Abstract
A central question for firms releasing successive generations of a product is whether they should pursue a market-driven approach and align own product releases to existing industry-level patterns. While an alignment with industry patterns enables firms to capitalize on general market receptivity, it may also entail dilution and competitive interference effects. Using data on the consumer electronics and automotive industries, we show that the effectiveness of such alignment depends on two additional timing-related decisions: the firm’s release regularity for successive product generations and its preannouncement timing. Firms benefit from alignment to the industry only if they release successive generations in a regular manner (to create anticipation) and refrain from early preannouncements (to avoid competitive counteraction). For all other combinations of release regularity and preannouncement timing, not aligning to the industry rhythm leads to higher levels of firm performance. Taken together, our findings enable a nuanced view of the interplay of timing-related launch decisions that provides actionable guidance for managers.
Similar content being viewed by others
Notes
The reasoning behind our timeframe is as follows: although all firms in our dataset have existed at least since the 1990s, the initial public offering of the last firm was in August 2002. We hence chose 2002 as a starting point. Because we use rolling regressions to capture time variation in performance, the timeframe from September 2002 to August 2004 was needed as a calibration period. Thus, the final timeframe is October 2004 to September 2012.
Common to secondary data, some controls (i.e., financial leverage, market share) exhibit missing values. We imputed the missing data by linear interpolation. We also included additional dummy variables in the regression analyses, one for each variable with missing data, indicating the presence (1) or absence (0) of values. None of these dummy variables had a significant effect on firm performance (p > .10).
http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/ data_library.html
Be reminded that we excluded firms with strongly varying r-values across different generational products to ensure that firms consistently released successive generation products with the same regularity in release rhythm across the product portfolio. The firm-level share price made this step necessary, because to measure the performance impact of release rhythm at the firm level, the approach had to be consistent throughout the firm’s product portfolio.
For the purpose of our research, the Gaussian copula estimation procedure is not suited to conduct hierarchical analyses. As it accounts for endogeneity in the IRRA variable, this variable has to be part of the model studied and therefore a model without IRRA (i.e., “Basic model”) cannot be estimated.
Please note that endogeneity-corrected models generally do not have the best fit because they tilt the regression line away from the best-fitting OLS line and thus should not be compared with the OLS models (Ebbes et al. 2011).
We thank an anonymous reviewer for this suggestion.
References
Aiken, L. S., & West, S. G. (1998). Multiple regression: Testing and interpreting interactions. Newbury Park: Sage.
Axarloglou, K. (2003). The cyclicality of new product introductions. Journal of Business, 76(1), 29–48.
Bahadir, S. C., Bharadwaj, S. G., & Srivastava, R. K. (2008). Financial value of brands in mergers and acquisitions: Is value in the eye of the beholder? Journal of Marketing, 72(6), 49–64.
Banerjee, S., & Soberman, D. A. (2013). Product development capability and marketing strategy for new durable products. International Journal of Research in Marketing, 30(3), 276–291.
Baumol, W. J. (1959). Business behavior, value and growth. New York: Macmillan.
Bayus, B. L., Erickson, G., & Jacobson, R. (2003). The financial rewards of new product introductions in the personal computer industry. Management Science, 49(2), 197–210.
Bertini, M., Gourville, J., & Ofek, E. (2011). When the name is the game. Business Strategy Review, 22(3), 50–55.
Boone, D. S., Lemon, K. N., & Staelin, R. (2001). The impact of firm introductory strategies on consumers' perceptions of future product introduction and purchase decisions. Journal of Product Innovation Management, 18(2), 96–109.
Brexendorf, T. O., Bayus, B., & Keller, K. L. (2015). Understanding the interplay between brand and innovation management: Findings and future research directions. Journal of the Academy of Marketing Science, 43(5), 548–557.
Brown, S. L., & Eisenhardt, K. M. (1997). The art of continuous change: Linking complexity theory and time-paced evolution in relentlessly shifting organizations. Administrative Science Quarterly, 42(1), 1–34.
Burke, R. R., & Srull, T. K. (1988). Competitive interference and consumer memory for advertising. Journal of Consumer Research, 15(1), 55–68.
Calantone, R., & Di Benedetto, C. A. (2012). The role of lean launch execution and launch timing on new product performance. Journal of the Academy of Marketing Science, 40(4), 526–538.
Capon, N., Farley, J. U., & Hoenig, S. (1990). Determinants of financial performance: A meta-analysis. Management Science, 36(10), 1143–1159.
Carhart, M. M. (1997). On persistence in mutual fund performance. Journal of Finance, 52(1), 57–82.
