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AN EMPIRICAL STUDY ON THE CAUSALITY RELATIONSHIP BETWEEN
INNOVATION AND BRANDING IN THE HOSPITALITY INDUSTRY OF GHANA: A
FINANCIAL PERFORMANCE PERSPECTIVE
FRANK FRIMPONG OPUNI, KWAME ADU-GYAMFI

& REGINA APPIAH-GYIMAH
Lecturer, Marketing Department, Accra Polytechnic, Accra, Italy

ABSTRACT
This paper investigated the causality relationship between branding and innovation from the viewpoint of
financial performance of firms in the hospitality industry in Ghana. A self-administered questionnaire was used to solicit
information from 600 participants who were senior employees in hotels, guest houses and pubs and leisure centres in the
10 regions of Ghana. Ordinary least squares regression was used as the main statistical tool for data analysis. It was found
that innovation and branding have a causality relationship with a variance of about 80.5%. Branding and innovation make
an interaction effect on return on investment with a variance of 59.2%. Yet, innovation alone significantly predicts return
on investment with a variance of 46.3% while branding alone accounts for less than 40.6% variance on return on
investment. Moreover, both innovation and branding significantly predict return on investment. Evidently, innovation and
branding have causality relationship and the two variables significantly predict return on investment.
KEYWORDS: Innovation, Branding, Hospitality Industry, Financial Performance, Return on Investment, Causality
Relationship
INTRODUCTION
Basically, rising human populations in many jurisdictions have brought about a high demand for hospitality
services across the world (Ahmad and Hashim, 2011). The proliferation of tourist centres and increasing human demand
for leisure has also contributed to this situation (Ahmad and Hashim, 2011; Kayaman and Arasli, 2007). There is therefore
increased investment in the hospitality industry, precisely hotel and restaurant sector, with many jurisdictions becoming
proliferated with hotels and guest houses (ONeil and Mattila, 2004; Kayaman and Arasli, 2007). Primary evidence to this
is that the hotel industry has enhanced its contribution to world GDP in recent years (World Travel & Tourism Council,
WTTC, 2013), while the industry continues to expand (WTTC, 2013; Kayaman and Arasli, 2007). In Ghana, the hotel and
restaurant industry is one of the four industries that enhanced their contributions to GDP 2013 (Ghana Statistical Service,
2013). Despite its remarkable contribution to economic development across the world currently, the full potential of the
hospitality industry to economic growth is yet to be realised (WTTC, 2013; Ahmad and Hashim, 2011). To Ahmad and
Hashim (2011), innovation and branding is one of the internal management tools for maximising the potential and
contribution of the hospitality industry to economic growth. This argument is supported by ONeil and Mattila (2004) and
Kayaman and Arasli (2007) based on empirical evidences.
The relevance of innovation and branding to the maximum financial performance of firms and their contribution
to economic growth in the hospitality industry is based on empirical evidences about a growing market competition in the
International Journal of Business
Management & Research (IJBMR)
ISSN (P): 2249-6920; ISSN (E): 2249-8036
Vol. 4, Issue 3, Jun 2014, 127-144
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128 Frank Frimpong Opuni, Kwame Adu-Gyamfi

