Building the BoP Producer Ecosystem: The Evolving Engagement of Fabindia with Indian Handloom Artisans

Recent research on the base of the pyramid (BoP) has called on firms to initiate market‐driven interventions directed at the BoP population with the objective of identifying and pursuing mutually profitable means of attaining meaningful poverty alleviation outcomes. In response, firms as well as scholars have engaged at length with the creation of new products and services for the BoP consumer but paid far less attention to the BoP producer—a member of the BoP population who creates value by producing goods and services for sale in nonlocal markets. Additionally, extant studies have largely focused on snapshot views of BoP interventions by firms, thereby limiting our understanding of the emergence of meaningful poverty‐alleviating outcomes over time from these interventions. This paper seeks to redirect attention toward the dynamic of the long‐term engagement between the firm and the BoP producer. Using rich qualitative data from Fabindia—an Indian handloom retailer—this paper examines how the engagement between Fabindia and communities of handloom artisans in India has persisted over a period of five decades. We found that, even as it encountered changes in the external environment and pursued newer organizational goals, Fabindia repeatedly renewed its engagement with handloom artisans and facilitated progression in poverty‐alleviation outcomes. Building on the insights from the case study, this paper presents a process model that highlights the role of innovative management practices in sustaining engagements between firms and BoP producers over time. Additionally, this paper proposes the concept of the “bridging enterprise”—a business enterprise that originates at the intersection of specific BoP communities and the corresponding nonlocal markets—as an interpreter and innovator reconciling the interests of stakeholders across the pyramid.     

Exploring How Peer Communities Enable Lead User Innovations to Become Standard Equipment in the Industry: Community Pull Effects

Literature on new product development indicates that on average around 40% of new products fail across different industries (e.g., Crawford, 1977 ; Crawford and Di Benedetto, 2008 ). Out of those that survive only few become widely accepted standard equipment in the industry (Utterback, 1996 ). Literature on entrepreneurship (e.g., Baron and Shane, 2008 ) and on innovation (e.g., Christensen, 1997 ) shows that such innovations often originate outside the boundaries of established firms. However, it is difficult to understand and analyze the exact source of such innovations and the entrepreneurial processes by which they are developed. It is therefore the aim of this study to shed light on how innovations become widely accepted by large segments of the market and specifically which demand‐side forces are at work. An approach suitable for pursuing this objective is to focus on those individuals who are on the leading edge with respect to an important market trend (lead users) and their respective peer communities. As little knowledge is available, an explorative case study design is applied, working with cases from two different industries, specifically the medical equipment and sporting equipment industry. A longitudinal research design is used, extracting data from multiple respondents and various other sources such as reports, publications, databases, or community web pages. The research framework takes a process perspective by following the entrepreneurial processes from invention to commercialization and diffusion. In this process, micro‐level variables at the individual and group level are analyzed as well as the barriers to be overcome by the individual innovator and the community. The findings show that communities play a central and active role in the entrepreneurial process. Community members provide valuable feedback on the overall potential of the lead users' ideas, participate by making concrete development contributions, acting as testers of the new products, and finally helping to diffuse the innovations inside and outside the community. We identify two pull effects on the part of the community: first, community members demand and facilitate the development of prototypes; and second, community members help to cross the chasm between first adopters and the early majority. This paper has various implications for entrepreneurship and innovation research. For entrepreneurship, this article points out peer communities as a specific kind of social network that plays a crucial role in entrepreneurial processes. For innovation research, this article emphasizes the interaction between lead users and their peer communities in the process of developing the next dominant product design.     

Forecasting the Commercial Attractiveness of User‐Generated Designs Using Online Data: An Empirical Study within the LEGO User Community

