The Form of Relationship between Firm‐Level Product Innovativeness and New Product Performance in Developed and Emerging Markets

This study compares the new product performance outcomes of firm‐level product innovativeness across a developed and emerging market context. In so doing, a model is constructed in which the relationship between firm‐level product innovativeness and new product performance is anticipated to be curvilinear, and in which the nature of this relationship is argued to be dependent on organizational and environmental factors. The model is tested using primary data obtained from chief executive officers and finance managers in 319 firms operating in the United Kingdom, an advanced Western market, and 221 firms from Ghana, an emerging Sub‐Saharan African market. The model is assessed using a structural equation model multigroup analysis approach with LISREL 8.5. In the United Kingdom and Ghana, the basic form of the relationship between firm‐level product innovativeness and business success is inverted U‐shaped, but the strength and/or form of this relationship changes under differing levels of market orientation, access to financial resources, and environmental dynamism. While commonalities are identified across the two countries (market orientation helps firms leverage their product innovativeness), differences are also observed across the samples. In Ghana, access to financial resources enhances the relationship between product innovativeness and new product performance, unlike in the United Kingdom where no moderation is observed. Furthermore, while U.K. firms leverage product innovativeness to their advantage in more dynamic environments, Ghanaian firms do not benefit in this way: here, high levels of innovation activity are less useful when markets are more dynamic. If the study's findings generalize, there are a number of implications for managers of both emerging and developed market businesses. First, managers in both developed and developing market firms should focus on determining and managing an optimal balance of novel and intensive product innovativeness within the context of their unique institutional environments. Second, for emerging market firms, a market orientation capability helps businesses leverage local market intelligence, enabling them to compete with multinational giants flocking to emerging markets, but typical developed market learning approaches may be insufficient for multinational firms when seeking to compete in emerging markets. Third, for emerging market firms, access to finances helps deliver product innovation success (although this is not the case for developed market firms, possibly due to strong financial institutions). Finally, unlike developed market firms, burdened by institutional voids at home, emerging market firms appear to be less capable of competing on an innovation front in more dynamic market conditions. Accordingly, policymakers in emerging markets should consider identifying ways to help businesses raise market orientation levels, and seek to create conditions that enhance access to financial capital (e.g., direct financing, matching grants, tax rebates, or rewarding firms that innovate creatively and intensely). Likewise, since environmental dynamism is likely to be a growing issue for emerging markets, efforts to help firms become more adept at keeping up with more agile developed market counterparts are needed.     

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.     

Benefits of Customer Codevelopment of New Products: The Moderating Effects of Utilitarian and Hedonic Radicalness

There is growing belief in the value of actively involving customers in innovation, commonly referred to as customer codevelopment or cocreation. These strategies are generally believed to be beneficial, although contingent views are prevalent. A widely espoused contingent view is that the positive contribution of customer codevelopment is dependent on the degree of radicalness (or innovativeness) of the products being developed. Some work argues that customer codevelopment is more useful for incremental innovation, whereas other work claims that customer codevelopment is more valuable when innovation is radical. This research makes an important contribution to this discourse by making a distinction between utilitarian radicalness and hedonic radicalness. Utilitarian radicalness refers to the degree to which an innovation is novel in terms of technology and functionality, whereas hedonic radicalness refers to the degree to which an innovation is novel in terms of sensorial, emotional, or symbolic aspects. Hypotheses about the contribution of customer codevelopment to market success depending on levels of utilitarian and hedonic radicalness are tested using dual‐respondent data about a large sample of innovation projects. The findings suggest that the contribution of customer codevelopment to market success is positively moderated by utilitarian radicalness and negatively moderated by hedonic radicalness. This underlines the importance of taking not only the level, but also the nature, of radicalness into account when making decisions about customer codevelopment.     

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.     

