Exploring the impact of advertising and R&D expenditures on corporate brand value and firm-level financial performance

Abstract

A parsimonious framework linking advertising expenditures and research and development expenditures to brand value, and brand value in turn to firm-level financial performance, was proposed and empirically investigated under four data conditions: data form, brand type, financial performance metric, and lag structure. Using pooled data from 125 firms (848 firm-year observations) over the period 1991-2007, 108 path analyses were conducted to compute five path model output metrics. Data on these metrics were then compared for each of the data conditions by means of analysis of variance. Although significant relationships were generally observed among framework variables, study results differed considerably across three of the four data conditions. The principal take-away from the study is that the impact of marketing activities on firm-level financial performance is likely to be in large part a function of the specific research purpose and methodology employed. As such, the take-away has implications when interpreting value-relevance findings, when constructing theories involving market-based assets, and when designing studies to investigate relationships between marketing and financial performance.

Success in Business-A Brand Equity Perspective

“…However the limitation of the research was that no broad inferences could be interpreted from the research as there was a significant difference in the outputs. The findings of the research came out with average results and provided less practical meaning in reaching a concrete decision (Peterson and Jeong, 2010).…”

“…The major constituents of the brand equity are the awareness regarding the brand name, the level of brand loyally existing among the customers, the quality associated with the brand and the various brand associations (Korkofingas and Ang, 2011). The concept of brand equity is largely product oriented but at the same time it helps in the value creation among the customers regarding the products they associate with (Park et al, 2010;Peterson and Jeong, 2010;Chatzitheodoridis et al, 2006). The brand valuation involves the cost based approach in which the cost of the brand creation is taken into account along with the associated replacement cost in launching of a fresh new brand.…”

“…A research carried out by Wang et al (2009) finds another implication of advertising of the brand is that advertisement has significant contribution to the brand equity. In order to find out the effect of the advertising and the amount of expenditure allocated for the research and development on corporate brand and also on the level of the firm's performance a research was conducted by Peterson and Jeong (2010). The research conducted by them helps to critically find out the implication of the varying degree and the nature of the advertising in contributing to the brand value.…”

An empirical investigation of brand equity: drivers and their consequences

“…The theory has a high level of concord with the idea that marketing investment in a brand is a pivotal dimension of brand value enhancement (e.g. Simon and Sullivan 1993;Srinivasan et al 2005;Chu & Keh 2006;Keller & Lehmann 2009;Peterson & Jeong 2010;etc.). The results of this study strongly support this view.…”

Impact of marketing and R D expenditures on financial performance: a research in manufacturing industry

“…Value creation process is related to research and development activities, while value appropriation process is related to advertising activities (Peterson & Jeong, 2010). Andras and Srinivasan (2003) stated that marketing and research and development expenditures are two key inputs which should be effectively managed to compete successfully in the market.…”