Trade-off between value creation and value appropriation?

Abstract

Purpose

Managers face the challenge of balancing resources needed to support value creation and value appropriation. In this study the authors analyze the impacts of innovation investments (i.e. value creation: VC) on advertising expenditures (i.e. value appropriation: VA), and vice versa, and verify the effects of these options on short- and long-term performance.

Design/methodology/approach

The effects of these two activities on short- and long-term performance were analyzed observing a panel of 4,090 companies of Standard and Poor's Compustat database from a 40-year period. The authors adopted the panel vector autoregressive (VAR) approach, using the generalized method of moments (GMM).

Findings

Although there is a trade-off between the strategic emphases on creating and appropriating value, there is also a synergy between them. The results from the impulse response functions support the argument for a virtuous business circle: companies that choose to intensify their investments in R&D tend to increase advertising expenditures, and vice versa.

Practical implications

Managers, rather than having to deal with a trade-off between allocating resources either on VC or VA activities, can capitalize on synergetic benefits resulting from the interaction among them.

Originality/value

The relationship between the VC and VA activities transcends the trade-off imposed by resource restrictions, since the interaction between them creates additional benefits afforded by the synergy of these activities.

Citation

Silveira, C.S., Oliveira, M.O.R.d., Heldt, R. and Luce, F.B. (2021), "Trade-off between value creation and value appropriation?", Marketing Intelligence & Planning, Vol. 39 No. 1, pp. 1-16. https://doi.org/10.1108/MIP-11-2019-0592