(When) Does Third-Party Recognition for Design Excellence Affect Financial Performance in Business-to-Business Markets?

Abstract

Third-party recognition for design excellence is often viewed as an event triggering the success of a product with a good design. However, evidence from extant research raises doubt as to whether this form of recognition matters in business-to-business (B2B) markets. Using a demand shock conceptualization to capture the signaling role and demand uncertainty of such recognition, this research argues that third-party recognition for design excellence does create firm value in B2B markets. The effect varies, however, depending on certain types of chief executive officer functional experience (market and finance) and the criteria used by third parties in judging design superiority. Model-free evidence and matched-sample analysis provides empirical evidence in support of the demand shock perspective and the hypothesized effects. The research adds a new theoretical conceptualization describing the impact of third-party recognition for design excellence and unveils several new research areas. Managerially, the results identify several new facilitating conditions that enable B2B firms to create greater value from an innovation strategy based on superior design.