Managing Knowledge for Innovation: The Case of Business‐to‐Business Services*

The present study builds a typology of organizational knowledge in business services and empirically examines the effects of knowledge on innovation performance. It is suggested that firms differ with respect to their knowledge creation approaches and that these approaches have implications for firms' innovation activities. A conceptual framework of knowledge assets with degrees of tacitness and collectiveness as the principal axes is used to ground the empirical analysis. The organizational knowledge framework is empirically operationalized using survey data from 167 business service firms and supplementary case study evidence from 16 other firms. It is found that business service improvements and new service introductions are significantly associated with collectively held knowledge, such as codified service solutions or team‐based competences and procedures. In contrast, relying solely on tacit knowledge held by individuals may hamper innovation. The results also suggest that tacit collective knowledge is more closely associated with new service introductions, whereas explicit collective knowledge is associated with service improvements. Tacit collective knowledge is thus conducive. A managerial implication is that new service introductions necessitate team competences and routines, whereas incremental service improvements are more likely if procedures are in place to codify services into explicit solutions or technologies. Thus, the knowledge management approach should depend on the strategic orientation of the service firm toward continuous improvement of existing services or development of completely new services.     

Determinants of the Level of Knowledge Application: A Knowledge‐Based and Information‐Processing Perspective*

Knowledge application is of key importance in the development of successful new products. Knowledge application refers to an organization's timely response to technological change by utilizing the knowledge and technology generated into new products and processes. This study uses the knowledge‐based theory of the firm and considers its roots in the information‐processing approach to organization theory to identify and structure potential antecedents of knowledge application. This study develops four hypotheses concerning antecedents of knowledge application. The hypotheses are tested using data collected from 277 high‐technology firms. Empirical results indicate that a long‐term orientation supported by a research and development (R&D) budget, formal rewards, and information technology directly increases the level of knowledge application, while R&D co‐location indirectly increases the level of knowledge application. It is surprising to find that an increase in the level of organizational redundancy reduces the level of knowledge application. The findings also suggest that information technologies, lead‐user, and supplier networks do not appear to significantly influence organizational redundancy.     

The Role of Value‐Informed Pricing in Market‐Oriented Product Innovation Management*

Although the positive effect of a market orientation on new product success is widely accepted and the market orientation literature has increased its understanding of how a market orientation leads to performance, the extant literature has overlooked the role of value‐informed pricing in the relationship. Value‐informed pricing is a pricing practice in which the decision makers base the price of the new product on the customers' perceptions of the benefits that the product offers and how these benefits are traded by customers against the price (that has yet to be determined). Considering that pricing mistakes may hit hard on the profitability of product innovations, it is important to firms to have a good understanding of its role. This study develops a framework in which value‐informed pricing is integrated in the relationship between market orientation and new product performance. A distinction is made between customer and competitor orientations, and relative product advantage is also included in the conceptual model. The model is tested on data obtained from managers based on a cross sectional sample of 144 firms. The respondents were involved in a decision‐making process of the pricing of a new product. The model is tested using structural equations modeling. The results show that value‐informed pricing has a strong effect on new product performance. It also reveals that each component of a market orientation fulfills a specific role in a market‐oriented organization. Value‐informed pricing is found to have important mediating effects in the market orientation–new product performance relationship. Results show that firms with a strong customer orientation engage in value‐informed pricing and develop superior benefits to customers in an advantageous product. In turn, both value‐informed pricing and relative product advantage positively affect new product market performance. However, no significant effect of competitor orientation on value‐informed pricing is found. Combined with the finding that competitor orientation negatively affects relative product advantage, this suggests that competitor orientation may hurt new product performance when this orientation is not balanced with a strong customer orientation. The results also portray that value‐informed pricing leads to higher product advantage. Interestingly, this relation is contingent on the degree of interfunctional coordination within the firm. This suggests that the relationship between market orientation and new product performance is strongest if firms integrate value‐informed pricing in the new product development process. In this sense, a market‐oriented firm mirrors the customer value perception that makes a trade‐off between benefits and price.     

