Effects of advertising and R&D on spillovers from a rival’s bankruptcy

Niket Jindal () and Rebecca J. Slotegraaf ()
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Niket Jindal: Indiana University
Rebecca J. Slotegraaf: Indiana University

Journal of the Academy of Marketing Science, 2024, vol. 52, issue 2, No 5, 349-369

Abstract: Abstract Research shows that marketing investments play a pivotal role in a firm’s own bankruptcy. However, there are even more firms that are not confronting bankruptcy themselves yet face spillovers from a rival’s bankruptcy. For such firms, it remains unknown whether their marketing investments affect these spillovers. We show that, in contrast to their generally positive effects in other contexts, advertising and R&D can either help or harm in the context of bankruptcy spillovers. The difference hinges on the industry’s growth and concentration. Advertising decreases (increases) a firm’s stock return when its rival files for bankruptcy in a low- (high-) growth industry and R&D decreases (increases) the stock return in a low- (high-) concentration industry. Further, advertising has a stronger effect in a higher concentration industry. The results provide insight on how a firm’s advertising and R&D help or harm its value, should one of its rivals file for bankruptcy.

Keywords: Advertising; Bankruptcy; Event study; R&D; Rival; Spillovers (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11747-023-00931-9

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