The Impact of R&D and Advertising on Firm Performance in High-Tech Industries-Evidence from the US Information and Communications Technology Industry

This paper empirically examines the marketing strategy of advanced technological companies by contemplating the critical role of innovation and advertising when using market share as the central marketing metric. The focus of the empirical setting is the U.S. Information and Communications Technology industry, which includes 150 manufacturing and nonmanufacturing companies over a 10 year period. Surprisingly, the importance of the qualitative characteristics of the industry and its strategic initiatives are largely ignored in the literature. Our quantitative study demonstrates R&D has a significant positive effect on companies' performance. Increasing the R&D share and the number of patents granted in advanced technological companies raises market share and revenue whereas increasing advertising alone has no significant effect on market share and revenue. Advertising effectiveness in this industry is systematically moderated over a short time. The results imply maintaining innovation efforts in advanced technology industries is necessary to yield better performance.