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

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Author Info

  • 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)

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    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.

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    File URL: http://dx.doi.org/10.1287/mnsc.49.2.197.12741
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 49 (2003)
    Issue (Month): 2 (February)
    Pages: 197-210

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    Handle: RePEc:inm:ormnsc:v:49:y:2003:i:2:p:197-210

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    Related research

    Keywords: new product introductions; firm value; personal computer industry; empirical analysis;

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    Cited by:
    1. Usero, Belén & Fernández, Zulima, 2009. "First come, first served: How market and non-market actions influence pioneer market share," Journal of Business Research, Elsevier, vol. 62(11), pages 1139-1145, November.
    2. Talke, Katrin & Salomo, Sören & Rost, Katja, 2010. "How top management team diversity affects innovativeness and performance via the strategic choice to focus on innovation fields," Research Policy, Elsevier, vol. 39(7), pages 907-918, September.
    3. Maria Belen Usero & Zulima Fernandez, 2005. "First Come, First Served: An Analysis Of Pioneer And Follower Firms' Market And Nonmarket Actions In The European Mobile Telephone Industry," Business Economics Working Papers wb054812, Universidad Carlos III, Departamento de Economía de la Empresa.
    4. Lee, Ruby P. & Naylor, Gillian & Chen, Qimei, 2011. "Linking customer resources to firm success: The role of marketing program implementation," Journal of Business Research, Elsevier, vol. 64(4), pages 394-400, April.
    5. Nazzal, Dima & Batarseh, Ola & Patzner, Joshua & Martin, Darren R., 2013. "Product servicing for lifespan extension and sustainable consumption: An optimization approach," International Journal of Production Economics, Elsevier, vol. 142(1), pages 105-114.
    6. Suk Choi & Christopher Williams, 2014. "The impact of innovation intensity, scope, and spillovers on sales growth in Chinese firms," Asia Pacific Journal of Management, Springer, vol. 31(1), pages 25-46, March.
    7. Kostopoulos, Konstantinos & Papalexandris, Alexandros & Papachroni, Margarita & Ioannou, George, 2011. "Absorptive capacity, innovation, and financial performance," Journal of Business Research, Elsevier, vol. 64(12), pages 1335-1343.
    8. Diaz-Di­az, Nieves Lidia & Aguiar-Di­az, Inmaculada & De Saá-Pérez, Petra, 2008. "The effect of technological knowledge assets on performance: The innovative choice in Spanish firms," Research Policy, Elsevier, vol. 37(9), pages 1515-1529, October.

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