How do extended reality experiences influence firm value?

Purpose – Extended reality (XR) technologies (i.e. augmented reality [AR] and virtual reality [VR]) have changed the digital landscape in recent years and present novel opportunities to marketers for providing innovative, experiential benefits to consumers. Many firms have developed and announced XR experiences (XREs); however, no prior work has assessed how investors react to these offerings and whether firms are rewarded for specific strategic decisions over others. This study aims to address this gap. Design/methodology/approach – The authors collected a comprehensive list of announcements of XREs made by publicly traded US firms. This study’s data set consists of 179 announcements made during the period of 2010 through 2022. The authors then conducted an event study to assess the effect of these announcements on firm value (i.e. stock price). In addition, the authors ran a moderation analysis to uncover which strategic decisions lead some firms to witness different financial effects than others. Findings – On average, firms witness a 0.38% (equivalent to $437m) loss in firm value after announcing XREs. However, this study’s moderation analysis reveals that firms that choose to adopt AR rather than VR, focus on the purchase phase of the customer journey (rather than pre-purchase or post-purchase) and/or announced XREs in more recent years, witness an increase in firm value. Research limitations/implications – Owing to financial data availability constraints, the event study focused on publicly traded firms in the USA. Future work should be expanded to international contexts, as scholars have suggested that XR technologies may face weaker acceptance in countries that are less individualistic and more collectivistic. Practical implications – The findings of this work allow firms to understand how to approach XREs in a way that enhances the consumer experience and is ultimately rewarded by investors. This event study suggests that firms should take a cautiously optimistic approach to XREs. Originality/value – This research applies vividness theory to understand how the consumer experience is affected by heterogeneous decisions that firms make when developing and announcing XREs, which, in turn, can affect investors’ responses. It also provides actionable strategic advice for practitioners who are interested in effectively approaching XR technologies. In addition, this study outlines important directions for future research within this domain.