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

  • 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)

Registered author(s):

    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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    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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