Exploring the impact of advertising and R&;D expenditures on corporate brand value and firm-level financial performance

A parsimonious framework linking advertising expenditures and research and development expenditures to brand value, and brand value in turn to firm-level financial performance, was proposed and empirically investigated under four data conditions: data form, brand type, financial performance metric, and lag structure. Using pooled data from 125 firms (848 firm-year observations) over the period 1991–2007, 108 path analyses were conducted to compute five path model output metrics. Data on these metrics were then compared for each of the data conditions by means of analysis of variance. Although significant relationships were generally observed among framework variables, study results differed considerably across three of the four data conditions. The principal take-away from the study is that the impact of marketing activities on firm-level financial performance is likely to be in large part a function of the specific research purpose and methodology employed. As such, the take-away has implications when interpreting value-relevance findings, when constructing theories involving market-based assets, and when designing studies to investigate relationships between marketing and financial performance.