Web 2.0 technologies and the rapid emergence of virtual user communities have created new challenges and opportunities for producer firms. The challenges concern the problem of idea overload when a large number of users are empowered to develop their own design creations. At the same time, opportunities arise because firm‐hosted user communities offer a promising source of creativity outside the firms' boundaries. In this paper, we study which data present in firm‐hosted online communities on user‐generated designs and user‐designers can be used to help a focal producer firm to reduce its workload in the selection phase by predicting which user‐generated designs it would most likely perceive as commercially attractive. Prior research emphasizes that among the vast amount of ideas generated in online user communities, it is the lead users' ideas that tend to stick out in terms of commercial attractiveness. Our paper aims to provide the next step by developing a heuristic for filtering commercially attractive ideas that are generated in online user communities. Therefore, prior lead user research is used as a point of reference for our study. This research stream has produced rich insights into the characteristics of users who are capable of developing new products that are commercially attractive from the perspective of a focal producer firm, as well as the characteristics of artifacts that such users tend to develop. Based on prior lead user research, we use theories on problem solving, creativity, and new product adoption to develop hypotheses on the factors that might influence the attractiveness of user‐generated designs from the focal producer firm's perspective in such a setting. Applying multilevel generalized linear modeling, 1799 designs from 116 user‐designers in the LEGO user community are analyzed. Our findings show that three prominent variables, the complexity of a given design, positive feedback from the community on specific designs, and the intensity of design activity by a user‐designer, can be used by a focal producer firm as filtering heuristics for the selection of promising user‐generated designs. We find an inverted U‐shaped relationship between the complexity of a user‐generated design and its perceived commercial attractiveness. Furthermore, we find a positive relationship between the positive feedback received by a given user‐generated design within the peer community and its perceived commercial attractiveness, as well as a U‐shaped relationship between the intensity of a certain user‐designer's activities and the likelihood that a given design by that user will be perceived as commercially attractive. The study is a first step toward a new Web‐based marketing research approach that can enable firms to filter vast numbers of user‐generated designs more effectively and efficiently.     

Perspective: Understanding the Nature and Measurement of the Lead User Construct

The lead user concept has attracted a lot of attention from scholars and practitioners alike. However, different studies apply different conceptualizations and measures of the lead user construct. Such variation in measurement of the construct make it almost impossible to consolidate findings from prior lead user research, which in turn hampers the accumulation of insights on the concept itself. This is also a challenge with respect to managerial practice: due to different interpretations of the concept, managers and R&D staff find it difficult to identify lead users for workshops and cooperation, and companies are often unable to transfer results from lead user projects to new product and business development. As a result, they only rarely repeat their work with lead users. The aim of this article is therefore to provide some thoughts and guidance on the conceptualization and measurement of the lead user construct.     

Extending Lead‐User Theory: Antecedents and Consequences of Consumers' Lead Userness*

Lead users are found to come up with commercially attractive user innovations and have been shown to be a highly promising source of innovation for new product development tasks. According to lead‐user theory, these users are defined as being ahead of an important market trend and experiencing high benefits from innovating. The present article extends lead‐user theory by exploring the antecedents and consequences of consumers' lead userness in the course of three studies on extreme sports communities. Regarding antecedents, it uncovers that field‐related variables (consumer knowledge and use experience) as well as field‐independent personality variables (locus of control and innovativeness) help explain an individual's lead userness. These variables might therefore be used as a proxy to identify the rare species of lead users. With regard to consequences, it uncovers that lead users demonstrate innovative behavior not only by creating new product ideas but also by adopting new commercial products more heavily and faster than ordinary users. This highlights the idea that lead users might not only be valuable to idea‐generation processes for radically new concepts; instead, they might also be relevant to more general issues in the marketing of new products.     

Lead Users and Early Adopters on the Web: The Role of New Technology Product Blogs*

Lead users and early adopters are often blogging or reading and commenting on blogs. Blogs, which are characterized by postings, links, and readers' comments, create a virtual “community” of blogger and readers. Members self‐select, and then the community gels around a theme or idea, product, industry, hobby, or any other subject. While community creation is one chief function of blogs, the information‐sharing, entertainment, or self‐ or value‐expressive functions are also important. Thus, new product development (NPD) managers can glean a great deal of information about what these audiences are thinking. The significance of blogging to NPD managers also lies in the shift of focus from being separate from to being immersed in these communities. Immersion enhances the potential of close relationships, sharing experiences, and co‐creating value with blogging communities through innovation. The focus of the study is on the roles of blogs in new product development, and an exploratory content analysis of new technology product blog postings is described. The goal was to examine what blogs actually say (and don't say) and to classify content based on the core elements of the marketing mix: product (including attributes and service aspects); price (including price comparisons); channel; and promotion. The bulk of the content was in the product category: for example, features (mentioned by 87.14%); overall evaluations (52.86%); performance (28.57%); compatibility (27.14%); ease of use (20%); and style (17.14%). About half discussed price, and about half discussed some channel aspect. The content is analyzed in detail, and implications for NPD mangers are discussed. People voluntarily join new product blogging communities, and if the manager of that product is not “present” (at least as an observer of this “straw poll”) an entire new product marketing agenda can be set by the community. Implicitly or explicitly, blogs can position the value proposition of the product in a prime target audience's mind. Such positioning could be advantageous or catastrophic as far as the NPD manager is concerned.     

