The Impact of Brand Architecture Strategy on Firm Value and Its Mechanism

Jiang Lianxiong; Lan Ziyuan; Xu Yifan; Wu Shuilong

doi:doi:10.16538/j.cnki.fem.20220815.301

Summary

How to manage the brand system to achieve higher business growth and operating performance is critical to modern firms’ business operation and marketing management. However, existing literature does not reach to consistent conclusions on the relationship between brand architecture strategy and operating performance, and lacks attention to the mechanism. Therefore, this paper examines the main effect and explores the mechanism of operating efficiency between brand architecture strategy and firm value, trying to uncover the “black box” in this relationship.

This paper takes the listed companies of China Securities 800 index (CSI 800) from 2015 to 2019 as the sample frame. After excluding those listed companies which belong to specific industries and lack main data, 1443 useable observations of 298 listed companies in Shanghai and Shenzhen Stock Exchange are obtained. Meanwhile, the data of brand architecture strategy types and the relevant marketing characteristics of sample listed companies are obtained by manual collection and coding, and the financial data are from CSMAR and Wind, which are the basis of empirical tests on theoretical assumptions.

The results show that: First, compared with the mixed branding and the house of brands, the branded house has a more significant positive effect on firm value. Second, all of the three brand architecture strategy types have obvious effects on firm value by significantly affecting operating efficiency. Furthermore, at the firm level, the branded house and the house of brands have the same effect on improving operating efficiency; at the business operation level, the branded house has greater cost advantages in business organization and management, and marketing investment, while the house of brands has more significant advantages in the introduction of new brands and products to gain revenue. Third, the relationship between brand architecture strategy and firm value is significantly heterogeneous due to the moderating role of the two business strategies of diversification and centralization, and the two market types of B2B and B2C.

The main contributions of this paper are as follows: First, through the study of multiple industry samples in China’s capital market, it tests and verifies the conclusion that the branded house has a higher positive impact on firm value in the new market scope, which is helpful to the generalization of this conclusion in the development of brand architecture strategy theory. Second, it is the first time to verify the internal mechanism that the brand architecture strategy affects operating efficiency and firm value through affecting business organization and resource allocation, including the cost and efficiency of business organization and management, marketing investment, and the introduction of new brands and products, which theoretically expands and deepens the brand architecture strategy theory. Third, the heterogeneity of the impact of brand architecture strategy on firm value is revealed by different business strategies and market types, which further deepens the mechanism explanation of the relationship in the main effect. Practically, it provides guidance for firms to choose appropriate brand architecture strategy to carry out the strategic decision-making and management of firm brand system, and the investment analysis of financial market.