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Pricing decisions of consumer innovators
Abstract
Increasing numbers of consumers who engage in the development of new products are selling their innovations on online marketplaces. We contribute to the scarce research on the commercialization activities of consumer innovators by comparing the consumers’ price decisions with the pricing of firms. Our predictions build on the baseline assumption that the price decisions of consumers are influenced by the same motivations that originally prompt them to innovate. We use a sequential mixed-method approach with a quantitative main study and follow-up qualitative research. The quantitative results draw on a matched-pair analysis of 4,242 computer games released on the online game platform Steam. We find that consumer innovators charge lower prices than firms for comparable games and that consumers and firms show different inclinations in aligning prices with the games’ development costs and perceived quality. The subsequent interview study with 29 hobbyist game developers provides clear support for the motivational explanations of consumers’ pricing decisions. The findings contribute to research on consumer innovation marketing and nascent entrepreneurship. They also improve the understanding of welfare effects resulting from increasing commercial activities of consumers.
... The research by Im, Bayus, and Mason [39] proposed that the concept of customer innovativeness should be broader to cover innate innovativeness and innovative customer behaviors. On the other hand, Ebbing and Lüthje [40] conceptualized customer innovativeness as the tendency to obtain new innovations in a specific category and earlier than other customers as new products appear in the market [41]. ...
... According to Villani et al. [47], cognitive innovativeness is more related to the epistemic value, which involves the desire for new experiences, mental stimulation, and intellectual skills. This was supported by Ebbing and Lüthje [40] through measuring and distinguishing different customer innovativeness: customers with higher cognitive motivation focus more on exploring knowledge, analytical thinking, and the ability to solve problems. Thus, the definition of customer innovativeness in this research is the tendency of customers with a higher motivation for innovativeness to purchase the latest products in the market earlier than others. ...
With the accelerating advances in artificial intelligence (AI) technologies, the rising demand for the intelligent personal assistant is expected to rapidly increase in the following decades. As customer loyalty has become a critical element in gaining a competitive advantage and many marketers pay great attention to it, this research aims to explore the factors that directly affect customer loyalty toward the intelligent personal assistant. The main motivation is to investigate and identify the direct effects that variables such as customer innovativeness and perceived value have on customer loyalty. Additionally, both product knowledge and corporate image will be examined as moderators. The results obtained demonstrate that perceived value has a positive influence on customer loyalty. Furthermore, product knowledge moderates the influence of functional and hedonic innovativeness on customer satisfaction. The study’s main contributions provide a better understanding of customer loyalty. This research aims to be viewed as a specific guide to provide effective practices that companies should implement to help them reallocate resources appropriately and enhance customer value creation. The results indicate that the higher the level of customer perceived value, the better the customer loyalty will be. The findings represent that corporate image has a positive moderating effect on the influence of customer innovativeness on perceived value. This study draws on the outcomes of administrative suggestions and recommends a few observational strategies to improve the monetary administration in the intelligent personal assistant industry.
Individual consumers in the household sector increasingly develop products, services and processes, in their discretionary time without payment. Household sector innovation is becoming a pervasive phenomenon, representing a significant share of the innovation activity in any economy. Such innovation emerges from personal needs or self-rewards, and is distinct from and complementary to producer innovations motivated by commercial gains. In this introductory paper to the special issue on household sector innovation, we take stock of emerging research on the topic. We categorize the research into four areas: scope, emergence, implications for business, and diffusion. We develop a conceptual basis for the phenomenon, introduce the articles in the special issue, and show how each article contributes new insights. We end by offering a research agenda for scholars interested in the salient phenomenon of household sector innovation.
