Analysis of the relationship between advertising, concentration and profitability in the U.S. manufacturing industry

Luca Bonardi, Fordham University

Abstract

The majority of studies presented in the literature have been performed across all industries. Few studies focused on the cereal or sugar industries are too specific to produce general results. Based on the existing research there is a wide range of studies for which the results cannot be applied to specific industries; or there are very specific industry studies that are initiated to explain a characteristic of an industry, and that cannot be generalized. In addition, studies generally focus on one year or, at most, on the change between two years. This does not take into consideration the fact that industries evolve over time and that the interaction between advertising, concentration and profitability requires time lags to show its effects. The characteristics of these studies and of the data employed affect our ability to extend the results obtained in these studies to other industries or over time.^ This dissertation investigates the relationship between advertising, concentration and profitability in the U.S. manufacturing industry. The analysis focuses on the U.S. manufacturing industry at the two-digit SIC code level over the period 1963–1997. The same analysis is performed using public companies operating in the automotive and pharmaceutical sectors over the period 1980–2000 focusing on the automotive and the pharmaceutical sectors. ^ The results from the estimation and the indications from the Granger causality test confirm the existence of a rich pattern of relationship between the three variables in levels, first differences or lags. Advertising appears to be determined by the interaction of profitability and concentration, whether these two variables interact and influence each other simultaneously. The analysis performed at the single industry level indicates that there is not sufficient variability to clearly identify the direction of causality between advertising, concentration and profitability.^

Subject Area

Business Administration, Marketing|Economics, General|Economics, Commerce-Business

Recommended Citation

Luca Bonardi, "Analysis of the relationship between advertising, concentration and profitability in the U.S. manufacturing industry" (January 1, 2002). ETD Collection for Fordham University. Paper AAI3037211.
http://fordham.bepress.com/dissertations/AAI3037211

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