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The New Product Portfolio Innovativeness-Stock Returns Relationship: The Role of Large Individual Investors' National Culture


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The marketing-finance interface literature has investigated the direct link between innovativeness and stock returns. Moving a step further, we investigate two unanswered questions: How and under what conditions is innovativeness associated with stock returns? Answering these questions is important for managers who have to defend innovation investments to board members and time the introductions of new products. We investigate large individual investors and their national culture in the food and beverage industry. Combining multiple datasets, we first investigate the relationship between innovativeness and large individual investor's stock holding decisions (i.e., to sell, hold onto or buy a firm's stocks). The results indicate that national culture moderates this relationship. At the firm level, we show that large investors' stock holding partially mediates the innovativeness-stock returns relationship and that the culture of a firm's large investors moderates this mediated relationship. Hence, we unveil a special segment of investors, large individual investors, which influence the extent to which firms benefit from innovativeness in the stock market, at least in the food and beverage industry.

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The New Product Portfolio Innovativeness-Stock Returns Relationship: The Role of Large Individual Investors' National Culture

  1. 1. From:From:  Large investors (e.g., Oprah Winfrey) decisions can drive a firm’s performance in the stock market.  Large investor stockholding decisions, whether to buy or to sell, influences firm value in the stock market.  Not all large investors react positively to a firm’s innovativeness.  We find that a large investor’s national culture plays a significant role in determining how she reacts to a firm’s innovativeness. The challenge of large investors Cillo, Griffith, and Rubera (2018)
  2. 2. From:From: Countries where the national culture will predominately strengthen the innovation to stock holding relationship.  Belgium  France  Japan Countries where the national culture will predominately weaken the innovation to stock holding relationship.  Australia  Ireland  Italy Cillo, Griffith, and Rubera (2018) Countries where the national culture strengthens and weakens the innovation to stock holding relationship relatively equally.  China  Hungary  USA
  3. 3. From:From:  Given large investors from different national cultures react very differently to firm innovativeness, firms can use a national culture-based segmentation approach when marketing to large investors.  This approach means that innovations will be positioned differently to large investors in different countries. Firm implications Cillo, Griffith, and Rubera (2018)
  4. 4. From: Cillo, Griffith, and Rubera (2018) Positioning innovation if cultural dimension is: Cultural Dimensions Below average Above average Individualism**: The strength of relations between members of a society. Stand out in the market Uncertainty avoidance: How a society manages future uncertainty. Create instability in the market Secure the prosperity of the firm Power distance: The way a society addresses differences among its members. Level the field by reducing the gap with competitors Create inequity among firms and consumers Masculinity: The distinction between gender roles in a society. Contribute to the overall welfare of society Strive to be recognized as worldwide leader and dominant force in the market Long-term orientation: The life orientation of people in a society, reflected in virtues oriented toward future rewards. Keep the status quo Be an agent of change in the local economy Indulgence: Whether a society values gratification of human desires related to enjoying life and having fun. Comply with a market law that the firm is forced to abide to in order to survive Satisfy personal enjoyment through an arbitrary choice Marketing Actions: Positioning Innovativeness along National Cultural Dimensions* *Country scores for each cultural dimension can be found at: **Individualism is the only dimension of Hofstede’s framework that never weakens the innovativeness–stock holding change relationship.
  5. 5. From:From:  When positioning firm innovativeness to a large investor from Brazil a firm might focus on innovativeness as a way for the firm to:  stand out in the market;  secure the prosperity of the firm;  create inequity among firms and consumers;  reach worldwide recognition as a leader; and/or  satisfy personal enjoyment.  As an example, a firm could state “This product will help our firm be recognized worldwide as leader in our industry, provide us with a long- term competitive advantage, and separate our customers from the rest!” Example Cillo, Griffith, and Rubera (2018)