Event studies on the market value effects of new product introduction delays for focal companies and suppliers

New product introduction delays can be caused by various factors, including setbacks in overly ambitious technological advancements and quality issues. Sometimes organisations deliberately delay a new product introduction for strategic reasons, such as to avoid cannibalisation of existing products. Such delays can have negative consequences for profitability, market share and firm value. Extant studies find that such delays can be managed by designing for manufacture and optimising project scheduling. Despite this, new product introduction delays continue to plague organisations. This research shows that there is a negative market value effect not only for focal companies announcing a new product introduction delay but also for their suppliers. For focal companies, the roles of several key firm resources are studied. More specifically, when experiencing a new product introduction delay, the research observes that there is a more negative change in market value is experienced by more profitable firms and those with higher advertising intensity. However, operational slack positively moderates the impact of advertising intensity on market value. Furthermore, a study of the Boeing 787 Dreamliner's introduction delays shows that the negative market value effect spills over from the focal company to their suppliers, irrespective of whether or not they were directly involved with the affected product. Further insight demonstrates that the initial new product introduction delay is more negative compared to a further delay. A systematic literature review of new product introduction delays forms the foundation of the subsequent empirical research. Following this, the short-term event study method followed by cross-sectional regression analysis is used in this research to empirically investigate the role of firm resources on market value effects for S&P 500 companies experiencing a new product introduction delay from the perspective of signalling theory. To do so, a dataset is compiled using secondary data on new product introduction delays from LexisNexis News and stock market data from Wharton Research Data Services (WRDS), spanning a 20 year period from 1999 to 2018. Data on firm resources is retrieved from Compustat. Moving beyond the focal company, the short-term event study is also used to uncover the spillover effects of such delays for suppliers of a focal company. To do so, the Boeing 787 Dreamliner's introduction delays are used. This enables study of market value effects of new product introduction delays for the focal company (i.e. Boeing) and its suppliers. Further classification of suppliers gives further insight via t-tests. Secondary data is compiled from Bloomberg SPLC and Airframer to identify Boeing's and the Dreamliner's suppliers, whilst stock market data and further supplier data is retrieved from Datastream. This data focuses on the initial delay to the Dreamliner introduction in 2007 and a further delay in 2009. The findings of this research provide important contributions to research and practice. The results advance the field by improving the understanding of the market value effects of new product introduction delays for both focal companies and suppliers. The findings provide knowledge to how their firm resources may be associated with a more or less negative market value if and when they experience a new product introduction delay. It is imperative to uncover the market value effects of new product introduction delays beyond the focal company for other parties, such as suppliers, because not doing so missed a large part of understanding of what impact such delays have on various organisations. This research is intended to stimulate further research on what new product introduction delays mean for organisations in the hope of developing more effective ways of managing and potentially preventing such delays. The main limitations of this research are that the event study method assumes the efficient market hypothesis when in reality markets may not always operate perfectly efficiently. Secondly, event studies measuring market value changes can only analyse public limited companies (PLCs), meaning the impact of such delays on companies which are not listed on a stock market is uncertain

Loyal customer bases as innovation disincentives for duopolistic firms using strategic signaling and Bayesian analysis

In this paper we model the strategic behavior of firms competing in duopolistic environments with a loyal customer base and formalize their decision to delay the introduction of the most technologically developed product available. The proposed model extends and complements the partial approaches studied in the economic, management and operations research literatures. The former emphasizes the role of the strategic knowledge spillovers that may take place among competing firms because of their incentives to introduce technologically superior products while assuming the acceptance of such products by customers as given. The second defines its technology acceptance model based on the demand side of the economic system without considering the resulting strategic interactions that arise among the firms. The latter addresses the effect that signals about a new technology have on the information acquisition behavior of decision makers (DMs) but does not consider the capacity of DMs to account for several product characteristics and their interaction when acquiring information. Using a duopolistic innovation game model we illustrate how the existence of loyal customer bases allows for higher expected payoffs when generating monopolized markets but decreases the incentives of firms to introduce the most technologically developed product available. The signaling equilibria of the game are determined by demand-based factors and the incentives of customers to acquire information on the existing products in the market. Among the main implications of our model is also the fact that the availability of decision support systems that can be used by DMs through their information acquisition processes would improve the quality of the technology being introduced in the market and increase the firms’ probability of success