Intangible capital,market share and corporate strategy

This paper theoretically and empirically identifies the determinants of firm profitability and market share for twelve broadly defined US manufacturing industry groups. The effects of advertising, research and development, and diversification on profitability and market share are econometrically tested for each industry group, and corporate strategy implications of the results are considered. One major result of the analysis is that research and development (R&D) tends to be much more effective as a means of enhancing firm profitability than advertising, and research and development spending decisions are more closely related to the profitability of R&D than advertising decisions are related to the profitability of advertising.