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The primary focus of brand equity research has been on how brand knowledge creates value for firms through customer behavior in product markets. Using archival data and five experiments, this article tests a framework that outlines the unique role brands play in the labor market. The framework distinguishes between vertical and horizontal differentiation and shows that vertical brand differentiation is associated with lower pay, whereas horizontal brand differentiation is associated with higher pay. Employees are also vertically and horizontally differentiated, and firms high in horizontal brand differentiation pay more for employees who match their brands' differentiating characteristics (i.e., brand-relevant complementarities). Results show that these brand–pay relationships have important downstream effects on employee behavior and, consequently, on firm profits. Specifically, leveraging vertical brand differentiation to lower pay represents a false economy because profits are attenuated by negative effects on employee productivity and retention. In contrast, when managers at firms high on horizontal brand differentiation pay more, profits increase via the same mediating employee behaviors. Six firm strategies and investments that influence firm bargaining power in the employee–brand matching process are found to moderate the brand–pay relationship and downstream effects on profits. [ABSTRACT FROM AUTHOR]

Every new product introduction entails a branding decision: whether to name the product using a direct extension, a sub-brand, or a new brand. While previous research has focused on how consumers evaluate alternatives in lab settings, or, in studies based on secondary data, on the effectiveness of brand extensions in general, a comprehensive framework of the antecedents and consequences of new product branding decisions is lacking from the literature. The authors propose a theoretical framework that organizes product-, category-, and firm-level determinants of firms' new product branding decisions, and empirically test the framework's predictions using a large sample of new product introductions, documenting with real world data how managers choose among three branding alternatives. In addition, using both product-specific and firm-specific valuation metrics, the authors quantify the negative impact on firm value of misaligning the new product branding decisions with the conditions facing new products. Conceptually, the authors bridge the branding and new product performance literatures, and present findings that extend knowledge from behavioral research on brand extensions. Empirically, the authors provide evidence to managers on how to choose brand names for new products in a way that enhances the stock market value of firms., Author(s): Larisa Kovalenko [sup.1] , Alina Sorescu [sup.2] , Mark B. Houston [sup.3] Author Affiliations: (1) grid.208226.c, 0000 0004 0444 7053, Boston College, , 140 Commonwealth Avenue, 02467, Chestnut Hill, [...]

At the time of an initial public offering (IPO), firms seek to maximize their stock market value. The authors theorize and show that a firm's innovation potential—firm outputs and activities that contribute to the development of future new products—can be used by the managers of IPO firms as a credible signal of the quality of the firm. Using a sample of 370 IPO firms from the consumer-packaged goods and pharmaceutical industries, and three metrics of innovation potential, the authors show that firms' innovation potential is (1) positively associated with the initial value of the IPO and with the first-day IPO returns and (2) negatively associated with the extent to which insiders sell their shares at the time of the IPO. The effectiveness of the three metrics of innovation potential as a signal of firm quality varies: patents have a stronger impact on insider sales than preannouncements and generic references to future innovation, while preannouncements have the strongest impact on first-day IPO returns. The article presents a nuanced view of the extent to which various firm stakeholders consider information about firms' innovation potential to be a credible signal that reduces the adverse selection present in IPO deals with insider sales. [ABSTRACT FROM AUTHOR]

Author(s): Alina Sorescu [sup.1] , Martin Schreier [sup.2] Author Affiliations: (1) grid.264756.4, 0000 0004 4687 2082, Texas A&M University, , College Station, TX, USA (2) grid.15788.33, 0000 0001 1177 4763, [...]

Consumers are increasingly mindful of corporate social responsibility (CSR) when making purchase and consumption decisions, but evidence of the impact of CSR initiatives on actual purchase decisions is lacking. This article introduces a novel brand accountability–based framework of consumer response to CSR initiatives, which categorizes CSR efforts as "corrective," "compensating," or "cultivating goodwill." Leveraging a database of CSR press releases by leading consumer packaged goods brands, the authors examine the effect of the different types of CSR announcements on brand sales. The findings suggest that CSR initiatives that genuinely aim to reduce a brand's negative externalities ("corrective" and "compensating") lift sales, whereas CSR actions focused on philanthropy ("cultivating goodwill") can hurt sales. The authors propose two moderators—CSR reputation and CSR focus on environmental or social causes—and a mechanism for these effects, which they examine under controlled experimental settings. The experimental results show that, conditional on CSR reputation, consumers perceive varying degrees of sincerity in the different CSR types and that sincerity mediates the effect of CSR type on purchase intentions. Overall, the results suggest that consumers are more inclined to reward firms that directly reduce the negative by-products of their own business practices than to be impressed by public goodwill gestures. [ABSTRACT FROM AUTHOR]

Event studies examine stock price movements around corporate events. These events can be voluntary firm announcements (e.g., new product introduction, alliance formation, channel restructuring) or announcements made by other entities such as regulatory bodies (e.g., FDA approval) or competitors (e.g., new market entry). The event study methodology was developed by finance researchers but has been widely adopted in other fields, including marketing. We review the manner in which event studies have been used in the marketing literature and summarize the current state of knowledge about the design and interpretation of event studies. We provide guidelines for researchers who use this methodology and for readers who draw inferences from results obtained from event studies, and we highlight a few areas where the methodology can be leveraged to help us better understand the financial value of marketing actions., Author(s): Alina Sorescu [sup.1] , Nooshin L. Warren [sup.2] , Larisa Ertekin [sup.1] Author Affiliations: (1) 0000 0004 4687 2082grid.264756.4Texas A&M University, 4112 TAMU, 77843-4112, College Station, TX, USA (2) [...]

We examine whether cobranding--the practice of using two established brand names on the same product-- increases the market value of parent firms. Using data from the consumer packaged goods industry, we document that the average stock market reaction to the announcement of cobranded new products is approximately C1.0%. We hypothesize that this reaction is significantly higher than it would have been if these same products were single branded, and we find evidence consistent with this hypothesis. We also examine the determinants of this stock market reaction. We find that the consistency between the two brand images, the innovativeness of the product, and the exclusivity of the cobranding relationship significantly increase the market reaction to cobranding announcements. Our findings provide important managerial guidelines for enhancing firm value through cobranding partnerships. [ABSTRACT FROM AUTHOR]