The Effect of Innovation Potential on Marketing Strategy

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Working Paper

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Previous research has found that the current levels of innovation and innovation potential convey vital information about the viability of firms. Organization efficiency, financial measures, and subjective assessments of firm performance fluctuate with the firm’s ability to innovate. Given the criticality of innovation to various measures of performance, it seems logical that managers would use levels of own and competitors’ innovation to inform marketing strategies. Yet, the link between innovation and marketing decisions is relatively uncharted.Drawing mainly from the principals of prospect theory, we propose that current and potential innovation levels impact the level of risk managers are willing to assume in their marketing decisions. We will include various measures of innovation (namely innovation potential of firms and their competitors, and current levels of innovation) and their interaction to assess how innovation affects the likelihood of managers to adopt high-risk strategies. We also will consider the moderating roles of market dependence and the relative success of a firm to bring ideas to fruition. The empirical context of this study is the pharmaceutical industry. This industry was chosen for two major reasons because (1) innovation process is well documented and visible, and (2) certain high-risk strategies, in this case the use of deceptive marketing, are systematicallytracked by the FDA, and their record is also available to the public. When the data is collected, we will employ a hierarchical linear modeling approach to evaluate the relationship between these firm and category level variables and the use of deceptive marketing. By furthering the understanding of the types of information used by managers in their decisions to use high risk marketing strategies, this study will have implications for managers, public policy and marketing research. Managers will be better able to anticipate their competitors’ actions given innovation status in the industry, market dependence, and relative measures of success. Those shaping public policy will be better equipped to prevent the use of potential harmful marketing strategies like deceptive marketing. Finally, this study will fill important gaps in the current marketing literature by linking two critical streams of research, innovation and marketing strategy.


Marketing | Technology and Innovation

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This paper is being prepared to submit to the "Journal of Marketing Research."

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