Academic journal article Journal of Small Business Management

Business Name Changes: The French Experience *. (Global Perspective)

Academic journal article Journal of Small Business Management

Business Name Changes: The French Experience *. (Global Perspective)

Article excerpt

Introduction

The name is the main component of any organization's identity. Any decision of corporate name modification has financial, marketing, and strategic effects. Despite the growing number of corporate name changes in recent years, there has been no in-depth analysis on the subject.

The objectives of this article are to evaluate the number and the growth of corporate name change, to critically examine the current typologies of corporate name changes, and to propose a valid classification of name change.

In marketing research, a considerable amount of attention has been given to brand names. Researchers have focused on the naming process (Shipley, Hooley, and Wallace 1988; Kohli and LaBahn 1997), corporate or brand dominant systems (Murphy 1987; Olins 1989; Laforet and Saunders 1994), sound symbolism or special brand names (Klink 2000) [for example, alphanumeric brand names (Pavia and Costa 1993)] or cobranding (Hillyer and Tikoo 1995; Rao, Qu, and Ruekert 1999).

However, research on corporate names has remained limited. For a long time, the choice of a name was a decision taken only when the firm was founded. No event called this initial choice into question. Now, beyond the large number of newsworthy examples (Verizon, WorldCom, TotalFinaElf, and Thales in France), there are more and more corporate name changes. All these high financial stake changes indicate the importance of corporate name.

The objective of this paper is two fold. First, it will evaluate the number and the growth of French corporate name changes, especially for small-and medium-sized firms. Then, a survey will examine the current typologies of name changes and will propose a valid classification.

Quantification of Corporate Name Changes

The existing quantifications of corporate name changes underestimate the magnitude. According to Grossman, Portugal, and Aspach (in Argenti 1994), there were 1,041 corporate name changes in 1985; 1,864 in 1988; and 1,600 in 1989 in the U.S. Aaker (1994) estimates the number of changes at 2,000 in the U.S. Enterprise IG, a consulting firm, counted 3,893 changes of corporate name in the stock exchanges of 57 countries for the year 2000. More precisely there were 2,976 changes in the U.S.; 250 in the United Kingdom; 186 in Canada; 74 in Germany; 56 in France; and 35 in Japan.

The underestimation is due to the difficulty in accounting for changes in the name of small firms. Cooperation with the French Patent Office (INPI) provides more precise data for France (Table 1). These data include the patronymic changes for persons that have been entered individually in the Trade Register. However, it is clear that company name changes are numerous and are growing rapidly In conclusion, the changes of French corporate names are a reality for small businesses. The reasons for name changes are numerous (Kapferer 1997; Delattre 1999); nevertheless, acquisitions and mergers are the perfect examples of events leading to a new name. The correlation between the corporate name changes and the takeover bids is strong (r = 0.71).

The Bulletin Officiel des Annonces Civiles et Commerciales (BODACC) 1 provides some interesting characteristics on name changes. The study of name changes in June and July 2000 indicates the following:

(1) 15.7 percent of corporate name changes are accompanied by a change of the legal status;

(2) 18.6 percent of corporate name changes are accompanied by a modification of activities;

(3) 23.8 percent of corporate name changes are accompanied by a modification of the capital structure (2); and

(4) 48.3 percent of corporate name changes are accompanied by a change of management, administration, or shareholding. This confirms the importance of mergers, acquisitions, spinoffs, and others modifications of shareholding or management.

All types of firms are affected by name changes. …

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