Firm efficiency, advertising and profitability: Theory and evidence

Chen, Jihui; Waters, George A.

doi:10.1016/j.qref.2016.04.004

Cited by 23 publications

(17 citation statements)

References 28 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Intangible assets investment makes the firm's success more believable in the market, which is important for branding and reputation (Aaker, 2007;Yin Wong & Merrilees, 2008;Montresor & Vezzani, 2016). Chen and Waters (2017) demonstrated that advertising positively affects profits. According to Wang et al (2017), R&D investment is positively related to financial performance.…”

Section: Introductionmentioning

confidence: 99%

Intangible Assets Investment and Firms’ Performance: Evidence From Small and Medium-Sized Enterprises in Korea

Seo

Kim

2020

Journal of Business Economics and Management

View full text Add to dashboard Cite

While many studies have examined the relationship between investment in intangibles assets and performance in large corporations, current research is lacking in regard to intangible investments in small and medium enterprises (SMEs). This study looks at SMEs in which intangible investments would usually be minor because they tend to consider intangible investment as an inefficient cost and concentrate on investments in tangible assets. This paper aims to contribute to the current literature and suggests that investment in the intangible assets of (human capital, advertising, R&D) is essential for SMEs pursuing superior firm performance. Actual data collected from 173 SMEs in Korea were analyzed employing hierarchical regression methodology. Results indicate that all three intangible resources have a positive effect on a firm's profitability and value. Interestingly, this research finds that investment in advertising has the most influential impact on a firm's profitability and value. This study has implications for SMEs in achieving their profitability and value. The results in this study highlight that intangible investment is not a waste of money for SMEs, and that business managers could strategically utilize these three key contributors (human capital, advertising, R&D) and adopt investment in intangible assets to accomplish their managerial goals.

show abstract

Section: Introductionmentioning

confidence: 99%

Intangible Assets Investment and Firms’ Performance: Evidence From Small and Medium-Sized Enterprises in Korea

Seo

Kim

2020

Journal of Business Economics and Management

View full text Add to dashboard Cite

show abstract

“…Finally, we found that advertising investment strategies have a higher pattern on the causal relationship with gross revenue. The results of each strategy are significantly higher comparing with the other measures of productivity; nevertheless, this pattern is the expected, since the supporting evidence of advertising accountability and the processes would make advertising spending more "essential to firm organic growth" (Gupta & Steenburgh, 2008), and the benefits induced by advertising, in turn, boost future sales and profits of the firm (Chen & Waters, 2017;Osinga, Leeflang, Srinivasan, & Wieringa, 2011).…”

Section: Productivity and Economic Differences By Advertising Investmmentioning

confidence: 84%

“…Many studies find that firms which invest in advertising show a positive effect on their performance and profitability (Comanor & Wilson, 1974;Porter, 1974;Lambin, 1976;Kirmani & Wright, 1989;Erickson, 1992;Leone, 1995;Mela, Gupta, & Lehmann, 1997;Osinga, Leeflang, Srinivasan, & Wieringa, 2011;Chen & Waters, 2017). However, there are also other studies testing the relationship between advertising and firm performance, that are unable to find a clear direction of the relation (Erickson & Jacobson, 1992;Han & Manry, 2004;Joshi & Hanssens, 2009).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…In this line, Chen & Waters (2017) argue that a highly productive firm may be able to extend its market share with advertising. Overall, the effects of advertising investment in economic performance not only depend on the intensity of the expenditure as the seminal research developed by Dorfman & Steiner (1954), it also depends on other variables such as: firm size, location, foreign direct investment (FDI) flows, economic sector, and strategies of advertising investments.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Does Investment in Advertising Boost Economic Performance? Firm-Level Evidence of Ecuadorian Manufacturing

Camino‐Mogro

2019

Journal of Technology Management & Innovation

View full text Add to dashboard Cite

This paper examines how the firm´s advertising investments are related to different measures of economic and productivity performance during 2007-2017 in Ecuadorian manufacturing. Particularly, this study analyzes if firms that have advertising investments have better economic and productivity performance compare to non-advertising investment firms. In addition, this looks for evidence on how the different advertising strategies may affect productivity and gross revenue in both advertising and non-advertising firms. For this, this paper estimates the total factor productivity (TFP) at firm-level using a semi-parametric approach to reduce the simultaneous and endogeneity problems in the selection of inputs. The estimation results show that manufacturing firms which invest in advertising have an Advertising Premia on economic and productivity indicators, this premia is higher on economic outcomes. Also, the findings are that continuing advertising investment strategy firms have higher TFP, labor productivity, and gross revenue than exiting advertising investment firms, suggesting self-selection in the exit side of the market but not in the entry side of the market. Finally, the study finds that after firms entering to invest in advertising, firms experience an improvement on TFP, labor productivity, and gross revenue growth, which are in favor of learning by advertising hypothesis.

show abstract

“…Advertising expenditures have always played an important role in strategic management and consumer behavior theory. Strategic management and consumer behavior theory focuses mainly on examining the impact of advertising expenditures on market concentration (Oliveira & Oliveira, 2018); barriers to entry, purchase behaviors, or intentions (Rajabi, Dens, De Pelsmacker, & Goos, 2017;Thornhill, Xie, & Lee, 2017), profits (Chen & Waters, 2017;Kim, Jun, Tang, & Zheng, 2018), and so on. However, there are few studies on the relationship between corporate advertising expenditures, environmental innovation, and resource acquisition.…”

Section: Introductionmentioning

confidence: 99%

Is environmental innovation conducive to corporate financing? The moderating role of advertising expenditures

Liao

2019

Bus Strat Env

View full text Add to dashboard Cite

Environmental innovation is an important way for firms to achieve sustainable development and acquire resources. Based on the stakeholder, resource dependence, and signal transmission theories, this study divided environmental innovation into substantive and strategic eco‐innovation and constructed a relationship model among environmental innovation, advertising expenditures, and corporate financing. Selecting 162 Chinese manufacturing listed companies from 2012 to 2017 as the research sample and adopting the multiple regression analysis method, the study found that substantive eco‐innovation had a positive effect on corporate financing, but strategic eco‐innovation had a significant negative effect on corporate financing. Further, advertising expenditures played a positive moderating role between substantive eco‐innovation, strategic eco‐innovation, and corporate financing. The robustness test further confirmed these results.

show abstract

Firm efficiency, advertising and profitability: Theory and evidence

Cited by 23 publications

References 28 publications

Intangible Assets Investment and Firms’ Performance: Evidence From Small and Medium-Sized Enterprises in Korea

Intangible Assets Investment and Firms’ Performance: Evidence From Small and Medium-Sized Enterprises in Korea

Does Investment in Advertising Boost Economic Performance? Firm-Level Evidence of Ecuadorian Manufacturing

Is environmental innovation conducive to corporate financing? The moderating role of advertising expenditures

Contact Info

Product

Resources

About