Srini S. Srinivasan

    (Department of Marketing, Drexel University, U.S.A.)

Abstract

To compete successfully in the market place, organizations optimally utilize their inputs and benchmark their key inputs and outputs against other successful firms. Two of the key inputs that organizations should effectively manage are marketing expenses and R&D expenses. In this research, we investigate a) if these two inputs systematically vary across consumer product and manufacturing product organizations, and b) if these two factors have an impact on firm's performance. We find that consumer product organizations have higher advertising intensity than manufacturing product organizations. However, manufacturing product organizations have higher R&D intensity than consumer product organizations. Findings of this research also reveal that advertising intensity and R&D intensity are positively related to firm profit margins.

Suggested Citation

  • Trina Larsen Andras & Srini S. Srinivasan, 2003. "Advertising Intensity and R&D Intensity: Differences across Industries and Their Impact on Firm's Performance," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(2), pages 167-176, August.
    • Handle: RePEc:ijb:journl:v:2:y:2003:i:2:p:167-176
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    References listed on IDEAS

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    Cited by:

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    2. Bart Bronnenberg & Sanjay Dhar & Jean-Pierre Dubé, 2011. "Endogenous sunk costs and the geographic differences in the market structures of CPG categories," Quantitative Marketing and Economics (QME), Springer, vol. 9(1), pages 1-23, March.
    3. Jian Xu & Feng Liu & You-hua Chen, 2019. "R&D, Advertising and Firms’ Financial Performance in South Korea: Does Firm Size Matter?," Sustainability, MDPI, vol. 11(14), pages 1-16, July.
    4. Basma Sellami Mezghanni, 2010. "How Ceo Attributes Affect Firm R&D Spending? New Evidence From A Panel Of French Firms," Post-Print hal-00479532, HAL.
    5. Salman Ali & Syed Mizanur Rahman, 2020. "R&D Expenditure in a Competitive Landscape: A Game Theoretic Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(1), pages 47-60, June.
    6. Tjandrawinata, Raymond R. & Simanjuntak, Destrina Grace, 2012. "Factors affecting productivity of research-based pharmaceutical companies following mergers and acquisitions," MPRA Paper 42514, University Library of Munich, Germany.
    7. Tolossa Fufa Gulema & Zhou Xiaoyan, 2021. "Mediating Role of Innovation Capacity in the Relationship between Corporate governance and Firm Performance: evidence from Chinese listed firms," International Journal of Science and Business, IJSAB International, vol. 5(4), pages 105-122.
    8. Juan Carlos Bou & Albert Satorra, 2014. "Univariate versus multivariate modeling of panel data," Economics Working Papers 1417, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Wan-Chen Wang & Maria Manuela Santos Silva & Luiz Moutinho, 2016. "Modelling Consumer Responses to Advertising Slogans through Artificial Neural Networks," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 15(2), pages 89-116, December.
    10. Corina Burunciuc & Halit Gonenc, 2020. "Reforms Protecting Minority Shareholders and Firm Performance: International Evidence," JRFM, MDPI, vol. 14(1), pages 1-24, December.
    11. Hendrik Klier & Christian Schwens & Florian B. Zapkau & Desislava Dikova, 2017. "Which Resources Matter How and Where? A Meta-Analysis on Firms’ Foreign Establishment Mode Choice," Journal of Management Studies, Wiley Blackwell, vol. 54(3), pages 304-339, May.
    12. Yixiao Zhou, 2014. "Role of Institutional Quality in Determining the R&D Investment of Chinese Firms," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(4), pages 60-82, July.
    13. Mantian Xue & Shudong Zhao, 2009. "Influence of export on innovation activities of domestic enterprises," Frontiers of Economics in China, Springer;Higher Education Press, vol. 4(3), pages 449-460, September.
    14. Jia-Hua Tsai & Shiow-Ying Wen, 2013. "Intellectual Capital, Corporate Governance and Firm Performance," Information Management and Business Review, AMH International, vol. 5(10), pages 482-491.
    15. Fan, Di & Xiao, Chengyong & Zhang, Xiao & Guo, Yujuan, 2021. "Gaining customer satisfaction through sustainable supplier development: The role of firm reputation and marketing communication," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).
    16. Morgan, Todd & Anokhin, Sergey & Wincent, Joakim, 2018. "When the fog dissipates: The choice between value creation and value appropriation in a partner as a function of information asymmetry," Journal of Business Research, Elsevier, vol. 88(C), pages 498-504.
    17. Neelotpaul Banerjee & Somroop Siddhanta, 2015. "An Empirical Investigation on the Impact of Marketing Communication Expenditure on Firms’ Profitability: Evidence from India," Global Business Review, International Management Institute, vol. 16(4), pages 609-622, August.
    18. Millet, Kobe & Lamey, Lien & Van den Bergh, Bram, 2012. "Avoiding negative vs. achieving positive outcomes in hard and prosperous economic times," Organizational Behavior and Human Decision Processes, Elsevier, vol. 117(2), pages 275-284.
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    20. Chaudhuri, Kausik & Kumbhakar, Subal C. & Sundaram, Lavanya, 2016. "Estimation of firm performance from a MIMIC model," European Journal of Operational Research, Elsevier, vol. 255(1), pages 298-307.
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    More about this item

    Keywords

    marketing expenditures; R&D expenditures; firm's performance;
    All these keywords.

    JEL classification:

    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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