The Market Valuation of Internet Channel Additions

The emergence of the Internet has pushed many established companies to explore this radically new distribution channel. Like all market discontinuities, the Internet creates opportunities as well as threats-it can be performance-enhancing as readily as it can be performance-destroying. Making use of...

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Bibliographic Details
Published in:Journal of marketing 2002-04, Vol.66 (2), p.102-119
Main Authors: Geyskens, Inge, Gielens, Katrijn, Dekimpe, Marnik G.
Format: Article
Language:English
Subjects:
Business structures
Competition
Competitive advantage
Distribution channels
Distribution costs
Internet
Investors
Literature reviews
Marketing
Publishing industry
Sales distribution
Securities markets
Statistical analysis
Stock markets
Studies
Transaction costs
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Summary:The emergence of the Internet has pushed many established companies to explore this radically new distribution channel. Like all market discontinuities, the Internet creates opportunities as well as threats-it can be performance-enhancing as readily as it can be performance-destroying. Making use of event-study methodology, the authors assess the net impact of adding an Internet channel on a firm's stock market return, a measure of the change in expected future cash flows. The authors find that, on average, Internet channel investments are positive net-present-value investments. The authors then identify firm, introduction strategy, and marketplace characteristics that influence the direction and magnitude of the stock market reaction. The results indicate that powerful firms with a few direct channels are expected to achieve greater gains in financial performance than are less powerful firms with a broader direct channel offering. In terms of order of entry, early followers have a competitive advantage over both innovators and later followers, even when time of entry is controlled for. The authors also find that Internet channel additions that are supported by more publicity are perceived as having a higher performance potential.
ISSN:0022-2429
1547-7185
DOI:10.1509/jmkg.66.2.102.18478