Abstract

This study investigates the relationship between customer loyalty and the product lifecycle, analyzing whether strong brand loyalty incentivizes firms to accelerate innovation. Using neoclassical economic models—such as budget constraints, indifference curves, and elasticity—the research examines how consumer preferences shape firms’ strategic innovation decisions. To test this hypothesis empirically, regression analysis was conducted on major aerospace and defense firms from 2012 to 2023, using market share as a proxy for customer loyalty and R&D expenditure as a measure of innovation investment. While initial OLS regressions suggested a positive correlation between market share and R&D investment, the introduction of firm and year fixed effects rendered the relationship statistically insignificant. These findings indicate that in the aerospace and defense industry, factors such as long-term government contracts and regulatory constraints play a more dominant role in shaping R&D investment decisions than market share as a proxy for customer loyalty. The study concludes that limited within-firm variation in R&D spending within this industry makes it difficult to establish a direct causal link between market share and innovation investment. Moreover, the results highlight the limitations of using market share as a sole indicator of customer loyalty, particularly in industries not primarily driven by direct consumer choice.

Advisor

Davison, Colin

Department

Business Economics

Disciplines

Advertising and Promotion Management

Keywords

product lifecycle, innovation, research and development, loyalty, brand loyalty, aerospace, boeing, Honeywell, Northrop, innovation

Publication Date

2025

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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