Advertising and R&D: theory and evidence from France

Philippe Askenazy, Thomas Breda () and Delphine Irac

Economics of Innovation and New Technology, 2016, vol. 25, issue 1, 33-56

Abstract: Advertising and innovation are two engines for firms to escape competition and improve profits. We propose a model that encompasses both the static and dynamic interactions between R&D, advertising and competitive environment. It provides three main predictions. First, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D. Second, the inverted-U relation between competition and R&D still holds with the introduction of advertising. Third, more competition is associated with on average more advertising expenditures. Empirical evidence from a large panel of 59,000 French firms over 1990-2004 supports these three properties.

Date: 2016
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Related works:
Working Paper: Advertising and R&D: theory and evidence from France (2016)
Working Paper: Advertising and R&D: theory and evidence from France (2016)
Working Paper: Advertising and R&D: Theory and evidence from France (2010)
Working Paper: Advertising and R&D: Theory and evidence from France (2010)
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DOI: 10.1080/10438599.2015.1046670

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