National Culture and Advertising Sensitivity to Business Cycles: A Reexamination

Abstract

The author reexamines the cyclical sensitivity of national advertising expenditure with a longitudinal data set of 59 countries over 35 years. In contrast to prior studies, the author examines the effects of the entire set of Hofstede culture dimensions to study cross-country variation in the advertising sensitivity and investigates how the emergence and growth of online advertising has transformed the cyclical sensitivity of advertising spending. National culture substantially affects advertising’s cyclical sensitivity, but in different ways than hypothesized previously. Consistent with the literature, advertising sensitivity is lower in long-term-oriented and high-uncertainty-avoidant countries and is unrelated to individualism. However, power distance is unassociated with cyclical sensitivity, and masculinity and indulgence—the two dimensions ignored in previous research—reduce cyclical sensitivity. Moreover, there is evidence that culture operates differently for the cyclical sensitivity of online advertising. Advertising expenditure is cyclically much more sensitive than documented previously and has grown more so over time since the advent of online advertising. This study provides initial evidence that online spending is more elastic than traditional advertising and that traditional spending has become more procyclical. The author advances timely and refined empirical generalizations on the cyclical sensitivity of advertising expenditure.