Review of Industrial Organization 18: 115–126, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
Proﬁtability and Media Advertising in Greek Food
OURANIA NOTTA and KOSTAS OUSTAPASSIDIS
Aristotelian University of Thessaloniki, Department of Agricultural Economics, 54006
Abstract. The effect of advertising intensity in four media (television, radio, newspapers and
magazines) on proﬁtability is examined in this paper. A proﬁtability model is tested using a unique
1993–1996 panel data set of 350 Greek food manufacturing ﬁrms. Fixed effects results for the
full model show that only television advertising increases proﬁtability signiﬁcantly. The results for
eight major food categories estimated separately show important differences between consumer and
producer groups; television advertising effects on proﬁtability are positive and signiﬁcant only in the
consumer industries where television advertising intensity is high. These ﬁndings show that television
is the only media where persuasive advertising exists in Greek food manufacturing ﬁrms.
Key words: Food industries, media advertising, proﬁtability.
Many empirical studies of the structure-performance relationship in manufactur-
ing industries have focused on the impact of advertising on industry proﬁtability
(Pagoulatos and Sorensen, 1981, pp. 728–732; Gisser, 1991, pp. 148–152; Connor
and Peterson, 1992, p. 157; Oustapassidis and Vlachvei, 1999, p. 1293). A limited
number of studies examined the effect of media advertising on industry proﬁtability
(Ackoff and Emshoff, 1975; Porter, 1976a, pp. 403–405). However, these studies
did not use ﬁrm level data and they did not take into account the persistence of
proﬁts. The aim of this study is to examine the effects of advertising expenditures
for each medium (TV, radio, magazine and newspaper) on ﬁrm proﬁtability using
panel data for a four-year period.
Each media advertising vary from each other with regard to the information
it provides, the costs of placing messages before potential buyers, the number of
repetition of the messages, etc. So, the question is what is the effect of each media
advertising on market performance in the food industry- an industry where advert-
ising seems to play an important role. We test here whether printed advertising is
more “informative” compared to “persuasive” television advertising.
The authors thank Prof. Dennis Mueller and the two anonymous referees for suggestions and
comments on an earlier draft of this paper.