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

Barry L. Bayus (), Gary Erickson () and Robert Jacobson ()
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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

Management Science, 2003, vol. 49, issue 2, 197-210

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.

Keywords: new product introductions; firm value; personal computer industry; empirical analysis (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:49:y:2003:i:2:p:197-210

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