New research from Syracuse University’s Martin J. Whitman School of Management finds that companies that participate in trade shows, demonstrating not only market-ready new products but also product concepts in early stages of development are recognized by investors; firm value is positively impacted as a result. In “Product concept demonstrations in trade shows and firm value,” Tridib Mazumdar, Howard R. Gendal Professor of Marketing, and his co-author, Taewan Kim (Lehigh University) find that previously demonstrated concepts approaching potential launch have the strongest positive effect on firm value, followed by embryonic-stage concepts demonstrated for the first time, followed by market-ready new products.
“Trade shows are appropriate venues to reveal firms’ internal innovative activities to the outside world and, thereby, effectively signal the financial market, even when the concepts are years away from commercialization, if at all,” said Mazumdar. “Our findings are particularly noteworthy for industries with a high rate of innovation, represented by active trade organizations that host periodic trade shows open to industry experts.”
The study compiled data from six automobile firms and 78 auto shows spanning 12 years, compiled from ConceptCarz.com, merging it with the firms’ stock prices during the same timeframe. The findings generate useful managerial guidelines for firms, helping them to decide where, how many and what types of concepts to demonstrate. It further helps determine the consequences of the trade show investments.
“Taking the time to demonstrate new products and concepts in a trade show setting can help open the flow of information about the innovations to the financial market,” said Mazumdar. “This helps shareholders make more judicious investment decisions and can reduce the possibility of insider trading.”
He added that government and research institutions can use the findings to introduce innovation-based competition and collaborative research and development by encouraging firms to reveal progress on their internal innovations, and observing financial market reaction to those innovations.
The research is forthcoming in the Journal of Marketing.
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