& Regina Appiah-Gyimah

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0
industry (Xing, n.d., ONeil and Mattila, 2004; Kayaman and Arasli, 2007). Similarly, rigorous innovation and branding is
needed to create unique identities and images for products in the face of competition (Brakus, Schmitt and Zarantonello,
2009; ONeill, Mattila and Xiao, 2006; Rnningen, 2010). For firms in the hospitality industry to maximise financial
performance, they ought to make market decisions that would impress and persuade customers and potential customers
(Ahmad and Hashim, 2011; Kayaman and Arasli, 2007). Meanwhile, the ability of managements to make market decisions
that persuade customers and potential customers depends on how innovation is used to improve and sustain appeal for
products (Shaw, Williams and Bailey, 2012) and how branding is used to communicate the appeal of these products
(Brakus, Schmitt and Zarantonello, 2009; Fran and Handelshgskolan, 2011). This argument has its origin from the
empirically-driven positive effects of branding and innovation on customer quality perceptions, customer satisfaction and
customer loyalty (ONeill, Mattila and Xiao, 2006; ONeill and Mattila, 2004).
A large body of empirical studies points to the individual and joint impacts of innovation and branding on
customer quality perceptions, customer satisfaction and customer loyalty (ONeill, Mattila and Xiao, 2006; Rnningen,
2010), with stronger emphasis on the predictive ability of innovation and branding on financial performance of firms in the
hospitality industry (Rnningen, 2010; Rahman and Ramos, 2010). However, there is scarcity of empirical studies on the
interdependency of innovation and branding (Potocan, n.d.; Singh and Singh, 2009), though a relatively small number of
researches have shown that innovation and branding have a causality relationship (Potocan, n.d.). Relatively, a few
empirical studies have also shown the effects of the individual dimensions of innovation and branding on customer
patronage and loyalty (ONeill and Mattila, 2004).
Generally, the existing number of identifiable empirical studies on the interdependency of innovation and
branding in the hospitality sector is encouraging (ONeill, Mattila and Xiao, 2006; Rnningen, 2010). Nonetheless, the
situation is different from a Ghanaian point of view, both in terms of the individual impacts of innovation and branding on
financial performance, as well as the interdependency of innovation and branding on each other. Moreover, identifiable
empirical studies on the moderating effects of customer satisfaction, customers service quality perceptions and other
organisational characteristics on innovation and branding in a Ghanaian perspective are lacking. Meanwhile, measurement
of the financial performance of an organisation based on innovation and branding is misleading without controlling for
customers quality perceptions, customer satisfaction and other characteristics of the organisation (ONeill, Mattila and
Xiao, 2006; Ahmad and Hashim, 2011).
This study therefore seeks to contribute to the limited body of empirical researches on the interdependency of
branding and innovation and its impact on financial performance (in terms of return on investment) of firms in the
hospitality industry in Ghana. This study additionally examines the moderating effects of customer satisfaction, customers
quality perceptions and other organisational characteristics. It is expected that findings of this study would justify the
collective relevance of innovation and branding to the maximisation of brand value, customer satisfaction and financial
performance in Ghanas hospitality sector.
STATEMENT OF THE PROBLEM
In 2012, the hospitality industry was one of the four industries that improved their contribution to GDP in Ghana
(GSS, 2013). However, the realisation of the full potential of this industry is farfetched on a global scale (WTTC, 2013),
including Ghana (GSS, 2013). Basically, hindrances to the realisation of the full growth potential of firms in the hospitality
industry of Ghana are believed to be empowered by operational challenges (Shaw, Williams and Bailey, 2012), especially
An Empirical Study on the Causality Relationship between Innovation and Branding 129
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those relating to customer service delivery and company image (Shaw, Williams and Bailey, 2012; Rumambi and Djati,
n.d.). As a result of financial limitations and lack of motivation, many hotels, restaurants and leisure centres, for instance,
treat rigorous branding and innovation practices as trade-offs for other trivial promotional activities
(ONeill and Mattila, 2004). This situation is an impediment to maximum financial performance of firms in the hospitality
industry because company image is a reflection of firms branding approach and strategy
(Shaw, Williams and Bailey, 2012) and is necessary for sustainable customer patronage (ONeill, Mattila, and Xiao, 2006).
Moreover, innovation is strategic process for rising above the negative effects of increasing competition in the hospitality
industry (Ahmad and Hashim, 2011).
As a result of the increasing competition, therefore, some firms are not achieving growth targets (Ahmad and
Hashim, 2011; Rumambi and Djati, n.d.). Additionally, firms in the hospitality industry aim at profits without much
financial commitment for customer satisfaction and desirable company image (ONeill, Mattila and Xiao, 2006).
As a remedial strategy, managements in the hospitality industry must be motivated to invest into innovation and
branding to augment the value of their brands, as well as customer patronage and satisfaction. For managements to be
motivated in this regard, they need empirical evidences that point to the relevance of innovation and branding to financial
performance (preferably in terms of return on investment) and delivery of value-driven and satisfactory services.
This study was therefore carried out in view of the limited number of empirical studies on this subject in a Ghanaian
context.
RESEARCH OBJECTIVE
The objective of this study was to examine the causality relationship between innovation and branding, as well as
the impact of this relationship and each of branding ad innovation on financial performance in the context of the hospitality
industry in Ghana. It contributes to the limited number of studies that examine the causality relationship between
innovation and branding.
REVIEW OF LITERATURE
There has been a growing volume of literature on innovation (Rahman and Ramos, 2010; Singh and Singh, 2009;
Rnningen, 2010) and branding (Hilgenkamp and Shanteau, 2010; Malik et al. 2012; Saeed et al. 2013) from the viewpoint
of the hospitality industry. A greater part of literature on innovation however focuses on how managements can use ideas,
technologies and other forms of resources to enhance financial performance and growth through paradigmatic marketing
approach (Cherchem, 2012; Dar and Khan, 2008). Branding, on the other hand, offers a framework of strategies for
developing and nurturing superior-quality products with unique identities that competitors cannot match-up with
(Po uromid and Iranzadeh, 2012; Safargaliev and Komarova, 2013).
For firms in the hospitality industry to thrive in the face of market competition and grow financially, they must be
able to make market decisions that support and drive the value of their brands (Keller, 2006; ONeill and Mattila, 2004).
However, superior brands take much of their market strength and potential from innovation (Shaw, Williams and Bailey,
2012). In view of this, a few writers and researchers have provided evidences to the interdependency of innovation and
branding (Shaw, Williams and Bailey, 2012; Tidd n.d., Xing, n.d.), arguing that a brands value is maximised when
innovation and branding make an interactive influence on it (Shaw, Williams and Bailey, 2012). For innovation and
branding to support a firms competitive advantage and financial performance individually or jointly, their strategic
130 Frank Frimpong Opuni, Kwame Adu-Gyamfi

