IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v49y2003i2p197-210.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.49.2.197.12741
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.49.2.197.12741?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 63-81.
    2. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Barry L. Bayus & William P. Putsis, Jr., 1999. "Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes," Marketing Science, INFORMS, vol. 18(2), pages 137-153.
    5. Paul Geroski & Steve Machin & John Van Reenen, 1993. "The Profitability of Innovating Firms," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 198-211, Summer.
    6. Langlois, Richard N., 1992. "External Economies and Economic Progress: The Case of the Microcomputer Industry," Business History Review, Cambridge University Press, vol. 66(1), pages 1-50, April.
    7. Pakes, Ariel, 1985. "On Patents, R&D, and the Stock Market Rate of Return," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 390-409, April.
    8. Chaney, Paul K & Devinney, Timothy M & Winer, Russell S, 1991. "The Impact of New Product Introductions on the Market Value of Firms," The Journal of Business, University of Chicago Press, vol. 64(4), pages 573-610, October.
    9. Kormendi, Roger & Lipe, Robert, 1987. "Earnings Innovations, Earnings Persistence, and Stock Returns," The Journal of Business, University of Chicago Press, vol. 60(3), pages 323-345, July.
    10. Mark E. Levonian, 1994. "The persistence of bank profits: what the stock market implies," Economic Review, Federal Reserve Bank of San Francisco, pages 3-17.
    11. Gary Erickson & Robert Jacobson, 1992. "Gaining Comparative Advantage Through Discretionary Expenditures: The Returns to R&D and Advertising," Management Science, INFORMS, vol. 38(9), pages 1264-1279, September.
    12. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ester Martínez Ros & Vicente Salas Fumás, "undated". "The effect of innovation activity on innovating quasi-rents: an empirical application," Studies on the Spanish Economy 03, FEDEA.
    2. Ashish Sood & Gerard J. Tellis, 2009. "Do Innovations Really Pay Off? Total Stock Market Returns to Innovation," Marketing Science, INFORMS, vol. 28(3), pages 442-456, 05-06.
    3. Panayotis Dessyllas & Alan Hughes, 2005. "R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries," Industrial Organization 0507008, University Library of Munich, Germany.
    4. Jessica M. Mc Lay & Roy Lay-Yee & Barry J. Milne & Peter Davis, 2015. "Regression-Style Models for Parameter Estimation in Dynamic Microsimulation: An Empirical Performance Assessment," International Journal of Microsimulation, International Microsimulation Association, vol. 8(2), pages 83-127.
    5. Sheikh, Shahbaz, 2018. "The impact of market competition on the relation between CEO power and firm innovation," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 36-50.
    6. Bertrand, Olivier & Zuniga, Pluvia, 2006. "R&D and M&A: Are cross-border M&A different? An investigation on OECD countries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 401-423, March.
    7. Sourafel Girma & Steve Thompson & Peter Wright, 2006. "International Acquisitions, Domestic Competition and Firm Performance," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(3), pages 335-349.
    8. Cheng Hsiao, 2007. "Panel data analysis—advantages and challenges," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 16(1), pages 1-22, May.
    9. DELL'ANNO, Roberto & VILLA, Stefania, 2012. "Growth in Transition Countries: Big Bang versus Gradualism," CELPE Discussion Papers 122, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    10. Grafström, Jonas & Poudineh, Rahmat, 2023. "No evidence of counteracting policy effects on European solar power invention and diffusion," Energy Policy, Elsevier, vol. 172(C).
    11. Rajshree Agarwal & Barry L. Bayus, 2002. "The Market Evolution and Sales Takeoff of Product Innovations," Management Science, INFORMS, vol. 48(8), pages 1024-1041, August.
    12. Cappelli, Riccardo & Czarnitzki, Dirk & Kraft, Kornelius, 2014. "Sources of spillovers for imitation and innovation," Research Policy, Elsevier, vol. 43(1), pages 115-120.
    13. Hsiao, Cheng & Hashem Pesaran, M. & Kamil Tahmiscioglu, A., 2002. "Maximum likelihood estimation of fixed effects dynamic panel data models covering short time periods," Journal of Econometrics, Elsevier, vol. 109(1), pages 107-150, July.
    14. Joshua Gans & Scott Stern, 2003. "When does funding research by smaller firms bear fruit?: Evidence from the SBIR program," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(4), pages 361-384.
    15. Pulak Mishra, 2018. "Are Mergers and Acquisitions Necessarily Anti-competitive? Empirical Evidence from India’s Manufacturing Sector," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 276-307, August.
    16. Kai-Lung Hui, 2004. "Product Variety Under Brand Influence: An Empirical Investigation of Personal Computer Demand," Management Science, INFORMS, vol. 50(5), pages 686-700, May.
    17. Marcus Tamm & Harald Tauchmann & Stefan Greß & Jürgen Wasem, 2005. "Price Elasticities and Social Health Insurance Choice in Germany: A Dynamic Panel Data Approach," RWI Discussion Papers 0028, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    18. Choi, Paul Moon Sub & Chung, Chune Young & Vo, Xuan Vinh & Wang, Kainan, 2020. "Are better-governed firms more innovative? Evidence from Korea," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 263-279.
    19. Jan Hanousek & Eugene Kroch, 1998. "The two waves of voucher privatization in the Czech Republic: a model of learning in sequential bidding," Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 133-143.
    20. Stefan Hirsch, 2018. "Successful In The Long Run: A Meta†Regression Analysis Of Persistent Firm Profits," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 23-49, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:49:y:2003:i:2:p:197-210. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.