Journal of Service Research, Ahead of Print.
This paper highlights the importance of innovation in driving economic growth, noting that traditional measures of innovation have focused mainly on manufacturing-related metrics like patents and R&D activities. It addresses the need for new measures that better reflect innovation in service-dominant economies. Specifically, the study highlights nation-level measures of customer perceived firm innovativeness and examines their relationship with firm financial performance. Using data from the American Innovation Index covering 123 publicly traded firms across 20 industries over 5 years (2018–2022), the research finds that customers’ perceptions of a firm’s innovativeness are significant predictors of future abnormal stock returns. Additionally, it reveals a positive relationship between changes in customer satisfaction levels, as measured by the American Customer Satisfaction Index, and abnormal stock returns. Together, these findings point to the importance of customer perceptions on firm performance.