Uses of Agent‐Based Modeling in Innovation/New Product Development Research*

Little has been written in the new product development literature about the simulation technique agent‐based modeling, which is a by‐product of recent explorations into complex adaptive systems in other disciplines. Agent‐based models (ABM) are commonly used in other social sciences to represent individual actors (or groups) in a dynamic adaptive system. The social system may be a marketplace, an organization, or any type of system that acts as a collective of individuals. Agents represent autonomous decision‐making entities that interact with each other and/or with their environment based on a set of rules. These rules dictate the behavioral choices of the agents. In these simulation models, heterogeneous agents interact with each other in a repetitive process. It is from the interactions between agents that aggregate macroscale behaviors or trends emerge. The simulated environment can be thought of as a “virtual” society in which actions taken by one agent may have an effect on the resulting actions of another agent. This article is an introduction to the ABM methodology and its possible uses for innovation and new product development researchers. It explores the benefits and issues with modeling dynamic systems using this methodology. Benefits of ABMs found in sociology and management studies have found that as the heterogeneity of individuals increase in a system or as network effects become more important in a system, the effectiveness of ABMs as a methodology increases. Additionally, the more adaptive a system or the more the system evolves over time, the greater the opportunity to learn more about the adaptive system using ABMs. Limitations to using this methodology include some knowledge of computer‐programming techniques. Three potential areas of research are introduced: diffusion of innovations, organizational strategy, and knowledge and information flows. A common use of ABMs in the extant literature has been the modeling of the diffusion process between networked heterogeneous agents. ABMs easily allow the modeling of different types of networks and the impact of these networks on the diffusion process. A demonstrative example of an agent‐based model to address the research question of how should manufacturers allocate resources to research (exploration) and development (exploitation) projects is provided. Future courses of study using ABMs also are explored.     

Global Innovation in MNCs: The Effects of Subsidiary Self‐Determination and Teamwork*

The ability of multinational corporations (MNCs) to leverage their innovation competencies across globally dispersed subsidiaries is an increasingly valuable source of competitive advantage. As multinational enterprises turn to foreign subsidiaries for research and development (R&D) and product development, questions arise regarding the most effective organizational structures for global innovation. Although organizational conditions that satisfy the needs for self‐determination and teamwork have long been considered intrinsic motivators, past research has not analyzed the consequences of intrinsic motivators on global innovation. The basic research question is this: In globally dispersed subsidiary R&D units, what organizational conditions and motivators are associated with the highest knowledge output? A sample of 275 globally dispersed R&D subsidiaries were studied from 1995 to 2002. Data were collected from a postal survey, field and telephone interviews, and secondary sources. Subsidiary self‐determination and teamwork were found to have a significant effect on knowledge output, as objectively measured by patent citations. Subsidiary self‐determination on inputs such as sourcing and hiring, and self‐determination on outputs such as marketing and product development, emerged as positive determinants of knowledge generation in R&D subsidiaries. In addition, interteam cooperation and intrateam cooperation were significant determinants of knowledge generation by subsidiaries. These findings highlight the importance of self‐determination, teamwork, and cooperation to knowledge creation and innovations. Managers face the tough challenge of how to motivate globally dispersed knowledge workers to conduct research that will generate knowledge and will strengthen firm performance. The results provide theoretical and practical insights on how MNCs can leverage their innovation competencies across foreign R&D subsidiaries.     

