Academic journal article Research-Technology Management

Do Innovations Really Pay off? Total Stock Market Returns to Innovation

Academic journal article Research-Technology Management

Do Innovations Really Pay off? Total Stock Market Returns to Innovation

Article excerpt

Do Innovations Really Pay Off? Total Stock Market Returns to Innovation; Ashish Sood and Gerard J. Tellis; Marketing Science, ePub ahead of print Jan. 12, 2009, pp. 1-15, http://journals.inform.org, doi 10.1287/mksc.1080.0407

Researchers Sood (Emory University School of Business) and Tellis (UCLA Marshall School of Business) argue that the stock market's true appreciation of innovation can be estimated by assessing the total market returns to an entire innovation project. From their analysis of 5,481 announcements from 69 firms in five markets and 19 technologies between 1977 and 2006 they find that the total market returns to an innovation project are $6 43 million, more than 13 times the $49 million from an average innovation event. They also find:

* Of three sets of activities of innovation (initiation, development and commercialization), returns to the development activities are consistently the highest across and within categories and the returns to commercialization the lowest. Moreover, returns to initiation occur, on average, 4.7 years ahead of launch.

* Returns to the new product launch are the lowest among all eight events tracked.

* Returns to negative events are higher in absolute value than those to positive events. …

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