Assessing the Relative Impact of Major Sources of Innovation on the Brand Equity of a Firm

Abstract

Purpose

Traditionally, firms have been dependent on internal sources such as their own employees – and up to a certain extent, on some external sources, their customers – for innovation. However, in the current scenario of technological dynamism, firms are exploring multiple sources to generate ideas for innovation. Therefore, there is a need to understand the relative effect of various sources of innovations on a firm’s performance.

Methodology/approach

We offer a conceptual framework where we identify six distinct sources of innovations – firm, customers, external network, competition, macro-environment, and technology and how they create value for focal firms especially their brand equity. We introduce a taxonomy of various costs and benefits related to innovations. We then argue using our proposed taxonomy to understand the relative strengths of various sources of innovation affecting a firm’s brand equity.

Findings

We discuss and compare the relative effects of these sources of innovations on a firm’s brand equity by rank-ordering the sources. The customers and the technology as a source of innovation have the maximum impact on the firm’s brand equity followed by the marginal impact of macro-environment and external network of a firm. The firm itself has a moderate impact on its brand equity, while competition has the minimal impact. Further, we also discuss how the relationship is moderated by different innovation characteristics (nature and type of innovations).

Practical implications

The main practical implication is to create awareness among managers about various costs and benefits of the proposed six sources of innovations and their effects on brand equity. Managers would be able to prioritize their sources of innovation based on firms’ current needs, and whether to focus on lower costs or building higher brand equity in the scarce resource environment.

Originality/value

We offer a comprehensive list of six sources of innovation, build a conceptual framework wherein we discuss the relative strengths of these sources affecting brand equity.

Citation

Kumar, V., Anand, A. and Nim, N. (2018), "Assessing the Relative Impact of Major Sources of Innovation on the Brand Equity of a Firm", Innovation and Strategy (Review of Marketing Research, Vol. 15), Emerald Publishing Limited, Leeds, pp. 99-142. https://doi.org/10.1108/S1548-643520180000015006