Perceived quality is one of the most critical aspects of product development that defines the successful design. This paper presents a new approach to perceived quality assessment by examining its elements, decomposed into a structure with the bottom-up sensory approach from the level of basic (‘ground’) attributes, covering almost every aspect of quality perception from the engineering viewpoint. The paper proposes a novel method for perceived quality attributes relative importance ranking, resulting in the balanced perceived quality of the final product within the given conditions. The proposed method helps to reach the equilibrium of the product’s quality equation from the perspective of design effort, time, and costs estimations. The authors introduce the Perceived Quality Framework (PQF), which is the taxonomy system for perceived quality attributes and the core of the attributes importance ranking (PQAIR) method. The research outcomes are based on findings of the qualitative exploratory study, including European and North American premium and luxury automotive manufacturers. An empirical structural validity test was performed to assess the usability and rigour of the proposed method. The results indicate that perceived quality evaluation can be significantly improved during all stages of product development.
Abbreviations: PQF: Perceived Quality Framework; PQAIR: Perceived Quality Attributes Importance Ranking; TPQ: Technical Perceived Quality; VPQ: Value-based Perceived Quality; OEM: Original Equipment Manufacturer.
This article draws on over 60 interviews and 120 surveys with indie game developers to illustrate relational labour and entrepreneurship practices in cultural industries and their relationship to ‘good work’. We first outline the changing organization of games work, the shift towards so-called indie production, and the associated rejection of creatively constrained, hierarchically managed production models. In the move towards small-scale games making, indies jettisoned producers because producers
represented industry modes of work, values and creative constraints. But indies are now struggling to manage production processes without producers. We use developer narratives to highlight how this ‘missing producer’ work is redistributed in the form of cultural entrepreneurship, cultural intermediation and relational labour. This
relational labour simultaneously supports and undermines sustainable production practices, as developers take on impossible workloads associated with networking and connecting with others. We next illustrate how the inherent valorization of growth and expansion in cultural entrepreneurship discourses may force developers to mimic industry practices and organization in order to find funding, but these practices inherently conflict with their desire to focus on making games as small, sustainable and creatively autonomous teams. Ultimately, we want to demonstrate how interviews and time spent with indie developers help us account for otherwise invisible and ambiguous cultural labour practices and discourses, thus allowing us to make sense of the larger context of cultural production and its possible futures.
This study examines the performance of user entrepreneurs in acquiring financial resources via crowdfunding. User entrepreneurs are thought to have better performance than non-user entrepreneurs, but the theoretical underpinnings of these differences are unclear. We propose a baseline hypothesis that claims of user entrepreneurship serve as a signal of capability and commitment to potential backers. In addition, building on three distinct identities of user entrepreneurs, we argue that user entrepreneurs' perceived passion, product innovativeness, and need similarity with potential backers mediate the relationship between user entrepreneurship and crowdfunding performance. Our results from a field study using a sample of crowdfunded ventures support these assertions. We validate these results and measures using both survey and experimental methods. This is one of the first studies to develop a multi-theoretical framework for user entrepreneurship, and the first to provide an underlying theoretical explanation for the superior crowdfunding performance of user entrepreneurs.
This paper combines general definitions of innovation applicable in all economic sectors with a systems approach, to develop a conceptual framework for the statistical measurement of innovation. The resulting indicators can be used for monitoring and evaluation of innovation policies that have been implemented, as well as for international comparisons. The extension of harmonised innovation measurement to all economic sectors has implications for innovation research and for policy learning.
The third edition of Michael Baker's popular text again starts from the premise that the development of marketing depends on the integration of theory and practice and that if marketing is to achieve the transition from art to applied science, it must establish a sound theoretical foundation in its own right. The book has been thoroughly updated to take account of new developments and many new contributions from leading marketing academics have been added including 13 entirely new chapters covering areas such as relationship marketing, marketing and Eastern Europe and Market Segmentation. The book will be useful to students at undergraduate and MBA level seeking a thorough understanding of the development of marketing theory and practice. It makes an excellent follow-up to Michael Baker's Marketing: An Introduction.
