2012 PROCEEDINGS - Public Relations Society of America
2012 PROCEEDINGS - Public Relations Society of America
2012 PROCEEDINGS - Public Relations Society of America
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A Time-Series Analysis <strong>of</strong> International <strong>Public</strong> <strong>Relations</strong> Expenditure and<br />
Economic Return: A Study <strong>of</strong> Japan, Liberia, Belgium, and Philippines<br />
Suman Lee, Ph.D.<br />
Iowa State University<br />
smlee@iastate.edu<br />
Byung Wook Kim<br />
Iowa State University<br />
byungkim98@gmail.com<br />
Abstract<br />
The purpose <strong>of</strong> this study is to examine the causal relationship between economic return and<br />
international public relations expenditure by other countries in the U.S. Based on time-series<br />
data analysis, this study found a sustainable lagged effect for Japan, a delayed lagged effect for<br />
Belgium, early lagged effect for Liberia, and no lagged effect for Philippines between their<br />
public relations expenditure in the US and the US imports from those countries.<br />
Introduction<br />
According to the Foreign Agent Registration Act (FARA, 22 U.S.C. §611) enacted by the<br />
U.S. Congress in 1938, public relations firms serving for foreign clients are required to file their<br />
contract information (e.g., content <strong>of</strong> agreement, income, and expenditures) to the US<br />
Department <strong>of</strong> Justice and to update these details every six month. The FARA report is a reliable<br />
source <strong>of</strong> information about public relations activities <strong>of</strong> other countries in the US for more than<br />
sixty years (FARA, 2005).<br />
In 2010, there were 378 active public relations contracts with 557 foreign clients from<br />
137 countries. From 1997 to 2003, 661 foreign clients from 150 countries spent 4.2 million US<br />
dollars on average for public relations in the US (Lee, 2006; Lee & Yoon, 2010). Foreign clients<br />
enter into these contracts to attract <strong>America</strong>n tourists, to encourage US consumers to buy their<br />
products, and to draw <strong>America</strong>n investments into their home countries (Lee & Yoon, 2010;<br />
Wang, 2006). Then, the question is whether these investments in international public relations in<br />
a target country (e.g., the US) can generate tangible economic outcomes as desired.<br />
<strong>Public</strong> relations scholars have been interested in the bottom line effect <strong>of</strong> public relations,<br />
but the outcomes <strong>of</strong> such efforts are, by nature, intangible and difficult to measure in dollar<br />
terms. The demand for concrete contribution <strong>of</strong> public relations to organizations becomes<br />
especially high during economic downturn when organizations are in search <strong>of</strong> all means to<br />
reduce cost. Mainly due to methodological challenges, only a few studies have <strong>of</strong>fered empirical<br />
evidences <strong>of</strong> the economic outcomes <strong>of</strong> public relations efforts (Ehling, 1992). Kim (2000) tested<br />
several models from advertising and found a positive relationship between an organization‘s<br />
reputation and its revenue. Similarly, Kim (2001) found a positive association between public<br />
relations expenditures and revenue mediated by company reputation. Lee and Yoon (2010) tested<br />
the bottom line effect <strong>of</strong> international public relations at the country level and found that the<br />
number <strong>of</strong> PR contracts in the US is positively related to US direct investments to a client‘s<br />
home country, the number <strong>of</strong> US tourists, and the volume <strong>of</strong> US imports.<br />
However, those studies have a fundamental limitation to detect a causal relationship<br />
between public relations expenditure and economic returns because they used cross-sectional<br />
data sets without considering time order in causality (Lee & Yoon, 2010). Time is a critical<br />
factor in ascertaining causal relationship. <strong>Public</strong> relations scholars have assumed that public<br />
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