The Characteristics of Takeover Target Firms: The Case of the English Brewing Industry, 1945–1960

The paper examines if takeovers target the “correct” firms. Using the English brewing industry (1945–1960) as a case study, size and conventional performance criteria of taken-over, independent and merging firms are assessed, and shown not to be valid target indicators. Comparison of a real estate/property utilization parameter – average asset value per “tied house” – for each firm category, shows that taken-over firms have the lowest average asset value per tied house. Low average asset value per house characterizes firms which, by failing to optimize their property assets, are poor performers. Takeover therefore, in this case, targets the “correct” firms.     

Capital Structure and the Cost of Capital for Untaxed Firms: The Case of REITs

REITs offer the opportunity to examine the relationship between capital structure and cost of capital in the absence of corporate earnings taxes. The evidence supports the leverage clientele effect as the motivation for the use of financial leverage by REITs.     

The Lead User method: an outline of empirical findings and issues for future research

In order to reduce the risks of failure usually associated with NPD, leading companies such as 3M, HILTI, or Johnson&Johnson are increasingly working with so-called Lead Users. Their identification and involvement is supported by the Lead User method – a multi stage approach aiming to generate innovative new product concepts and to enhance the effectiveness of cross-functional innovation teams. While the Lead User method is frequently cited in the literature, yet, there are only limited attempts to comprehensively discuss how this approach is embedded in theories and empirical findings of innovation and marketing research. Therefore the Lead User method is in the focus of the present paper, both with respect to its theoretical foundation and its implementation into the innovation management system. First, empirical research on user innovations is reviewed to clarify the theoretical foundation of the Lead User method. Second the attention is drawn to the Lead User practice by discussing the various process steps of this specific approach on the basis of two applications of the method. Based on this discussion, we outline open questions related with the practical implementation of the Lead User method in order to start an agenda for future research.     

The Implications of Demand Instability for the Behavior of Firms: The Case of Residential Construction

The position of the new residential construction sector as a large but very volatile component of total investment has provoked much study of the causes of that volatility and of its relation to the stability of the economy as a whole. There has never been, however, serious analysis of the assertion that this same volatility of housing starts, by creating an unstable environment for firms operating in the industry, serves to increase the cost of producing and marketing housing.
This paper will focus on the phenomenon of demand instability as it affects firm behavior. It approaches the demand instability problem from two distinct but complementary perspectives. The first part sets forth a theoretical conception of the manner in which demand instability should influence any firm's organization and operations. The second part presents an analysis of interviews conducted with representatives of a number of firms which supply materials for residential construction. This analysis provides a partial test of the theory and offers insights into areas on which theory alone sheds little light.     

Social Status,Entry and Predation: The Case of British Shipping Cartels 1879–1929

The authors incorporate social status and regional affiliation—two variables of central sociological interest—into an economic analysis of entry and predation. They build on Scott Morton’s [1997] examination of entry and predation in the merchant shipping industry and examine whether the social status of an entrant owner impacts on the predation behavior of the incumbent cartels. They find that high social status entrants are significantly less likely (40%) to be preyed upon than the low social status entrants. They discuss several interpretations of this result. Subsequent analysis supports the hypothesis that cartel members use social status as an indicator of an entrant’s propensity to be a cooperative cartel participant.     

Value Creation by Toolkits for User Innovation and Design: The Case of the Watch Market

This study analyzes the value created by so-called "toolkits for user innovation and design," a new method of integrating customers into new product development and design. Toolkits allow customers to create their own product, which in turn is produced by the manufacturer. In the present study, questions asked were (1) if customers actually make use of the solution space offered by toolkits, and, if so, (2) how much value the self-design actually creates. In this study, a relatively simple, design-focused toolkit was used for a set of four experiments with a total of 717 participants, 267 of whom actually created their own watches. The heterogeneity of the resulting design solutions was calculated using the entropy concept, and willingness to pay (WTP) was measured by the contingent valuation method and Vickrey auctions. Entropy coefficients showed that self-designed watches vary quite widely. On the other hand, significant patterns still are visible despite this high level of entropy, meaning that customer preferences are highly heterogeneous and diverse in style but not completely random. It also was found that consumers are willing to pay a considerable price premium. Their WTP for a self-designed watch exceeds the WTP for standard watches by far, even for the best-selling standard watches of the same technical quality. On average, a 100% value increment was found for watches designed by users with the help of the toolkit. Taken together, these findings suggest that the toolkit's ability to allow customers to customize products to suit their individual preferences creates value for them in a business-to-consumer (B2C) setting even when only a simple toolkit is employed. Alternative explanations, implications, and necessary future research are discussed.     

