The Dynamic Relationship between Investments in Brand Equity and Firm Profitability: Evidence Using Trademark Registrations

34 Pages Posted: 6 Oct 2016

See all articles by Dirk Crass

Dirk Crass

ZEW – Leibniz Centre for European Economic Research

Dirk Czarnitzki

KU Leuven - Department of Managerial Economics, Strategy, and Innovation

Andrew A. Toole

US Patent and Trademark Office

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016

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.

Keywords: Brand Equity, Firm Profitability, Intellectual Property Rights, Trademarks

JEL Classification: O31, O34

Suggested Citation

Crass, Dirk and Czarnitzki, Dirk and Toole, Andrew A., The Dynamic Relationship between Investments in Brand Equity and Firm Profitability: Evidence Using Trademark Registrations (January 2016). USPTO Economic Working Paper 2016-1. Available at SSRN: https://ssrn.com/abstract=2848507 or http://dx.doi.org/10.2139/ssrn.2848507

Dirk Crass

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Dirk Czarnitzki

KU Leuven - Department of Managerial Economics, Strategy, and Innovation ( email )

Naamsestraat 69 bus 3500
Leuven, 3000
Belgium

Andrew A. Toole (Contact Author)

US Patent and Trademark Office ( email )

Alexandria
VA 22313-1451
United States

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