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Bringing Innovation to Fruition: Insights From New Trademarks

Published online by Cambridge University Press:  08 November 2022

Lucile Faurel*
Affiliation:
Arizona State University W. P. Carey School of Business
Qin Li
Affiliation:
Hong Kong Polytechnic University School of Accounting and Finance qin.a.li@polyu.edu.hk
Devin Shanthikumar
Affiliation:
University of California Irvine Paul Merage School of Business dshanthi@uci.edu
Siew H. Teoh
Affiliation:
University of California Los Angeles Anderson School of Management steoh@anderson.ucla.edu
*
lucile.faurel@asu.edu (corresponding author)
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Abstract

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We build a novel comprehensive data set of new product trademarks as an output measure of product development innovation. We show that risk-taking incentives in CEO compensation motivate this type of innovation and that this innovation improves firm performance. Using an exogenous shock to executive compensation, we find that reductions in stock option compensation cause reductions in new product development. We also find that firms undertaking new product development experience increases in future cash flow from operations and return on assets. These findings suggest the importance of product development innovation to firms and new trademarks as a novel innovation measure.

Type
Research Article
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

Earlier versions of this article circulated under the titles “Product Development Innovation: Insights from Trademarks,” “CEO Incentives and New Product Development: Insights from Trademarks,” and “CEO Incentives and Product Development Innovation: Insights from Trademarks.” We thank Yoojin Lee and Tiana Lehmer for their research assistance. We also thank Jarrad Harford (the editor), Wenrui Zhang (the referee), workshop participants at Arizona State University, Chapman University, Ohio State University, Pennsylvania State University, Santa Clara University, Southern Methodist University, Stanford University, University of California Davis, University of California Irvine, University of California Riverside, University of Oregon, University of Texas Dallas, University of Toronto, the 2015 AAA Annual Meeting, the 2015 AAA Financial Accounting and Reporting Section Midyear Meeting, the AAA 2015 Managerial Accounting Section Midyear Meeting, the 2014 AAA Western Region Meeting, the 2015MIT Asia Conference, the 2016 Temple Conference on Convergence of Financial and Managerial Accounting, the 2015 UCI/UCLA/USC Conference, the 2015 Utah Winter Accounting Conference, and discussants Thomas Bourveau, Brian Cadman, Christo Karuna, Chen Li, Maria Loumioti, and Volkan Muslu. We gratefully acknowledge financial support from The Don Beall Center for Innovation and Entrepreneurship at the UCI Paul Merage School of Business.

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