The Economic Implications of Advertising (RLE Advertising) by Firestone Otto John;

Author:Firestone, Otto John; [Firestone, O. J.]
Language: eng
Format: epub
Publisher: Taylor & Francis Group
Published: 1967-08-15T00:00:00+00:00

3 Ibid.p. 277.

Advertising Expenditures and Capital Investment

How close is the link between investment and advertising? Again, little quantitative evidence exists to answer this question. To deal with this question, more than quantitative evidence is needed, for analysis has to probe into causal relationship and into business motivation. How do businessmen decide what advertising budgets are required to establish a market of a given size which will warrant the undertaking of additional capital investment? How do businessmen decide what type of advertising campaign and what kind of advertising media will likely come closest to minimizing their risks and enhancing their prospects for a successful venture which in turn would justify for them proceeding with the investment?

In the field of statistical information, data are also lacking to assess trends of comparable flows such as advertising expenditures on consumer goods and services. Information is needed not only in terms of total expenditures but also for comparable flows, that is by industries, sectors, large corporations and the main commodity groupings.

Available data permit nothing but the broadest kind of generalization, and even these must be qualified because the flows that are measured cover different sectors of economic activity. Still, some trends can be observed and these have a certain meaning because the data are comparable over time as they relate to each sector.

The comparison presented here covers trends of total advertising expenditures, i.e. business, institutional and government advertising, and trends of business gross capital formation, as per National Accounts. The latter cover for Canada capital expenditures by private and government business enterprises (on plant and equipment), private non-commercial institutions, and outlay on new residential construction by individuals and business investors. The U.S. data relate to Gross Private Domestic Investment, which covers a similar sector as does Business Gross Capital Formation in Canada. The pertinent data are presented for both Canada and the United States for the period 1946 to 1966 in Table 2.

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