The Role of National Culture in Advertising’s Sensitivity to Business Cycles: An Investigation Across All Continents
Cutting advertising budgets has traditionally been a popular reaction by companies around the globe when faced with a slacking economy. Still, anecdotal evidence suggests the presence of considerable cross-country variability in the cyclical sensitivity of advertising expenditures. We conduct a systematic investigation into the cyclical sensitivity of advertising expenditures in 37 countries across all continents, covering up to 25 years and four key media: magazines, newspapers, radio and television. While our findings confirm that advertising moves in the same direction as the general economic activity, we also show that advertising is considerably more sensitive to business-cycle fluctuations than the economy as a whole, with an average co-movement elasticity of 1.4. Interestingly, advertising’s cyclical dependence is systematically related to the cultural context in which companies operate. Advertising behaves less cyclically in countries high on long-term orientation and power distance, while advertising is more cyclical in countries high on uncertainty avoidance. Further, advertising is more sensitive to the business cycle in countries characterized by significant stock-market pressure and few foreign-owned multinationals. These results have important strategic implications for both global advertisers and their ad agencies.
|Keywords||advertising, business cycle, cross-country comparison, national culture, time-series econometrics|
|JEL||Statistical Decision Theory; Operations Research (jel C44), Business Administration and Business Economics; Marketing; Accounting (jel M), Marketing (jel M31), Advertising (jel M37)|
|Publisher||Erasmus Research Institute of Management|
|Series||ERIM Report Series Research in Management|
|Journal||ERIM report series research in management Erasmus Research Institute of Management|
Deleersnyder, B, Dekimpe, M.G, Steenkamp, J-B.E.M, & Leeflang, P.S.H. (2007). The Role of National Culture in Advertising’s Sensitivity to Business Cycles: An Investigation Across All Continents (No. ERS-2007-095-MKT). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/10890