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Return on investment in design!

Firms that were honored with design awards saw an immediate increase in stock price

Did you know that companies that receive awards for product design see an immediate uptick in their stock price? That's according to groundbreaking research in a study entitled, "Product Design Awards and the Market Value of the Firm, published in Production and Operations Management.

The authors analyzed the stock prices of 264 firms that received design industry awards between 1998 and 2011. They looked at abnormal stock returns, defined as as the degree to which a firm's stock price deviated from investor's expectations, over a two-day period following the firms' receiving design awards for a commercialized product.

The study quantified the effect great design might have on the stock price of a given firm and found on average a 1% uptick in valuations beyond what was expected by analysts. It seems that investors reacted positively to the prospect that design honors would translate into better sales performance and improved profitability for a firm.

It's similar to the long held belief in the Apple Effect, whereby Apple's outstanding product design has resulted in vast profits and stock price increase for the Cupertino, CA firm.

As part of the creative supply chain, we aren't surprised by this study. We are just happy the authors figured out a way to quantify it.

           


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