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Advertising as an Entry Deterrent: Evidence from UK firms

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  • David Paton

Abstract

Advertising is widely considered to be an important isolating mechanism through which firms may defend an established competitive advantage. However, there is relatively little empirical evidence on the extent of the strategic use of advertising either to deter or in response to entry. In this paper, I report on a study of the advertising practices of 843 medium-sized and large UK-based firms. Nearly one-quarter of all the advertisers surveyed state that they attribute importance to entry deterrence as an aim of their advertising. Further, one in five managers of advertising firms state that they would increase advertising expenditure if a new rival company appeared in their market. It is also apparent that there is a strong correlation between the perceived importance of advertising as an entry-deterring tool and the intensity of advertising spending. Multivariate modelling provides confirmation that the existence of a sheltered market position, and the profitability that typically accompanies this, provides a statistically significant determinant of the decision to use advertising as a strategic entry-deterring weapon.

Suggested Citation

  • David Paton, 2008. "Advertising as an Entry Deterrent: Evidence from UK firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(1), pages 63-83.
    • Handle: RePEc:taf:ijecbs:v:15:y:2008:i:1:p:63-83
    DOI: 10.1080/13571510701830507
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    Cited by:

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    2. Kappes, Jan Willem & Merkert, Rico, 2013. "Barriers to entry into European aviation markets revisited: A review and analysis of managerial perceptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 58-69.
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    Keywords

    Advertising; Survey Data; Entry;
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