, Volume 7, Issue 2, pp 207-236

First online:

The effect of advertising on brand awareness and perceived quality: An empirical investigation using panel data

  • C. Robert ClarkAffiliated withInstitute of Applied Economics, HEC Montreal and CIRPEE
  • , Ulrich DoraszelskiAffiliated withDepartment of Economics, Harvard University
  • , Michaela DraganskaAffiliated withGraduate School of Business, Stanford University Email author 

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We use a panel data set that combines annual brand-level advertising expenditures for over three hundred brands with measures of brand awareness and perceived quality from a large-scale consumer survey to study the effect of advertising. Advertising is modeled as a dynamic investment in a brand’s stocks of awareness and perceived quality and we ask how such an investment changes brand awareness and quality perceptions. Our panel data allow us to control for unobserved heterogeneity across brands and to identify the effect of advertising from the time-series variation within brands. They also allow us to account for the endogeneity of advertising through recently developed dynamic panel data estimation techniques. We find that advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.


Advertising Brand awareness Perceived quality Dynamic panel data methods

JEL Classification

L15 C23 H37