Applied economists have been trying to sell businesses on the value of demand-based pricing for many years. Their arguments promoting demand-based pricing have not been particularly persuasive and cost-based pricing continues to be a dominant price-setting method. This paper suggests four changes that may lead more firms to use demand principles when they set prices. Applied economists should acknowledge the benefits of other price-setting processes, shift their focus from profit-optimization to profit-improvement opportunities (e.g., increasing price so it is closer to the demand function), develop pricing heuristics that better meet firm needs, and add new pricing topics to classroom discussions.
Given the rising role of users in innovation processes and the increasing amount of research in this field the aim of this paper is to explore the limits of our understanding of the user innovation (UI) concept. In doing so, the study addresses four basic questions: (1) Why do users create and share innovation? (2) Who is the user-innovator? (3) What type of innovation do users create? (4) How do users innovate? The results of a systematic literature review identified the main research streams on user innovation, together with weaknesses of past research and perspectives for future studies.
"Early access" is a release strategy for software that allows consumers to purchase an unfinished version of the software. In turn, consumers can influence the software development process by giving developers early feedback. This early access model has become increasingly popular through digital distribution platforms, such as Steam which is the most popular distribution platform for games. The plethora of options offered by Steam to communicate between developers and game players contribute to the popularity of the early access model. The model is considered a success by the game development community as several games using this approach have gained a large user base (i.e., owners) and high sales. On the other hand, the benefits of the early access model have been questioned as well.
In this paper, we conduct an empirical study on 1,182 Early Access Games (EAGs) on the Steam platform to understand the characteristics, advantages and limitations of the early access model. We find that 15% of the games on Steam make use of the early access model, with the most popular EAG having as many as 29 million owners. 88% of the EAGs are classified by their developers as so-called "indie" games, indicating that most EAGs are developed by individual developers or small studios.
We study the interaction between players and developers of EAGs and the Steam platform. We observe that on the one hand, developers update their games more frequently in the early access stage. On the other hand, the percentage of players that review a game during its early access stage is lower than the percentage of players that review the game after it leaves the early access stage. However, the average rating of the reviews is much higher during the early access stage, suggesting that players are more tolerant of imperfections in the early access stage. The positive review rate does not correlate with the length or the game update frequency of the early access stage.
Based on our findings, we suggest game developers to use the early access model as a method for eliciting early feedback and more positive reviews to attract additional new players. In addition, our findings suggest that developers can determine their release schedule without worrying about the length of the early access stage and the game update frequency during the early access stage.
This article investigates the development and current state of pricing strategy research by undertaking a content analysis of 515 articles published in leading academic journals between 1995 and 2016. The results suggest several developments in research focus and methodology; recent research has focused more strongly on services and applies more rigorous research designs. The results also indicate a persistent focus on consumer markets and economic theories, as well as an increasing consideration of demand-side respondents, at the expense of supply-side respondents. An important feature of this review is a set of actionable takeaways, with both theoretical and methodological implications for pricing strategy research.
Platforms have evolved beyond just being organized as multi-sided markets with complementors selling to users. Complementors are often unpaid, working outside of a price system and driven by heterogeneous sources of motivation — which should affect how they respond to platform growth. Does reliance on network effects and strategies to attract large numbers of complementors remain advisable in such contexts? We test hypotheses related to these issues using data from 85 online multi-player game platforms with unpaid complementors. We find that complementor development responds to platform growth even without sales incentives, but that attracting complementors has a net zero effect on on-going development and fails to stimulate network effects. We discuss conditions under which a strategy of using unpaid crowd complementors remains advantageous.
Innovation has traditionally been seen as the province of producers. However, theoretical and empirical research now shows that individual users—consumers—are also a major and increasingly important source of new product and service designs. In this paper, we build a microeconomic model of a market that incorporates demand-side innovation and competition. We explain the conditions under which firms find it beneficial to invest in supporting and harvesting users’ innovations, and we show that social welfare rises when firms utilize this source of innovation. Our modeling also indicates reasons for policy interventions with respect to a mixed user and producer innovation economy. From the social welfare perspective, as the share of innovating users in a market increases, profit-maximizing firms tend to switch “too late” from a focus on internal research and development to a strategy of also supporting and harvesting user innovations. Underlying this inefficiency are externalities that the producer cannot capture. Overall, our results explain when and how the proliferation of innovating users leads to a superior division of innovative labor involving complementary investments by users and producers, both benefitting producers and increasing social welfare.
