Internal Sequential Innovations and Market Value

39 Pages Posted: 20 Jan 2008

See all articles by Kun Liu

Kun Liu

Washington State University - College of Business and Economics

Jonathan D. Arthurs

Washington State University

John B. Cullen

Washington State University

Sheng Li

affiliation not provided to SSRN

Date Written: January 18, 2008

Abstract

Research shows that innovations contribute to a firm's performance such as market value. However, research is less specific concerning how innovations contribute to market value. Simplistic assumptions are often made such as additivity, which assumes that the bundle of innovations can be additively separated into individual innovations. We identify some important interrelationships among innovations by drawing upon evolutionary economics and focusing on how the underlying technological trajectories drive the evolution of innovations. We suggest that some innovations are internal sequential innovations, which share the genealogical linkage from the same underlying technological trajectory. We further suggest that internal sequential innovations contribute significantly to a firm's market value from three dimensions - the depth, coverage, and learning dimensions. Specifically, we show that for public corporations in four innovation-intensive industries from 1980 to 1994, the depth and coverage contribute positively to the market value. In addition, the learning dimension, or how long the sequential relationships among innovations have existed, has an inverted-U relationship with the market value.

Keywords: evolutionary economics, innovation, interrelatedness

JEL Classification: O32, O34

Suggested Citation

Liu, Kun and Arthurs, Jonathan D. and Cullen, John B. and Li, Sheng, Internal Sequential Innovations and Market Value (January 18, 2008). Atlanta Competitive Advantage Conference Paper. Available at SSRN: https://ssrn.com/abstract=1085414 or http://dx.doi.org/10.2139/ssrn.1085414

Kun Liu (Contact Author)

Washington State University - College of Business and Economics ( email )

PO Box 644750
Pullman, WA 99164-4750
United States

Jonathan D. Arthurs

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

John B. Cullen

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

Sheng Li

affiliation not provided to SSRN ( email )

No Address Available

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