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How Global Investors Think About Innovation in the Stock Market

How Global Investors Think About Innovation in the Stock Market

Paola Cillo, David A. Griffith and Gaia Rubera

gripping money

In the stock market, innovators such as Elon Musk and Jeff Bezos are both lionized by the press and rewarded with soaring stock prices when investors bet on their game-changing strategies. While past market literature has focused on the role of innovation in driving market gains, it has not focused on the national culture of large individual investors who buy, hold, and sell large blocks of these stocks. Being a heterogenous group, these investors behave differently when it comes to making investment decisions based on a firm’s innovation. Understanding investors’ national cultures is an important key to understanding these differences.

As global wealth rises and investors trade across markets, large individual investors, such as the Saudi ruling class, Asian tech investors, US and other regional venture capitalists, and global celebrities, can have outsized effects on stock returns. For example, media personality Oprah Winfrey’s announcement of her purchase of a 10% stake in Weight Watchers on October 19, 2015 generated $700 million in stock market value for the company in just two days. Similarly, when Indian investor Rakesh Jhunjhunwala sold his stocks in Design Arena, the stock lost 12.4% of its value the day after the announcement.


Our research team conducted a study to examine the effect of nationality and culture on stock returns, with the goal of helping managers segment, target, and position stock offerings to large individual investors based on their innovativeness positioning. We sought to answer: For which investors, how, and under what conditions does firm marketing create value in the stock market?

We hypothesized that large investors will buy more of a firm’s stocks when innovativeness increases, with buying strategies varying by culture. We used Geert Hofstede’s widely accepted value framework, with its six dimensions of individualism (IND), uncertainty avoidance (UA), power distance (PD), long-term orientation (LTO), masculinity (MASC), and indulgence (INDULG) to analyze investor differences.

The team analyzed the food and beverage industry for this study, assessing the 56 firms operating just in this industry and listed on 27 stock exchanges that introduced at least one new product in the industry worldwide in the 2006 to 2014 timeframe. We selected food and beverage for analysis because product innovation is integral to the industry’s growth strategy. We studied individual investors who bought at least 3% of stock in these 56 firms for the first time during this time period, for a total of 458 investors studied.

We performed our analyses at the investor level to investigate the effect of a firm’s innovativeness on each investor’s decision to buy, hold, or sell its stock. At the firm level, we aggregated these individual decisions to evaluate how investors’ determination of innovativeness influenced stock returns.

Findings include:

  • Large individual investors from countries high on IND, UA, PD, LTO, and INDULG buy more stocks of innovative firms.
  • Large individual investors from countries high on MASC tend to sell.
  • When firms are equally innovative, ones with large individual investors high on IND, PD, LTO, and INDULG perform better in the stock market. Firms with large individual investors high on MASC gain less.

​Managers can use our study results to inform how they market to and interact with large individual investors. When firms launch innovative products, their performance is uncertain. Segmenting and positioning to meet investors’ different needs can help firms make the case for innovation more effectively. The study provides different examples of how to do so, which may help managers contribute millions of dollars to their firms’ bottom lines and avoid costly exoduses by disaffected investors.

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Read the authors’ slides for sharing this material in your classroom.

From: Paola Cillo, David A. Griffith, and Gaia Rubera, “The New Product Portfolio Innovativeness-Stock Returns Relationship: The Role of Large Individual Investors’ Culture,” Journal of Marketing, 82 (November).​

Go to the Journal of Marketing​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

Paola Cillo is Associate Professor of Management, Department of Management & Technology, ICRIOS, Gucci Research Lab, Bocconi University.

David A. Griffith is Professor of Marketing, Department Head of the Department of Marketing, Hallie Vanderhider Chair in Business, Mays Business School, Texas A&M University.

Gaia Rubera is Professor of Marketing, Department of Marketing, BIDSA, Gucci Research Lab, Bocconi University.