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What is the relationship between innovation and firm value? Does the type of innovation make a difference? To answer these questions, the authors examine how breakthrough and incremental innovations affect three different facets of firm performance: normal profits, economic rents, and total firm risk. They argue that each of these metrics is of independent interest to shareholders and managers …
New product preannouncements are strategic signals that firms direct at their customers, competitors, channel members, and investors. They have been touted as effective means of deterring competitor entry, informing potential customers, and even tipping the balance of technological standard battles in favor of the preannouncing firms. However, preannouncements also carry the risks of unwanted c…
In the 2004 alone, there were more than 30,000 acquisitions worldwide, worth an estimated $1.35 trillion. The conclusion of decades of academic research is that the average acquisition leaves the acquiring firm worse off financially than before. However, not all acquisitions are bad for shareholders; averages conceal winners and losers. In this article, Sorescu, Chandy, and Frabhu highlight a f…
Radical innovations are engines of economic growth and the focus of much academic and practitioner interest, yet some fundamental questions remain unanswered. The authors use theoretical arguments on the risk associated with radical innovations, and the resources needed for them, to answer the following questions on the sources and financial consequences of radical innovation: (1) Who introduce…