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    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 factor
    Author
    Tackx, Koen
    Rothenberger, Sandra
    Verdin, Paul
    Publication Year
    2017
    Journal
    European Management Journal
    Publication Volume
    35
    Publication Issue
    3
    Publication Begin page
    327
    Publication End page
    335
    
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    Abstract
    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 Capturing
    Knowledge Domain/Industry
    Special Industries : Energy
    DOI
    10.1016/j.emj.2016.07.008
    URI
    http://hdl.handle.net/20.500.12127/5640
    ae974a485f413a2113503eed53cd6c53
    10.1016/j.emj.2016.07.008
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