Carrillo, J. E. (2005). Industry clockspeed and the pace of new product development. Production & Operations Management, 14(2), 125–141.
Dacko, S. G., Liu, B. S., Sudharshan, D., & Furrer, O. (2008). Dynamic capabilities to match multiple product generations and market rhythm. European Journal of Innovation Management, 11(4), 441–471.
Danaher, P. J., Bonfrer, A., & Dhar, S. (2008). The effect of competitive advertising interference on sales for packaged goods. Journal of Marketing Research, 45(2), 211–225.
Druehl, C. T., Schmidt, G. M., & Souza, G. C. (2009). The optimal pace of product updates. European Journal of Operational Research, 192(2), 621–633.
Dunn, R., Reader, S., & Wrigley, N. (1983). An investigation of the assumptions of the NBD model as applied to purchasing at individual stores. Journal of the Royal Statistical Society. Series C (Applied Statistics), 32(3), 249–259.
Ebbes, P., Papies, D., & van Heerde, H. J. (2011). The sense and non-sense of holdout sample validation in the presence of endogeneity. Marketing Science, 30(6), 1115–1122.
Eisenhardt, K. M., & Brown, S. L. (1998). Time pacing: Competing in markets that won't stand still. Harvard Business Review, 76(2), 59–69.
Essens, P. J., & Povel, D.-J. (1985). Metrical and nonmetrical representations of temporal patterns. Perception & Psychophysics, 37(1), 1–7.
Fiegenbaum, A., & Karnani, A. (1991). Output flexibility—A competitive advantage for small firms. Strategic Management Journal, 12(2), 101–114.
Fitzsimons, G. J. (2008). Death to dichotomizing. Journal of Consumer Research, 35(1), 5–8.
Gijsenberg, M. J. (2017). Riding the waves: Revealing the impact of intrayear category demand cycles on advertising and pricing effectiveness. Journal of Marketing Research, 54(2), 171–186.
Hair Jr., J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate data analysis: A global perspective. Upper Saddle River: Pearson/Prentice Hall.
Hashai, N., Kafouros, M., & Buckley, P. J. (2018). The performance implications of speed, regularity, and duration in alliance portfolio expansion. Journal of Management, 44(2), 707–731.
Hendricks, K. B., & Singhal, V. R. (1997). Does implementing an effective TQM program actually improve operating performance? Empirical evidence from firms that have won quality awards. Management Science, 43(9), 1258–1274.
Hultink, E. J., Griffin, A., Robben, H. S. J., & Hart, S. (1998). In search of generic launch strategies for new products. International Journal of Research in Marketing, 15(3), 269–285.
Investopia. 2015a. Are there significant seasonal patterns in the electronics sector? Available at http://www.investopedia.com/ask/answers/052215/are-there-significant-seasonal-patterns-electronics-sector.asp. Accessed 15 September 2019.
Investopia. 2015b. How important are seasonal trends in the automotive sector? Available at http://www.investopedia.com/ask/answers/041715/how-important-are-seasonal-trends-automotive-sector.asp. Accessed 15 September 2019.
Jain, B. A., & Kini, O. (1994). The post-issue operating performance of IPO firms. Journal of Finance, 49(5), 1699–1726.
Judge, G. G., Hill, R. C., Griffiths, W., Lutkepohl, H., & Tsoung-Chao, L. (1998). Introduction to the theory and practice of econometrics. Hoboken: John Wiley & Sons.
Kerin, R. A., & Sethuraman, R. (1998). Exploring the brand value-shareholder value nexus for consumer goods companies. Journal of the Academy of Marketing Science, 26(4), 260–273.
Kohli, C. (1999). Signaling new product introductions: A framework explaining the timing of preannouncements. Journal of Business Research, 46(1), 45–56.
Koku, P. S., Jagpal, H. S., & Viswanath, P. V. (1997). The effect of new product announcements and preannouncements on stock price. Journal of Market-Focused Management, 2(2), 183–199.
Lee, Y., & O'Connor, G. C. (2003). The impact of communication strategy on launching new products: The moderating role of product innovativeness. Journal of Product Innovation Management, 20(1), 4–21.
Lilly, B., & Walters, R. (1997). Toward a model of new product preannouncement timing. Journal of Product Innovation Management, 14(1), 4–20.
Lobel, I., Patel, J., Vulcano, G., & Zhang, J. (2016). Optimizing product launches in the presence of strategic consumers. Management Science, 62(6), 1778–1799.
McKinsey. 2006. Reinventing innovation at consumer goods companies. Available at www.nwq.nl/publicaties/McKinsey.pdf. Accessed 15 September 2019.
Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363.
