The Innovation Process and Financial Decisions

28 Pages Posted: 9 Oct 2005

See all articles by Elazar Berkovitch

Elazar Berkovitch

Interdisciplinary Center, Herzliyah

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah; European Corporate Governance Institute (ECGI)

Ronen Israel

Interdisciplinary Center, Herzliyah

Date Written: September 2005

Abstract

The literature has identified two different processes by which innovation of new products presents itself. The first, the Technology Push process, occurs when the innovation of a new product is spurred by a technology that the entrepreneur possesses. The second, the Market Pull process, occurs when demand for products that do not yet exist motivates the innovation. The premise of this article is that the type of the innovation process - Technology Push or Market Pull - is not exogenous, but endogenously determined by the corporation. Moreover, the innovation process is related to and jointly determined with financial decisions in the corporation, such as diversification decisions, going public decisions, compensation practices, governance structure, and ownership structure.

Keywords: Innovation, Investment Policy, Start up, Diversification, Spin off, IPO, Technology Push, Market Pull

JEL Classification: G31, O31, O32, O33

Suggested Citation

Berkovitch, Elazar and Grinstein, Yaniv and Israel, Ronen, The Innovation Process and Financial Decisions (September 2005). Johnson School Research Paper Series No. 25-06. Available at SSRN: https://ssrn.com/abstract=813404 or http://dx.doi.org/10.2139/ssrn.813404

Elazar Berkovitch

Interdisciplinary Center, Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

Yaniv Grinstein (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Ronen Israel

Interdisciplinary Center, Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel
972-9-9527306 (Phone)

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