Advertising, industry innovation, and entry deterrence

Shi Qi

International Journal of Industrial Organization, 2019, vol. 65, issue C, 30-50

Abstract: With the advent of the Internet and social media platforms, advertising has become cheaper and more effective in reaching consumers. This paper studies the effect of better informative advertising on innovation and industry growth. This paper finds that improvements in informative advertising can lead to costly entry deterrence. Because advertising and innovation are complementary, better advertising raises the threats of entry. When innovation spillover is present in an industry, an incumbent firm has incentives to strategically lower its own innovation to deter entry. As a result, better advertising in innovation-intensive industries can have negative consequences on industry growth and consumer welfare. This paper also investigate the role of innovation spillover on entry deterrence.

Keywords: Advertising; Entry deterrence; Innovation (search for similar items in EconPapers)
JEL-codes: L15 L25 M37 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:65:y:2019:i:c:p:30-50

DOI: 10.1016/j.ijindorg.2018.09.006

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