In observational studies with an aim of assessing treatment effects or comparing groups of patients, several approaches could be employed. Often baseline characteristics of the patients may be imbalanced between the groups and adjustments are needed to account for this. It can be accomplished either via appropriate regression modeling or, alternatively, by conducting a matched pairs study. The latter is often chosen because it makes the groups appear comparable. In this article, we considered these two options in terms of their ability to detect a treatment effect in time-to-event studies. Our investigation shows that Cox regression model applied to the entire cohort is often a more powerful tool in detecting treatment effect as compared to a matched study. Real data from a hematopoietic cell transplantation study is used as an example.
Evidence from past research and insights from an exploratory investigation are combined in a conceptual model that defines and relates price, perceived quality, and perceived value. Propositions about the concepts and their relationships are presented, then supported with evidence from the literature. Discussion centers on directions for research and implications for managing price, quality, and value.
In their effort to differentiate themselves from cost-driven rivals, many industrial companies are beginning to serve their customers through value-based offerings. Such companies often engage actively in collaborative value creation with their customers. To capture a fair share of the value created, they need to adopt a value-based pricing approach. Therefore, value-driven competition necessitates value-based pricing (VBP). The present study explores the barriers to exercising value-based pricing and suggests ways to overcome those obstacles in putting value-based pricing into action in B2B sales. The study is implemented as an exploratory multi-case study applying an abductive research methodology. Our cases show that industrial sellers try to understand and influence their customers' desired value perception, influence customer-perceived value (CPV), and improve their bargaining position as means to overcome these barriers to improved value capture. Hence, our findings deepen the current understanding of value-based pricing in industrial buyer–seller relationships. In doing so, it contributes to the literature on customer value, organizational capabilities, business models, and sales management in previously unexplored areas. Moreover, the study provides guidance to business practitioners willing to develop value-based pricing as part of their business model.
Platforms have evolved beyond just being organized as multi-sided markets with complementors selling to users. Complementors are often unpaid, working outside of a price system and driven by heterogeneous sources of motivation—which should affect how they respond to platform growth. Does reliance on network effects and strategies to attract large numbers of complementors remain advisable in such contexts? We test hypotheses related to these issues using data from 85 online multi-player game platforms with unpaid complementors. We find that complementor development responds to platform growth even without sales incentives, but that attracting complementors has a net zero effect on on-going development and fails to stimulate network effects. We discuss conditions under which a strategy of using unpaid crowd complementors remains advantageous.
Purpose
– How do pricing methods affect firm performance? From both an academic as well as a managerial perspective this question is important. The literature is silent on the relationship between pricing approach and company performance. The aim of this paper is to address this research gap.
Design/methodology/approach
– To address this practical and theoretical deficit, the authors surveyed 1,812 professionals involved in pricing to measure the influence of pricing approach on firm performance.
Findings
– The authors find a positive relationship between value‐based pricing (but not competition‐based pricing) and firm performance. Furthermore, the authors find that the three pricing orientations differently influence firm pricing capabilities, which in turn are positively related to firm performance. This paper is thus the first paper documenting a positive relationship between value‐based pricing and firm performance through a quantitative research design.
Originality/value
– These findings have important theoretical as well as practical implications and suggest that all firms, regardless of size, industry or geography, benefit from value‐based pricing.
