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Foreign Entry and Firm Advertising Intensity: Evidence from China

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  • Sizhong Sun

Abstract

This paper investigates the determinants of advertising intensity at the firm level by focusing on the role of foreign entry. In a monopolistically competitive market with heterogeneous firms, we show that foreign entry affects the expected advertising intensity of domestic firms through its impact on the cost of resources, brand image, and productivity spillovers and its impact on firms’ exit behaviour. Then, using comprehensive firm-level data from China’s manufacturing sector between 2005 and 2007, we test this hypothesis and find that foreign entry significantly affects advertising intensity. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Sizhong Sun, 2014. "Foreign Entry and Firm Advertising Intensity: Evidence from China," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(1), pages 79-97, August.
    • Handle: RePEc:kap:revind:v:45:y:2014:i:1:p:79-97
    DOI: 10.1007/s11151-014-9426-z
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    2. Liu, Yi & Li, Xue & Lahiri, Sajal, 2016. "Determinants of privatization in China: The role of the presence of foreign firms," China Economic Review, Elsevier, vol. 41(C), pages 196-221.

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    More about this item

    Keywords

    Advertising intensity; Foreign entry; FDI; China; D22; F23; L10; L60; M37;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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