Recessions provide challenges to managers seeking to develop and justify an appropriate level of market-facing activity. The literature on the topic offers limited guidance on what strategy is most appropriate. We briefly review the literature on the topic and report on recent results that show (a) that R&D spending by B2BGoods firms and B2BServices firms in recessions increases both profits and stock returns, while advertising spending decreases both profits and stock returns; (b) for B2CServices firms, both R&D and advertising spending in recessions increases profits and stock returns and (c) for B2CGoods firms, R&D spending in recessions increases profits and stock returns, while advertising spending increases profits but decreases stock returns. Further, these effects are either strengthened or weakened depending on the firm's market share and financial leverage.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics