Product Innovations and Performance of Audit Firms in Taiwan: Consideration of Life Cycles and Market Segments

Abstract

This study investigates the relationship between product innovations and financial performance of Taiwanese audit firms in different market segments at varied life cycle stages. In terms of market segmentation, this study divides total samples into national, regional and local audit firms. Further, this study establishes three organisational life cycle stages for each sub-sample: young, adult and old stages. Based on a 16-year time series longitudinal data, this study validates the existence of life cycles in professional service organisations—audit firms. The significant findings are a positive association between product innovations and financial performance in all sub-samples at each life cycle stage. Furthermore, the extent of performance effects of product innovations varies for audit firms in different market segments at different life cycle stages. Findings obtained in this study contribute knowledge to business-related literatures and possess managerial implications to the practitioners.