EconPapers    
Economics at your fingertips  
 

Advertising, in-house R&D, and growth

Volker Grossmann ()

Oxford Economic Papers, 2008, vol. 60, issue 1, 168-191

Abstract: This paper develops a quality-ladder model of endogenous growth to study the interplay between in-house R&D and combative advertising expenditure, and its implications for economic growth, firm size, and welfare. The analysis shows that, somewhat surprisingly, higher incentives to engage in advertising, although combative, unambiguously foster innovation activity of firms. This, possibly, leads to faster growth and even higher welfare. These results rest on two features of the model which are well-supported by empirical evidence. First, if firms incur higher sunk costs for marketing, concentration and firm size rise. Second, firm size and R&D expenditure are positively related as larger firms are able to spread R&D costs over higher sales. The analysis also suggests that R&D subsidies are conducive to R&D and growth without inducing firms to raise advertising outlays. Copyright 2008 , Oxford University Press.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpm016 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:60:y:2008:i:1:p:168-191

Ordering information: This journal article can be ordered from
http://www.oup.co.uk/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by A. Banerjee and James Forder

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2019-06-18
Handle: RePEc:oup:oxecpp:v:60:y:2008:i:1:p:168-191