Can socially irresponsible firms benefit from corporate advertising?

Abstract

Can corporate advertising improve firm performance following a brand crisis borne out of corporate social irresponsibility (CSI)? This article investigates socially irresponsible firms and their corporate advertising expenditures, which can be used to counter negative opinions. First, we examine whether firms experiencing a negative brand image due to socially irresponsible behavior alter their corporate advertising expenditures. Next, we assess the resulting impact of corporate advertising spending by CSI firms on overall performance. Using a sample of firms engaging in socially irresponsible behavior between 1995 and 2011, we find that such firms tend to increase their corporate advertising. Such changes in corporate advertising expenditures ultimately impact firm performance. Specifically, an increase in corporate advertising helps to reduce the negative effect of CSI on firm performance.     

Advertising agency operating efficiency

This study uses data envelopment analysis to evaluate the operating efficiency of a sample of 41 US advertising agencies, based on their profits and expenditures in six key areas (i.e., payroll to employees, other payroll-related expenses, administrative expenses, space and facilities expenses, corporate expenses, and professional fees). The analyses reveal that, on average, 5% of an agency's budget is wasted, incurring the greatest amount of waste in the administrative and corporate expenses. The tobit model also indicates that professional fees contributed the most agency inefficiency overall.     

An exploratory analysis of the determinants of cooperative advertising participation rates

The paper offers an exploratory empirical investigation of the determinants of cooperative advertising participation rates. Using data for 2,286 brands, we examine the relationship of participation rates to national advertising expenditures by brand. We also consider how participation rates vary with average manufacturers’ margins by industry, average retail margins by category, and additional category-level variables. Reflecting the discrete nature of the dependent variable, the analysis employs discrete choice estimation techniques instead of OLS regression. The results reveal a significant quadratic relationship between advertising and participation rates. We interpret this and other significant findings in the context of existing work.     

Advertising and Steiner’s Dual Stage Model: Our Assessment

Between 1967 and 1979, we produced a number of studies that explored different facets of the economics of advertising. This work culminated in our 1974 book entitled Advertising and Market Power. Our leading hypothesis was that heavy advertising expenditures often but not always had anti‐competitive effects. And our primary empirical evidence in support of this hypothesis was that industries with heavy advertising expenditures also reported higher profit rates, which we interpreted as indicating that higher prices followed when manufacturers can effectively spend large amounts on advertising. Since that time, Robert Steiner has developed a model of firm behaviour for consumer goods industries. He finds that distribution margins are generally higher where manufacturer prices are lower. Furthermore, heavy manufacturer advertising is likely to depress distribution margins for heavily advertised products. While our earlier work implicitly assumed that distribution margins are generally the same regardless of the volume of advertising, Steiner’s results raise doubt on this assumption. Steiner’s model must therefore be acknowledged when interpreting our earlier findings.     

Images paired with concrete claims improve skeptical consumers’ responses to advertising promoting a firm’s good deeds

Previous research has focused attention on state skepticism over corporate social responsibility (CSR) communications, but little work has focused on how to override preexisting differences in consumer skepticism. To gain insight into this issue, the present studies explore whether company ads promoting a firm’s good deeds generate more positive responses when the ads contain concrete claims and/or images related to the firm’s corporate social responsibility claims, and how these elements of the CSR communication interact with individual differences in advertising skepticism. Results show that highly skeptical consumers (a) respond less favorably to ads than less skeptical consumers, overall; (b) respond more favorably to ads that contain a combination of concrete claims and images supporting those claims; and (c) respond as favorably as less skeptical consumers when ads feature concrete claims with supporting images. Additional results suggest that images are effective among highly skeptical consumers because skeptical consumers have a reduced ability to visualize advertising claims. Implications and future research directions are discussed.     

Corporate Advertising Pass-through onto the Brand: Some Experimental Evidence

While researchers and managers have speculated that corporate advertising can have an impact on brand knowledge, to date there is no empirical support for such "pass-through." We report on a laboratory study manipulating the presence or absence in a brand ad of retrieval cues for subjects' corporate advertising and their pre-existing brand knowledge. We found evidence of pass-through, but it was moderated by the retrieval of subjects' pre-existing brand knowledge. Our results have theoretical and managerial implications, and suggest a number of interesting opportunities for future research.     

Synergy between R&D and advertising on shareholder value: Does firm size matter?

Using the hierarchical linear model, we examine whether R&D and advertising and their synergy influence firm value. We also investigate whether firm size moderates the market value effects of R&D, advertising, and the synergistic effect of R&D and advertising on firm value. We find that R&D and the synergy between R&D and advertising have significant positive effects on shareholder value. Moreover, we find that the effects of R&D and advertising are significantly higher in large firms than small firms, while the synergistic effect is significantly positive in small firms but not in large firms. These results offer important insight for executives on the implications of resource allocation on R&D and advertising expenditures to create firm value. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Consistency and commonality in advertising content: Helping or Hurting?

