Businesses are eager to understand the factors influencing their resource allocation decisions, yet this area remains largely unexplored in academic research. Furthermore, the existing limited literature predominantly focuses on the determinants of resource allocation to research and development (R&D), with a heavy emphasis on high-income countries. Against this backdrop, this study addresses the lacuna in academic research regarding factors influencing resource allocation decisions, particularly in emerging markets like India. Focused on Indian manufacturing firms, the research employs fractional logistic regression on a 187-firm panel from 2006 to 2023, exploring determinants of R&D and advertising spending. Results indicate positive impacts of capital intensity, liquidity, export intensity, past financial performance and firm age on R&D spending, while large, highly geared firms with strong stock performance show lower R&D intensity. Advertising spending is positively influenced by high liquidity, growth prospects and past sales, with negative impacts from factors like capital intensity, leverage, firm size and stock market performance. Industry-specific factors significantly influence resource allocation decisions, emphasizing the need for tailored strategies. The study provides practical insights for managers, suggesting the prioritization of internal funding for R&D and advertising, maintaining a lower debt structure, and recognizing the innovation-marketing spending trade-off. Also, the findings highlight the need to align resource allocation with a plethora of firm-specific factors. Moreover, the results accentuate that managers should consider industry-level factors, as they significantly impact resource allocation. The non-linear effects of industrial concentration on R&D and advertising suggest a need for careful evaluation of competition levels. Resource investments in R&D and advertising may vary with changing industrial concentration. The positive impact of industrial turbulence on R&D and the opposite effect on advertising suggest a focus on innovation during turbulent times. Managers are advised to carefully manage the R&D-advertising trade-off in such periods.
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