The Tier-Rotation Curve: A Theory of Brand-Substrate Decoupling and Its M&A-Value Geometry
Year: 2026
Type: preprint
Abstract: When founders exit branded firms, deal outcomes diverge sharply even among principals of comparable quality and brand strength. This paper attributes that variation to the proportion of brand conviction (the factual beliefs observers hold about the brand's performance claims, distinct from evaluative attitude) that has been externalized from the founder's personal judgment into organizational routines, guidelines, decision rights, and trademarks that an acquirer can own independently. Brand signal is modeled as accumulating in an organizational substrate according to a logistic trajectory whose rate is governed by sustained knowledge-externalization effort, a cold-start offset, and sector substitutability. Acquirer willingness-to-pay is a piecewise function of organizational-brand share featuring a separability threshold (the threshold above which brand assets become acquirable independent of the originating principal): below the threshold, founder-flight risk produces discounts and earnout structures; above it, the brand commands a premium increasing with sector substitutability. The model yields three contributions. First, it derives a non-monotonic value geometry with a discontinuous slope at the separability threshold – generating within-founder longitudinal predictions unavailable to cross-sectional human-capital or succession-discount theories, and constituting a sharp empirical wedge against them. Second, it grounds the accumulation process in Nonaka and Takeuchi's (1995) SECI externalization mechanism and identifies four observable proxies – shifts in 10-K language, advertising allocation, media salience, and trademark composition – that allow empirical distinction from quality-based accounts. Third, it endogenizes the RBV's assumption of differential resource mobility for brand assets, extending the dynamic capabilities tradition (Teece, Pisano, and Shuen 1997; Eisenhardt and Martin 2000) by specifying the mechanism, threshold, and sector moderator that determine when initially sticky brand resources become separable. The theory is illustrated with four boundary objects and yields five falsifiable propositions. Includes paper.yaml (Paper Spec v0.1.0) – a machine-readable specification of the paper's claims, assumptions, and dependencies. See https://github.com/spectralbranding/paper-spec for the standard.
Author: Zharnikov, Dmitry
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7160493338