Rethinking advertising-sales response curves: the moderating role of R&D in nonlinear advertising effects

Purpose Prior research suggests that the advertising–sales relationship exhibits diminishing returns beyond optimal thresholds. Integrating resource-based view and signaling theory, this study investigates whether advertising effectiveness recovers or continues to decline at elevated spending levels. We further examine how R&D intensity moderates this nonlinear relationship. Design/methodology/approach This study analyzes an unbalanced panel of 2,231 firm-year observations from 258 firms listed on India's National Stock Exchange across ten industrial sectors (2014–2024). We employ hierarchical regressions to model the nonlinear advertising–sales relationship and to test the moderating role of R&D intensity. Findings Results indicate that advertising effectiveness is consistent with a three-phase nonlinear pattern: sales response is stronger at low advertising levels, weakens at moderate levels, and strengthens again at high levels. R&D intensity significantly moderates this pattern: high-R&D firms exhibit stronger resurgence at elevated intensities, while low R&D firms peak effectiveness at low advertising levels. Practical implications Managers may face the greatest vulnerability at moderate advertising levels, where effectiveness temporarily weakens. Low-R&D firms may benefit from maintaining cost-efficient low-to-moderate advertising spending, while high-R&D firms can justify greater advertising intensity to leverage innovation-driven complementarities. Originality/value This study advances advertising response modeling beyond inverted-U paradigms by documenting an empirically grounded S-shaped pattern in advertising effectiveness. By identifying R&D intensity as a key boundary condition, the study clarifies how innovation capability shapes nonlinear returns to advertising intensity.