The impact of corporate and product trademarks on SMEs performance in the fashion sector

Purpose – Brands have become an increasingly valuable marketing tool in a crowded marketplace, since they allow consumers to distinguish sellers and goods and make choices based on more reliable information (Lemper, 2012). Brand is defined as a complex symbol representing a variety of ideas and attributes that build up in the minds of consumers over time, whose legal term is trademark (American Marketing Association, 2010); it is fundamental for competitiveness and long term survival at the point that brand personality might be, in some cases, more important than technical features of the product (Petty, 2010). For these reasons, more and more marketing managers devote considerable efforts to build and manage corporate and product brand (Madden et al., 2006), thus facing increasing pressures to justify the economic returns of such spending (Srivastava et al., 1999). According to Rust and colleagues (2004, p. 76), for a long time marketers have not been accountable for demonstrating how marketing adds to shareholder value and that “this lack of accountability has undermined marketers’ credibility, threatened the standing of the marketing function within the firm, and even threatened marketing’s existence as a distinct capability within the firm.” Also from an academic point of view, this issue has been under-investigated, apart from few studies (Seethamraju, 2003; Griffiths et al. 2005; Greenhalgh and Rogers, 2007; Krasnikov et al., 2009) which focus on large corporations and generally show a positive impact of brand and trademark activities on firm economic and financial performance. Furthermore, even though small and medium size enterprises (SMEs) account for 95% of the business population and recently provide evidence of stronger brand investments (Hughes and Mina, 2010), these studies have not taken them into consideration, as outlined also by some authors (Mendonca et al., 2004; Rogers et al., 2007; Helmers and Rogers, 2008). Since SMEs have to devote efforts to build and manage brand and possibly to register and renew trademarks, the impact of these decisions on SMEs performance is worth investigating. Consequently, this paper aims at answering this question: is there a positive relationship between building brand awareness among consumers using trademarks and SMEs economic performance? Smart growth of firms includes improving their knowledge assets and makes them be fruitful for their business, thus this issue is particularly relevant to activate and support development paths in the 21st century. Design/methodology/approach – In order to shed light on this relationship, we consider trademarks as a reliable indicator of a firm’s efforts to build brand awareness. Indeed, previous studies (Cohen 1986; Aaker 1991; Krasnikov et al., 2009) outline the close link between brands and trademarks, showing that the latter captures a significant portion of branding efforts; consequently previous studies considered trademarks a good proxy of brand. Moreover, marketing professionals make more and more use of trademark protection, not only for the company names, but also for a wide set of product features, such as colours, odours, sounds, and shapes, in order to find out new ways of building a unique identifier of their products in consumers’ mind (Burgunder, 1997). In particular, according to Mercer (2010) who distinguishes between corporate brands and product brands, we classify trademarks into two broad categories—corporate trademarks (also called trade names) and product trademarks—and suggest that they are indicators of firm efforts to build brand awareness among consumers. We then evaluate not only the relationship between the number of trademarks and SMEs economic and financial performance, hypothesizing that trademarks are positively associated with performance, but also whether corporate and product trademarks have a different impact, hypothesizing a positive influence of both corporate and product trademarks on economic and financial performance of SMEs in the fashion industry. The analysis is carried out using a fixed-effect cross-sectional time-series regression model over a period of ten years, from 2002 to 2011, taking into account the issue related to time-lags between trademark registrations and SMEs performance, proxied by sales. The panel dataset of Italian SMEs operating in the fashion industry in the Veneto and Lombardia Regions, representative of the Italian framework in terms of distribution of companies by firm size, was built by matching different data sources: data on trademark characteristics were drawn from Romarin, a database with global coverage provided by the World Intellectual Property Organization (WIPO), while economic information is collected from AIDA, a Bureau Van Dick database.