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The Effect of Product Introduction Delays on Operating Performance

Author

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  • Kevin B. Hendricks

    () (School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario N2L 3C5, Canada)

  • Vinod R. Singhal

    () (College of Management, Georgia Institute of Technology, Atlanta, Georgia 30308)

Abstract

This paper provides empirical evidence on the effect of product introduction delays on accounting-based measures of operating performance. Based on a diverse set of 450 publicly traded firms that experienced product introduction delays, we find that delays have a statistically significant negative effect on profitability. Depending on the method used to estimate abnormal performance, the median abnormal decline in return on assets (ROA) ranges from 2.70% to 3.44% over a three-year period around the year of the delay announcement. The median decline in sales over assets ranges from 5.92% to 10.99%, and the median decline in return on sales ranges from 1.48% to 3.06%. Cross-sectional regression analysis indicates that the impact of delays on abnormal ROA is more negative for smaller firms, and for firms that are more profitable before the delay. Furthermore, the impact is more negative for firms that operate in industries that are larger and more profitable. We also find a positive association between abnormal ROA and abnormal stock price performance around the product introduction delay announcements.

Suggested Citation

  • 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.
  • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:5:p:878-892
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    File URL: http://dx.doi.org/10.1287/mnsc.1070.0805
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    References listed on IDEAS

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    1. Ahmed, Anwer S., 1994. "Accounting earnings and future economic rents : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 17(3), pages 377-400, May.
    2. Shantanu Bhattacharya & V. Krishnan & Vijay Mahajan, 1998. "Managing New Product Definition in Highly Dynamic Environments," Management Science, INFORMS, vol. 44(11-Part-2), pages 50-64, November.
    3. Fama, Eugene F & French, Kenneth R, 1995. " Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-155, March.
    4. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-536, June.
    5. V. Krishnan & Karl T. Ulrich, 2001. "Product Development Decisions: A Review of the Literature," Management Science, INFORMS, vol. 47(1), pages 1-21, January.
    6. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    7. Barber, Brad M. & Lyon, John D., 1996. "Detecting abnormal operating performance: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 41(3), pages 359-399, July.
    8. Morris A. Cohen & Jehoshua Eliasberg & Teck-Hua Ho, 1996. "New Product Development: The Performance and Time-to-Market Tradeoff," Management Science, INFORMS, vol. 42(2), pages 173-186, February.
    9. Kevin B. Hendricks & Vinod R. Singhal, 1997. "Delays in New Product Introductions and the Market Value of the Firm: The Consequences of Being Late to the Market," Management Science, INFORMS, vol. 43(4), pages 422-436, April.
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    Cited by:

    1. repec:spr:annopr:v:244:y:2016:i:2:d:10.1007_s10479-016-2114-7 is not listed on IDEAS
    2. repec:gam:jsusta:v:10:y:2018:i:4:p:964-:d:138126 is not listed on IDEAS
    3. repec:gam:jsusta:v:9:y:2017:i:6:p:992-:d:100953 is not listed on IDEAS
    4. Bichescu, Bogdan & Raturi, Amitabh, 2015. "The antecedents and consequences of plant closing announcements," International Journal of Production Economics, Elsevier, vol. 168(C), pages 197-210.
    5. Xin, Jenny Y. & Yeung, Andy C.L. & Cheng, T.C.E., 2010. "First to market: Is technological innovation in new product development profitable in health care industries?," International Journal of Production Economics, Elsevier, vol. 127(1), pages 129-135, September.
    6. Brandenburg, Marcus, 2016. "Supply chain efficiency, value creation and the economic crisis – An empirical assessment of the European automotive industry 2002–2010," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 321-335.
    7. Tang, Ailie K.Y. & Lai, Kee-hung & Cheng, T.C.E., 2016. "A Multi-research-method approach to studying environmental sustainability in retail operations," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 394-404.
    8. Saravanan Kesavan & Vishal Gaur & Ananth Raman, 2010. "Do Inventory and Gross Margin Data Improve Sales Forecasts for U.S. Public Retailers?," Management Science, INFORMS, vol. 56(9), pages 1519-1533, September.
    9. repec:kap:jtecht:v:42:y:2017:i:4:d:10.1007_s10961-016-9554-8 is not listed on IDEAS
    10. Cuijpers, Maarten & Guenter, Hannes & Hussinger, Katrin, 2011. "Costs and benefits of inter-departmental innovation collaboration," Research Policy, Elsevier, vol. 40(4), pages 565-575, May.
    11. Li, Zhaolin & Shao, Lusheng, 2015. "Time-based procurement," International Journal of Production Economics, Elsevier, vol. 169(C), pages 350-361.

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