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Advertising and R&D: Theory and evidence from France

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  • Philippe Askenazy

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, IZA - Institute for the Study of Labor - IZA, Banque de France - Banque de France)

  • Thomas Breda

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Delphine Irac

    (Banque de France - Banque de France)

Abstract

This paper exploits a unique panel of 59,000 French firms over 1990-2004 to investigate the interactions between R&D, advertising and the competitive environment.The empirical findings confirm the predictions of a dynamic model that complements results known in static frameworks. First, more competition pushes Neck and Neck firms to advertise more to attract a larger share of consumers on their products or services. Second, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D.

Suggested Citation

  • Philippe Askenazy & Thomas Breda & Delphine Irac, 2010. "Advertising and R&D: Theory and evidence from France," PSE Working Papers halshs-00564988, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00564988
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564988
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    Keywords

    advertising; innovation; competition; Lerner;

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