Positive Research On Firm’s Marketing Input And Profitability Of Processing Of Food From Agricultural Products In China

With the economic development, the gap between urban and rural residents’income continues to expand, which becomes a potential risk to hinder social stabilityand sustainable economic development. So increasing rural residents’ incomebecomes a top priority. The development of the agricultural food processing plays animportant role in absorbing surplus rural labor force and increasing farmers’ income.Agricultural food processing enterprises are facing the problem of producthomogeneity. In order to obtain sustainable profitability, they need to increase productand brand differentiation. The possible solution is to increase the marketinginvestment. Marketing investment has not only investment-effect, but also cost-effect,and thus clarifying the relationship between marketing investment and profitability inthe agricultural food processing enterprises has a realistic necessity.Many domestic and foreign scholars studied the effect of capital structure, R&Dinvestment, working capital management, technical level on the profitability of thebusiness. However, there are little study on the relationship between marketinginvestment and profitability of firms. Thus the relationship between marketinginvestment and profitability has a theoretical necessity.This paper uses the financial data of the industry of agricultural food processfrom year1998to2005, to study the relationship between marketing investment andprofitability of firms. Firstly, the article starts from the basic concepts of marketinginvestment and profitability, reviews the theory of marketing investment andprofitability. Secondly, the paper shows the data sources and processing instructions,empirical facts, and the choices of independent variable, dependent variables andcontrol variables. Thirdly, in the empirical part of this paper, it uses mixed OLS, fixedeffects and random effects models for panel data regression analysis. Moreover, itadds control variables and cross terms, and regression results are analyzed.Furthermore, this paper checks the robustness of the regression results.The study concludes that:(1) the profitability of the agricultural food processingenterprises in China and their marketing investments are significantly positivelycorrelated.(2) For firms with access to financial support, profitability is higher thanthose without. For private enterprises, profitability is lower than state-ownedenterprises.(3)The effect of marketing investment on firms’ profitability depends onexporting conditions of enterprises, ownership, region, and financial support. In non-exporting firms, one unit of marketing investment’s effect to profitability isgreater than the exporting enterprises. One unit of marketing investment’s effect toprofitability in state-owned, private, Hong Kong&Macao&Taiwan andforeign-funded enterprises decreases gradually. One unit of marketing investment’seffect to profitability in central, eastern and western regions decreases gradually. Forfirms without financial support, the same unit of marketing investment on theprofitability is great than firms who have financial support.