When do firms with disruptive intent create shareholder value?

Purpose This study aims to investigate how a firm’s focus on low-end/ new-market customers, which the authors refer to as disruptive intent (DI), affects shareholder value and how marketing capabilities moderate this relationship. Design/methodology/approach Drawing on the theories of disruptive innovation and market-based assets (MBAs), the authors argue that the relationship between a firm’s DI and shareholder value is contingent upon whether the firm possesses the complementary capabilities to build and leverage MBAs. The study uses a unique panel data set (n = 1,316) consisting of 137 US retailers between 2004 and 2018, created using text mining techniques to measure firms’ DI from annual reports, to test the hypotheses. Findings The findings suggest that, by itself, disruptive intent neither enhances firm value nor increases firm risk. However, firms with high disruptive intent improve firm value when they also possess high MBA-building and MBA-leveraging capabilities. Furthermore, while disruptive intent’s interaction with MBA-leveraging capability does not affect firm risk, its interaction with MBA-building capability increases firm risk. Research limitations/implications The authors contribute to the literature on disruptive innovation and marketing-finance interface by (1) providing a framework to understand the nuances of how DI affects shareholder value in terms of both returns and firm risk; (2) developing the link between firm capabilities and performance of disruptive firms, which is “strikingly absent” in the literature on disruptive innovations, and (3) extending the knowledge on MBA-building and MBA-leveraging capabilities by studying their moderating role in the relationship between an important strategic orientation (i.e. DI) and shareholder value. Practical implications Findings from the present study can help managers make informed decisions on how to re-align marketing activities and investments when focusing on low-end/new-market customers. Originality/value To the best of our knowledge, our study is the first to empirically test the relationship between retailers’ DI and shareholder value.