Product Development Innovation: Insights from Trademarks

66 Pages Posted: 28 Mar 2015 Last revised: 10 Mar 2019

See all articles by Lucile Faurel

Lucile Faurel

Arizona State University

Qin Li

University of California, Irvine - Paul Merage School of Business

Devin M. Shanthikumar

University of California, Irvine - Paul Merage School of Business

Siew Hong Teoh

University of California, Irvine - Accounting Area

Date Written: March 8, 2019

Abstract

In several large surveys of CEOs, trademarks rank as equally or more important than patents for firm innovation, growth and performance, and the OECD’s definition of innovation includes trademarks. The innovation literature, however, almost exclusively studies patents. We build a novel dataset of 123,545 trademark registrations by S&P 1500 firms from 1993 to 2011 to study the value of trademarks and how firms motivate trademark innovation. We find that firms registering more trademarks earn future increases in sales and profitability. One new trademark increases next-year sales by $1.85 million for a median firm in a low-patent (non-high-tech) industry. Trademark creation increases with the fraction of CEO compensation in the form of stock options, the convexity of CEO incentives, and the value of unvested options the CEO holds. Using a revised accounting rule, SFAS 123(R), as an exogenous shock to option compensation, we find that reductions in stock option compensation cause reductions in trademark creation. Thus, trademarks have value and CEO risk-taking incentives are important motivators of new product development innovation.

Keywords: Product Development, Trademarks, Innovation, Sales, Productivity, Stock Options, Vega, Incentives

JEL Classification: J33, M12, M41, M52, O31

Suggested Citation

Faurel, Lucile and Li, Qin and Shanthikumar, Devin M. and Teoh, Siew Hong, Product Development Innovation: Insights from Trademarks (March 8, 2019). Available at SSRN: https://ssrn.com/abstract=2585804 or http://dx.doi.org/10.2139/ssrn.2585804

Lucile Faurel (Contact Author)

Arizona State University ( email )

W.P. Carey School of Business
School of Accountancy, B267H
Tempe, AZ 85287
United States
(480) 965-6216 (Phone)

Qin Li

University of California, Irvine - Paul Merage School of Business ( email )

Campus Drive
Irvine, CA 62697-3125
United States

Devin M. Shanthikumar

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
SB 440
Irvine, CA 92697-3125
United States

Siew Hong Teoh

University of California, Irvine - Accounting Area ( email )

Irvine, CA 92697-3125
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
539
rank
49,376
Abstract Views
2,820
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information