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The Effect of Product Introduction Delays on Operating Performance

School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario N2L 3C5, Canada
College of Management, Georgia Institute of Technology, Atlanta, Georgia 30308
khendricks{at}wlu.ca
vinod.singhal{at}mgt.gatech.edu

This paper provides empirical evidence on the effect of product introduction delays on accounting-based measures of operating performance. Based on a diverse set of 450 publicly traded firms that experienced product introduction delays, we find that delays have a statistically significant negative effect on profitability. Depending on the method used to estimate abnormal performance, the median abnormal decline in return on assets (ROA) ranges from 2.70% to 3.44% over a three-year period around the year of the delay announcement. The median decline in sales over assets ranges from 5.92% to 10.99%, and the median decline in return on sales ranges from 1.48% to 3.06%. Cross-sectional regression analysis indicates that the impact of delays on abnormal ROA is more negative for smaller firms, and for firms that are more profitable before the delay. Furthermore, the impact is more negative for firms that operate in industries that are larger and more profitable. We also find a positive association between abnormal ROA and abnormal stock price performance around the product introduction delay announcements.

Key Words: product introduction delays; empirical analysis; operating performance
History: Received: April 3, 2006;