& Regina Appiah-Gyimah

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0
practices must be relevant, appropriate and sufficiently detailed (Fran and Handelshgskolan; Leger and Swaminathan,
2007; ONeill and Mattila, 2004).
According to Keller (2006), sustainable practices of branding in the hospitality sector embrace three primary
models of branding: brand positioning, brand resonance and brand chain value. Conceptually, these models are
interwoven with brand experience (Brakus, Schmitt and Zarantonello, 2009), and brand equity (i.e. brand awareness, brand
loyalty, perceived quality and brand image) (Kayaman and Arasli, 2007). Invariably, effective branding should be able to
enhance brand experience and equity in practical situations, where innovation would maximise any effect of branding on
patronage and financial performance (Rnningen, 2010; Shaw, Williams and Bailey, 2012).
Innovations empowerment of the effect of branding, or vice versa, on customer patronage and financial
performance and the individual impacts of innovation and branding on organisation financial growth depend on some
antecedents. These antecedents are reflected in the conceptual model of Rnningen (2010), the Resource-based View,
Dynamic Capability Approach and Ricos (2004) ROI Metrics. Figure 1 shows the Rnningens (2010) antecedents of
innovation and its overall effects.

Source: Rnningen (2010)

Figure 1: A Conceptual Model of Antecedents for Innovation and Overall Effects
In Figure 1, knowledge and competence and the involvement of employees, are important antecedents in
innovation, which may involve product, process, organisational and market innovation. The model also indicates that an
effective implementation of innovation would improve the competitiveness of a firm and its financial performance. With
inspiration from Rnningens (2010) model, Rahman and Ramos (2010) posit that the utmost priority given to innovation
and branding by managements of organisations is as a result of their individual impacts on business growth and financial
performance. Moreover, there is much empirical evidence that innovation and branding jointly influence customers
service quality perceptions, purchase decisions, and loyalty, and customer satisfaction (Safargaliev and Komarova, 2013;
Malik et al. 2012; Saeed et al. 2013; Singh and Singh, 2009). Research has also shown that innovation and branding have a
strong predictive effect on organisational financial performance (Sayem, 2012; Po Uromid and Iranzadeh, 2012); however
the strength of this relationship is based on the availability of adequate resources and the organisations capability to use
these resources to maximally leverage innovation and branding (Po Uromid and Iranzadeh, 2012; Safargaliev and
An Empirical Study on the Causality Relationship between Innovation and Branding 131
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Komarova, 2013). This argument has been related to the organisational resource-based theory and the dynamic capability
approach.
Traditionally, the Organisational Resource-based theory is premised on the need to initiate and implement
business processes only when there is substantial evidence that the organisation has adequate resources to do so
(Grant, 2001, Wernerfelt, 1984). In this context, a resource is the bundle of logistics, materials and competencies available
to the organisation (Grant, 2001. According to Hart (1995), the resource-based theory, also referred to as the resource-
based view, argues that the implementation of business processes or ideas should be based on the availability of resources
(mostly financial resources) to the organisation. However, the availability of financial resources should be driven by the
realistic need for the intended process or project (Wernerfelt, 1984; Grant, 2001). An organisations management may ask:
do we really need these resources to improve performance or create customer, brand and stakeholder value?
(Akio, 2005, p. 127). If there is actually no need for these resources, the organisation will end up wasting scarce resources
(Akio, 2005; Wernerfelt, 1984). It is important to note that the actual need of these resources is driven by realistic
evidences that their acquisition and use would create value in the organisation (Grant, 2001, Akio, 2005).
Though empirical and conceptual evidences point to the positive influence of innovation and branding on
financial performance, their implementation and use should be informed by the availability of resources that can meet the
demand of their use (Priem & Butler, 2001). Moreover, their adoption and application in the context of available financial
resources should be based on their practical and realistic relevance to a positive organisational change. Therefore,
innovation and branding must be pivoted on the availability of adequate financial resources in the organisation.
This requirement is largely reflected in the antecedent block of Figure 1.
Poulis et al. (2013) posits that the availability of financial resources and the need for innovation and branding in
the organisation must be considered alongside the capability of the organisation to use available resources effectively to
achieve its objectives for innovation and branding. The effective use of available resources makes a bearing with using
them to create organisational value, brand value and financial performance (Poulis et al. 2013; Akio, 2005). The Dynamic
Capability Approach (DCA) argues in line with Poulis et al. (2013). The basic principle governing the use of
DCA suggests that organisations should have the capability to use whatever resources they have to cause a positive change
in brands and their patronage (Economic Foundations of Strategy, 2004). More often than not, capability in this context
stands for the appropriateness of the collective competency available to the organisation (CFS, 2004; Rnningen, 2010).
It has more to do with the ability of management to make and use suitable business strategies in making the best of
innovation and branding (Poulis et al. 2013). The DCA argues that employees and management must be adequately
competent to use available resources to drive an expected change in the organisation. To this end, the decision to leverage
innovation and branding would be informed by three satisfied basic conditions: (1) the presence of a need for innovation
and branding (Akio, 2005); (2) the availability of financial resources for practicing innovation and branding
(Akio, 2005; Priem and Butler, 2001); and (3) the capability of the organisation in terms of human resource to use
innovation and branding to maximise organisational value (CFS, 2004; Wilson and Daniel, 2007; Poulis et al. 2013).
The diagram below conceptualises the adoption of innovation and branding under the consideration of available financial
resource.
132 Frank Frimpong Opuni, Kwame Adu-Gyamfi