The Effects of Competition in Short Product Life‐Cycle Markets: The Case of Motion Pictures*

It is critically important to understand the relationship between new product launch strategies and their interaction with the competitive environment, which results in the successful introduction of new products. Deciding when to launch new products is among the most significant issues facing managers when formulating new products strategy, especially for products with short product life cycles. However, little extant research has focused on the interaction of product launch timing and the competitive market environment. This study explores the effects of four types of competitive threats on the market performance of short product life‐cycle products. Threats from new products and incumbents are possible. Also, products in the same category and those in related product categories exert competitive pressures. In this paper, a framework of competitive threats is developed, and research questions are constructed and empirically tested using the motion pictures industry as the focus of this research. A set of simultaneous equations was estimated using a sample of 2,948 movies introduced in the U.S. market between 1997 and 2004. The results show that all competition types have negative direct, indirect (as mediated by distribution intensity), and total effects on the performance of a new product. For a focal product, incumbent products exert a greater negative impact on performance than new entrants. Surprisingly, products in different, but related, categories are more harmful to the performance of products than products in the same category. The results have important implications for launch timing and new product performance.     

The Impact of User‐Oriented Design on New Product Development: An Examination of Fundamental Relationships*

Design offers a potent way to position and to differentiate products and can play a significant role in their success. In many ways it is the focus on deep understanding of the customer or user—what may be termed user‐oriented design (UOD)—that transforms a bundle of technology with the ability to provide functionality into a “product” that people desire to interact with and from which they derive benefits. Even though the importance of this type of design is gaining recognition, several fundamental relationships between user‐oriented design contributions and the new product development (NPD) process and outcomes (i.e., product) remain unresearched, although they are assumed. This article examines the fundamental relationships underlying the incorporation of a user orientation into the NPD process. The discussion is organized around UOD's impact in terms of enhancing collaborative new product development (process oriented), improving idea generation (process oriented), producing superior product or service solutions (product oriented), and facilitating product appropriateness and adoption (product oriented). Each of these is developed and presented in the form of a research proposition relating to the impact of user‐oriented design on product development. The fundamental relationships articulated concerning UOD's impact on NPD form a conceptual framework for this approach to product design and development. For practitioners, the article suggests how user‐oriented design can improve NPD through its more grounded and comprehensive approach, along with the elevated appreciation of design challenges and heightened sense of possibilities for a product being developed. For scholars, the article identifies four important areas for UOD research. In addition to the rich avenues offered for research by each of these, the framework presented provides a foundation for further study as well as the development of new measures and tools for enhancing NPD efforts.     

Perspective: Economic Conditions,Entrepreneurship, First‐Product Development,and New Venture Success*

Entrepreneurial ventures have a significant impact on new job creation and economic growth, but existing evidence indicates that most entrepreneurial ventures fail. This paper reports key insights from VENSURV, a new database that tracks the success and failure of ventures founded since 1998. Based on an analysis of 539 new ventures founded during the years 1991–2001, the following conclusions are reached. First, consistent with prior research, less than half of the 539 ventures survived more than two years. Second, economic downturns lead to higher failure rates for new ventures. Third, new venture success is highly correlated with first‐product success. Fourth, first‐product success is enhanced when those products are introduced into markets with emerging market needs but with established industry standards. Finally, first‐product and venture performance are significantly higher for products based on ideas that came from the founders. In addition, the most successful first products are based on ideas that reflect both technology development and an analysis of customer needs.     

The Effects of Occupational Licensing: Evidence from Business‐Level Data

Occupational licensing currently affects more than 1,000 occupations in the United States. I use confidential US Census Bureau business micro‐data to shed light on the effect of occupational licensing in cosmetology on key market outcomes and study its effect on the providers of occupational training. Occupational licensing regulation does not seem to affect the equilibrium number of practitioners or prices of services to consumers, but is associated with significantly lower practitioner entry and exit rates. I further find states with more stringent licensing requirements to have more instructors and a larger median size of training facilities, suggesting possible barriers to entry for the training schools. Instructors, however, do not earn more in such states.     