Innovation has traditionally been seen as the province of producers. However, theoretical and empirical research now shows that individual users—consumers—are also a major and increasingly important source of new product and service designs. In this paper, we build a microeconomic model of a market that incorporates demand-side innovation and competition. We explain the conditions under which firms find it beneficial to invest in supporting and harvesting users’ innovations, and we show that social welfare rises when firms utilize this source of innovation. Our modeling also indicates reasons for policy interventions with respect to a mixed user and producer innovation economy. From the social welfare perspective, as the share of innovating users in a market increases, profit-maximizing firms tend to switch “too late” from a focus on internal research and development to a strategy of also supporting and harvesting user innovations. Underlying this inefficiency are externalities that the producer cannot capture. Overall, our results explain when and how the proliferation of innovating users leads to a superior division of innovative labor involving complementary investments by users and producers, both benefitting producers and increasing social welfare.
This paper was accepted by Lee Fleming, entrepreneurship and innovation.
Purpose
– The purpose of this paper is to test the relationship between organizational antecedents, pricing capabilities, and firm performance.
Design/methodology/approach
– Quantitative survey of 748 managers from mostly large companies globally.
Findings
– It was found that the following five key organizational resources (the 5 Cs) – center-led price management, organizational confidence, championing behaviors, organizational change capacity, and pricing capabilities – positively influence firm performance. Furthermore, it was found that center-led price management, organizational change capacity, and championing behaviors act as important antecedents to pricing capabilities and, except for the former, to organizational confidence. The authors also examine interaction and mediation effects.
Originality/value
– The results thus suggest that generic organizational factors – namely center-led price management – as well as highly idiosyncratic firm, specific capabilities – namely organizational confidence, championing behaviors by top management, organizational change capacity, and pricing capabilities – are key requirements to increase firm performance via pricing.
Do-it-yourself (DIY) is an increasingly popular consumer behavior, but little is known about this large consumer segment. We undertake a depth interview study and review diverse literatures to develop a conceptual model of DIY behavior that explores the reasons why consumers DIY and the benefits they receive. The purpose of the model is to improve our understanding of a consumer segment that, in many ways, behaves differently from typical consumers. Research propositions are derived and discussions of implications and ideas for future research follow.
We study how an individual’s exposure to external information regulates the evaluation of entrepreneurial opportunities and entrepreneurial action. Combining data from interviews, a survey, and a comprehensive web log of an online user community spanning eight years, we find that technical information shaped opportunity evaluation, and social information about user needs drove individuals to entrepreneurial action. Our empirical findings suggest that reducing demand uncertainty is a central factor regulating of entrepreneurial action, an insight that received theories of entrepreneurial action have so far overlooked.
Digital platforms are becoming increasingly important for household sector innovators that seek support for the innovation process and that want to make innovations available to large audiences. Innovation development and diffusion is especially challenging for first-time innovators as they cannot build on experiences from prior innovations. We argue that first-time innovators can increase the diffusion success of their innovations by engaging in pre-innovation platform activities. We use the context of the 3D printing platform Thingiverse to show that a consumer's pre-innovation platform activity increases innovation diffusion success and that frequency, quality and relatedness of a consumer's pre-innovation platform activity promotes this effect. We find support that innovation quality, the use of recombinant innovations, and innovation documentation are three mechanisms through which pre-innovation platform activities translate into higher diffusion success of consumers’ first innovation.
Using two studies, the author examines the influence of the inferred motive for a firm's price increase on perceptions of price unfairness. Prior to the research presented here, the only established causal antecedent of perceived price unfairness was increased relative profit. In Study 1, the author extends the existing research by demonstrating that the inferred motive, as well as inferred relative profit, provides causal explanation of perceived price unfairness. When participants inferred that the firm had a negative motive for a price increase, the increase was perceived as significantly less fair than the same increase when participants inferred that the firm had a positive motive. In addition, the author shows in Study 2 that the firm's reputation can influence the inferred motive, thereby altering perceptions of price unfairness. Specifically, participants sometimes gave a firm with a good reputation the benefit of the doubt when inferring motive. If the “good” firm did not profit from the price increase, participants inferred significantly more positive motives than if it did profit. The firm with a poor reputation did not receive this benefit; inferred motive was equally negative regardless of whether the firm profited from the price increase. Together, these studies provide evidence that consumer inferences of the motive for a price increase influence the perceived fairness of the increase. Furthermore, reputation is shown to moderate the effect of inferred relative profit on inferred motive. Finally, analyses show that perceived unfairness leads to lower shopping intentions and demonstrate that perceived unfairness mediates the effects of inferred motive and relative price on consumers’ shopping intentions.
