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The Financial Rewards of New Product Introductions in the Personal Computer Industry

Author

Listed:
  • Barry L. Bayus

    (Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina 27599)

  • Gary Erickson

    (School of Business, Box 353200, University of Washington, Seattle, Washington 98195)

  • Robert Jacobson

    (School of Business, Box 353200, University of Washington, Seattle, Washington 98195)

Abstract

Based on data from firms in the personal computer industry, we study the effect of new product introductions on three key drivers of firm value: profit rate, profit-rate persistence, and firm size as reflected in asset growth. Consistent with our theoretical development, we find that new product introductions influence profit rate and size; however, we find no effect on profit-rate persistence. Interestingly, we also find that the effect of new product introductions on profit rate stems from a reduction in selling and general administrative expenditure intensity rather than through an increase in gross operating return. Notably, firms decrease their advertising intensity in the wake of a new product introduction. Firm profitability in this industry apparently benefits from new product introductions because new products need less marketing support than older products.

Suggested Citation

  • Barry L. Bayus & Gary Erickson & Robert Jacobson, 2003. "The Financial Rewards of New Product Introductions in the Personal Computer Industry," Management Science, INFORMS, vol. 49(2), pages 197-210, February.
    • Handle: RePEc:inm:ormnsc:v:49:y:2003:i:2:p:197-210
    DOI: 10.1287/mnsc.49.2.197.12741
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    References listed on IDEAS

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