Product Design Innovation and Customer Value: Cross‐Cultural Research in the United States and Korea

Innovation is one of the key drivers of success that a firm must utilize to develop a competitive advantage. The ability to innovate is especially important for a firm's survival in dynamic, changing environments. Customer demands are constantly changing, and more purchases are made when a firm's product design incorporates what customers perceive as cutting‐edge innovations. Satisfying customer demands is a distinct challenge for product designers because firms must develop a clear understanding of what aspects of design the customer wants. Although the importance of design has increased, very little research has been done to explain the relationship between product innovation and product design. Studies indicate that design innovation may create greater customer value through improvements in design value. Previous research has been limited and has not provided a clear concept of design innovation or defined the relationship between design innovation and marketing competencies. This paper seeks to offer a conceptual definition of design innovation, and to define the link between design innovation and marketing competencies. This paper utilizes cross‐cultural research to discover how these concepts differ due to cultural differences between the United States and Korea. This research contributes substantially to our understanding of the relationship between design innovation and customer value.     

Impact of Knowledge Type and Strategic Orientation on New Product Creativity and Advantage in High‐Technology Firms

As different types of knowledge may have different effects on new product positional advantage, knowledge portfolio management in concert with the firm's strategic orientation is indispensable for new product success. However, previous research has not dealt with the knowledge resources and strategic implementations that affect new product development (NPD). To fill in this gap, the current study focuses on two dimensions of knowledge type (knowledge complexity and knowledge tacitness) and two forms of strategic orientation (technological orientation and market orientation), which influence the positional advantages as determinants of NPD outcomes. Drawing on the resource‐based view, this study explains how these knowledge and strategic orientation variables influence new product creativity, which comprised the novel and meaningful characteristics of new products. Finally, it demonstrates how these two dimensions of new product creativity differentially provide product advantages in terms of customer satisfaction and product differentiation, which lead to superior new product performance. A conceptual framework is developed and the related hypotheses provided to incorporate the study variables and to test their relationships in a sample based on data collected from both marketing and project managers from 100 U.S. high‐technology firms. The model estimation results from path analysis demonstrate that reliance on knowledge of high tacitness harms meaningfulness, while reliance on knowledge of high complexity increases both novelty and meaningfulness of new product. As expected, market orientation and technological orientation improve the meaningfulness and novelty dimensions of the new product, respectively. New product novelty and meaningfulness are shown to enhance new product advantage in terms of product differentiation and customer satisfaction, both of which contribute to new product performance. It is also found that the combinative use of market orientation and knowledge complexity, and technological orientation and knowledge tacitness positively influence both the novelty and meaningfulness of new products. This study, using the product‐level analysis, contributes to the literature by clarifying how the firm's different knowledge properties and strategic orientations both play a role as a source of new product creativity, and how new product creativity, as a valuable and rare resource, enhances new product advantage. The study results suggest that project/product managers should increase the transferability and codifiability of unstructured knowledge by stimulating intraorganizational knowledge sharing among NPD team members, and that they should promote both technology and market‐orientated practices to fully develop creativity of new products.     

The Impact of Product Innovativeness on the Link between Development Speed and New Product Profitability*

A review of the literature reveals that the relationship between development speed and new product profitability is not as strong and straightforward as conventional wisdom suggests. A number of studies show positive results, others show mixed results, and some present no evidence of a relationship. In other words, the valence of the link between development speed and new product profitability is unclear at this time. Therefore, this study investigates whether or not speeding new products to market has positive or negative effects on new product profitability. Prior research shows that product innovativeness influences both development speed and new product profitability. This raises the question of whether increasing speed is equally successful in improving profitability across new products that differ in their degree of innovativeness. Therefore, this study also investigates the moderating effect of product innovativeness on the relationship between development speed and new product profitability. The results from a survey‐based study of 233 manufacturers of industrial products in the Netherlands reveal an inverted U‐shaped relationship between development speed and new product profitability. The findings also show that the optimal point is different for two new product types—product improvements and line additions—that vary in their innovativeness. These results provide an onset for the development of a decision tool that helps managers to determine how much to spend on accelerating the development of individual new products and how they should allocate that spending across products in their new product portfolio.     

