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Growth-related Measures of Brand Equity Elasticity for Food Firms

  • Liu, Juan
  • Sporleder, Thomas L.

Brand names and brand equity are recognized as important intangible assets among firm managers in the global food supply chain. This analysis investigates the long-run potential of brand equity among food processors to actually create real options for a firm's management. The empirical analysis views brand equity among food processors as a real option of growth and empirically tests selected drivers that are conceptually associated with firm growth. Results indicate that brand equity has a positive effect on the growth option value of the firm, after accounting for other major drivers of firm growth. Brand equity elasticity is estimated with respect to a firm's growth value for both the industry- and firm-level. One major implication of the analysis is that managers of food firms should evaluate the efficacy of brand equity building strategies in terms of the contribution brand equity makes to the firm's growth option value. The evidence suggests that categorizing and managing advertising expenditures solely as an expense item may be too narrow from a strategic viewpoint.

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File URL: http://purl.umn.edu/8172
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Article provided by International Food and Agribusiness Management Association (IAMA) in its journal International Food and Agribusiness Management Review.

Volume (Year): 10 (2007)
Issue (Month): 01 ()
Pages:

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Handle: RePEc:ags:ifaamr:8172
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  1. Cravens, Karen S. & Guilding, Chris, 1999. "Strategic brand valuation: A cross-functional perspective," Business Horizons, Elsevier, vol. 42(4), pages 53-62.
  2. Robert S. Pindyck, 1986. "Irreversible Investment, Capacity Choice, and the Value of the Firm," NBER Working Papers 1980, National Bureau of Economic Research, Inc.
  3. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
  4. Nicolas P. B. Bollen, 1999. "Real Options and Product Life Cycles," Management Science, INFORMS, vol. 45(5), pages 670-684, May.
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