Finding Commercially Attractive User Innovations: A Test of Lead‐User Theory*

Firms and governments are increasingly interested in learning to exploit the value of lead‐user innovations for commercial advantage. Improvements to lead‐user theory are needed to inform and to guide these efforts. The present study empirically tests and confirms the basic tenets of lead‐user theory. It also uncovers some new refinements and related practical applications. Using a sample of users and user–innovators drawn from the extreme sport of kite surfing, an analysis was made of the relationship between the commercial attractiveness of innovations developed by users and the intensity of the lead‐user characteristics those users display. A first empirical analysis is provided of the independent effects of its two key component variables. In the empirical study of user modifications to kite‐surfing equipment, it was found that both components independently contribute to identifying commercially attractive user innovations. Component 1, the high expected‐benefits dimension, predicts innovation likelihood, and component 2, the ahead of the trend dimension, predicts both the commercial attractiveness of a given set of user‐developed innovations and innovation likelihood due to a newly proposed innovation supply side effect. It was concluded that the component variables in the lead‐user definition are indeed independent dimensions, so neither can be dropped without loss of information—an important matter for lead‐user theory. It also was found that adding measures of users' local resources can improve the ability of the lead‐user construct to identify commercially attractive innovations under some conditions. The findings reported here have practical as well as theoretical import. Product modification and development has been found to be a relatively common user behavior in many fields. Thus, from 10 to nearly 40 percent of users report having modified or developed a product for in‐house use in the case of industrial products or for personal use in the case of consumer products in fields sampled to date. As a practical matter, therefore, it is important to find ways to selectively identify the user innovations that manufacturers will find to be the basis for commercially attractive products in the collectivity of user‐developed innovations. The implications of these findings for theory as well as for practical applications of the lead‐user construct are discussed—that is, how variables used in lead‐user studies can profitably be adapted to fit specific study contexts and purposes.     

Analyzing the Welfare Impacts of Full‐line Forcing Contracts

Theoretical investigations have examined both anti‐competitive and efficiency‐inducing rationales for vertical bundling, making empirical evidence important to understanding its welfare implications. We use an extensive dataset on full‐line forcing contracts between movie distributors and video retailers to empirically measure the impact of vertical bundling on welfare. We identify and measure three primary effects of full‐line forcing contracts: market coverage, leverage and efficiency. We find that bundling increases market coverage and efficiency, but has little impact on one distributor's gaining leverage over another. As a result, we estimate that full‐line forcing contracts increased consumer and producer surplus in this application.     

The Role of Future‐Market Focus in the Early Stages of NPD across Varying Levels of Innovativeness

The concept of future‐market focus (FMF) arose out of the debate about firm size and incumbency in the face of radical or disruptive innovations, and has been demonstrated to have a positive correlation with radical innovation (RI) success. This study examines the relationship between FMF and the processes used in the early stages of NPD for four types of innovation projects: incremental innovations, technological breakthroughs, market breakthroughs, and radical innovations. We found that the future‐market focus of a project team can influence the early stage processes used in a new product innovation project, and does so differentially across levels of innovativeness. In particular, the concept generation process, understanding of market needs, and screening decision criteria are different for low‐ versus high‐FMF projects and there are differences based on the level of innovation. In addition, we found that radical innovation projects rated low in FMF are markedly different than the radical innovation projects described in prior studies.     

User Involvement throughout the Innovation Process in High‐Tech Industries

The feedback and input of users have been an important part of product innovation in recent years. User input has been studied from different approaches and is applied through different methods in particular phases of the innovation process. However, these methods are not integrated into the whole innovation process and are used only in particular phases or on an ad hoc basis. New developments in technology, social media, and new ways of working closer with customers have opened up new possibilities for firms to gain user input throughout the whole innovation process. However, the impact that these new developments in technology offer for user input innovation in high‐tech firms is unclear. Therefore, we study how high‐tech firms collect and apply user feedback throughout the whole innovation process. The paper is based on a comparative case study of eight cases in the high‐tech industry, in which qualitative data collection was applied. The key contribution of the paper is a conceptual framework on user data‐driven innovation throughout the innovation cycle. This framework gives insight into user involvement types and approaches to collect and apply user feedback throughout the innovation process.     

A Closer Look at Cross‐functional R&D Cooperation for Innovativeness: Innovation‐oriented Leadership and Human Resource Practices as Driving Forces

Because cross‐functional research and development (R&D) cooperation appears to drive innovation, many firms have invested considerably in it. However, despite substantial efforts to improve information and communication infrastructures or to bring departments in closer proximity with one another, structural investments often fail to produce the desired positive impact on cross‐functional R&D cooperation. This failure may arise because firms undertaking these structural investments do not manage their employees adequately. Extant research acknowledges the importance of motivating and enabling members of the R&D function to cooperate with other functions. Yet empirical studies investigating the relative importance of leadership and different human resource (HR) practices for enhancing cross‐functional R&D cooperation are scarce. Drawing on the resource‐based view and organizational support theory, this study investigates how innovation‐oriented leadership and HR practices might support members of the R&D function and encourage cross‐functional R&D cooperation, which enhances product program innovativeness. Specifically, members of the R&D function who are supported in their innovation efforts through innovation‐oriented leadership and HR practices should reciprocate for the support they receive by intensifying their cross‐functional cooperation to achieve greater product program innovativeness. Relying on multi‐informant data from 125 firms with assessments from marketing and R&D managers, this study shows that innovation‐oriented leadership and HR practices have different effects on cross‐functional R&D cooperation. A structural equation modeling‐based analysis of the hypothesized relationships reveals that innovation‐oriented leadership, rewards, and training and development have considerable positive effects. In contrast, recruitment does not drive cross‐functional R&D cooperation. Because firms usually operate in dynamic markets, and increasingly acquire relevant information from customers when generating innovations, this study also considers market‐related dynamism and customer integration as important contingency factors. For firms facing market‐related dynamism and those relying on customer integration, leadership and training and development are particularly effective for enhancing cross‐functional R&D cooperation. By integrating two theoretical perspectives, this study not only advances knowledge on the antecedents of cross‐functional R&D cooperation, but also helps explain differences in their relative effectiveness. Furthermore, it both adds to the discussion of whether monetary rewards are appropriate means to foster innovation and challenges existing assumptions about the role of recruiting for innovation.     