Investigating the Drivers of Innovation and New Product Success: A Comparison of Strategic Orientations*

The notion of producing innovations and achieving new product success has received a great deal of attention. Though many have investigated these effects in marketing and various fields within management, there has been little cross‐fertilization between fields of study to explain the basis for this superior performance. Though research has examined the resource‐based view (RBV) and market orientation individually, none has evaluated and compared their effect on firm innovation and new product success in one study. Furthermore, although empirical work has been conducted between market orientation and organizational learning, comparatively less research has been conducted to evaluate the relationship between organizational learning and the RBV to examine their combined effects on a firm's ability to innovate and succeed. Subsequently, the purpose of the present article is to investigate whether a focus on the customer (i.e., market orientation) or the firm (i.e., RBV) will drive the ability to (1) innovate within the firm and (2) succeed in terms of new product success, financial performance, market share, and customer value. The present article examines the relationship between organizational learning and the RBV and market orientation. It presents an empirically testable framework that investigates the relationship that RBV and market orientation have with performance outcomes. Data were collected from 249 senior executives. LISREL was applied to evaluate the relationships. Confirmatory factor analysis and related techniques were applied to assess the robustness of the measures used. Findings show that organizational learning is strongly associated with market orientation, which in turn impacts various performance outcomes including customer value. The RBV had a significant relationship with new product success. These results suggest that managers seeking innovation and new product success should focus less on the provision of customer value. Instead they should look toward developing their resources within the firm, including investing in human resources, to ultimately provide value to the firm. Findings indicate that this unique offering—innovations—will have an indirect effect on customer value and financial performance. In contrast, those in pursuit of positive financial performance and customer value should focus on the development of market orientation. Even though this will not necessarily lead to the development of innovative processes and new product success according to the present study, this approach may lead to a greater market share in the long term. This article reviews theoretical and managerial implications in more depth, providing an impetus for further research.     

High‐Performance Product Management: The Impact of Structure,Process, Competencies,and Role Definition*

Product management is one of the most important functions in marketing. Yet the product management literature has focused largely on creating successful products and has relatively little to say about creating effective product management organizations. This paper focuses on the organizational determinants of high‐performance product management at three levels: (1) the product manager as an individual; (2) the marketing processes related to product management; and (3) the organization structure and role definition. The paper identifies several key factors that potentially impact product management performance. A set of qualitative interviews is conducted to develop hypotheses related to constructs that may drive product management performance. These hypotheses are used to develop a causal model for product management performance that includes constructs related to roles and responsibilities, organization structure, and marketing processes related to product management. An empirical survey of 198 product managers from a variety of industries is conducted to test the causal model. The results of the causal model suggest that performance of a product management organization is driven by structural barriers in the organization, the quality of marketing processes, roles and responsibilities, and knowledge and competencies. The findings suggest that structural boundaries and interfaces are the biggest impediment to effective product management, followed by clarity of roles and responsibilities. The research highlights the importance of organization structure and effective human resource practices in improving product management performance.     

Moderating Effects of Nationality and Product Category on the Relationship between Innovation and Customer Equity in Korea and China

Innovation has become a key concept in recent decades. Truly innovative products can create value for consumers, extend the product category, generate higher margins, and strengthen the brand. Simply speaking, relationships may form between product innovation and each driver of customer equity. However, for different product categories and nationalities, this relationship may differ. This paper not only identifies the relationships between innovation and customer equity, but also examines the moderating effects of product category and nationality. In total, 409 consumers from Korea (n = 200) and China (n = 209) were surveyed by questionnaire in this study. The stimuli of the degree of innovation (i.e., radical or incremental) included Nike+Ipod and Adidas 1, and Nike Air Max and Adidas Team Series from the shoe industry, while H&M designer label and Nano material, and H&M seasonal collection and cycle material from the clothing industry. Structural equation modeling was used to test the hypotheses. The results show that the degree of innovation exerts positive influences on value equity and brand equity, which can be drivers of customer equity. Thus, the reason firms launch innovative products is not only to boost sales by increasing customer value, but also to improve brand image, which can influence the customers’ purchase decision. The relationship between innovation and customer equity can be moderated by product category and nationality. Managers should develop different innovation strategies based on different product categories and customer nationalities.     