Nault, B. R., & Vandenbosch, M. B. (1996). Eating your own lunch: Protection through preemption. Organization Science, 7(3), 342–358.
Pacheco-de-Almeida, G., Hawk, A., & Yeung, B. (2015). The right speed and its value. Strategic Management Journal, 36(2), 159–176.
Pae, J. H., & Lehmann, D. R. (2003). Multigeneration innovation diffusion: The impact of intergeneration time. Journal of the Academy of Marketing Science, 31(1), 36–45.
Park, S., & Gupta, S. (2012). Handling endogenous regressors by joint estimation using copulas. Marketing Science, 31(4), 567–586.
Pauwels, K., Silva-Risso, J., Srinivasan, S., & Hanssens, D. M. (2004). New products, sales promotions, and firm value: The case of the automobile industry. Journal of Marketing, 68(4), 142–156.
Pérez-Nordtvedt, L., Payne, G. T., Short, J. C., & Kedia, B. L. (2008). An entrainment-based model of temporal organizational fit, misfit, and performance. Organization Science, 19(5), 785–801.
Pogue, D. 2014. Ces: Does the consumer technology show have a future? Available at http://www.bbc.com/future/story/20130104-does-ces-have-a-future. Accessed 15 September 2019.
Porac, J. F., Thomas, H., & Baden-Fuller, C. (1989). Competitive groups as cognitive communities: The case of scottish knitwear manufacturers. Journal of Management Studies, 26(4), 397–416.
Radas, S., & Shugan, S. M. (1998). Seasonal marketing and timing new product introductions. Journal of Marketing Research, 35(3), 296–315.
Raithel, S., Sarstedt, M., Scharf, S., & Schwaiger, M. (2012). On the value relevance of customer satisfaction. Multiple drivers and multiple markets. Journal of the Academy of Marketing Science, 40(4), 509–525.
Ramani, G., & Kumar, V. (2008). Interaction orientation and firm performance. Journal of Marketing, 72(1), 27–45.
Rappaport, A. (1986). Creating shareholder value: The new standard for business performance. New York: Free press.
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718–804.
Schatzel, K., & Calantone, R. (2006). Creating market anticipation: An exploratory examination of the effect of preannouncement behavior on a new product's launch. Journal of the Academy of Marketing Science, 34(3), 357–366.
Sehgal, S., & Levitan, D. 2018. How tech companies can fight ‘tech product fatigue. Available at https://www.odwyerpr.com/story/public/11582/2018-11-07/how-tech-companies-can-fight-tech-product-fatigue.html. Accessed 15 September 2019.
Shah, B., & Greene, J. 2012. Marketing through surprise and secrecy: Lessons from ‘watch the throne’. Available at https://www.forbes.com/sites/onmarketing/2012/05/15/marketing-through-surprise-and-secrecy-lessons-from-watch-the-throne/#71a0998c152a. Accessed 15 September 2019.
Sharma, A., Saboo, A. R., & Kumar, V. (2018). Investigating the influence of characteristics of the new product introduction process on firm value: The case of the pharmaceutical industry. Journal of Marketing, 82(5), 66–85.
Shaver, J. M. (1998). Accounting for endogeneity when assessing strategy performance: Does entry mode choice affect FDI survival? Management Science, 44(4), 571–585.
Shi, W., & Prescott, J. E. (2012). Rhythm and entrainment of acquisition and alliance initiatives and firm performance: A temporal perspective. Organization Studies, 33(10), 1281–1310.
Shugan, S. M. (1989). Product assortment in a triopoly. Management Science, 35(3), 304–320.
Simon, C. J., & Sullivan, M. W. (1993). The measurement and determinants of brand equity: A financial approach. Marketing Science, 12(1), 28–52.
Simon, H. A., & Kotovsky, K. (1963). Human acquisition of concepts for sequential patterns. Psychological Review, 70(6), 534–546.
Smith, T. M., Gopalakrishna, S., & Smith, P. M. (2004). The complementary effect of trade shows on personal selling. International Journal of Research in Marketing, 21(1), 61–76.
Sorescu, A., Shankar, V., & Kushwaha, T. (2007). New product preannouncements and shareholder value: Don't make promises you can't keep. Journal of Marketing Research, 44(3), 468–489.
Sorescu, A., Warren, N. L., & Ertekin, L. (2017). Event study methodology in the marketing literature: An overview. Journal of the Academy of Marketing Science, 45(2), 186–207.
Souza, G. C., Bayus, B. L., & Wagner, H. M. (2004). New-product strategy and industry clockspeed. Management Science, 50(4), 537–549.
