Your search

In authors or contributors
Publication year
  • Economic recessions reshape consumer expectations and amplify scrutiny, altering how firms’ capabilities translate into performance. This study examines how recession-driven shifts in consumer expectations intensify the vulnerability of firms with high preexisting consumer satisfaction and how their innovation choices shape the extent to which this capability becomes a liability. We argue that recessions heighten negative reactions to perceived performance deviations, making high pre-recession satisfaction—typically a strategic strength—especially vulnerable. Using data from the U.S. automobile industry spanning the 2008 financial crisis, we find that consumer satisfaction declines significantly during recession and that firms with higher preexisting satisfaction experience disproportionately larger losses. We further demonstrate that innovation strategy plays a decisive moderating role: incremental product redesigns, which preserve familiarity and signal stability, mitigate the recession penalty for high-satisfaction firms, whereas new product introductions do not offer comparable protection. The study provides a theoretical account of how economic downturns can invert the value of demand-side capabilities and identifies conditions under which incremental innovation outperforms more transformative approaches. Managerially, the findings offer guidance on how firms can align innovation portfolios with shifting consumer psychology to protect reputational assets and sustain performance during an economic disruption.

Last update from database: 8/21/26, 4:15 PM (UTC)