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The dynamic relationship between investments in brand equity and firm profitability: Evidence using trademark registrations

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  • Dirk Crass
  • Dirk Czarnitzki
  • Andrew A Toole

Abstract

Most marketing practitioners and scholars agree that marketing assets such as brand equity significantly contribute to a firm’s financial performance. In this paper, we model brand equity as an unobservable stock that results from up to thirty years of past brand-related investment flows. Using firm-specific trademarks as investment proxies, our results show a significant long-run impact on financial performance. The dynamic profile of brand-related investments has an inverted-U shape that reaches its peak after eleven years. On average, it takes four years before brand related investments show a positive return, and investments older than nineteen years show no significant impact. For the median trademarking firm, brand equity contributes 265,000 Euro to annual profits.

Suggested Citation

  • Dirk Crass & Dirk Czarnitzki & Andrew A Toole, 2016. " The dynamic relationship between investments in brand equity and firm profitability: Evidence using trademark registrations," Working Papers of Department of Management, Strategy and Innovation, Leuven 526330, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
  • Handle: RePEc:ete:msiper:526330
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    File URL: https://lirias.kuleuven.be/retrieve/363445
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    References listed on IDEAS

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    1. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
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    3. Andrea Fosfuri & Marco S. Giarratana, 2009. "Masters of War: Rivals' Product Innovation and New Advertising in Mature Product Markets," Management Science, INFORMS, vol. 55(2), pages 181-191, February.
    4. Singfat Chu & Hean Keh, 2006. "Brand value creation: Analysis of the Interbrand-Business Week brand value rankings," Marketing Letters, Springer, vol. 17(4), pages 323-331, December.
    5. Aschhoff, Birgit & Baier, Elisabeth & Crass, Dirk & Hud, Martin & Hünermund, Paul & Köhler, Christian & Peters, Bettina & Rammer, Christian & Schricke, Esther & Schubert, Torben & Schwiebacher, Franz, 2013. "Innovation in Germany - Results of the German CIS 2006 to 2010. Background report on the Innovation Surveys 2007, 2009 and 2011 of the Mannheim Innovation Panel," ZEW Dokumentationen 13-01, ZEW - Leibniz Centre for European Economic Research.
    6. Graevenitz, Georg von, 2007. "Which Reputations Does a Brand Owner Need? Evidence from Trade Mark Opposition," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 215, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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    Cited by:

    1. Marco Grazzi & Chiara Piccardo & Cecilia Vergari, 2019. "Concordance and complementarity in IP instruments," DISCE - Quaderni del Dipartimento di Politica Economica dipe0003, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

    More about this item

    Keywords

    Brand Equity; Firm Profitability; Intellectual Property Rights; Trademarks;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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