Although going public allows firms access to more financial capital that can fuel innovation, it also exposes them to a set of myopic incentives and disclosure requirements that constrain innovation. This tension is expected to produce a unique pattern of innovation strategies among firms going public, causing such firms to increase their innovation levels but reduce their innovation riskiness. Specifically, the authors predict that after going public, firms innovate at higher levels and introduce higher levels of variety with each innovation; however, these innovations are less risky, characterized by fewer breakthrough innovations and fewer innovations in new-to-the-firm categories. The authors compare 40,000 product introductions in the period 1980–2011 from a sample of consumer packaged goods firms that went public with a benchmark sample of firms that remained private, and the results support their predictions. Utilizing tests to resolve questions about endogeneity, including self-selection, reverse causality, and competing explanations, the authors demonstrate that initial public offering selection and dynamics do not drive this going-public effect. The authors also uncover a set of industry factors that mitigate the drop in breakthrough innovation by offering product-market incentives that counterbalance the documented effect of stock market incentives.

W e consider how public firms influence their stock market valuations by timing the introduction of innovative new products. Our focus is on innovation ratchet strategy-firms timing the introduction of innovations in order to demonstrate an improvement in the number of introductions over time. We document that public firms use an innovation ratchet strategy more often than do private firms and that the stock market rewards public firms for doing so. These rewards from the stock market, however, come at the expense of performance in product markets. Specifically, because firms using an innovation ratchet strategy delay some product introductions, they have significantly lower sales growth in the year they ratchet. Finally, we identify firm and market characteristics that influence the likelihood that a public firm will engage in an innovation ratchet strategy.

Shareholder complaints put pressure on publicly listed firms, yet firms rarely directly address the actual issues raised in these complaints. The authors examine whether firms respond in an alternative way by altering advertising investments in an effort to ward off the financial damage associated with shareholder complaints. By analyzing a unique data set of shareholder complaints submitted to S&P 1500 firms between 2001 and 2016, supplemented with qualitative interviews of executives of publicly listed firms, the authors document that firms increase advertising investments following shareholder complaints and that such an advertising investment response mitigates a postcomplaint decline in firm value. Furthermore, results suggest that firms are more likely to increase advertising investments when shareholder complaints are submitted by institutional investors, pertain to nonfinancial concerns, and relate to topics that receive high media attention. The findings provide new insights on how firms address stock market adversities with advertising investments and inform managers about the effectiveness of such a response.

Influencers’ follower count, or indegree, is a key criterion that advertisers use when devising influencer marketing campaigns. However, whether influencers with lower or higher follower count are more effective in generating engagement remains an open question. This multimethod research effort—involving an observational field data analysis, based on 802 Instagram marketing campaigns featuring more than 1,700 influencers, together with an eye-tracking study and laboratory experiments—establishes conclusive evidence of an inverted U-shaped relationship between influencers’ follower count and engagement with sponsored content. A higher follower count implies broader reach but also cues a weaker relationship that reduces followers’ engagement likelihood. That is, engagement increases, then decreases, as influencer follower count rises. The authors further test the potential moderating effects of two campaign properties: Campaign content customization and brand familiarity. Higher content customization and lower brand familiarity signal that influencers value their relationships with followers and thereby flatten the inverted U-shaped relationship. Managers can leverage these novel results and the related actionable guidelines to improve their influencer marketing strategies.

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