Prof. Dr. David Bendig (l.), Dr. Colin Schulz (m.l.), Prof. Dr. Christian Ketterer (m.r.), Prof. Dr. Sebastian Kortmann (r.)

How does hedge fund activism relate to market and technological breakthrough innovation, and which firm characteristics are associated with weaker negative patterns? This study, published in the Journal of Product Innovation Management (VHB JQ3: A; ABS: 4; IF: 9.2), examines this question using a panel of 302 U.S. manufacturing and service firms from 2008 to 2020. Moving beyond patents and R&D inputs, the study links hedge fund campaign data to expert-coded breakthrough innovation scores from more than 10,000 new product announcements.

The key findings:

• Hedge fund activism is associated with lower technological breakthrough innovation: In the three years after a hedge fund campaign, targeted firms in the sample are associated with lower technological breakthrough innovation than comparable non-targeted firms.
• Broad top management career variety is associated with a smaller decline in market breakthrough innovation: Teams whose members bring experience across functions such as R&D, marketing, operations, and finance show less pronounced negative patterns under activist pressure. This pattern is not statistically supported for technological breakthrough innovation.
• Greater relative tangibility is associated with smaller reductions in technological and market breakthrough innovation: Firms with more tangible resource bases (i.e., with more physical assets such as plants and equipment) appear less exposed to negative breakthrough innovation patterns under activist pressure.

For practice, the findings suggest that hedge fund activism does not relate uniformly to all forms of breakthrough innovation. Cross-functional top management experience and a more tangible resource base may matter when firms seek to maintain breakthrough innovation under investor scrutiny. More broadly, the study points to the importance of looking beyond ownership pressure alone and considering how internal resources and managerial profiles relate to breakthrough innovation patterns.

The study “Breakthrough Innovation Under Fire: Hedge Fund Activism and Firms' Mitigation Strategies” by Prof. Dr. David Bendig, Colin Schulz, and Christian Ketterer (all University of Münster), and Sebastian Kortmann (Vienna University of Economics and Business and University of Amsterdam) is available here in open access: https://doi.org/10.1111/jpim.70037

Contact for inquiries: 
Dr. Colin Schulz
University of Münster
Institute for Entrepreneurship 
Leonardo-Campus 9, 48149 Münster
Email: colin.schulz@uni-muenster.de