Is advertising for losers? An empirical study from a value creation and value capturing perspective
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Publication type
Journal article with impact factorPublication Year
2017Journal
European Management JournalPublication Volume
35Publication Issue
3Publication Begin page
327Publication End page
335
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Does advertising lead to higher profits? This question has preoccupied company executives and academic researchers for many decades. Arguments have been put forth in both directions, and evidence is mixed at best. In this article, we re-examine the question from a value creation and value capturing perspective, which allows us to re-interpret and reconcile the different views and empirically validate the resulting hypotheses. Using a database of the top 500 brands of established companies during the 2008-2015 period, we find that advertising spending has no significant impact on profitability, while both brand value and research and development (R&D) spending have a clearly positive effect. In addition, we observe a positive interaction effect between advertising spending and R&D spending and a negative interaction between brand value and R&D spending on profitability. These findings corroborate the view that advertising in and of itself does not improve profitability, rather, its effect is positive only when it acts in support of customer value creation as a result of R&D.Keyword
Advertising Effectiveness, Brand Value, Research and Development, Profitability Drivers, Value Creation, Value CapturingKnowledge Domain/Industry
Special Industries : Energyae974a485f413a2113503eed53cd6c53
10.1016/j.emj.2016.07.008