International heterogeneity in the associations of new business models and broadband Internet with music revenue and piracy

Broadband Internet has fundamentally changed business models in many industries. In the music industry, for instance, old business models were challenged by illegal competitors, and broadband Internet has enabled value creation through new business models. The changes that established business models experienced in the wake of broadband Internet, however, differed vastly across national markets, and these differences are not well understood. We build a conceptual framework and study the extent to which differences in economic and cultural factors are associated with different market outcomes in the wake of the proliferation of broadband Internet. Thus, we compile two unique data sets from the music industry, comprising (1) revenue data for 36 countries and 22 years and (2) piracy data for 47 countries and >2 years. We use a Bayesian multilevel model to explore between-country heterogeneity in the associations between these variables and broadband Internet adoption and business model innovations. Our results show that the negative association between broadband Internet penetration and music revenue is weaker in high-income countries, where income restrictions are less likely to drive demand towards illegitimate piracy services. In terms of cultural factors, we find that a market's response to the introduction of broadband Internet is less negative in countries scoring high on Hofstede's individualism and uncertainty avoidance dimensions. Furthermore, we find that overall revenues only recover after the latest generation of streaming services (e.g., Spotify) has been introduced, and the adoption of these services is associated with lower levels of online music piracy.     

The Value of Customer Cocreated Knowledge during the Innovation Process

Customer cocreation during the innovation process has recently been suggested to be a major source for firms' competitive advantage. Hereby, customers actively engage in a firm's innovation process and take over innovation activities traditionally performed by a firm's employees. Despite its suggested importance, previous research has revealed contradictory findings regarding its impact, the nature of involved customers, and the channels of communication that enable cocreation. To provide a more fine‐grained picture, customer cocreated knowledge is first delineated into its key value dimensions of relevance, novelty, and costs, and then their impact on various innovation outcomes is investigated. Next, the study examines the antecedent role of customer determinants; that is, lead user characteristics and customer–firm closeness, on these knowledge value dimensions. Finally, we explore how these effects are moderated by the type of communication channel used. An empirical validation of the conceptual model is performed by means of survey data from 126 customer cocreation projects. The data analysis indicates that customer cocreation is most successful for the creation of highly relevant but moderately novel knowledge. Cocreation with customers who are closely related to the innovating firm results in more highly relevant knowledge at a low cost. Yet, cocreation with lead users produces novel and relevant knowledge. These effects are contingent on the richness and reach of the communication channels enabling cocreation. Overall, the findings shed light on opportunities and limitations of customer cocreation for innovation and reconcile determinants originating in relationship marketing and innovation management. At the same time, managers obtain recommendations for selecting customers and communication channels to enhance the success of their customer cocreation initiatives.     

Augmenting the eye of the beholder: exploring the strategic potential of augmented reality to enhance online service experiences

Driven by the proliferation of augmented reality (AR) technologies, many firms are pursuing a strategy of service augmentation to enhance customers’ online service experiences. Drawing on situated cognition theory, the authors show that AR-based service augmentation enhances customer value perceptions by simultaneously providing simulated physical control and environmental embedding. The resulting authentic situated experience, manifested in a feeling of spatial presence, functions as a mediator and also predicts customer decision comfort. Furthermore, the effect of spatial presence on utilitarian value perceptions is greater for customers who are disposed toward verbal rather than visual information processing, and the positive effect on decision comfort is attenuated by customers’ privacy concerns.     

eCCIq: The quality of electronic customer-to-customer interaction

Electronic customer-to-customer interaction (eCCI) becomes crucial in innovative business models (e.g., Ebay, Facebook) that are either intentionally built on such eCCI occurring completely on purpose or for providers that are embedding web 2.0 and social media techniques in their service offering. To enable a more active application and purposeful management of eCCI, it is essential to conceptualize its quality (eCCIq) as a start. In doing so we identify seven factors that constitute the domain of eCCIq: ‘Content’, ‘Security’, ‘Hedonic’, ‘Quantity’, ‘Atmosphere’, ‘Convenience’ and ‘Social’. Construct development is based on existing literature on CCI and various closely-related constructs as well as on an empirical study assessing eCCIq in a qualitative and quantitative manner. Our results enable firms to more selectively influence and control eCCIq and provide the basis to conduct any further research on the impact of eCCI and its quality.     

A new fluctuation test for constant variances with applications to finance

We present a test to determine whether variances of time series are constant over time. The test statistic is a suitably standardized maximum of cumulative first and second moments. We apply the test to time series of various assets and find that the test performs well in applications. Moreover, we propose a portfolio strategy based on our test which hedges against potential financial crises and show that it works in practice.     

A compound option approach to model the interrelation between banking crises and country defaults: The case of Hungary 2008

We analyze the Hungarian financial crisis of 2008 in a stochastic framework that advances structural credit risk models for country defaults: by applying compound option theory we consider payments for bailing-out the banking sector together with debt service payments in a joint crisis model. We estimate the model parameters by applying the time series maximum-likelihood approach of Duan (1994) on yield spreads of Hungarian Bonds. We find that difficulties in acquiring funds for debt servicing in combination with high outstanding debt triggered the crisis, rather than problems in the domestic banking sector. The estimated crisis probabilities dramatically rise during 2008.