Scholars and practitioners widely argue that strong, successful brands are built on consistent and unique positioning, which should be reflected in the brands’ advertising. Surprisingly, however, little empirical evidence supports this claim, especially with regard to advertising content. The authors investigate whether and to what extent brands’ advertising content consistency—the similarity in the firm’s own advertising content over time—and commonality—the similarity between the firm’s and competitors’ advertising content—affect brands’ sales. Insights emerge from the analysis of the impact on sales of the content of 247 television ads aired by 33 brands in six consumer packaged goods categories over a four-year period. Results indicate that more than advertising spending, both consistency and commonality in advertising content affect sales, especially with respect to long-term cumulative sales. However, brands differ considerably regarding the direction of the effects. While small brands tend to benefit from increased consistency and commonality in advertising content, large brands tend to suffer from increased consistency. Thus, whether consistency and commonality in advertising content will help or hurt depends on the size of the brand.     

The impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value

This research examines the impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value. Using proprietary data on annualized advertising expenditures for 1651 firms spanning seven years, we document that both display advertising and paid search advertising exhibit positive effects on firm performance (measured by sales) and firm value (measured by Tobin's q). Paid search advertising has a more positive effect on sales than offline advertising, consistent with paid search being closest to the actual purchase decision and having enhanced targeting abilities. Display advertising exhibits a relatively more positive effect on Tobin's q than offline advertising, consistent with its long-term effects. The findings suggest heterogeneous economic benefits across different types of advertising, with direct implications for managers in analyzing advertising effectiveness and external stakeholders in assessing firm performance.     

Corporate Philanthropic Giving,Advertising Intensity,and Industry Competition Level

This article examines whether the likelihood and amount of firm charitable giving in response to catastrophic events are related to firm advertising intensity, and whether industry competition level moderates this relationship. Using data on Chinese firms’ philanthropic response to the 2008 Sichuan earthquake, we find that firm advertising intensity is positively associated with both the probability and the amount of corporate giving. The results also indicate that this positive advertising intensity-philanthropic giving relationship is stronger in competitive industries, and firms in competitive industries are more likely to donate. This study thus provides evidence suggesting that even in the wake of catastrophic events, corporate philanthropic giving is strategic.     

Does corporate advertising work in a crisis? An examination of inoculation theory

The primary purpose of this paper is to propose a conceptual framework of consumer evaluation of corporate advertising in a corporate crisis. It also suggests future research propositions by investigating how the so-called inoculation effect from pre-crisis corporate advertising influences consumer response to corporate advertising during a crisis. First, the paper describes how the inoculation effect confers resistance to negative news in a corporate crisis. Next, the paper determines whether the inoculation effect further reduces consumer resistance to corporate advertising during a crisis. Other factors that figure into the broader context of corporate crises are then discussed. These include four other types of external impacts on a crisis situation – the crisis, the corporation, the media, and individual differences. The article concludes with implications for research and practice.     

企业国际多元化：一个文献综述

从资源配置的角度看,企业战略包括两个基本方面：行业多元化和国际多元化。与行业多元化相比,对国际多元化的关注较少。理论分析表明,国际多元化既有成本,也有收益。通过总结国外关于国际多元化的最新研究发现,目前关于国际多元化与企业绩效关系的实证研究结论并不一致,这些经验研究主要是基于发达国家企业的样本,并且这些研究本身也存在许多问题。利用新兴市场经济国家的样本可能会得出不同的结论。     

Explaining the use and effects of humour in advertising: an evolutionary perspective

Prior reviews have outlined the state of research of humour in advertising and showed that some findings deserve further explanations. This paper makes the point that evolutionary psychologists’ explanations of the functions of humour can provide new or alternative explanations for these findings and suggest new research avenues. The evolutionary functions of humour have been widely discussed in the literature, but advertising researchers have neglected biological nature and biological evolution as additional or alternative explanations for humour in advertising. The paper contributes to the advertising literature and broadens perspectives for research on humour in advertising by reviewing research on the evolutionary functions of humour, by showing how these functions can explain the use, effects, and moderators of humour in advertising beyond the explanations provided in prior literature, and by suggesting new propositions for future research on humour in advertising.     

Impact of industry sector on corporate diversification and firm performance: Evidence from Indian business groups

Prior business group (BG) studies implicitly assume that corporate diversification‐firm performance relationships are uniform across industry sectors. This generalization may lead to research implications that are not equally true for BG‐affiliated manufacturing and service firms. Drawing on strategy and marketing literature, this research addresses this scholarly gap. Our empirical analysis of a large sample of BG‐affiliated Indian firms over a five‐year period (2004‐2008) indicates that the influence of corporate diversification on firm performance is greater for affiliated service firms than affiliated manufacturing firms. Results also indicate that the influence of BG size and diversity on diversification‐firm performance relationship varies significantly depending on whether the focal firm belongs to the manufacturing or service sector. Firm's share ownership does not generate similar influence. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

动态最优控制模型在广告业的应用综述(中)

