Research Article: The effects of tech and non-tech innovation on brand equity in China: The role of institutional environments

Date Published: May 8, 2019

Publisher: Public Library of Science

Author(s): Qiong Yao, Liwen Huang, Mingli Li, Nicola Lacetera.


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.

Partial Text

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” [1–3]. More managers are inclined to forgo short-run profits for maximum long-term added value by offering brand name products or services, which is referred to as brand equity [4–6]. As a key driver of brand equity [6], innovations can create differentiation, enhance a brand’s value proposition, and revitalize the brand [2]. Furthermore, a brand’s investment in innovation may grant it the ability to successfully employ a wider range of marketing strategies than the competition [7]. Therefore, building an innovative mechanism capable of sustained growth may be necessary for firms to affect brand construction positively. However, the emerging economies are experiencing rapid changes, and this provides a paradoxical environment to the development of innovation and brands [1, 8]. Differing economic, social and legal institutions require multiple emphases on different things in different markets [1]. Compared with developed countries, the brand equity of Chinese firms is generally in low level, characterized by lack of social value expression and price premium as well as terrific unevenness across the regions [9, 10]. Thus, it is still unclear how innovation behavior fosters firm’s brand equity in emerging economies [1, 11].