& Regina Appiah-Gyimah

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0

(Adjusted from: Akios, 2005; CFS, 2004; Wilson & Daniel, 2007; Priem & Butler, 2001)

Figure 2: Innovation and Branding Based on Resource View and Dynamic Capability Approach
In Figure 2, the practices of innovation and branding can only lead to organisational growth and financial
performance when there is a basic need for their practices (Akios, 2005; CFS, 2004); thus innovation and branding are
acceptable in view of the firms market condition; the cost of practicing innovation and branding is known to be within the
financial capacity of the firm (Wilson and Daniel, 2007); financial resources can be acquired and deployed in practices of
innovation and branding (Akios, 2005; CFS, 2004; Wilson and Daniel, 2007; Priem and Butler, 2001); and the firm has the
dynamic capability to effectively use available resources for innovation and branding (Priem and Butler, 2001).
The measurement of return on investment (ROI) and its operational meaning are relevant to the credibility of any
research focused on the impact of innovation and branding on financial performance in terms of ROI. This is because
ROI analysis is relevant to knowing the true impacts of a business process on financial performance. Additionally, most
researches have represented organisational financial performance with return on investment (ROI). As a result, the
measurement of ROI has been of high concern to researchers. Return on investment (ROI) is a widely used approach for
measuring the value of a new and improved process or product technology. ROI is also used for measuring the economic
value of applying processes that come with costs in an organisation (Rico, 2004). Meanwhile, there is the need to
understand how ROI is measured and how it can reflect the financial outcome of investing in processes in view of Ricos
(2004) ROI metrics model.
ROI metrics are designed to measure the economic value of new and improved ICT investments (Rico, 2004).
Each ROI metric is a relevant indicator of how much a new investment process is worth. There are only six basic metrics
related to ROI (Rico, 2004; Jacoby, 2005), and these are costs, benefits, benefit/cost ratio or B/CR, return on investment or
ROI, net present value or NPV, and breakeven point or BEP (Rico, 2004; El Emam, 2003). According to Jacoby (2005),
each ROI metric builds upon its predecessor and refines the accuracy of the economic value of the acquisition of systems
and processes.
Table 1: ROI Metrics Showing Simplicity of ROI Formulas and Their Order of Application
An Empirical Study on the Causality Relationship between Innovation and Branding 133
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Metric Definition Formula
Costs Total amount of money spent on IS use Costi
Benefits Total amount of money gained from a new IS use Benefit
i

B/CR Ratio of benefits to costs
Benefits
Costs
ROI Ratio of adjusted benefits to costs 100
Benefits-Costs x 100%
Costs
NPV Discounted cash flows
Benefits
i

(1+Discount Rate)
Years
Costs
0

BEP Point when benefits meet or exceed cost
Costs
Old Costs/New Costs-1
Source: Rico (2004)
With reference to Table 1, costs consist of the amount of money an organization has to pay in order to practice
innovation and branding (Rico, 2004; Jacoby, 2005). On the other hand, benefits generally consist of the amount of money
saved by practicing innovation and branding (Rico, 2004). Ratio of benefits to costs, B/CR, is a simple ratio of the amount
of money saved in practicing innovation and branding to the amount of money consumed (Rico, 2004; El Emam, 2003).
Return on investment, ROI, is also a ratio of money saved to money consumed in practicing innovation and branding,
expressed as a percentage (Rico, 2004; El Emam, 2003; Jacoby, 2005). However, the ROI metric demands that cost are
first subtracted from the benefits. NPV is a method of adjusting or discounting the estimated cash flows of practicing
innovation and branding on projected or future inflation over time (Pogue, 2004; Morten & Thron, 2004; Rico, 2004).
Breakeven point is a measure of the amount of money that must be spent on innovation and branding before it begins
yielding its benefits (Rico, 2004).
Based on what has been discussed, it is worth saying that the individual and joint impacts of innovation and
branding on an organisation reflects in its return on investment (ROI). Nonetheless, any measurement to determine the
impacts of innovation and branding on financial performance in terms of ROI must incorporate the ROI Metrics by Rico
(2004) in the context of the resource-based view, dynamic capability approach and contextually suitable theories of
branding and innovation such as the ones discussed earlier in this section. In the light of discussions made above and
conceptual frameworks of related theories of this study, the following primary hypotheses shall be tested:
H
1
: There is a significant causality between branding and innovation in the hospitality sector of Ghana.
H
2
: Branding significantly predicts financial performance in terms of ROI in the hospitality sector of Ghana.
H
3
: Innovation significantly predicts financial performance of firms in terms of ROI in the hospitality sector of Ghana.
H
4
: Branding and innovation make an interaction effect on financial performance in terms of ROI in the hospitality
sector of Ghana.
METHODOLOGY
One of the major expectations of the researcher in this study was to reach findings that reflect a nationwide
situation. Findings were also expected to be largely credible. By principle, data used in this research must therefore come
from a representative and random sample of respondents. Moreover, data collection instruments must be adequately
reliable to ensure and maximise data integrity. In view of this, this studys methodology must incorporate rigorous
reliability and validity measures. Harwood and Garry (2006), Gronroos (1997), Hunt (1990) and Fleming and Asplund,
134 Frank Frimpong Opuni, Kwame Adu-Gyamfi

