Product Concept Demonstrations in Trade Shows and Firm Value: A Case of Auto Shows
Posted: 25 Feb 2011
Date Written: February 24, 2011
Abstract
Firms routinely demonstrate new product concepts in trade shows long before their eventual launch, presumably to signal the market about their innovative activities. Focusing on the automotive industry, we investigate the effects of automotive concept demonstrations in auto shows on the abnormal stock returns of three U.S. and three major Japanese automakers. Utilizing an event-study methodology, we find that the number and diversity of concepts demonstrated, the degree of their innovativeness, and their readiness to launch positively impact the firm’s cumulative abnormal stock returns. The firm’s past history of converting the concepts into commercial vehicles in a timely manner increases the credibility of the firm using concepts to signal its innovativeness, which adds to firm value. However, as the total number of concepts demonstrated in an auto show increases, it adds to the noise, diminishing the firm’s ability to signal innovativeness.
Keywords: Innovation, signaling, time to market, event study
JEL Classification: M31, O32, D84
Suggested Citation: Suggested Citation