Four fundamental issues serve to establish the identity of the field of marketing, distinguish it from other fields and disciplines, and compel further research inquiry. These issues ask (1) How do customers and consumers really behave? (2) How do markets function and evolve? (3) How do firms relate to their markets? and (4) What are the contributions of marketing to organizational performance and societal welfare? These issues also serve as the organizing framework for this special issue
Although the questions posed by these fundamental issues are durable, new answers will need to be sought to accommodate the following trends and disruptions that are shaping the direction of marketing: (1) the connected knowledge economy; (2) globalizing, converging, and consolidating industries; (3) fragmenting and frictionless markets; (4) empowered customers and consumers; and (5) adaptive organizations. These new directions challenge academic marketing to provide meaningful measures, inferences, and calibration; understand functional interfaces; and rethink the role of theory.
Though price and quality are recognized as important tactical and strategic variables for a marketing manager, few empirical data are available on the behavior of price or the correspondence between price and quality over time. The authors report results for three hypotheses derived from product life cycle theory, dynamic pricing policy, and economic information theory about price trends, price convergence, and the correspondence between price and quality among brands in 62 durable product forms. Results strongly confirm the hypotheses that prices converge as well as decrease in real terms. The decline in price variation apparently results from a narrowing of prices by all relevant competitors. Brands entering or exiting a category counterbalance one another and are nearly as likely to be priced below as above a category mean. Reduced correspondence between price and quality levels over time suggests that as pricing flexibility declines, competition may occur in the form of promotional expenditures rather than relative quality improvements. Implications of these findings for marketing strategy and consumer welfare are discussed.
Makerspaces are open communities for tinkering, innovating, and socializing: They are equipped with tools and training that support “making” by participants. It has been argued that makerspaces can be a powerful vehicle to enhance both innovation and innovation diffusion by consumers. This research note offers initial empirical evidence for these claims. Through a survey of 558 participants drawn from makerspaces worldwide, the study shows that the innovation rate is about 53% and that the diffusion rate is about 18% among these individuals – substantially higher than the innovation and diffusion rates found in national innovation surveys of general populations, i.e. individuals who innovate independently at home at their own discretion.
These findings doubtless reflect both a selection and a treatment effect: Individuals inclined or motivated to innovate and/or diffuse, tend to join makerspaces; and once individuals do participate, the rich resources they find in makerspaces most likely will improve the opportunities to innovate and/or diffuse successfully. Since innovation by consumers is both personally and economically valuable, these findings support the case for further research into the nature of successful makerspaces, and suggest the potential social welfare value of public investment.
This essay draws on research undertaken as part of a research network project exploring the growth of independent game producers in recent years and the associated changes in the technological and economic conditions of the games industry in the UK, Europe, and the North American continent. It reflects on the possibilities of and challenges to a critical and creative maturing of video games as a cultural medium, evaluating these in the context of contemporary developments in global technoculture and the digital economy. Bernard Stiegler’s critical analysis of hyperindustrial consumer culture is mobilized in evaluating the dreams for an indie future of video games as a creative force in digital cultural transformation.
Consumer reviews may reflect not only perceived quality but also the difference between quality and price (perceived value). In markets where product prices change frequently, these price-influenced reviews may be biased as a signal of product quality when used by consumers possessing no knowledge of historical prices. In this paper, we develop an analytical model that examines the impact of price-influenced reviews on firm optimal pricing and consumer welfare. We quantify the price effects in consumer reviews for different formats of review systems using actual market prices and online consumer ratings data collected for the digital camera market. Our empirical results suggest that unidimensional ratings, commonly used in most review systems, can be substantially biased by price effects. In fact, unidimensional ratings are more closely correlated with ratings of product value than ratings of product quality. Our findings suggest the importance for firms to account for these price effects in their overall marketing strategy and suggest that review systems could better serve consumers by explicitly expanding review dimensions to separate perceived value and perceived quality.
