2006 Inaugural Mays Marketing Research Camp Report
Innovation and New Product Management
Friday, April 27 2006
Mays Business School
Texas A&M University
|
Alina Sorescu, Assistant Professor, Mays Business School, Building Long-term Firm Value through Innovation |
Alina Sorescu, Texas A&M University
Jelena Spanjol, Texas A&M University
This research seeks to investigate the optimal mix of breakthrough and incremental innovations and the optimal new product allocation strategy across the categories in which firms operate. The methodology used is the long-term calendar-time portfolio returns on a panel dataset comprised of 22,532 products introduced by 153 firms between 1985-2003. The findings from this study suggest that a firm with a portfolio comprised of high breakthrough and incremental innovations has the strongest impact on long-term firm value compared to all other portfolio combinations of breakthrough and incremental innovations. In addition, firms with high levels of category dominant innovation have a strong impact on long-term firm value. The implication of this study is that breakthrough innovations by themselves are not a source of economic rents. Instead, incremental innovations significantly enhance the financial value of breakthrough innovations.
The summary of the Q&A is as below:
Q. Are cup-holders in cars break-through or incremental innovation?
R. I would perhaps classify them as incremental innovations.
Q. What if break-through innovations are the norm in the industry?
Q. How do you the incremental innovations of competitors?
Q. Innovation is an inherently complex process. There could be several trade-offs involved.
