The Role of National Culture in Advertising’S Sensitivity to Business Cycles: An Investigation Across All Continents

46 Pages Posted: 29 Jan 2008

See all articles by Barbara Deleersnyder

Barbara Deleersnyder

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

M. G. Dekimpe

Catholic University of Leuven (KUL) - Department of Applied Economics; Erasmus Research Institute of Management (ERIM)

Jan‐Benedict EM Steenkamp

University of North Carolina (UNC) at Chapel Hill - Marketing Area

Peter S.H. Leeflang

University of Groningen - Faculty of Economics and Business

Date Written: 19 2007, 12

Abstract

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, time-series econometrics, cross-country comparison, national culture

JEL Classification: C44, M31, M, M37

Suggested Citation

Deleersnyder, Barbara and Dekimpe, Marnik and Steenkamp, Jan-Benedict E. M. and Leeflang, Peter S.H., The Role of National Culture in Advertising’S Sensitivity to Business Cycles: An Investigation Across All Continents (19 2007, 12). ERIM Report Series Reference No. ERS-2007-095-MKT. Available at SSRN: https://ssrn.com/abstract=1088221

Barbara Deleersnyder (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Marnik Dekimpe

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 16 326 957 (Phone)
+32 16 326 732 (Fax)

HOME PAGE: http://www.econ.kuleuven.ac.be/tew/academic/market/members/MarnikDekimpe.htm

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1715/9576 (Phone)
+31 10 408 9011 (Fax)

HOME PAGE: http://web.eur.nl/fbk/dep/dep3/about/members/people/mdekimpe

Jan-Benedict E. M. Steenkamp

University of North Carolina (UNC) at Chapel Hill - Marketing Area ( email )

CB 3490
Chapel Hill, NC 27599
United States
919-962-9579 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/Faculty/search/detail.cfm?person_id=860

Peter S.H. Leeflang

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
361
Abstract Views
2,486
rank
82,580
PlumX Metrics