South African Journal of Science
On-line version ISSN 1996-7489
Print version ISSN 0038-2353
BLANKLEY, William. Correlations between advertising and R&D expenditures: Dealing with important intangibles. S. Afr. j. sci. [online]. 2007, vol.103, n.3-4, pp.94-98. ISSN 1996-7489.
Expenditures on research and experimental development (R&D) and advertising by companies are forms of capital investment in intangible commodities as opposed to capital investment in tangible commodities such as plant and equipment. The amounts spent on both advertising (adspend) and R&D are positively related to the profitability of commercial enterprises. Various studies have recorded the links between R&D and adspend at the level of firms, sub-sectors and sectors of industry for particular countries. However, no analyses appear to have been published on the associations between these two kinds of investment either at national level or in international comparisons. The findings presented here indicate that the most-developed countries spend between two and six times more on R&D per capita than on advertising. In less R&D-intensive economies, however, adspend may equal or exceed R&D expenditure per capita. In four countries examined, that have the lowest investment in R&D as a percentage of GDP-namely South Africa, Greece, Portugal and Poland-adspend actually exceeds gross expenditure on R&D. I focus on the link between R&D and adspend in South Africa between 1989 and 2004, for which a highly significant correlation (r = 0.99) was found. I also examine international comparisons of reliable data and indicator series concerning these factors in 17 other countries between 1995 and 2004. In the majority of EU and other countries for which relevant advertising and R&D data were available, significant correlations were also found between these two variables. Because total advertising figures tend to be published within the first quarter of the following year, it may be possible to use these statistics to forecast national R&D expenditure. The benefits for businesses to continue investing in both advertising and R&D, even under adverse economic conditions, are also discussed.