Product Concept Demonstrations in Trade Shows and Firm Value

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Author Information : Tridib Mazumdar (Whitman School of Management, Syracuse University)
Howard R. Gendal (Whitman School of Management, Syracuse University)
Taewan Kim (College of Business and Economics, Lehigh University)

Year of Publication : Journal of Marketing (2016)

Summary of Findings : The study shows how trade show demonstrations of a mix of new product concepts at different stages of completion and market-ready products influence shareholder value of the demonstrating firm.

Research Questions : 1. Firms often pursue a portfolio of new products that are at different stages of development. Trade shows offer a setting where firms can demonstrate the different stages of innovation in the same event. At which stage of product development is it optimal for a firm to reveal its innovation?

2. Are certain trade shows more beneficial for showcasing certain innovation stages?

What we know : The study shows that tradeshows can be used to communicate firms’ innovations to the outside world and can effectively signal the financial market, even when the concepts are years away from commercialization, if at all. The study generates useful managerial guidelines for firms to decide where, how many and which types of concepts to demonstrate, and determines the consequences of such investments. The study findings are particularly suited for industries with a high rate of innovation, represented by active trade organizations hosting periodic trade shows. The shows are generally open to industry experts for free movement of information to the financial market.

Novel Findings : Prior studies have investigated the roles of announcing early stage innovation and R&D projects, preannouncements of forthcoming new products, and announcement about the introduction of finished new products. These studies look at each of these events individually. We consider a tradeshow setting where firms demonstrate their innovations at different stages of completion at the same venue and at the same time. So we can identify which stage of innovations is best suited for public demonstration for the shareholders of the firm.

Novel Methodology : The study utilizes auto shows as a setting to address the research questions. It compiles a unique data set for six automobile firms and 78 auto shows spanning 12 years from the Jan. 6, 2002, Detroit Auto Show through the Nov. 20, 2013 Tokyo Motor Show, compiled from www.conceptcarz.com. This data set is merged with firms' stock prices that come from the WRDS, CRSP.

Implications for Practice : The research shows that the scope of tradeshows goes beyond creating current demand for the commercially-available products. Tradeshows are an appropriate venue to reveal a firm's internal innovations. The study generates useful managerial guidelines for firms to decide where, how many and which types of concepts to demonstrate, and determines the consequences of such investments. The study findings are particularly suited for industries with a high the rate of innovation, that are represented by active trade organizations hosting periodic tradeshows generally open to industry experts for free movement of information to the financial market.

Implications for Policy: Government and research institutions can introduce innovation-based competition and collaborative R&D by requiring firms to reveal progress in their internal innovation processes, and observing reactions of the financial market to assess the winners and losers.

Implications for Society: More information about internal and undisclosed innovation practices helps shareholders of firms make more judicious investment decisions, and will reduce possibilities of insider trading and making uninformed decisions.

Implications on Research: This research opens up the possibility of future research to investigate: (1) best allocation of demonstration items, (2) firm strategies that may also influence the demonstration mix, and (3) replication in other industries for enhancing the generalizability of the findings.

Abstract : Trade shows are a popular venue for firms to demonstrate their portfolio of market-ready new products as well as product concepts under different stages of development. Utilizing auto shows as a context, the authors investigate the effects of concept and product demonstrations on the demonstrating firm’s value. Event study results show that abnormal returns follow an inverted U-shape effect of product development stages, with previously demonstrated concepts approaching potential launch having the strongest positive effect, followed by the early-stage concepts demonstrated for the first time to the world (i.e., debuts), and then market-ready new products. Tradeshow locations mediate these effects. The effects of early-stage debut demonstrations are present only when concepts are demonstrated in tradeshows located in the home country of the demonstrating firm. However, the effect of displaying previously demonstrated concepts that have survived product development hurdles are present in venues within as well as outside the home country locations.

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Tridib Mazumdar

Tridib Mazumdar

Professor Mazumdar is the Howard R. Gendal Professor of Marketing and director of the Earl V. Snyder Innovation Management center. His research interests are in the areas of pricing, price promotions, new products, and determinants and effects of star power.
Tridib Mazumdar
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