R&D, Advertising and Firms’ Financial Performance in South Korea: Does Firm Size Matter?

Abstract

Advertising and research and development (R&D) are two engines for firms to obtain competitiveness and improve profits. This study develops a system of equations to investigate the overall relationships among R&D, advertising and financial performance across firm sizes. Data from Korean listed firms have been used during 2012–2016. First, our results show that R&D and advertising are complementary in South Korea. Second, for large firms, advertising is positively and significantly associated with financial performance, and the R&D expenditure has no significant influence. Finally, R&D and advertising expenditures have a negative impact on the financial performance of small firms. An additional analysis is conducted to examine the duration of R&D and advertising. Our results from Korean listed firms contain important implications for academia as well as practitioners.

R&D Investments, Debt Capital, and Ownership Concentration: A Three-Way Interaction and Lag Effects on Firm Performance in China's Pharmaceutical Industry

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“…, 2018). In line with this notion, recent research argues that both R&D intensity for technological innovation and advertising for marketing promotion are complementary strategic engines for a firm to build its competitive advantage through increasing both sales and the firm's value (Jindal, 2020; Xu et al. , 2019) in turbulent markets.…”

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