Knowledge Sharing in Interorganizational Product Development Teams: The Effect of Formal and Informal Socialization Mechanisms*

Working collaboratively with suppliers is increasingly cited as a “best practice” in product development. The importance of sharing knowledge between buyer and supplier in this context has been well recognized, although comparatively little research exists on the interorganizational socialization mechanisms that facilitate it. The present research proposes and tests a theoretical model of the impact of formal and informal socialization mechanisms on the level of knowledge sharing within interorganizational product development projects and the subsequent effect on buyer firm performance. Results from this study of 111 manufacturing organizations in the United Kingdom largely support its hypotheses. It is revealed that informal socialization mechanisms (e.g., communication guidelines, social events) play an important role in facilitating interorganizational knowledge sharing, whereas formal socialization mechanisms (e.g., cross‐functional teams, matrix reporting structures) act indirectly through informal socialization to influence knowledge sharing. The results also show that interorganizational knowledge sharing is positively associated with supplier contribution to development outcomes, which, in turn, improves buyer product development performance and, ultimately, financial performance. Product development managers are encouraged to build social ties between interorganizational development teams to increase the flow of knowledge and to improve both product development outcomes and financial performance.     

The Effects of Market Network Heterogeneity on Innovation Diffusion: An Agent‐Based Modeling Approach

Innovations usually have an initial impact on very few people. The period of learning or early evaluation precedes the diffusion of the technology into the wider addressed population. More than a transfer, this is best characterized as communication of benefits, costs, and compatibility with earlier technologies and a relative assessment of the new state of the art. Innovation development by an organization or individual creates not just a device (i.e., process or tacit knowledge) but concomitantly a capacity on the part of other organizations or persons to use, adopt, replicate, enhance, or modify the technology, skills, or knowledge for their own purposes. How innovations actually diffuse is to understand the communication of progress, and this framing helps one to design innovations and also design the marketing and testing programs to ready innovations for market and launch them efficiently. Diffusion theory's main focus is on the flow of information within a social system, such as via mass media and word‐of‐mouth communications. This theory presents often in the form of mathematical models of innovation and imitation. Distinct from classical diffusion models, however, consumers are not all identical in how they connect to others within a market or how they respond to information. We examine the effects of various network structures and relational heterogeneity on innovation diffusion within market networks. Specifically, network topology (the structure of how individuals in the market are connected) and the strength of communication links between innovator and follower market segments (a form of relational heterogeneity) are studied. Several research questions concerning network heterogeneity are addressed with an agent‐based modeling approach. The present study's findings are based on simulation results that show important effects of network structure on the diffusion process. The ability to speed diffusion varies significantly according to within‐ and cross‐segment communications within a heterogeneous network structure. The implications of the present approach for new product diffusion are discussed, and future research directions are suggested that may add useful insights into the complex social networks inherent to diffusion. A simple summary is that discovery of significant prime communicator nodes in a network allows innovation development practices to be better calibrated to realistically multiple market segments.     

