The effect of government incentives on the brand value of the firm: KOSGEB application in Antalya

This study investigates the effect of government financial support on a firm's brand equity. Firm value stems from its ability to develop a bundle of valuable resources and capabilities that enable the company achieve a competetive advantage. Firm's tangible resources are its resources like the materials, plant, capital, etc. Intangible resources include the firm's and its products'/services' reputation, customer loyalty and skilled labor force. Recent empirical research on the relationship between a firm's market value and its brand value suggests that brand value has a significant impact on firm's market value and the ratio brand value to market value has increased over the past couple of decades. There is wide body of research that examines the determinants of brand value. Innovation, marketing-related intangible assets and human capital (talented, knowledgable, experienced employees) are among the main determinants of brand value. Investing on these determinants require financial resources which for many Small and Medium Enterprises (SMEs) hard to obtain. For SMEs the governmental financial support is usually the only financial resource to use to develop factors that enhance their brand value. In almost all economies (both developed and developing) SMEs comprise most of the business establishments in the economy and governments are increasing their support to SMEs. SMEs comprise 99% of the Turkish economy according to Turkish Statistics Institute (TUIK) and many government support programmes are available for the Turkish SMEs. In this study the Turkish SMEs' financial data is investigated to see whether government financial support has an effect on an SME's brand equity. The sample consists of 15 SMEs from Antalya which benefitted from government financial support programmes between 2006-2010. Using the financial statements of these firms and the Hirose Method their brand values are calculated for the 2006-2010 and 2011-2015 periods and compared. The results show that 12 out 15 firm's brand value has increased and brand equity is likely to increase if the receivers of the government financial support has a cost advantage in production and utilize marketing effectively. The results of the regression model developed to analyze the determinants of the increase in brand value show that the financial support received is the only explanatory variable which is statistically significant in explaining the increase in brand equity.