Tech Stock Valuation

It is relatively rare to find companies that report high levels of both advertis-

ing and R&D activity. Exceptions to this rule are provided by firms that offer

educational services, chemicals and allied products, industrial machinery and

computer equipment, electronic equipment, measuring instruments, and

transportation equipment. It is more typical to find firms that employ advertising

or R&D, but not both, as an effective means for product differentiation.

The most obvious implication of these data is that advertising and R&D con-

stitute alternative means of product differentiation that have the potential to differ

in their effectiveness across industry ...