This paper aims to examine the B2B advertising effect on firm’s market value and whether/how its effectiveness can be enhanced with corporate social responsibility (CSR) strengths.
The authors propose that CSR can be a strategic complement to advertising and reinforce the latter’s positive effect on a firm’s performance in two logics: signaling mechanism and defensive mechanism. Using the Kinder, Lydenberg, and Domini database and final data obtained from Compustat, the authors applied fixed effect regression analysis to test the interaction effect of advertising expense and CSR strengths on firms’ market performance as operationalized in Tobin’s Q.
The result confirms that CSR moderates the B2B advertising effect on a firm’s market value. More importantly, the authors find that internal CSR activities that are closely related to a firm’s core business, compared to external CSR activities, more significantly enhance the advertising effectiveness on a firm’s market value.
This research provides guidelines for B2B firms to better prioritize resource allocation to CSR practices for achieving a better financial outcome.
The current study on the joint effect of advertising and CSR has important theoretical and managerial implications, given both tools are commonly used by most B2B firms but not necessarily integrated into one corporate marketing strategy.