& Regina Appiah-Gyimah

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0
2001) argue that a reliable research with a strong basis for generalising findings is better carried out as a quantitative
research with an objectivist stance. With support from other empirical evidences, the researcher decided to use a
quantitative research in this study. With the quantitative research technique, rigorous randomisation, reliability and validity
measures were used to access data (Harwood and Garry, 2006). This research technique provided a framework of suitable
principles and statistical procedures for testing hypotheses in this study (Fleming and Asplund, 2001; Harwood and Garry,
2006).
The main population of this study was management employees of hotels, restaurants and leisure centres in Ghana.
The sampling frame of this study was management level employees of hotels, restaurants and leisure centres, which have
been registered with Registrar Generals Department and Ghana Tourist Board and have been operating for at least five
years. With registered firms, information relevant to sampling could be easily accessed from the Registrar Generals
Department or Ghana Tourist Board. The researcher used firms which have operated for not less than 5 years in Ghana
owing to the need to ensure that data collected in this study reflected ample experience and knowledge that forms a basis
for data integrity. Moreover, this measure was relevant to making use of secondary information that span five years.
Probability sampling methods, namely cluster sampling, stratified sampling and simple random sampling, were
used in selecting respondents in this study. Cluster sampling was used to select hotels, restaurants and leisure centres from
the 10 regions of the country. As a result of potential differences in company characteristics in data, stratified sampling was
used to categorise members of the sampling frame into homogeneous groups, namely hotels, guest houses and pubs
and leisure. Simple random was used to select respondents from each stratum. Since the population of members in each
stratum was infinite, a sample size of 200 was made from each stratum. An overall sample size of 600 was used in his
study.
Secondary and primary data were used in this study. Secondary data on financial performance in terms of return
on investment (ROI) on firms in the hospitality industry ware obtained from the Ministry of Tourism and/or Ghana Tourist
Board. Primary data were collected on branding (i.e. brand positioning, brand resonance, brand chain value brand equity
and brand experience), innovation (i.e. process innovation, product innovation, organisational innovation and market
innovation), customers quality perceptions and customer satisfaction using a self-administered questionnaire that was
based on a five-point likert scale.
Statistical data analysis was done using SPSS and STATA. The Cronbachs alpha was used to test for the
reliability of the research instruments. Normality test was also carried out on continuous data using Shapiro-Wilks test.
The normality test was necessitated by the assumption that continuous data employed took the characteristic nature of a
normal distribution. As a result the continuous nature of data used in this study and the fact that these data were assumed to
be normally distributed, parametric statistical tools were used in testing hypotheses. Ordinary least squares (OLS)
regression was used to test all research hypotheses, where the Univariate Analysis of Variance (UNCOVA) was used as a
supporting statistical tool of data analysis.
RESULTS
In this section, findings of the study are presented. Meanwhile, the response rate of this study was 99%.
Thus 591 questionnaires were completed by respondents and successfully retrieved. An important assumption made in this
study is that continuous data obtained on branding and innovation are normally or approximately normally distributed at
An Empirical Study on the Causality Relationship between Innovation and Branding 135
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5% significance level. It was also expected that data gathered on these two variables would be reliable. The following two
tables verify the normality and reliability of data on these two variables.
Table 1: Shapiro-Wilks Test of Normality of Data

Shapiro-Wilk
Statistic df Sig.
Branding .888 591 .059
Innovation .887 591 .564
a. Lilliefors Significance Correction
Table 1 comes with the Shapiro-Wilks test of normality of data. It tests the hypothesis that data gathered on
innovation and branding are normally or approximately normally distributed at 5% significance level. From this table, data
on branding (p = .059) and innovation (p = .564) are approximately normally distributed at 5% significance level, though
the normality of data on innovation is relatively higher. Normality of data associated with the two variables is a basis for
making valid conclusions in this analysis.
Table 2: Reliability Test: Cronbachs Alpha


N
Cronbach's
Alpha
N of
items
Cases

Valid 591 .773 2
Excluded
a
0

Total 591


Table 2 comes with a test for data reliability in terms of innovation and branding. From the table, no item has
been removed from the pool of data collected. Moreover, the value of the Cronbachs alpha is high (.773), and this reflects
a high reliability of the data collection instrument hence data gathered. This confirmed high reliability of data, like the
normality of data, translates into valid conclusions in this study.
The first hypothesis of this study states that there is a significant causality between branding and innovation in the
hospitality sector of Ghana. A causality relationship between innovation and branding implies that the two variables
influence each other (i.e. innovation affects branding and branding affects innovation). This hypothesis is tested at
5% significance level. Tables 3 and 4 test this hypothesis.

