Antecendents and consequences of corporate brand name redeployment
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For the past several years, there has been an increasing trend of a phenomenon in which firms decide to change their identities by redeploying their corporate or product brand names. These brand name redeployments, resulting from a merger or an acquisition deal occur in a variety of different approaches ranging from elimination of one brand, to concatenation of the brand names. The frequency and costs involved in these redeployment processes are exorbitantly high. In spite of these high stakes, the motives behind this corporate strategy are quite diverse, intriguing and, at times, vague. On one hand, researchers argue that brand name changes are a result of the firm’s strategic decision to leverage equity and/or “broaden the scope of business.” On the other hand, several theorists argue the motive on a rather selfish nature of the executive and/or the firm. Such variation in the firm’s strategic choice motivates this investigation. The objective of this study is to develop an understanding of the firm-, market- and transaction-specific antecedent factors that lead to these brand name redeployment decisions and subsequently, explore the consequences of this strategic action. This research uses the various theories of the firm relating to mergers and acquisitions (viz. Resource-based perspective, market and managerial power perspective, signaling theory etc.) and brand redeployments (brand extensions) to formulate a conceptual model of antecedent factors influencing the brand name redeployment decision. The impacts of these factors are ascertained through an empirical analysis conducted over a sample of about 656 merger or acquisition transactions during the 1995-1999 period. Finally this research also incorporates an exploratory analysis of the performance-based consequences of these redeployments. The results indicate that relative standing, market overlap between the acquirer and the target firm and the transactional characteristics of the merger or acquisition have a significant impact on the brand name redeployment decision.