توسعه محصول جدید و ارزش شرکت در تولید گوشی تلفن همراه

We study the effect of new product introduction on firm value. Using a unique sample on mobile phone handset introduction by the 16 largest major handset manufacturers from 1992 to 2002, we distinguish between truly innovative product introduction and imitative product introduction. We find that while most product introduction is imitative, both types of innovation increase firm value. However, truly innovative innovation is found to increase firm value by more than imitative introductions.

Wireless markets trigger the innovation of new technologies and products that are subsequently used and applied throughout the economy. The widespread adoption of new wireless technologies provides substantial growth opportunities for firms (Helpman and Trajtenberg, 1998 and David and Wright, 2003), and the discussion on the “digital divide” suggests that economies depend on an advanced telecommunications infrastructure (including wireless) to prosper (Röller and Waverman, 2001 and Czernich et al., 2009). Given that there are potentially divergent public and private incentives for different types of innovations, it is important to consider the impact of the introduction of innovative products on firm value to identify a starting point for further studies on differences between socially desired and privately executed innovative activity. This paper therefore takes a first look at patterns of successful, growth facilitating product innovations in cellular handsets. Handset producers adopt different innovation strategies (specifically imitation and “true” innovation) to create value. These competitive strategies determine which kinds of innovations are launched and how, i.e. whether consumers and other firms are offered new wireless technologies with incremental improvements or with drastically new technological features. These innovation strategies also determine the impact of new wireless technologies on economic growth. They also determine the extent to which a new service or technology penetrates the economy. For example, the success of SMS technology was made possible only by the introduction a series of drastic (e.g. technical SMS functionality) and incremental (e.g. auto-completion of words) innovations embedded in a large number of wireless handsets. In addition to being truly innovative or imitative, a handset encapsulating novel features can also contain features that make it more attractive to all consumers (vertical innovation) or only a subset of them (horizontal innovation) mobile handset industry. In the 1990s, competition moved from vertical technological improvements such as decreased handset weight to horizontal innovations increasing customer segmentation and product differentiation to attract replacement demand for handsets (Koski and Kretschmer, 2007).2 Firm strategies on research and development and product introduction in this market therefore entail multiple decisions. Firms have to decide if they want to engage in vertical and/or horizontal innovation and whether, or to what extent, to imitate technological leaders or to expand the technological boundaries themselves. In this context, we can think of several empirical issues to address: (i) First, is truly innovative or imitative product introduction more conducive to increasing firm value? A naïve view would state that true innovations create more value for the firm as something genuinely new is introduced (and valued) by the market. However, this view does not consider the cost of R&D for a truly new product. If these costs were high and second-movers could imitate an introduction quickly, the market would value imitative product introduction more highly since the same technology can be used for a fraction of the cost. Given that we consider only successful product introductions (i.e. ones that resulted in a product for the end consumer market) however, we would expect true innovation to increase firm value more than imitation. (ii) The second question arising from the distinction between horizontal and vertical innovation is the following: will vertical innovation increase firm value more than horizontal innovations? The answer to this question again depends crucially on the degree to which these types of innovations can be imitated. While it might seem intuitive that vertical innovations (which are valued by all consumers) should be more profitable than horizontal ones, it will also be the case that vertical innovations will attract more imitative product introduction than horizontal innovation. In other words, a dominant design on vertical product characteristics might emerge, while products remain differentiated horizontally. Assessing the relative effect of these is the second empirical task we face. (iii) A third question we ask is: does the impact of product introduction on firm value change over time? Given that a shift in innovative behavior can be observed in this market (Koski and Kretschmer, 2007), the hypothesized ranking of true innovation over imitative product introduction over no new products may change if continued innovation becomes more expensive and/or easier to imitate (Adner and Zemsky, 2006), so that imitation becomes more profitable compared to true innovation. Various previous studies have found that R&D investments – typically measured very broadly – and new product announcements are positively related to firm valuation (see, e.g. Kelm et al., 1995, Chen et al., 2002, Sharma and Lacey, 2004, Cho and Pucik, 2005 and Connolly and Hirschey, 2005). Our paper aims to give a more nuanced picture of the relationship between innovative activity and firm value. Specifically, we use a sample of the 16 largest mobile handset manufacturers and their product introduction decisions in the time period 1992–2002, and further match the data with their phones’ characteristics and firm financial information to see how new product introductions relate to firm value. Using Tobin’s Q, a standard measure of shareholder value in innovation studies (Hall, 1999), as our measure of success, we also study how the competitive landscape affects the product introduction-firm value link to see whether being an innovation leader or imitating seems a more profitable strategy. We find that new product introductions are positively related to firm value, and that the firms that are able to take a technological lead in innovation in the wireless markets are valued more highly than others. Our data show that until the late 1990s, mobile manufacturers derived competitive advantage from technological leadership in terms of handset size, talk and standby times, but thereafter, as this advantage vanished, the firms needed to employ other, more horizontally oriented, innovation strategies. The paper is organized as follows. Section 2 documents product introduction patterns in the cellular handset industry during the period of 1992–2002 and introduces the key explanatory variables of our empirical study. Section 3 analyses the relationship between new product introductions and firm value. Section 4 concludes.