本文介绍了动态最优控制模型在广告领域的研究进展,主要包括Sethi在1977年总结之后的模型发展。这些模型要回答的基本问题是,如何确定一个或一组相互竞争的企业的最优广告支出和其他可能随时间变化的利益相关因素。模型的最优化描述了这些变量如何转化为销售额,进而转化为利润。本文有两个主要目的。一方面,整理了早期综述文献中已经提到过的领域中产生的新贡献。另一方面,探讨了1977年以来广告学领域出现的新的研究方向。考虑到文章长度,本文将分成上中下三篇刊载。本篇主要介绍了销售—广告响应模型;耐用品的累积销售额模型;广告过程中具有多个状态变量的广告模型。     

Managerial ownership,diversification, and firm performance: Evidence from an emerging market

Numerous existing studies have explored the impact of corporate diversification on firm performance, whereas considerably less research has investigated the inter-relationships among managerial ownership, diversification, and firm performance. This paper develops several hypotheses based on the agency theory self-interest perspective and tests the relationships among managerial ownership, corporate diversification, and firm performance using a sample of 98 emerging market firms listed on the Taiwan Stock Exchange. The results show a U-shaped relationship between managerial ownership and corporate diversification, similar to that found in prior studies. However, the inflection point is 33.17%, which is lower than that found in previous studies. Moreover, in contrast to prior results, corporate diversification is found to be positively associated with short-term firm performance and bears no relationship with mid-term firm performance, while firms engaged in unrelated diversification outperform those engaged in related diversification. This paper concludes with theoretical implications and suggestions for future research.     

Corporate crisis advertising: A framework examining the use and effects of corporate advertising before and after crises

While corporate advertising has been widely studied as a promotional tool, few studies have examined how it can be used in a corporate crisis situation. In 2013, Kim proposed a conceptual framework for examining stakeholders’ evaluation of pre-crisis corporate advertising, using the inoculation and reactance theory. The framework, published in Journal of Marketing Communications, suggested that pre-crisis advertising can increase audience resistance towards negative news of an organization and decrease audience resistance towards future corporate advertisements from the organization. The present study expands on Kim’s work to develop the corporate crisis advertising (CCA) framework. In addition to the inoculation and reactance effects discussed in Kim’s model, CCA aims to discuss the effects of corporate advertising on improving organization’s prior reputation based on halo effect, and how post-crisis advertising messages can be evaluated based on crisis theories. Our proposed framework provides a comprehensive view of the use of corporate advertising both before and after a crisis and is useful for organizations to understand the impact of corporate advertising on stakeholders’ evaluation of the organization in a crisis situation. Potential applications of CCA are discussed and directions for future research suggested.     

Context effects of TV programme-induced interactivity and telepresence on advertising responses

This article provides an analysis of the relationship between annual advertising expenditures and sales, using a time series regression procedure, for beer, wine, and liquor sold in the United States from 1971 to 2012. Information from these four decades provides a comprehensive analysis of the relationships of numerous variables with aggregate alcohol category sales. Even though per capita alcohol consumption has not changed much throughout this period, alcohol advertising media expenditures for all alcohol beverages have increased almost 400% since 1971. This study has provided evidence of consumption changes across categories of alcohol beverages over the past 40-plus years with the preponderance of those changes significantly correlated to fluctuations in demography, taxation and income levels – not advertising. Despite other macro-level studies with consistent findings, the perception that advertising increases consumption exists. The findings here indicate that there is either no relationship or a weak one between advertising and aggregate category sales. Therefore, advertising restrictions or bans with the purpose of reducing consumption may not have the desired effect. Implications on policy decisions regarding advertising controls are addressed.     

Examining the Relationship Between Advertising Expenditures and Sales of Quick-Service Restaurants in the United States

The United States fast-food industry represents an important business sector with respect to national and international economics. Due to the low levels of product differentiation and high industry competition, fast-food companies heavily engage in advertising and branding activities. Quick-service restaurants (QSR) are the largest and growing segment of the fast-food industry. The current study examined the longitudinal relationship between advertising expenditures and sales revenues for the QSR industry and leading QSR brands in the United States from 1986 to 2007. Hypotheses were tested using a time-series regression analysis. Managerial, research, and policy implications of the results are provided.     

Predictors of export performance in developing economies: a longitudinal analysis of Moroccan SMEs

Purpose: To help increase understanding of the export performance, we investigate the influence of firm size, research and development (R&D), advertising expenditures and network relationships, and develop a conceptual model to increase export intensity. Design/methodology/approach: The research involved a four-year longitudinal study of export performance of 168 exporting SMEs in Morocco (672 observations). The two-stage least square estimation (G2SLS) was used to test the hypotheses. Findings: The findings of the two-stage least square estimation (G2SLS) suggest that export sales and domestic sales are interdependent and influence each other. R&D expenditures and network affiliation have positive and significant impact on export sales, while advertising expenditure has a negative and significant influence on export sales. Research limitations/implications: Readers should use caution in generalizing the findings unless verified in other developing contexts. Practical implications: The findings of this study are useful for managers and export policy makers in developing countries. A proper understanding of the predictors of export performance may help them encourage the growth and diversification of exports that is so vital for developing countries. Originality/value: Export performance is a key element in the field of international marketing. Unfortunately, the literature exhibits a lack of empirical studies in developing countries, particularly in Maghreb regions. The empirical testing of the theoretical model in a developing economy is a significant contribution to fill the needed gap in the literature toward generalizing findings.