The Effect of Business Model Innovation Announcements on Share Prices — A Study of US Listed Technology Firms

Purpose: The purpose of this paper is to examine the immediate effect of different types of business model innovation behavior by US listed technology firms on the market performance of equity securities, in this case the share prices of the firms in question.

Design/Methodology/Approach: This study employs a quantitative research design, based on stock market data of US listed technology firms. A sample of 147 firms were chosen, considering the time period of 2014-2016. The stock market data was then matched with secondary data, outlining the firms’ business model innovation behavior.

Findings: Our findings indicate that the stock market awards frequent business model innovators more than less frequent business model innovators, controlling for factors such as sub-industry belonging and proxies for size of the firm.

Research limitations/Implications: The study is one of the few that connects business model innovation with stock market performance and thus contributes to research by empirically connecting business model innovation with different performance metrics. Obviously, the study has inherent limitations in terms of single industry, a single stock market and variables used.

Practical Implications: Practical implications to be drawn from this study includes evidence towards how the stock market values and awards announcements of business model innovations, which is of value for corporate executives, investors and stock market analysts alike.

Originality/Value: Our study brings new insights into how business model innovation is perceived by stock market analysts and investors and consequently how announcing business model innovations can be used as a managerial tool by management to improve the firm’s performance on capital markets.