The Role of Product Innovation in Marketing Performance: Empirical Study in FMCG Market

Abstract

Product innovation allows firms to not only develop new market segments but also expand its current market segments and product portfolios; however, it is also associated with higher costs as well as higher risks and management challenges. Hence, despite growing research on product innovation, its effect on firm performance remains unclear. Moreover, prior studies on brand equity generally focus on the link between consumers’ perceptions of brand equity and their behavioral intentions and outcomes such as repeat purchase and brand loyalty at the individual consumer level, with hardly any studies on brand equity and the associated outcomes at the level of brands or product categories. We address both these research gaps by using signaling theory and dynamic marketing capability (DMC) perspective from resource-based theory (RBT) to explore the mediating role of product innovation in the influence of research and development (R&D) expenditure and brand equity on marketing performance. We also examine differences in these influences for different types of firms (retailer, small and medium enterprises [SME], and multinational companies [MNC]) and innovation (conventional, functional, and organic) using a large dataset from the Italian package food industry. We discuss our findings and their implications and suggest several directions for future research.