Examining the Impact of Product Leak Announcements on Online Buzz, Product Sales, and Firm Value

Description

In some occasions, classified information about new products may be leaked to the public via online forums or news websites before the products are officially introduced. For example, more than 2 months before the planned release for iPhone 12 by Apple in October 2020, information about the product line-up, features, prices, and tentative launch dates were already circulating online (Entrepreneur 2020). I refer to this phenomenon as product leak announcements. Product leaks are typically viewed negatively, and companies often go to great lengths to prevent such leaks. For example, Apple operates a “Worldwide Loyalty Team”, consisting of undercover agents who pose as normal employees to identify suspects who leak new product information to outsiders (Apple Insider 2009). Attempts to prevent product leaks are not isolated to the consumer electronics industry - automobile companies often camouflage their new car models when they drive them out for test runs to prevent design features from being leaked (Autoblog 2014). Despite the aversion towards product leaks, its actual impact on businesses has not been empirically examined from a marketing perspective. For example, it is possible that product leak announcements may generate more anticipation and interest in the unreleased products. Conversely, product leak announcements may also take away the excitement and novelty when the products are subsequently introduced, resulting in lower product demand. The present research aims to help companies understand how product leak announcements affect online word-of-mouth, consumer demand, and firm value (i.e., three separate studies). In addition, the research will also examine how these impact vary based on characteristics of the announcement (i.e., type of information leaked, source of leak, timing) and leaked product (i.e., incremental vs radical innovation, stage of production). A better understanding of these factors would help companies plan their course of action in the event of a product leak. Findings from this research may also have important implications for hiring employees and sourcing for manufacturing partners. The impact of product leak announcements would be investigated using real-world data. Product leak announcements from relevant websites, forums, and social media will be collected, and this will be combined with online word-of-mouth, product sales, and financial data. An instrumental variable approach will be used to address endogeneity issues due to unobservable confounding factors, and some supply chain variables (e.g., number of manufacturing partners / employees) are proposed as instruments.