Does Environmental Innovation Produce License: A Customer-Based Brand Equity Perspective?

Abstract

Firms often look for ways to improve the return on investment that they earn from costly environmental innovation. Drawing from customer-based brand equity perspective, this article investigates license effect, a previously unexplored benefit associated with brands’ environmental innovation. License effect refers that high level of environmental innovation grants brands the license to employ atypical marketing strategy without penalty (in the form of impaired attitudes). We confirm the existence of license effect at product attribute level and brand level in study 1 and 2. Study 3 further investigated whether license effect was contingent on important contextual factors. Our results reveal that license takes effect on price strategy at both product attribute level and brand level. Moreover, license effect disappears in recycle phase. We conclude that license comes into effect only when customers construe atypical marketing strategies as behaviors that associated with personal benefit. By introducing license effect, we bridge innovation literature and customer-based brand equity theory to explore firms’ benefit from consumers’ evaluations. Furthermore, our findings remind managers of a new approach to improve return from environmental innovation investment.