Table 3: Model Summary
b
- Prediction of Branding
Model R
R
Square
Adjusted
R Square
Std. Error of
the Estimate
Durbin-
Watson
1 .897
a
.804 .804 .60986 2.105
a. Predictors: (Constant), Innovation
b. Dependent Variable: Branding

Table 3 is a model summary associated with the prediction of branding by innovation. The table indicates that
innovation accounts for about 80.4% of variance (i.e. effect) in branding. This value reflects a high level of causal
relationship between innovation and branding. This is because the R Square value would be the same when branding
becomes the predictor. What is uncertain at this stage is whether this relationship is linear or not. Table 4 verifies this.
136 Frank Frimpong Opuni, Kwame Adu-Gyamfi

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Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0
Table 4: Anova
b
- Prediction of Branding
Model
Sum of
Squares
df
Mean
Square
F Sig.
1
Regression 900.358 1 900.358 2.421E3 .000
a

Residual 219.067 589 .372
Total 1119.425 590
a. Predictors: (Constant), Innovation
b. Dependent Variable: randing

Table 4 shows an ANOVA test associated with the prediction of branding by innovation or the causal relationship
between the two variables. At 5% significance level, the causal relationship between branding and innovation are
significantly linear, F (1, 589) = 2421, p = .000. This implies that as innovation is improved in the hospitality industry in
Ghana, branding is enhanced and vice versa. It could also mean that the effect of branding on ROI improves when the
effect of innovation on branding enhances. In Table 5 of Appendix A, innovation significantly predicts branding at
5% significance level (p = .000). In this table, each unit change in the conditional mean of innovation, changes branding by
92% at a rate of between 6% and 32% confidence interval. In Table 6, branding significantly predicts innovation at
5% significance level (p = .000). In Table 6, each unit change in the conditional mean of branding, changes innovation by
87% at a rate of between 84% and 91% confidence interval. Tables 5 and 6 therefore confirm the causality relationship
between innovation and branding. The first hypothesis is therefore confirmed.
The second hypothesis states that branding significantly predicts financial performance in terms of ROI in the
hospitality sector of Ghana. The third hypothesis also states that innovation significantly predicts financial performance in
terms of ROI in the hospitality sector of Ghana. These tests are done at 5% significance level. Tables 7 and 8 are associated
with the test of these hypotheses.
Table 7: Model Summary
c

Model R R Square
Adjusted R
Square
Std. Error of
the Estimate
Durbin-
Watson
1 .681
a
.463 .462 .13426
2 .683
b
.467 .465 .13392 2.100
a. Predictors: (Constant), Innovation
b. Predictors: (Constant), Innovation, Branding
c. Dependent Variable: Return on Investment

Table 7 shows the model summary associated with a stepwise regression analysis. The first model represents the
prediction of ROI by innovation alone. In this respect, innovation accounts for about 46% of variance on ROI, whereas
innovation and branding account for about 47% of variance on ROI. In essence, branding alone accounts for a very low
level of variance (i.e. less than 1%) in ROI in the presence of innovation. This implies that innovation contributes a higher
level of variability (i.e. effect) on ROI relative to branding. However, when branding stands alone without innovation
(please see Table 14 in Appendix B), it contributes a variance of 40.6% on ROI. Since there is a significant causality
relationship between branding and innovation, however, it is very likely that the variance contributed by innovation on
ROI is powered by branding, a reason for which branding might have exhibited a low influence on ROI. Table 8 comes
An Empirical Study on the Causality Relationship between Innovation and Branding 137
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with the ANOVA test associated with Table 7.
Table 8: ANOVA
c

Model Sum of Squares Df
Mean
Square
F Sig.
1
Regression 9.161 1 9.161 508.251 .000
a

Residual 10.617 589 .018
Total 19.778 590
2
Regression 9.232 2 4.616 257.399 .000
b

Residual 10.545 588 .018
Total 19.778 590
a. Predictors: (Constant), Innovation
b. Predictors: (Constant), Innovation, Branding
c. Dependent Variable: Return on
Investment


