The effect of marketing department power on investor responses to announcements of AI-embedded new product innovations

Abstract

AbstractEven as more companies integrate artificial intelligence (AI) into their new products and services, little research outlines the strategic implications of such AI adoption. Therefore, the present study investigates how investors respond to announcements of new product innovations integrated with AI by non-software firms (AI-NPIs), with the prediction that they respond favorably if the firms feature a marketing department with substantial power; such firms likely possess the marketing resources and assets needed to ensure the success of AI-NPIs. An event study with a sample of 341 announcements by 77 S&P 500 firms between 2009–2018 supports this prediction. Furthermore, the relationship between marketing department power and investor response intensifies when the announcement (1) occurs in later innovation stages, (2) involves the sourcing of external innovation assets, and (3) refers to more complex innovations. These findings have both theoretical and managerial implications.