Impact of Advertising and R&D on Profitability: Evidence from Indian Automobile Industry

Abstract

The purpose of this study is to examine the effect of R&D intensity and advertising intensity on profitability of Indian automobile industry.  For this purpose twenty five automobile players were selected and data on R&D expenditures, advertising, net profits and sales turnover were extracted from CMIE PROWESS for time period 1998-2014. The findings reveal that 17 firms exhibit significant association between advertising intensity and profitability and 16 firms between R&D intensity and profitability. The study suggests that to reap the benefit of R&D expenditures complex procedure of R&D investment and to obtaining license for new designs should be dismantled.

 Keywords: Automobiles, Profitability, Structure, advertising, R&D