The eternal quest for novelty: a different view on the economic value and risks associated with the search for novelty

Novelty is widely acknowledged to be key in the growth and prosperity of firms. However, the multifaceted and complex characteristics that govern novelty processes can also link it to both diminution in value and failure. Not all novel inventions are valuable and not every valuable invention is novel, and the associated risks and uncertainty remain inherent to the value-creation process. Firms should carefully balance the potential benefit of novelty with the potential to incur a certain degree of risks. In general, the nature of duality in novelty stimulates the need for a better understanding of the impact and risks associated with firm’s generation of novelty. This doctoral thesis synthesises the multitude of insights, ideas and approaches related to novelty processes. It then goes a step further by deepening the empirical research into the technical and social contexts of novelty. It links firm-level processes of knowledge-search with invention-level ex-ante novelty indicators, to consider the value of novelty from a variety of different perspectives. It explores the value and the risks associated with both technological novelty and firm search processes through distinct novel approaches. The economic impact is assessed through the analysis of the shift in market value after the moment of disclosure of patenting inventions. The side effect is assessed through the investigation of the hazard of firm failure. Despite the strong potential which novelty represents for the generation of breakthrough innovation, the thesis argues that its tangible economic impact is sporadic and rare. Based on the same premise, the thesis argues it involves substantial risks. The empirical evidence suggests that novelty only marginally encourages investors in further financing of the firm. Whereas the firm survival analysis shows that novelty significantly increases firm failure rate, and it does not increase leverage for merger or acquisition.