Does Advertising Productivity Affect Organizational Performance? Impact of Market Conditions

Mahabubur Rahman, M. Ángeles Rodríguez‐serrano and Mathew Hughes
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Mahabubur Rahman: ESC [Rennes] - ESC Rennes School of Business
M. Ángeles Rodríguez‐serrano: University Pablo de Olavide
Mathew Hughes: Loughborough University

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Abstract: Advertising is crucial in influencing customers' perceptions and purchase intentions, and numerous studies have investigated whether advertising expenditure has any significant impact on financial performance. A thorough understanding remains elusive: while several studies document a positive impact, others report that advertising has either a negative or a statistically insignificant effect. Three flaws among existing studies are responsible for this problem: bundling advertising with other forms of marketing, the inadequacy of expenditure as a measure and a failure to consider contingencies. Deviating from earlier studies, we examine the effect of advertising productivity on firm performance rather than the impact of the absolute amount of advertising expenditure. Moreover, adopting a contingency approach, we evaluate how market conditions of market dynamism, market complexity and market munificence moderate the relationship between advertising productivity and organizational performance. Drawing a multi-industry sample from the USA, this study demonstrates that advertising productivity has a positive impact on capital market-based performance measures, conditional on market conditions. We reveal new insights into when, why and to what extent advertising contributes (or not) to organizations' financial performance.

Date: 2021-10
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Citations: View citations in EconPapers (2)

Published in British Journal of Management, 2021, 32 (4), pp.1359-1383. ⟨10.1111/1467-8551.12432⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03419361

DOI: 10.1111/1467-8551.12432

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