Why do firms spend money on costly innovation?
A)Competitive markets leave firms no choice but to innovate.
B)Innovation is a low-risk activity.
C)Innovation always results in higher profits for firms.
D)Innovation is usually profitable because the majority of innovations reach the market place.
E)Because innovation is beneficial for society and firms are motivated to act in ways that are beneficial for society.

Question

Quizplus · Accepted Answer

Competitive markets often force firms to innovate to maintain or enhance their market position, differentiate their products, improve efficiency, or meet changing consumer demands. Innovation is not necessarily low-risk or always profitable, and not all innovations reach the market or are successful. While societal benefits can be a motivator, the primary reason firms invest in innovation is to stay competitive.

Why Do Firms Spend Money on Costly Innovation