Innovation Activity and Stock Price Effects in the Retail Industry. a case study of the relationships created through the product development process

Abstract

Issue of study. Several attempts have been made to connect innovation activities to firm performance measurements with the hope of providing a “one size fits all” for how to do innovation. Enormous amounts of money are invested each year into firm innovation portfolios. Still, previous research has struggled with finding consistency in the relation between innovation and firm performance. Researchers within the field agree that the relationship between innovation and firm performance should be considered vital for firms and industries but that it needs to be viewed as individual and highly dependent on each firm’s or industry’s contextual factors. The aim of this thesis is to investigate the Swedish retail industry and the relationship between innovation and firm performance. Purpose. By investigating the Swedish retail industry, the aim of the thesis is to provide guidelines for which innovation categories that drive firm performance in the Swedish retail industry. Our hope is that these guidelines will help innovation managers and decision makers when selecting where to direct innovation investments, as well as when selecting metrics for innovation activities and firm performance. Furthermore this thesis aims to extend the academic knowledge within the area of innovation- and performance measurement. Methodology. A narrative literature review was conducted during the first phase of the thesis work to gain knowledge regarding innovation, innovation activities, innovation measurements, and performance measurement. A model for testing innovation and its relationship to the performance indicator stock price was created. Quantitative data collection followed, using both secondary data for the model’s control variables and dependent variable, as well as a content analysis of annual reports for the collection of data for the independent variables. Generalised least square regressions were performed to produce results from the data collection, which later on were analysed and discussed. 2 Conclusion. Being the growing and competitive business that the Swedish retail industry is, the ability to measure and manage innovation has become extremely important. To meet this challenge, innovation managers would benefit from increased knowledge regarding the connection between different innovation activities and firm performance. By testing different commonly pursued innovation categories towards the performance indicator stock price, we can conclude that innovation does have a significant and positive impact on firm performance. This relationship is found especially true in regards to product innovation. Thus we can provide implications for investment managers and decision makers within the Swedish retail industry regarding where to direct innovation focus and investments to increase firm value.