Returns to Brand Building via Advertising

Pinar Yildirim, Marketing, The Wharton School

Abstract: We aim to test if investment in branding – specifically investment in advertising – improves a firms’ outcomes in the labor markets. Advertising provides informative signals about brands, and therefore may signal resources and capability of the firm as an employer, which increases the returns to its efforts in the labor market. Thus in labor markets where informational frictions are high, advertising can provide signals which influence individuals. Presumably, for any employee, as is the case in any search, some familiarity with the employer should reduce the cost of searching and choosing, and indicators of signals of quality may increase the motivation of an employer to apply to an employer. Moreover, there may be behavioral signals which result in individuals favoring companies because they like “the product” or “the brand.” Labor market benefits of advertising investment, to date, has not been studied by another paper before.