An Event Study of the Effect of New Product Development on Stock Price in China

New product development (NPD) has long been a crucial issue in practice and academia. Regarding its effect on firms’ financial performance, however, controversial arguments exist. Moreover, there is little research investigating this issue in developing countries, which may be different from developed countries. Therefore, we intend to examine two key issues of NPD: 1) whether NPD leads to positive financial performance (stock price) and 2) whether supplier collaboration, a key element of open innovation, enhances the effect of NPD on stock price. Using the event study method, we analyzed the data collected from 81 publicly traded companies in China, which announced NPD over the seven-year period before the global financial crisis. The analysis results indicated that 59% of the companies exhibited an increase in their stock price with positive mean abnormal return and that supplier collaboration in NPD did not significantly affect stock price. Along with post-hoc analyses, we provided theoretical and managerial implications with future research directions.