Product Design Awards and the Market Value of the Firm

Abstract

Product design has increasingly been recognized as an important source of competitive advantage. This paper empirically estimates the impact of effective design on the market value of the firm. We use a firm’s receipt of a product design award as a proxy for its design effectiveness. Based on data from 264 announcements of design awards made between 1998 and 2011, we find that award announcements are associated with statistically significant positive stock market reactions. Depending on the benchmark model used to estimate the stock market reaction, the market reaction over a two-day period (the day of announcement and the preceding day) ranges from 0.95% to 1.02%. The market reaction is more positive for smaller firms and for firms whose award winning products are consumer goods. However, a firm’s growth potential, industry competitiveness, and whether a firm is a first time award winner or repeated award winner do not significantly affect the market reaction.

Keywords: Product design; design award; shareholder value; abnormal returns