Battle royal in biotechnology: R&D vs. product vs. process innovations

Abstract

Companies regard innovation as a central element of their business. However, as not all innovation types are the same, the central question is: should their announcements bring about the same effect on performance? This article analyses potential differences in firm value derived from the innovation-type announcements ‘R&D’, ‘product’, and ‘process’, made by intensive news-generating firms such as biotech companies. The empirical application shows a significantly positive reaction to innovation announcements, with the prospect of future innovation (‘R&D’ investment announcements) having greater impact on firm value than ‘product’ and ‘process’ innovations. Firm experience also acts as a moderator in this innovation–performance relationship, which is particularly relevant for entrepreneurs who need to develop and send credible signals indicating the value of the firm's intangible assets to the market.

Keywords:

• biotechnology
• innovation
• R&D
• firm age
• firm value

Notes on contributor

Juan Luis Nicolau is a Full Professor, Ph.D. in Economics and Business Administration. His research interests are the analysis of individual choice behaviour and the examination of firm market value. He has published in international journals such as Strategic Management Journal, Omega, European Journal of Operational Research, Journal of Business Research, Economics Letters, Marketing Letters, International Marketing Review, Journal of Service Marketing, Tourism Management, Journal of Air Transport Management, International Journal of Hospitality Management, Annals of Tourism Research, Journal of Travel Research, Tourism Economics, as well as Spanish journals such as Investigaciones Económicas, Revista de Economía Aplicada, and Moneda y Crédito

María Jesús Santa-María is an Associate (Tenured) Professor, Ph.D. in Economics. Her research interests revolve around innovation and competitiveness. She has published in Entrepreneurship and Regional Development, Economics Letters, Marketing Letters, International Journal of Hospitality Management or Journal of Air Transport Management, among others.