Exploring the Appeal of Product Design: A Grounded,Value‐Based Model of Key Design Elements and Relationships*

Product design is increasingly being recognized as an important source of sustainable competitive advantage. Until recently, the domain of design has been loosely categorized as “form and function” issues. However, as this paper will explore, product design deals with a much richer range of issues, many of which have not been considered in the marketing literature. To explore the domain and elements of design, the paper begins with two major goals: (1) to elicit the key dimensions of design and to develop an enriched language for the understanding and study of design; and (2) to integrate the design dimensions within a broader model that ties initial design goals to eventual psychological and behavioral responses from consumers. To achieve these ends, grounded theory development is used by conducting an extensive literature review, in‐depth interviews, and an interactive object elicitation technique. Drawing from this rich source of qualitative information as well as diverse literature fields, a framework is proposed for the creation of design value in consumer products. This framework not only explores the domain of design but also highlights the important elements of design that go well beyond the clichéd form and function issues. The resulting model reflects specific marketplace and organizational constraints that may help or impede the conversion of designer goals to so‐called design levers. These levers are used to convey three types of values to consumers: rational, kinesthetic, and emotional. The framework then explains how and when these different values may be perceived by the consumer. Within this framework, testable research propositions and specific directions for future design‐based research are also offered. Beyond its potential to spur marketing and new product development (NPD) management thought, the framework offered here represents a significant contribution to the field of design, which has historically been represented as a highly fragmented body of knowledge. Formalizing this framework should help overcome perhaps the largest obstacle to date to marketing‐related and NPD‐related research in this area—the lack of a detailed and consistent nomological view of the scope of design dimensions including testable linkages. Design has become an important tool that can be used by managers to develop dominant brands with lasting advantages. This research lends the NPD manager and the marketing manager better insights in into how this increasingly popular focus can be used to influence consumer behavior and firm success. “Design may be our top unexploited competitive edge.” Tom Peters, 2004 (cover review of Norman, 2004 ) “We don't have a good language to talk about [design]. In most people's vocabularies, design means veneer.… But to me, nothing could be further from the meaning of design. Design is the fundamental soul of a man‐made creation.” Steve Jobs, Apple Computers     

Product Choice and the Importance of Aesthetic Design Given the Emotion‐laden Trade‐off between Sustainability and Functional Performance

This paper investigates the trade‐off decision that consumers face when choosing between a product that is perceived to be more sustainable (i.e., more socially and environmentally responsible) and another product that instead is perceived to offer superior functional performance. Prior research has demonstrated that consumers often believe that there is a trade‐off between sustainability and performance, and in some cases, this trade‐off may be real and not just perceived. The objectives of the current research are to understand the mediators and moderators of this trade‐off choice and to illustrate one specific way in which to use this understanding to promote the consumption of relatively more sustainable products despite a perceived performance trade‐off. Two separate studies were conducted. The first employed a student‐based sample, whereas the second employed a nationally representative online sample. In both studies, participants were presented with a choice between two consumer products. One product was depicted as having superior sustainability characteristics (and average functional performance), and the other product was depicted as having superior functional performance (and average sustainability characteristics). Participants were asked to imagine that they were leaning toward choosing one product over the other, and then rated the degree to which they were feeling a set of possible emotions. Following these ratings, participants chose one of the products. The results suggest that consumers presented with such a trade‐off will tend to choose the product with superior functional performance over the product with superior sustainability characteristics, due to feelings of distress, until a minimum threshold of functional performance is achieved. The current research also shows that choice given this trade‐off depends upon the degree to which consumers value sustainability that, in turn, is mediated by consumers’ feelings of confidence and guilt. Further, based on an understanding of the emotions mediating choice in this context, the authors demonstrate how the effective use of product aesthetic design can improve the relative choice likelihood of sustainable products. Specifically, the authors demonstrate that superior aesthetic design has a disproportionately positive effect on the choice likelihood of sustainability‐advantaged (versus performance‐advantaged) products due to the effect that superior aesthetic design has on overcoming the potential lack of confidence in sustainable products. These findings highlight the specific value of aesthetic product design in the context of marketing sustainable products and suggest that it is especially important for firms interested in marketing sustainable products to also develop market‐leading product aesthetic design capabilities.