Table 8 shows the ANOVA associated with the prediction of ROI by innovation and branding. At 5% significance
level, each model in Table 7 represents a significant linear relationship. Thus, innovation significantly linearly predict ROI,
F (1, 589) = 508.25, p = .000. Moreover, innovation and banding significantly linearly predict ROI, F (2, 588) = 257.4,
p = .00. This means that return on investment increases in the hospitality industry with increased level of banding and
innovation. In Table 9 of Appendix B, innovation alone significantly predicts ROI at 5% significance level (p = .000),
likewise branding (p = .036), though the extent to which branding predicts ROI is likely to be lower relative to innovation.
Based on evidences provided by Tables 7, 8 and 9, it is worth concluding that both innovation and branding significantly
predict ROI in the hospitality industry of Ghana. The second and third hypotheses are therefore confirmed.
Based on results in Tables 7, 8 and 9, it is likely that innovation and branding makes an interaction effect on ROI.
For robustness sake, Table 12 is used to test for between-subjects effect that confirms this clue.
Table 12: Tests of Between-Subjects Effects
Dependent Variable: Return on Investment
Source
Type III Sum of
Squares
df Mean Square F Sig.
Corrected Model 11.716
a
11 1.065 76.493 .000
Intercept 21.077 1 21.077 1.514E3 .000
Branding * Innovation 11.716 11 1.065 76.493 .000
Error 8.062 579 .014
Total 95.610 591
Corrected Total 19.778 590
a. R Squared = .592 (Adjusted R Squared = .585)

Table 12 comes with a test for between-subjects effect for innovation and branding, where ROI serves as the
dependent variable. At 5% significance level, branding and innovation makes an interaction effect on ROI (p = .000).
In other words, innovation and branding make a collective influence on ROI in the hospitality industry in Ghana.
This corroborates the significance of the prediction of ROI by innovation and branding in Tables 7 and 8.
138 Frank Frimpong Opuni, Kwame Adu-Gyamfi

& Regina Appiah-Gyimah

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0
Table 13: Partial Correlations
Variable Pair
Control
Variable
Original
r
Controlled
r
Difference
in r
Controlled
p Value
Branding*ROI Innovation .637 .321 .316 .000
Innovation*ROI Branding .681 .082 .599 .247

Table 13 comes with partial correlation test that identifies the strength of the relationship between branding and
ROI and innovation and ROI. Since branding and innovation empower each other in influencing ROI, they must be
controlled for to identify their independent effects on ROI. In Table 13, the relationship between branding and ROI reduces
from .637 to .316 in terms of coefficient when innovation is controlled for (i.e. the effect of innovation is taken out), but
the new correlation coefficient is significant at 5% significance level (p = .000). On the other hand, the relationship
between innovation and ROI reduces from .681 to .082 in terms of coefficient when branding is controlled for
(i.e. the effect of branding is taken out). Moreover the new correlation coefficient is insignificant at 5% significance level
(p = .247). The tests confirm the causality of branding and innovation found in the previous tables. However, it is evident
that branding contributes nearly all the effect of innovation on ROI. This means that innovation alone does not contribute
much to ROI without the effect of branding.
DISCUSSIONS
There is substantial harmony between previous findings and the results of this study. For instance, the finding
regarding the causality relationship between innovation and branding is confirmed by Shaw, Williams and Bailey (2012)
and ONeill and Mattila (2004), though in their studies the variances associated with this relationship is lower. This is
logical in view of the fact that these studies were based on different industries or populations. A non-empirical backing of
the causality relationship between innovation and branding comes from Priem and Butler (2001) and Xing (n.d.), who
argue that innovation and branding interdependent on each other in practice. In essence, branding is affected by innovation
whereas innovation is affected by branding. In reality, the appropriateness of branding and its impact on customer
patronage would be dependent on the level of innovation brought into any act of branding in the hospitality industry
(Rnningen, 2010). On the flip side, engagements in innovations may be influenced by a firms current branding practice
or its future plans for branding (Rnningen, 2010; Shaw, Williams and Bailey, 2012).
According to this studys findings, innovation alone accounts for about 46% of variance on ROI, whereas
innovation and branding account for about 47% of variance on ROI based on the OLS regression result. At 5% significance
level, a test for between-subject effect indicates that branding and innovation makes an interaction effect on
ROI (p = .000). In other words, innovation and branding make a collective influence on ROI in the hospitality industry in
Ghana, with a variance of 59.2%. Thus the OLS regression result and test of between-subject effect result indicate that
innovation and branding make an interaction effect on ROI. This result is confirmed by the argument that innovation and
branding are marketing tools for determining and maximising financial growth (Tidd n.d.; Rnningen, 2010 Shaw).
The interaction effect of innovation and branding on ROI is backed empirically in the study of Williams and Bailey (2012).
Though branding and innovation make an interaction effect on ROI, branding alone accounts for a very low level
of variance (i.e. less than 1%) on ROI in the presence of innovation. This suggests that innovation contributes a higher
An Empirical Study on the Causality Relationship between Innovation and Branding 139
in the Hospitality Industry of Ghana: A Financial Performance Perspective

