Are Quarterly Earnings Pressures Hurting Companies’ Long-Term Innovation Prospects?

New research finds firms under greater short-term financial pressure produce fewer influential and novel innovations

BALTIMORE, June 18, 2026 — If public companies are increasingly focused on meeting quarterly earnings expectations, what happens to the innovations that require years of investment and patience to develop?

New research published in the INFORMS journal Management Science suggests the answer could have far-reaching implications for businesses, investors and the broader economy. The study, "The Changing Nature of Firm Innovation: Short-Termism and Influential Innovation in U.S. Public Firms," found that companies facing greater short-term financial pressures tend to produce fewer breakthrough and novel innovations, the kinds of discoveries that can shape industries for decades.

The findings, which were recognized with the Panmure House Prize—one of the United Kingdom's largest academic prizes open to researchers globally—add new evidence to a longstanding concern in corporate America: that pressure to deliver immediate financial results may come at the expense of long-term innovation.

"What we found was that companies facing stronger short-term pressures tend to generate fewer breakthrough or novel inventions," said Yuan Shi of Cornell University, a co-author of the study. "These are the kinds of innovations that not only reshape industries and society, but also create long-term growth opportunities for investors."

The research examined thousands of publicly traded U.S. companies between 1997 and 2015, using patent data to measure both the influence and novelty of innovation.

One measure, known as patent influence, examined how often future patents built upon earlier inventions. Another measured patent novelty by evaluating the extent to which companies were creating new combinations of technological concepts. Together, these indicators helped researchers assess not just how much innovation companies produced, but how impactful that innovation was.

The researchers then explored whether short-term financial pressures were actually causing the decline in influential innovation rather than simply occurring simultaneously.

To answer that question, they examined changes in institutional investor ownership and analyzed firms before and after major transitions, including mergers and shifts between private and public ownership.

"One of the central questions was whether we were observing correlation or causation," said Rachelle C. Sampson of the University of Maryland, a co-author of the study. "Our results remained consistent even after accounting for alternative explanations and testing for causal effects."

The findings point to a broader shift in the nature of innovation among public companies.

As investors place greater emphasis on quarterly and annual financial performance, firms appear more likely to prioritize projects with shorter timelines and more predictable outcomes. More ambitious research initiatives, which often require substantial investment and years to mature, can become harder to justify.

The consequences extend beyond individual companies.

"Our findings suggest that companies and investors may be missing important opportunities when long-term research programs are shelved because of short-term capital market pressures," said Brent Goldfarb of the University of Maryland, a co-author of the study. "These decisions can affect not only individual firms but entire industries."

The researchers also found that while some public companies continued to generate highly influential patents, those innovations became increasingly concentrated among a smaller number of firms over time.

"In the course of this research, we found that the production of influential patents became increasingly concentrated among fewer public companies," said Rafael A. Corredoira of Newcastle University, a co-author of the study. "Importantly, declines among public firms were not fully offset by increases from venture-capital-backed or private firms."

The study raises important questions about how companies can balance Wall Street's expectations with investments in long-term innovation

The researchers suggest that firms may benefit from helping investors better understand the factors that contribute to innovative performance. Rather than focusing exclusively on research and development spending, companies can provide additional indicators of innovation output and quality, including measures such as patent novelty and influence.

For investors, executives and policymakers alike, the findings highlight a central challenge of modern capitalism: ensuring that the pressure to deliver results today does not come at the expense of discoveries that create value tomorrow.

Read the full PDF of the study here.

About INFORMS and Management Science

INFORMS is the world's largest association for professionals and students in operations research, AI, analytics, data science and related disciplines, serving as a global authority in advancing cutting-edge practices and fostering an interdisciplinary community of innovation. INFORMS empowers its community to improve organizational performance and drive data-driven decision-making through its journals, conferences and resources. Learn more at www.informs.org or @informs.

Management Science, a leading journal published by INFORMS, publishes research on decision sciences, strategy, innovation and quantitative methods that inform managerial and policy decisions.

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Rebecca Seel

Public Affairs Specialist

[email protected]

(443) 757-3578