Our results show that new product introduction results in greater firm value in a technologically dynamic market in which technologies evolve and improve constantly. While this is not unexpected, our paper is the first (to our knowledge) to explicitly consider different competitive positions of a firm’s new product portfolio. In a market with rapid technological progress and intense competition like the mobile handset market, following a strategy of technological leadership is risky as the advantage gained may be ephemeral if imitation is easy and quick. Our results suggest, however, that mobile phone manufacturers that launch new cellular handset models that are closer to the technological edge do create more value for their shareholders than other companies. That is, taking a technological lead is seen as an indicator for long-term viability and profitability, even though a current successful product may be copied or imitated fairly easily. The innovation dynamics revealed by our data indicate that there are clear incentives for firms in the mobile handset industry to aim at reaching or keeping technological leadership via innovation. This tendency pushes firms to strive for more drastic technological improvements and benefits a world-wide market of end-users. It may also have long-term aggregate growth impacts as business users and government service providers adopt new communication solutions that enable them to create more efficient work environments via wireless communications (such as transmitting real-time information via wireless systems to improve patient care in the hospitals). At a general level, our study also suggests that innovations that are imitated quickly (mostly horizontal innovations in our setting) create less value for the firm than vertical ones that are difficult to imitate. Interestingly, from a social planner’s perspective, it may be precisely the innovations that can be widely copied by competitors and other firms in the economy that are most beneficial, while tightly protected innovations will diffuse in the economy at a much slower rate, if at all. This result ties in with the sizable literature on spillovers that find a divergence between private and public incentives for poorly protected innovations (which are reflected in lower impact on firm value in our study). However, it is interesting to note that although imitation seems easy and quick in this industry, some firms still do thrive for drastic product innovation, which subsequently creates significant consumer value through imitation from direct competitors. Thus, while we do not have a counterfactual scenario to consider, innovation still appears rapid in this industry and technological opportunities are still seized, if only for a brief period of time. Our empirical findings also add insight to the debate on handset exclusivity. Our results indicate that firms increase their value following innovative activity – particularly activities resulting in drastic innovations – so that it seems that markets provide strong innovation incentives for wireless handset manufacturers. Firms regard innovation as their major means of competing, and thus have incentives to develop new devices to attract new customers, whether or not regulation prohibits exclusive arrangements between handset manufacturers and wireless service carriers. Thus, from this perspective, regulation banning exclusive arrangements is unlikely to harm innovation in the wireless industry as argued by some of the parties participating in the regulation debate. Our distinction between vertical and horizontal innovations is just one of the possible classifications. In recent years, with the emergence of smartphones which are differentiated by their embedded software suggests another important distinction between hard- and software innovations. Studying the dynamics between these would be challenging as software innovations typically originate from specialized software producers, suggesting that one would have to look at the entire ecosystem of hard- and software producers for a particular smartphone. However, research capturing later stages of the mobile handsets markets will have to take this into account. Another related interesting question is whether the rents from innovative activities by handset manufacturers accrue to the operator with whom the innovators partner. Unfortunately, given our data limitations, investigation of this topic is outside the scope of this paper. We hope to raise this highly important topic in subsequent research. Our paper has several limitations: first, our firms are multiproduct firms whose value may be influenced by other important factors than handset introduction. By allowing for firm-specific effects in our estimations, we hope to strip out some of these effects, but there will always be some unexplained variation in the value of such complex firms. Second, our measure of technological leadership is imperfect. We plan to include data on horizontal product features (which play a more important role in later stages of the industry) in future research. However, even when using more narrow definitions of technological leadership or consider isolated dimensions, we find qualitatively similar results to the ones reported in our paper. Third, we treat the wireless industry as a single global market. Clearly, international competition, national champions and strong regional or national identities matter and might introduce regional biases – for example, Nokia’s presence in Finland is much greater than in, say, the US or Asia, where strong national incumbents dominate the market. Finally, we do not have data on a handset’s (or a handset portfolio’s) average sales price and volume. Clearly, this may be an even better indicator of a new product’s success and its subsequent impact on firm value, but we do not have this data available. Despite these shortcomings, we believe that our paper illustrates that technological leadership played an important role in the early stages of the mobile handset market, thus lending some empirical support to first-mover strategies in technologically dynamic markets. Acknowledgements The authors thank the joint Networks, Services and Global Competition Research Program of ETLA (Research Institute of the Finnish Economy) and BRIE (Berkeley Roundtable on the International Economy), Tekes (National Funding Agency for Technology and Innovation), the Anglo-German Foundation and the Norwegian Research Council for financial support and the editors John Mayo and Glenn Woroch, a referee, and conference participants at the 2008 ITS Conference in Montreal and the conference on “Wireless Technologies: Enabling Innovation and Economic Growth” at the Georgetown Center for Business and Public Policy for helpful comments.