Prior researches find that advertising is the most common marketing strategy and also one of the most effective way to influence consumers¡¦ purchasing decisions. On the other hand, innovation plays an important role to enhance competitiveness of firms. However, little attention has been paid to the relationship among advertising, innovation and firm values in the existing literature. The main purpose of this paper is to examine the effect of pre-IPO advertising and innovation on the level of IPO underpricing. Furthermore, this study examines whether market states influence the impact of pre-IPO marketing expenditures and innovation on IPO underpricing levels. The empirical results show: (1) without considering market states, pre-IPO advertising expenditures significantly reduce IPO underpricing levels; (2) without considering market states, pre-IPO innovation activities significantly increase IPO underpricing levels; (2) pre-IPO innovation activities significantly increase IPO underpricing levels; (3) pre-IPO advertising expenditures cannot significantly reduce IPO underpricing levels in bull markets; and (4) pre-IPO advertising expenditures can significantly reduce IPO underpricing levels in bear and correction markets; and (5) pre-IPO innovation activities significantly increase IPO underpricing levels in bull, bear and correction markets.

Advertising is an important mechanism by which firms are able to communicate with their current and potential consumers. An advertising campaign may satisfy a multitude of objectives for a firm. Namely, advertising can be used to create awareness for a product or brand. It may be used to inform consumers about the usage features and benefits specific to a brand or a given product, or generate favorable attitudes and preferences amongst customers. Additionally, advertising may aim to persuade consumers towards trial or purchase. All these objectives enhance e consumers’ response towards the firm and its products/brands, and in turn, advertising helps to achieve sales for the advertised firm in the long run. This dissertation examined the relationship between advertising expenditures and sales revenue at the aggregate and brand level for the Quick Service Restaurant (QSR) industry in the United States from 1986 to 2007. Two main objectives of this study were to: 1) analyze the relationship between advertising expenditures and sales revenue within the QSR industry; and 2) provide analysis of the relationship between advertising and sales revenues for leading QSR firms, in the United States during the observed period. Thus, the current study provides the most comprehensive analysis of the relationships between advertising and sales in the QSR industry to date. Hypotheses were tested by time series analysis. Specifically, a stepwise regression analysis with backwards elimination of non-significant predicators was utilized to select a set of statistically significant predictor variables. This study controlled for factors expected to affect sales revenues such as population size, price and inflationary effects. Findings from this study indicate that aggregate advertising expenditures and aggregate sales for the QSR industry in the United States were significantly and positively related from 1986 to 2007. This is the first study to examine this relationship over such an extended period of time—twenty-two years. Results from brand level show a positive and significant relationship between advertising expenditures and sales revenues for certain QSR brands. Additional analysis, explored the relationship between advertising expenditures and another measure of consumption, market share, for QSR firms in the United States during 1986 to 2007. Results from this set of analysis, demonstrated a positive and significant relationship between electronic advertising expenditures and market share for several QSR brands. A Chow test (Chow, 1960) was also conducted on the brand level models to test for the presence of structural breaks in the data. Other means of analysis are also offered, and the implications of the results to research and theory are drawn. The study also identified future directions for research. / text

Master of Science / Department of Agricultural Economics / John M. Crespi / The objective of this analysis is to develop a demand model for the Sunsweet Cooperative and from this model, determine if the benefits to Sunweet’s advertising, as measured by the change in revenues, exceed the advertising costs. Weekly retail scanner data from July 20, 2008 through June 13, 2010 were used. Ordinary least squares regression equations were estimated to determine the overall demand for Sunsweet dried prunes. Two different models were estimated, one for Sunsweet’s overall prune demand and another for the Sunsweet’s Ones product. The advertising elasticity for the total dried prune demand was 0.10 and for the Ones product was 0.24. The demand equations demonstrated that Sunsweet’s advertising expenditures are increasing the overall demand for their dried prunes and their specific Ones product. What cannot be determined from the demand estimations is whether increase in revenues was greater than the cost of the advertising program. This is an especially important question for Sunsweet as it can be discerned from the data that Sunsweet’s advertising expenditures are quite large as a fraction of its revenues when compared with other similar food sellers. Using the regression equations, a benefit-cost simulation was conducted. We developed a measure that tells us how much the quantities sold of prunes would be affected by increased advertising expenditures by Sunsweet while taking into account the costs of advertising under an assumption of monopolistic competition. Two different scenarios were evaluated, one with a shutdown condition that did not allow average revenue to be below average cost and another without this shutdown condition. The total Sunsweet prune model resulted in an average benefit cost of 2.143 with the shutdown constraint and 1.845 without the shutdown constraint. The Ones product model resulted in an average benefit-cost estimate of 2.672 with the shutdown constraint and 2.358 without the shutdown constraint. Overall these ratios are good for a company operating under monopolistic competition and suggest that for every dollar spent on the advertising campaign, the average return was near to or greater than $2. Overall our analysis showed that Sunsweet’s advertising expenditures are increasing their overall demand and their benefits of advertising are exceeding their costs of advertising.