New Product Development Practices and Early‐Stage Firms: Two In‐Depth Case Studies

New product development practices (NPD) have been well studied for decades in large, established companies. Implementation of best practices such as predevelopment market planning and cross‐functional teams have been positively correlated with product and project success over a variety of measures. However, for small new ventures, field research into ground‐level adoption of NPD practices is lacking. Because of the risks associated with missteps in new product development and the potential for firm failure, understanding NPD within the new venture context is critical. Through in‐depth case research, this paper investigates two successful physical product‐based early‐stage firms' development processes versus large established firm norms. The research focuses on the start‐up adoption of commonly prescribed management processes to improve NPD, such as cross‐functional teams, use of market planning during innovation development, and the use of structured processes to guide the development team. This research has several theoretical implications. The first finding is that in comparing the innovation processes of these firms to large, established firms, the study found several key differences from the large firm paradigm. These differences in development approach from what is prescribed for large, established firms are driven by necessity from a scarcity of resources. These new firms simply did not have the resources (financial or human) to create multi‐ or cross‐functional teams or organizations in the traditional sense for their first product. Use of virtual resources was pervasive. Founders also played multiple roles concurrently in the organization, as opposed to relying on functional departments so common in large firms. The NPD process used by both firms was informal—much more skeletal than commonly recommended structured processes. The data indicated that these firms put less focus on managing the process and more emphasis on managing their goals (the main driver being getting the first product to market). In addition to little or no written procedures being used, development meetings did not run to specific paper‐based deliverables or defined steps. In terms of market and user insight, these activities were primarily performed inside the core team—using methods that again were distinctive in their approach. What drove a project to completion was relying on team experience or a “learn as you go approach.” Again, the driver for this type of truncated market research approach was a lack of resources and need to increase the project's speed‐to‐market. Both firms in our study were highly successful, from not only an NPD efficiency standpoint but also effectiveness. The second broad finding we draw from this work is that there are lessons to be learned from start‐ups for large, established firms seeking ever‐increasing efficiency. We have found that small empowered teams leading projects substantial in scope can be extremely effective when roles are expanded, decision power is ground‐level, and there is little emphasis on defined processes. This exploratory research highlights the unique aspects of NPD within small early‐stage firms, and highlights areas of further research and management implications for both small new ventures and large established firms seeking to increase NPD efficiency and effectiveness.     

The Performance Effects of Human Resource Practices: The Case of Interclub Networks in Professional Baseball, 1919–1940

This study investigates the performance effects of two industry‐specific human resource management innovations that dramatically changed the way professional baseball teams selected and trained ballplayers. In the early part of this century, major league clubs developed and refined two player‐development practices based on “reserve team” and “farm team” systems. We use a panel data set of the win/lose records for the population of 16 major league clubs for the seasons from 1919 through 1940 to test hypotheses about the effect of human resource practices on organizational performance. The results suggest that the reserve team practice had no significant impact on organizational performance. In contrast, the more complex farm‐team system, pioneered by Branch Rickey of the St. Louis Cardinals, improved organizational performance and diffused rapidly throughout the league. We estimate that by 4 years after its creation, the farm‐team system improved a team's win rate by 0.068 points relative to nonadopters of the farm‐team system and teams with less than 4 years of prior experience with a farm‐team system. The results also show that the farm‐team effect was not confined to St. Louis but also was experienced by later adopters. These results contribute to the growing literature showing a positive effect of human resource policies on organizational performance. The results also illustrate the important role the external environment plays in shaping this relationship (e.g., legal restrictions to labor mobility).     

