Product Portfolio and Brand Extension Effects of Innovation: A Diversification Perspective on Innovation's Ability to Achieve New Value

Abstract

Organizational researchers have long considered innovation a critical activity. While insightful regarding the nature of the innovation process and the rewards and risk associated with innovation, prior work has neglected the perspective that innovations function within a firm's wider product portfolio. This perspective enables assessment of when innovations truly generate value for firms and the mechanisms through which it does so. I propose a general theory for how innovation creates new value for a firm and apply this theory to understanding how new value from innovation is reflected in the changes it manifests in the diversity of a firm's product portfolio.This dissertation addresses these issues by examining how innovation introductions drive two types of changes in the firm's portfolio - product portfolio and within-brand portfolio diversification - and how those changes influence the new value firms will capture. In addition, I examine the degree to which these outcomes are contingent upon the characteristics of the innovation itself. Thus, I address the inherent interdependencies in managing innovations while still capturing the influence of individual innovation characteristics. The importance of this topic lies in both theory and practice. Theoretically, this work sheds light on the degree to which innovation value is a function of the value accrued to the innovation itself and its interdependency with the firm's overall product and brand portfolios. Practically, understanding how the new value from innovation incorporates the effect of the innovation on the firm's portfolio enables firms to grasp how decisions they make regarding innovation pipelines and in managing their overall portfolio influences their expected success.