A firm’s performance is dependent on product innovation that increases its market power
as well as its capacity to cope with market conditions. Product innovation increases a firm’s
leverage in a highly competitive market. It increases consumer loyalty and satisfies a wide range
of consumer needs since they are presented with a variety of products to choose from. Innovative
products earn a firm super profit in the short-run that declines over time as follower firms imitate
the new product. Firms have to maintain innovativeness especially for complementary products