Srivastava, R. K., Shervani, T. A., & Fahey, L. (1998). Market-based assets and shareholder value: A framework for analysis. Journal of Marketing, 62(1), 2–18.
Srivastava, R. K., Shervani, T. A., & Fahey, L. (1999). Marketing, business processes and shareholder value: An organizationally embedded view of marketing activities and the discipline of marketing. Journal of Marketing, 63(Special Issue), 168–179.
Statista. 2019a. Consumer electronics sales as percentage of total retail e-commerce sales in the united states from 2017 to 2023. Available at https://www.statista.com/statistics/278891/share-of-consumer-electronics-sales-in-total-us-e-retail-sales. Accessed 15 September 2019.
Statista. 2019b. Iphone sales share of apple's total revenue worldwide from 1st quarter 2009 to 2nd quarter 2019. Available at https://www.statista.com/statistics/253649/iphone-revenue-as-share-of-apples-total-revenue. Accessed 15 September 2019.
Statista. 2019c. Share of automobiles and parts sales of total U.S. E-retail sales from 2013 to 2018. Available at https://www.statista.com/statistics/278893/share-of-auto-and-parts-sales-in-total-us-e-retail-sales. Accessed 15 September 2019.
Sterman, J. D., Repenning, N. P., & Kofman, F. (1997). Unanticipated side effects of successful quality programs: Exploring a paradox of organizational improvement. Management Science, 43(4), 503–521.
Strebel, J., O'Donnell, K., & Myers, J. G. (2004). Exploring the connection between frustration and consumer choice behavior in a dynamic decision environment. Psychology & Marketing, 21(12), 1059–1076.
Su, M., & Rao, V. R. (2010). New product preannouncement as a signaling strategy: An audience-specific review and analysis. Journal of Product Innovation Management, 27(5), 658–672.
Talay, M. B., Akdeniz, M. B., & Kirca, A. H. (2017). When do the stock market returns to new product preannouncements predict product performance? Empirical evidence from the U.S. automotive industry. Journal of the Academy of Marketing Science, 45(4), 513–533.
Thom, H. C. S. (1968). Direct and inverse tables of the gamma distribution. Silver Spring: Environmental Data Service.
Turner, S. F., Mitchell, W., & Bettis, R. A. (2013). Strategic momentum: How experience shapes temporal consistency of ongoing innovation. Journal of Management, 39(7), 1855–1890.
Vermeulen, F., & Barkema, H. (2001). Learning through acquisitions. Academy of Management Journal, 44(3), 457–476.
Vermeulen, F., & Barkema, H. (2002). Pace, rhythm, and scope: Process dependence in building a profitable multinational corporation. Strategic Management Journal, 23(7), 637–653.
Villas-Boas, J. M. (1993). Predicting advertising pulsing policies in an oligopoly: A model and empirical test. Marketing Science, 12(1), 88–102.
Wade, J. 2016. Why the consumer electronics show is dead - for product launches. Available at https://www.inc.com/jareau-wade/why-the-consumer-electronics-show-is-dead-for-product-launches.html. Accessed 15 September 2019.
Webb, D., & Pettigrew, A. (1999). The temporal development of strategy: Patterns in the u.K. insurance industry. Organization Science, 10(5), 601–621.
Wilcox, D. W. (1992). The construction of U.S. consumption data: Some facts and their implications for empirical work. American Economic Review, 82(4), 922–941.
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. Cambridge: MIT Press.
Yan, M., & Stuart, M. 2019. Apple forever changed the biggest tech event of the year by not showing up. Available at https://www.businessinsider.in/Apple-forever-changed-the-biggest-tech-event-of-the-year-by-not-showing-up/articleshow/67440714.cms. Accessed 15 September 2019.
Yang, C.-L., Chiang, M.-H., & Chen, C.-W. (2014). The relationship between information content and institutional investors: Evidence from new product preannouncements. Review of Managerial Science, 8(3), 405–418.
Zhu, R., Chen, X., & Dasgupta, S. (2008). Can trade-ins hurt you? Exploring the effect of a trade-in on consumers' willingness to pay for a new product. Journal of Marketing Research, 45(2), 159–170.
Acknowledgements
The authors thank the entire JAMS review team for their constructive and insightful recommendations throughout the whole process. Moreover, the authors thank Johannes Hattula for his helpfulcomments and suggestions for improvement.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
V. Kumar served as Area Editor for this article.
Rights and permissions
About this article
Cite this article
Bornemann, T., Hattula, C. & Hattula, S. Successive product generations: financial implications of industry release rhythm alignment. J. of the Acad. Mark. Sci. 48, 1174–1191 (2020). https://doi.org/10.1007/s11747-019-00709-y
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11747-019-00709-y