Brand creation vs acquisition in portfolio expansion strategy

Abstract

PurposeThis paper seeks to address the following question: What causes firms to choose brand creation vs brand acquisition for brand portfolio expansion?Design/methodology/approachA multilevel interdisciplinary conceptual model is developed with nine factors at three levels of influence: the market, firm, and brand portfolio. Using 125 brand acquisitions and creations for 22 firms between 2001 and 2007, the model is tested using logistic regression to determine which factors significantly influence brand portfolio expansion strategy and whether they encourage acquisition or creation.FindingsSignificant factors were found at the market and firm levels, with competitive intensity of the market having the strongest effect, followed by the firm's financial leverage, market concentration, and market growth.Practical implicationsContrary to prior expectations, external factors at the market and firm levels have an impact on choice of acquisition vs creation. However, internal firm factors may serve as moderators of strategy effectiveness.Originality/valueThis is the first study to empirically examine factors affecting the brand portfolio expansion strategy via brand creation versus brand acquisition across a variety of industries. From a methodological standpoint, one of the more serious and persistent problems facing prior brand research is the lack of brand‐level data, but this paper's approach overcomes this limitation by using media expenditures in the AdSpender database to represent brands within a category/market.