www.tjprc.org editor@tjprc.org
level of variability (i.e. effect) on ROI relative to branding. Similarly, innovation alone significantly predicts ROI at 5%
significance level (p = .000), likewise branding (p = .036), but the extent to which branding predicts ROI is lower relative
to innovation. The result of Williams and Bailey (2012) stands in opposition to this finding (i.e. branding makes a higher
effect on ROI relative to innovation), and this may be as a result of differences in the populations of the two studies.
The result that branding contributes far lesser variance on ROI could be accounted for by brandings high effect on
innovation. Thus, branding exerts a greater part of its influence on innovation for which it could not influence ROI much.
Though innovation also exerts much of its influence on branding, the extent is relatively smaller. This is justified by
findings in the partial correlations test. In this test, the relationship between branding and ROI reduces from .637 to .316 in
terms of coefficient when innovation is controlled for. On the other hand, the relationship between innovation and
ROI reduces from .681 to .082 in terms of coefficient when branding is controlled for. Evidently, branding contributes
nearly all the effect of innovation on ROI. This means that innovation alone does not contribute much to ROI without the
effect of branding. This result is reflected in the fact that innovation alone accounts for about 46% of effect on
ROI while branding alone accounts for less than 1% of effect on ROI.
CONCLUSSIONS AND RECOMMENDATION
The objective of this study was to examine the causality relationship between innovation and branding from
the perspective of financial performance in the hospitality industry in Ghana.
Based on findings of this study, it is concluded that innovation and branding have a causality relationship in
the hospitality industry of Ghana, with a variance (i.e. effect) of 80.4%. At 5% significance level, the causal relationship
between branding and innovation are significantly linear. This implies that as innovation is improved in the hospitality
industry in Ghana, branding is enhanced by direct proportion, and vice versa. Similarly, findings confirm that innovation
significantly predicts branding at 5% significance level (p = .000), and branding significantly predicts innovation at 5%
significant level (p = .000).
Innovation alone accounts for about 46% of variance on ROI, whereas innovation and branding account for about
47% of variance on ROI based on the OLS regression result. In essence, branding alone accounts for a very low level of
variance (i.e. less than 1%) on ROI in the presence of innovation. This suggests that innovation contributes a higher level
of variability (i.e. effect) on ROI relative to branding. Innovation alone significantly predicts ROI at 5% significance level
(p = .000), likewise branding (p = .036), but the extent to which branding predicts ROI is lower relative to innovation.
At 5% significance level, a test for between-subject effect indicates that branding and innovation makes an
interaction effect on ROI (p = .000). In other words, innovation and branding make a collective influence on ROI in the
hospitality industry in Ghana, with a variance of 59.2%. Thus the OLS regression result and test of between-subject effect
result indicate that innovation and branding make an interaction effect on ROI.
The relationship between branding and ROI reduces from .637 to .316 in terms of coefficient when innovation
is controlled for, but the new correlation coefficient is significant at 5% significance level (p = .000). On the other hand,
the relationship between innovation and ROI reduces from .681 to .082 in terms of coefficient when branding is controlled
for. In this respect, the new correlation coefficient is insignificant at 5% significance level (p = .247). Evidently, branding
contributes nearly all the effect of innovation on ROI. This means that innovation alone does not contribute much to
ROI without the effect of branding. This result is reflected in the fact that innovation alone accounts for about 46% of
140 Frank Frimpong Opuni, Kwame Adu-Gyamfi

& Regina Appiah-Gyimah

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0
effect on ROI while branding alone accounts for less than 1% of effect on ROI. Based on the high positive relationship
between innovation and branding, branding is believed to exhaust its effect on innovation for which it could not pose much
influence on ROI.
It is recommended that firms in the hospitality sector give priority and commitment to practicing and investing
in branding and innovation, since these two variables largely impact return on investment. Future researchers
are encouraged to examine the causality relationship between innovation and branding in the contexts of service quality
and customer satisfaction. This is because ROI would practically be dependent on service quality and customer
satisfaction. Meanwhile, company size, category of firm and the like should be controlled for in related future studies.
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An Empirical Study on the Causality Relationship between Innovation and Branding 143
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APPENDIX A
Table 5: Coefficients
a
Prediction of Branding
Model
Unstandardized Coefficients
Standardized
Coefficients
t Sig.
95% Confidence Interval for B
B Std. Error Beta Lower Bound Upper Bound
(Constant)
.190 .064

2.965 .003 .064 .316
Innovation .920 .019 .897 49.201 .000 .884 .957
a. Dependent Variable: Branding
Table 6: Coefficients
a
Prediction of Innovation
Model
Unstandardized
Coefficients
Standardized
Coefficients
T Sig.
95% Confidence Interval For
B
B Std. Error Beta Lower Bound Upper Bound
1
(Constant) .450 .060 7.499 .000 .332 .568
Branding .874 .018 .897 49.201 .000 .839 .909
a. Dependent Variable: Innovation
APPENDIX B
Table 9: Coefficients
a
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
95% Confidence Interval
for B
Collinearity
Statistics
B Std. Error Beta
Lower
Bound
Upper
Bound
Tolerance VIF
1
(Constant) .066 .014 4.673 .000 .038 .094
Innovation .093 .004 .681 22.544 .000 .085 .101 1.000 1.000
2
(Constant) .062 .014 4.409 .000 .035 .090
Innovation .076 .009 .559 8.210 .000 .058 .094 .196 5.110
Branding .018 .009 .136 1.994 .037 .000 .036 .196 5.110
a. Dependent Variable: Return on Investment


Table 14: Model Summary Prediction of ROI by Branding
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate
1 .637
a
.406 .405 .14126
a. Predictors: (Constant), Branding