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FE Working Paper No. 0206
Kiel University, Department of Food Economics and Consumption Studies, Kiel
Product innovation is a competitive strategy in food industry. Successful product development management is a key determinant of a firm's performance. In recent years functional foods, which are innovative food products that provide health benefits beyond basic nutrition, have become increasingly important in Germany. Using the structure-conductperformance approach it can be argued that product innovation raises barriers to entry and thus improve profitability. This study examines the effect of functional food innovative activity (compared to overall innovative activity) on the profitability of 23 German food industry sectors from 1995 to 1999. Panel data analysis also includes concentration, firm size, market size and growth, advertising expenditure and capital intensity. While a positive relationship between product introduction and profitability was hypothesized, it is not supported by data.
product innovation
functional food
market structure
structureconduct-performance approach
food industry
panel data analysis
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Working Paper

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