The Impact of Innovation Potential on Marketing Strategy
Using a zero-inflated negative binomial model, I examine the relationship between innovation status and frequency of deceptive marketing as tracked by the U.S. Food and Drug Administration (FDA). The FDA carefully monitors the content of all marketing communications from pharmaceutical firms (Sheehan 2003, 159-162). Based on a sample collected from the FDA, Inteleos, Delphion, and COMPUSTAT, I find that multiple facets of innovation have significant relationships with the use of deceptive marketing. The analysis shows that the strength of a firm’s innovation pipeline in a product category and across all other drug categories is negatively related to the use of deceptive marketing for a product. The opposite relationship holds for strength of innovation pipeline of the competitive firms in the category. Patent protection of innovations already introduced to market is also related to the use of deception. Furthermore, I find that some of these relationships are moderated by the extent to which a firm is dependent on the category. By furthering the understanding of the types of information used by managers in high-risk decisions, this study has critical managerial, policy, and research implications. Managers will be better able to anticipate their competitors’ actions given the strength of innovation pipelines in the industry, patent protection of current products, and market dependence. Those shaping public policy will be better equipped to prevent the use of potentially harmful marketing strategies, such as deceptive marketing. Finally, this study will fill important gaps in the current business literature by linking two critical streams of research, innovation and marketing strategy.
INFORMS Marketing Science
City or Country
TIPTON, Martha Myslinski and Bharadwaj, Sundar.
The Impact of Innovation Potential on Marketing Strategy. (2010). INFORMS Marketing Science. Research Collection Lee Kong Chian School Of Business (SMU Access Only).
Available at: http://ink.library.smu.edu.sg/lkcsb_research_smu/99