Marketing–Industrial Design Integration in New Product Development: The Case of China*

Despite the acknowledgement of functional integration as an important driver of new product development (NPD) success and the growing recognition of the significance of industrial design (ID), the integration between industrial design and other functional units in NPD has been rarely researched. In this article, we examine the marketing and ID integration in NPD in the context of China. Mainly based on Cooper's (1994) stage‐gate phases of NPD process and Gupta, Raj, and Wilemon's (1985) categorization of NPD activities, we develop a conceptual framework that identifies 29 areas that might require integration or where integration might occur between marketing and ID. Specifically, we investigate and compare the current and the ideal integration between marketing and ID perceived by the two functions. An analysis of data from 113 companies reveals that the current level of integration fell short of the ideal level of integration in all the phases of NPD. Both managers believed in the descending trend of integration along the stage‐gate NPD phases and were dissatisfied with the current level of integration in all the NPD phases. Except for a few areas of agreement, marketing and ID managers showed significant differences with each other in their perceptions of the current and the ideal integration in most of the 29 areas. Despite the disagreements however, the two functions agreed with each other on the most important areas that require integration and achieved the highest level of marketing–ID integration. These findings suggest that firms should improve the marketing–ID integration in all the NPD phases and that management could improve the effectiveness of marketing–ID integration by prioritizing and focusing on the most important areas. Research and managerial implications, limitations, and future research directions are presented in the paper.     

Management,Organizational Justice and Emotional Exhaustion among Chinese Migrant Workers: Evidence from two Manufacturing Firms

This article explores how Human Resource (HR) policies and practices influence employee perceptions of organizational justice, which in turn impacts employee emotions and feelings of emotional exhaustion. Using structural equation modelling and based on employee survey data drawn from two manufacturing organizations, we find that a strong HR system — perceived by workers as distinctive, attractive and consistently implemented — fosters perceptions of distributive, procedural and interactive justice. However, only distributive injustice leads to negative emotions and emotional exhaustion. This is explained by reference to the cultural and institutional context (China), status (migrant) and type of workers (semi‐skilled, manual) included in the study. We discuss the theoretical and practical implications that arise from these findings.     

Size (and competition) among organizations: modeling scale‐based selection among automobile producers in four major countries, 1885–1981

Based on previous empirical research, size is perhaps the most powerful explanatory organizational covariate in strategic analysis. We suggest that theoretical arguments about size be examined carefully to specify models with explicit comparison sets and with mechanisms linking size and underlying processes to outcomes. We illustrate the approach here by advancing arguments about scale competition within an organizational population. In this effort, we feature a theoretical model of scale‐based selection, which posits that a firm's chances of survival decrease with its aggregate distance from larger competitors on a transformed size gradient. The model assumes that the appropriate comparison set consists of all contemporaneous similar organizations competing on the basis of scale and operating in a localized geographic setting. We argue that aggregate distance of a focal firm from larger other firms (a specific form of relative position in the size distribution) reflects the extent to which it can capitalize on potential competitive advantages of scale emanating from economic, political, and social processes. Analyzing the mortality rates of large organizations across the entire histories of automobile industries in four major countries provides support for the theory. We discuss the general implications of our findings for strategic and organizational analysis. Copyright © 2003 John Wiley & Sons, Ltd.     

Skyscrapers and the Skyline: Manhattan, 1895–2004

This article investigates the market for skyscrapers in Manhattan from 1895 to 2004. Clark and Kingston (1930) have argued that extreme height is a result of profit maximization, while Helsley and Strange (2008) posit that skyscraper height can be caused, in part, by strategic interaction among builders. I provide a model for the market for building height and the number of completions, which are functions of the market fundamentals and the desire of builders to stand out in the skyline. I test this model using time series data. I find that skyscraper completions and average heights over the 20th century are consistent with profit maximization; the desire to add extra height to stand out does not appear to be a systematic determinant of building height.     

The Industrial Organization of Housing Supply: Market Activity, Land Supply and the Size of Homebuilder Firms

Existing studies of housing markets assume that homebuilding is a homogeneous, perfectly competitive industry. This paper uses MSA-level data on the average size of homebuilder establishments and homebuilder market concentration to test the appropriateness of this paradigm. The data reveal a wide and systematic variation across metropolitan-area housing markets in both the average size of builders and the market share for the largest builders in an MSA. These results are more consistent with treating homebuilders as monopolistically competitive suppliers of a differentiated product than with treating them as perfectly competitive homogeneous firms. Builders are larger in more active housing markets and where there is a greater supply of readily developed land suitable for large developments. Builder size and concentration are sensitive to the type of regulating jurisdiction imposing land-use regulation. Both are lower when land-use regulations are imposed by smaller jurisdictions, and this is particularly true when the smaller jurisdictions impose more intense regulation.