Workforce Composition and Innovation: How Diversity in Employees’ Ethnic and Educational Backgrounds Facilitates Firm‐Level Innovativeness

This article studies how workforce composition is related to a firm's success in introducing radical innovations. Previous studies have argued that teams composed of individuals with diverse backgrounds are able to perform more information processing and make deeper use of the information, which is important to accomplish complex tasks. We suggest that this argument can be extended to the level of the aggregate workforce of high‐technology firms. In particular, we argue that ethnic and higher education diversity within the workforce is associated with superior performance in radical innovation. Using a sample of 3,888 Swedish firms, this article demonstrates that having greater workforce diversity in terms of both ethnic background and educational disciplinary background is positively correlated to the share of a firm's turnover generated by radical innovation. Having more external collaborations does, however, seem to reduce the importance of educational background diversity. The impact of ethnic diversity is not affected by external collaboration. These findings hold after using alternative measures of dependent and independent variables, alternative sample sizes, and alternative estimation techniques. The research findings presented in this article would seem to have immediate and important practical implications. They would suggest that companies may pursue recruitment policies inspired by greater ethnic and disciplinary diversity as a way to boost the innovativeness of the organization. From a managerial perspective, it may be concluded that workforce disciplinary diversity could be potentially replaced by more external links, while ethnic diversity could not.     

A Closer Look at Cross‐Functional Collaboration and Product Innovativeness: Contingency Effects of Structural and Relational Context

This study applies a contingency perspective to examine how the intra‐organizational context influences the relationship between cross‐functional collaboration and product innovativeness. It focuses on the role of (1) formal, structural factors directly controllable by top management decisions and (2) more intangible, relational factors as potential enhancements of the firm's ability to convert cross‐functional collaboration into product innovativeness. A study of 232 firms confirms the hypotheses, finding that the relationship between cross‐functional collaboration and product innovativeness is stronger for higher levels of decision autonomy and shared responsibility (structural context) and social interaction, trust, and goal congruence (relational context). In addition, a post‐hoc analysis using a configurational approach to organizational contingencies reveals that organizations' relational context is more potent than their structural context for converting cross‐functional collaboration into product innovativeness. The study's implications and future research directions are discussed.     

Getting More from Cross‐Functional Fairness and Product Innovativeness: Contingency Effects of Internal Resource and Conflict Management

This research investigates how organizations' internal resource and conflict management influence the relationship between cross‐functional fairness and product innovativeness. It considers two contextual dimensions of both internal resource management (job rotation and internal rivalry) and conflict‐handling mechanisms (integrating and avoiding) as key components of the firm's ability to convert fair interactions, across departments, into product innovativeness. The tests of the study's hypotheses, based on a sample of more than 200 Canadian‐based firms, confirm that the cross‐functional fairness–product innovativeness relationship is amplified at higher levels of job rotation and integrative conflict handling but suppressed at higher levels of internal rivalry and avoidance of conflict handling. The authors discuss the study's implications and future research directions.     

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.     

Acquisition Motives and the Distribution of Acquisition Performance

Research summary: I examine how acquisition motives relate to the distribution of post‐acquisition performance. I argue that acquisitions motivated by operating synergies have the potential to experience greater gains than acquisitions driven by financial synergies but are harder to value and implement, making them more uncertain. Using SEC filings, conference calls and press releases to capture acquisition motives, I find that acquirers pursuing operating synergies are more likely to experience highly positive and highly negative long‐term returns than acquirers pursuing financial synergies. I also find that acquisition experience and geographic proximity to targets soften acquirers' extreme downside outcomes in operating synergy acquisitions. My theory and results suggest that approaches that emphasize average outcomes for acquirers and use industry classifications to capture acquisition motives may be incomplete. Managerial summary: Managers engage in acquisitions for various reasons. In this study, I find that reasons related to operating synergies (e.g., revenue growth through new product offerings or cost savings through economies of scale) are more likely to result in extreme high and low performance outcomes for the acquiring firm compared to reasons related to financial synergies (e.g., diversification of cash flow streams). In addition, I find that the acquirer's prior acquisition experience and the geographic proximity between the target and acquirer help soften the extreme low performance outcomes related to operating synergies. Copyright © 2017 John Wiley & Sons, Ltd.     

