Uncovering the bright and dark sides of innovation on firm- and customer-related performance

Innovation must create value for two key stakeholders: shareholders and customers. However, while shareholders are concerned about the extent to which innovation activities impact the production cost, customers are focused on the potential of innovation activities to satisfy their needs. This problem has confounded managers about the benefits of innovation to firm- and customer-related performance outcomes. We attempt to highlight the bright-side of innovation and those that demonstrate a dark-side (less bright) on manufacturing firms’ production costs, and customer satisfaction. Following previous research, we differentiate between radical and incremental innovation. Drawing on a multi-informant dataset collected from B2B manufacturing firms and their customers, we show that while radical innovation significantly drives down production cost, it negatively affects customer satisfaction. The results also show that while the effect of incremental innovation on production cost is not significant, manufacturing firms with a higher level of incremental innovation have higher levels of customer satisfaction.