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14 Sep 2015

The Complementary Role of Branding

Investing in emerging technology is a double-edge sword for companies. As competition grows fiercer, finding innovative solutions becomes a crucial part of any company's strategy to stay competitive. Offering a product based on emerging technology provides a clear opportunity for innovation and success. Yet to capitalize on such technology can require heavy investment and it is a choice that carries a real risk of failure.

This article by Chirag Patel and Christophe Haon is the subject of the 17th GEM LAB GEM LAB Executive Summaries.

From the article

Internally versus Externally Developed Technology and Market Acceptance of Innovations : The Complementary Role of Branding
European Management Review, Vol. 11, N°2, pp. 173 - 186
Chirag Patel, Christophe Haon, 2014

To mitigate the risk of heavy internal investments, companies may often choose to simply license outside technology. Previous research on this issue has provided contradictory conclusions as to a company's chances at success if it chooses internally or externally developed technology. The authors of this latest study suggest this could be in part due to the failure of previous studies to take into account branding choices. In response, the authors carried out research to examine the link between new technology and branding choices. In addition, they looked at the impact of previous technology on the success of a future related technology.

New technology calls for a new brand ?

By using data from the early history of internet banking in the United States, the authors examined how successful banks were at implementing their internet banking offer. The study compiled data from a five-year period starting in 1995 and looked at three factors for each bank : innovation market acceptance, technology development choice and branding choice.

In other words, to understand the market success of an internet banking offer, the authors looked at whether or not a bank chose to develop its technology in-house and whether it chose to create a new brand or extend an existing one.

Internally developed technology calls for a new brand

Results from the study demonstrated that banks which developed their technology internally where more likely to achieve market acceptance if they created a new brand. On the other hand, branding choices provided no significant difference in market acceptance for banks that used externally developed technology.

Invest in new technology for longterm benefits

The authors of the study went beyond the questions of internal/external and new/existing brand choices to look at the impact of previous related technology on the success of a new technology. That is, they examined the impact of PC banking (the failed predecessor to internet banking) on market acceptance for internet banking offers. Study results provided clear empirical evidence that incorporating emerging technologies (even those that fail) can lead to greater market success for future related innovations. Banks that invested in PC banking were able to leverage the technological and market knowledge this experience provided them with to successfully deploy their internet banking offer.

Key Points

  • Study results confirm that internally developed technology is more likely to succeed
  • Internally developed technology is more likely to succeed if it is marketed under a new brand.
  • Investing in emerging technology, even if it fails, provides valuable experience that can help a future related technology succeed.
Mara Saviotti