Drivers of Cross-National Variation in Advertising Spending: A Longitudinal Analysis of the Effects of Freedom and Foreign Direct Investment

We examine the effects of freedom and foreign direct investment on ad spending. We also assess possible differential effects of foreign direct investment (FDI) on ad spending across economies with different income levels. We employed random effect time-series cross-sectional (TSCS) models linear in parameters for fifty economies using annual data from Euromonitor and other sources for the 2000–2013 period. We found that freedom and FDI have significant effects on ad spending. A theoretical contribution of this study to the literature consists in showing that macro-level environmental factors such as political freedom and FDI are crucial for understanding how firms allocate their ad spending to national markets. It also shows that the effect of FDI on ad spending is more salient in low income economies than in high income economies.