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Effects of advertising and R&D on spillovers from a rival’s bankruptcy

Author

Listed:
  • Niket Jindal

    (Indiana University)

  • Rebecca J. Slotegraaf

    (Indiana University)

Abstract

Research shows that marketing investments play a pivotal role in a firm’s own bankruptcy. However, there are even more firms that are not confronting bankruptcy themselves yet face spillovers from a rival’s bankruptcy. For such firms, it remains unknown whether their marketing investments affect these spillovers. We show that, in contrast to their generally positive effects in other contexts, advertising and R&D can either help or harm in the context of bankruptcy spillovers. The difference hinges on the industry’s growth and concentration. Advertising decreases (increases) a firm’s stock return when its rival files for bankruptcy in a low- (high-) growth industry and R&D decreases (increases) the stock return in a low- (high-) concentration industry. Further, advertising has a stronger effect in a higher concentration industry. The results provide insight on how a firm’s advertising and R&D help or harm its value, should one of its rivals file for bankruptcy.

Suggested Citation

  • Niket Jindal & Rebecca J. Slotegraaf, 2024. "Effects of advertising and R&D on spillovers from a rival’s bankruptcy," Journal of the Academy of Marketing Science, Springer, vol. 52(2), pages 349-369, March.
    • Handle: RePEc:spr:joamsc:v:52:y:2024:i:2:d:10.1007_s11747-023-00931-9
    DOI: 10.1007/s11747-023-00931-9
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