Investigating the Influence of Characteristics of New Product Introduction Process on Firm Value: The Case of the Pharmaceutical Industry

Scholars have identified several benefits of new product introductions (NPI), yet the literature has largely overlooked the process of NPI in generating marketplace insights and influencing subsequent products. Building on the concepts of absorptive capacity, we argue that the influence of products on firm value depends on the process characteristics, which we conceptualize as pace, irregularity, and scope of NPI. Using data collected from multiple sources for products introduced by pharmaceutical firms between 1991 and 2015 and robust econometric methods that account for endogeneity and unobserved heterogeneity, we find that pace and scope have an inverted-U effect on firm value whereas irregularity negatively influences firm value. Moreover, strategic emphasis and product complexity negatively moderate the relationship between irregularity and scope of NPI and firm value. Our research documents the importance of adopting a portfolio approach for sequential introduction of new products and incorporating the insights gained from previous product introductions and cautions managers against evaluating products in isolation. We discuss the economic significance of our results and provide actionable guidance to managers