Antecedents and Contingent Effects of Organizational Adaptive Capability on Firm Product Innovativeness

Organizational adaptive capability is a broad term and was studied from different perspectives, such as market, technology, and management system, in the management literature. However, the simultaneous effects of these different perspectives and their related adaptive capability constructs on a firm's product innovativeness have yet to be addressed. Additionally, an empirical study of the influence of informal structural dimensions, such as loose coupling, multiplexity, and redundancy, on the organizational adaptive capability, as antecedents, is also missing in the technology and innovation management (TIM) literature. By studying 153 firms, we found that (1) market‐, technology‐, and management system‐related adaptive capability constructs simultaneously and positively impact firm product innovativeness; (2) under the loose coupling construct, autonomous behaviors of departments positively impact technology and management system adaptive capability, loose management style influences market and management system adaptive capability, and uneven/slow information travel in organizations negatively affects technology and management system adaptive capability; (3) multiplexity positively influences all organizational adaptive capability constructs; and (4) under the redundancy construct, information distribution redundancy has an “∩” shape relationship with technology adaptive capability. We also demonstrated that the impact of informal structural constructs on adaptive capability is contingent upon environmental turbulence, e.g., rapid or unanticipated changes in market and technology. We found that the influence of loose management style on technology adaptive capability decreases with increased rate of market turbulence, and the effect of resource slack, as a part of the redundancy construct, on technology adaptive capability changes quadratically, an “∩” shaped curve, with an increased rate of market turbulence. We further found that the effect of the autonomous behaviors of departments on market adaptive capability increases with an increased level of technology turbulence. The role of resource slack on the market adaptive capability was also found to change quadratically, an “∩” shaped curve, with an increased rate of technology turbulence. Interestingly, the impact of the information distribution redundancy on market adaptive capability changes nonlinearly, a “U” shaped curve, with an increased rate of technology turbulence. Further, we showed that the influence of organizational technology adaptive capability on product innovativeness increases with increased level of technology turbulence. This study concludes with several theoretical and managerial implications.     

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.     

Impacts of Subsidized Security on Stability and Total Social Costs of Equilibrium Solutions in an N-Player Game with Errors

Investment in defense by all agents is a socially optimum equilibrium in many interdependent security scenarios. However, practically, some agents might still choose not to invest in security due to bounded rationality and errors, thus decreasing the total social welfare. Previous work shows that providing subsidies may help induce more agents to invest. Our study suggests that giving subsidies to agents prone to making an erroneous choice could increase the stability of the socially optimum equilibrium, as well as decrease the total social costs.     

Synergies among Producer Firms,Lead Users,and User Communities: The Case of the LEGO Producer–User Ecosystem

While many firms today proactively involve users in their new product development efforts using a wide variety of methods such as the lead user method, firm‐hosted user communities, or mass customization toolkits, some pioneering firms are experimenting with the creation of sustainable producer–user ecosystems designed for the continuous exploration and exploitation of business opportunities. In this paper, the functioning of such ecosystems is studied with particular emphasis on the synergies they can yield. Based on an explorative and longitudinal multiple case study design, the producer–user ecosystem of the firm LEGO is analyzed, and three main actors in the ecosystem are identified: entrepreneurial lead users who aim to start their own businesses, a vibrant user community, and the LEGO company as the focal producer firm and facilitator for multiple user‐to‐user and user‐to‐producer interactions. Our study reveals three kinds of synergies: (1) reduced risk for entrepreneurial lead users and the focal producer firm, (2) the extension of the design space of the focal producer firm's products, and (3) the creation of buzz within the user community. Finally, the theoretical and managerial implications of our findings for innovation researchers and practitioners are discussed.     

Consumer Innovativeness and the Use of New versus Extended Brand Names for New Products*

Despite the importance of branding to new product success, little research has been conducted on how individual adoption orientation might affect brand name preferences. This paper draws on the diffusion literature to investigate how consumer innovativeness affects consumer response to alternative branding strategies (i.e., new vs. extended brands, for new products). The results of an empirical study found that consumer innovativeness has a greater effect on new product evaluations for new brand names relative to extended brand names. Also, results indicate that highly innovative consumers evaluate new products with new brand names more favorably than brand extensions. Furthermore, consumer confidence in the new product was found to mediate the effects of consumer innovativeness and its interaction with brand name type on new product evaluation. Implications include not only giving greater managerial consideration to using new brands but also supporting the chosen branding strategy with appropriate promotional efforts for respective adopter groups.