Gear Manufacturers as Contestants in Sports Competitions: Breeding and Branding Effects

Several manufacturers make substantial investments to contest in sport competitions, using the gear they develop and market. However, no systematic analysis of the breeding (i.e., innovation) and branding (i.e., marketing) returns from such investments exists. In this study, the authors conceptualize and empirically estimate the breeding and branding returns such manufacturers obtain. They gather data for 30 car brands of 16 manufacturers over the period 2000-2015 regarding their participation, spending and performance in Formula One championships, annual patent citations, and R&D budgets as well as monthly vehicle registrations, advertising expenditures, and F1 TV-viewership. The authors find that only gear manufacturers with relatively high levels of R&D spending obtain a positive and significant breeding return from contesting in sport competitions. While most brands obtain positive branding returns, the lower the level of advertising spending for the brand, the greater the branding returns from contesting in competitions. Thus, research-intense gear manufacturers have more to gain from contesting in sport competitions, as compared to advertising-intense gear manufacturers. These findings may guide manufacturers in budget allocation decisions on sport competitions, R&D, and advertising.