Abstract
Recently, innovation has been a key driver of brand equity. However, the emerging economies provide a dynamic institutional environment that makes it difficult to explore the relationship between innovation and brand equity. By combining the brand equity literature and institutional theory, our research investigates the effects of technical and non-technical innovation on brand equity and how the effects vary within different institutional factors (product market development, regional legal environment). A sample composed of 124 listed companies in China from 2009 to 2014 was analyzed empirically and provides strong support for the theoretical predictions. The results confirm the positive effect of the two innovations on brand equity and the contingent effect of institutional factors as follows: the regional legal system positively moderates the relationship between the two innovations and brand equity, and product market development positively moderates the relation of technical innovation and brand equity; there was found to be no significant influence of non-technical innovation on brand equity. This study provides crucial theoretical and managerial implications for managers.
Highlights
In contemporary business, enhancing brand equity has been a key strategic issue for many firms attempting to offer superior returns instead of providing initiatives of potentially lower value “but with more immediate and quantifiable financial outcomes” [1,2,3]
As we see the three instrumental variables, the estimated coefficients of them are significant except TI i(t-2) in model 1, suggesting they are effective as the single IV
Based on the brand equity literature and institutional theory, this study offers empirical evidence to explore the effect of technical and non-technical innovation on the brand equity and the moderating effect of institutional factors, including product market development and regional legal environment, in the context of China—the emerging economy
Summary
In contemporary business, enhancing brand equity has been a key strategic issue for many firms attempting to offer superior returns instead of providing initiatives of potentially lower value “but with more immediate and quantifiable financial outcomes” [1,2,3]. As a key driver of brand equity [6], innovations can create differentiation, enhance a brand’s value proposition, and revitalize the brand [2]. Building an innovative mechanism capable of sustained growth may be necessary for firms to affect brand construction positively. The emerging economies are experiencing rapid changes, and this provides a paradoxical environment to the development of innovation and brands [1, 8].
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