Contingency Fit and Performance Consequences of Trademark and Innovation: Evidence from Taiwan’s Textile, Food, and Chemicals Industries

Abstract

Given the lack of empirical study targeting mature industry, using data from Taiwan’s textile, food, and chemicals industries, this study examines the performance consequences of trademark and innovation and their determinants. The main results of this study show that firms are more likely to rely on the strategic importance of trademark if they have greater levels of advertisement intensity and R&D intensity, and lower ratios of operating leverage. Innovating firms are more likely to adopt the make-and-buy innovation strategy if they own less ‘‘important’’ patents and have more resources to support their employees’ innovation efforts, higher R&D intensity, and larger size. This study provides evidence in support of the contingency viewpoint. The findings suggest that the strategic fit of a trademark delivers better performance in terms of such measures as EPS, sales growth rate, operating profit ratio, and accounting broad-index. Superior accounting performance also results from the strategic fit of innovation. The strategic fit of the trademark can only facilitate increases in new product quantity, whereas both the make-and-buy strategy and strategic fit of innovation can drive new product profitability. Finally, the results demonstrate that the strategic fit of the trademark is more closely associated with the firm’s performance than is the strategic fit of innovation.