Advertising intensity and concentration change in manufacturing industries

The effect of advertising intensity on concentration change in 269 manufacturing industries is investigated in this dissertation. A single-equation regression model was utilized, emphasizing the 1967-1982 period. The dependent variable, concentration change, is a measure of change in the degree of competition. Besides advertising intensity (levels and changes), the other independent variables are initial concentration ratio, industry size, industry growth, and dummy variables for industries categorized as: (1) industries with high research and development spending; (2) convenience good industries; and (3) consumer good industries;The advertising intensity variables were hypothesized to have positive effects on concentration change because: (1) the advertising data source, Leading National Advertisers, mainly consists of national advertising, which tends to be more persuasive than informative; (2) there exist various real and pecuniary scale advantages in advertising; (3) some forms of advertising cost so much (especially network TV) that it creates an absolute cost barrier to entry; (4) large firms benefit by a number of restrictive practices in advertising; (5) there exist a number of advertising characteristics that favor larger firms; and (6) larger firms are the favorite customers of advertising agencies and receive preferential treatment. Furthermore, since these factors apply especially well to network TV, the network TV advertising intensity coefficients were expected to be larger than those for other types of advertising intensities;The regression results supported the above hypotheses; it appears that advertising intensity does have a positive and significant effect on concentration change for 1967-1982. The total, electronic (spot and network TV plus network radio) and network TV advertising intensities (levels and changes) were always positive and generally significant at the 1% or 5% levels. In particular, as hypothesized, network TV advertising intensity (both levels and changes) generally had larger coefficients than their total or electronic advertising intensity counterparts. And, from the 5-year subperiod analyses, it appears that the effects of advertising intensity levels (especially for network TV) on concentration change seem to be getting increasingly larger in each successive 5-year period since 1967.