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First to market: Is technological innovation in new product development profitable in health care industries?

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  • Xin, Jenny Y.
  • Yeung, Andy C.L.
  • Cheng, T.C.E.
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    Abstract

    Do innovative products incorporated advanced technologies help firms improve operating performance? In this study we traced the operating performance of 168 publicly traded manufacturing firms in the USA that announced technologically innovative products in two major industries from the health care domain, namely pharmaceuticals and medical instruments. We employed the event-study methodology and collected objective financial data from Compustat. We found that technologically innovative products have a statistically significant positive effect on operating performance. The median abnormal increase in return-on-assets ranged from 2.20% to 7.07% over a four-year period. The median abnormal increase in return-on-sales ranged from 4.16% to 4.70% and the median abnormal increase in sales-over-assets ranged from 5.85% to 7.38%.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 127 (2010)
    Issue (Month): 1 (September)
    Pages: 129-135

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    Handle: RePEc:eee:proeco:v:127:y:2010:i:1:p:129-135

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    Web page: http://www.elsevier.com/locate/ijpe

    Related research

    Keywords: Technological innovation New product development Event study;

    References

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    1. Pedroso, Marcelo Caldeira & Nakano, Davi, 2009. "Knowledge and information flows in supply chains: A study on pharmaceutical companies," International Journal of Production Economics, Elsevier, vol. 122(1), pages 376-384, November.
    2. Koufteros, Xenophon & Marcoulides, George A., 2006. "Product development practices and performance: A structural equation modeling-based multi-group analysis," International Journal of Production Economics, Elsevier, vol. 103(1), pages 286-307, September.
    3. Lööf, Hans & Heshmati, Almas, 2000. "Knowledge Capital and Performance Heterogeneity: A Firm Level Innovation Study," Working Paper Series in Economics and Finance 387, Stockholm School of Economics, revised 14 Aug 2000.
    4. O'Brien, C. & Smith, S. J. E., 1995. "Strategies for encouraging and managing technological innovation," International Journal of Production Economics, Elsevier, vol. 41(1-3), pages 303-310, October.
    5. McGuire, Stephen J. & Dilts, David M., 2008. "The financial impact of standard stringency: An event study of successive generations of the ISO 9000 standard," International Journal of Production Economics, Elsevier, vol. 113(1), pages 3-22, May.
    6. Afonso, Paulo & Nunes, Manuel & Paisana, António & Braga, Ana, 2008. "The influence of time-to-market and target costing in the new product development success," International Journal of Production Economics, Elsevier, vol. 115(2), pages 559-568, October.
    7. William C. Bogner & Pratima Bansal, 2007. "Knowledge Management as the Basis of Sustained High Performance," Journal of Management Studies, Wiley Blackwell, vol. 44(1), pages 165-188, 01.
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    9. Lo, Chris K.Y. & Yeung, Andy C.L. & Cheng, T.C.E., 2009. "ISO 9000 and supply chain efficiency: Empirical evidence on inventory and account receivable days," International Journal of Production Economics, Elsevier, vol. 118(2), pages 367-374, April.
    10. Warren, Matthew P. & Forrester, Paul L. & Hassard, John S. & Cotton, John W., 2000. "Technological innovation antecedents in the UK ceramics industry," International Journal of Production Economics, Elsevier, vol. 65(1), pages 85-98, April.
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    12. Valle, Sandra & Vázquez-Bustelo, Daniel, 2009. "Concurrent engineering performance: Incremental versus radical innovation," International Journal of Production Economics, Elsevier, vol. 119(1), pages 136-148, May.
    13. Gupta, Abhishek & Pawar, Kulwant S. & Smart, Palie, 2007. "New product development in the pharmaceutical and telecommunication industries: A comparative study," International Journal of Production Economics, Elsevier, vol. 106(1), pages 41-60, March.
    14. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 529-54, July.
    15. Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
    16. Kevin B. Hendricks & Vinod R. Singhal, 2008. "The Effect of Product Introduction Delays on Operating Performance," Management Science, INFORMS, vol. 54(5), pages 878-892, May.
    17. Chan, Su Han & Martin, John D. & Kensinger, John W., 1990. "Corporate research and development expenditures and share value," Journal of Financial Economics, Elsevier, vol. 26(2), pages 255-276, August.
    18. Guenther, David A. & Rosman, Andrew J., 1994. "Differences between COMPUSTAT and CRSP SIC codes and related effects on research," Journal of Accounting and Economics, Elsevier, vol. 18(1), pages 115-128, July.
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    Cited by:
    1. Su, Meng & Rao, Vithala R., 2011. "Timing decisions of new product preannouncement and launch with competition," International Journal of Production Economics, Elsevier, vol. 129(1), pages 51-64, January.
    2. Ni, John Z. & Flynn, Barbara B. & Jacobs, F. Robert, 2014. "Impact of product recall announcements on retailers׳ financial value," International Journal of Production Economics, Elsevier, vol. 153(C), pages 309-322.
    3. Gunday, Gurhan & Ulusoy, Gunduz & Kilic, Kemal & Alpkan, Lutfihak, 2011. "Effects of innovation types on firm performance," International Journal of Production Economics, Elsevier, vol. 133(2), pages 662-676, October.

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