The effect of innovative activity on performance in nascent Finnish mutual fund market in 1997-2010

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Volume Title
School of Business | Master's thesis
Date
2012
Major/Subject
Marketing
Markkinointi
Mcode
Degree programme
Language
en
Pages
65
Series
Abstract
Purpose of the study Dynamics of competition among companies has many reasons, and these dynamics eventually have their effect on company performance. Innovating has been alleged to be one factor affecting companies’ competitive positions. In this thesis, the effect of innovative activity, which was derived from new product introductions, on market based performance, which is company’s market share change, was investigated. Moreover, the study was performed on a nascent and rapidly growing market, a setting that historically has received close to zero attention in the research on the relationship between innovative activity, specifically when it comes to new product introductions, and performance. Methodology The study was performed on the Finnish mutual fund market during the years of 1997-2010. The one objective was to examine the evolution of the mutual fund market and the other was to inspect the relationship between innovative activity and market based performance. The former was carried out descriptively using simple average figures, and the latter by employing statistical methods, namely fixed-effects panel data analysis using linear regression. Findings The results show that the growth of the mutual fund market has been rapid and it eventually matches a similar level of importance among financial instruments as in other European countries. Also, the market has become perhaps even more clearly dominated by few big management companies owned by commercial banks. These companies introduce most of the new funds but the number of these introductions contrasted with existing resources, which represents innovative activity, is lower than among smaller companies. It was found that both new product introductions alone and innovative activity even to larger extent positively affect market share change. In addition, the results implicate that new product introductions may play a different kind of role for different sized companies, i.e. bigger companies benefit it when they defend their market positions, and thus performance, and smaller companies utilize new product introductions as a means to grow by market share, and thus increase performance. These findings were expected in the light of former theories, namely first-mover advantage and the Red Queen effect. Thus, basing on these results, the positive relationship between innovative activity and performance seems to exist also in a nascent market setting.
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Keywords
new product introductions, innovative activity, market share, the Red Queen effect, first-mover advantage
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