To investigate how cognitive biases inhibit value-based pricing practices among managers in business markets, this article considers five different cognitive biases—perceived lack of control, herding, fixed-pie bias, ambiguity aversion, and egocentric fairness bias—and their effects on value-based pricing. Despite recent calls for more research on the psychological aspects of pricing, few studies have focused on business markets. Drawing on research in psychology and marketing for its theoretical foundation, this overview extends the limited body of existing research. The article's key contribution is to explain how psychological challenges affect value-based pricing practices, with implications and suggestions for further research.
This chapter introduces the complex area of software cost estimating. It discusses what software is and the typical work breakdown structure (WBS) elements in a typical software cost estimating task. The chapter talks about software costing characteristics and concerns, and the process used to estimate the cost. It focuses on source lines of code (SLOC) and function points (FP), the two primary means to determine the size of a software project, rather than using the traditional independent variables such as power, weight, or frequency that one uses in hardware programs. One of the many unique aspects of software cost estimation includes only having development and maintenance costs phases and that there are no learning curves associated with software development. The chapter describes the problems with software cost growth, and also discusses some software cost estimating tools that are available on the commercial market.
Value creation and value appropriation are fundamental strategic processes. Both can be analyzed at the level of the individual manager, an organization or at the systemic level. On the organizational level, empirical research so far has put strong emphasis on aspects of value creation, while value appropriation has received less attention. We analyze value appropriation through the organizational implementation of pricing processes in the context of formalization, specialization, centralization, dispersion of influence, and top-management involvement in firms' pricing organization. Through a large-scale exploratory study of 419 European companies in the B2B area, we identify five empirical organizational configurations of pricing organization for value appropriation. Testing the effects of pricing configurations relating to pricing performance as well as overall firm performance reveals that more systematic approaches to pricing organization significantly improve value appropriation outcomes.
When business executives and economists think about whether developing an innovation will be worthwhile, they tend to focus on the economic value of the outcome of the innovation process. “Will we earn enough profit from using or selling X innovation to justify the money and time required to develop it?” is, in effect, the question they ask.
Extant research underscored that user-innovators, especially those belonging to communities can be excellent collaborators with firms seeking new ideas. The two characteristics significant for commercial success are community membership and information disclosure. However, recent national surveys in Japan and the U.S. reveal that these characteristics are a part of the minority group of user-innovators. This study aims to investigate the differences in characteristics and motives between such a minority and the majority of user-innovators. We conducted a survey in Japan and classified 579 user-innovators into three groups - social, revealing, and silent innovators. Significant differences were observed in demographic variables, innovation adoption rates, and motives for product development. Based on the results, this study discusses how firms can effectively co-opt and integrate each type of user-innovator into their organizations' innovation processes.
The success of the Linux operating system has demonstrated the viability of open-source software, an alternative form of software development that challenges traditional assumptions about software markets. Understanding why developers participate in open-source projects is crucial for assessing the impact of open-source software. Their motivations fall into two broad categories: internal factors (e.g., intrinsic motivation, altruism) and external rewards (e.g., expected future returns, personal needs). The results of a survey administered to open-source programmers are summarized.
Judgment and decision-making research has a long tradition in management and represents a substantial stream of research in entrepreneurship. Despite numerous reviews of this topic in the organizational behavior, psychology, and marketing fields, this is the first review in the field of entrepreneurship. This absence of a review of entrepreneurial decision making is surprising given the extreme decision-making context faced by many entrepreneurssuch as high uncertainty, time pressure, emotionally charged, and consequential extremesand the large number of studies in the literature (e.g., 602 articles in our initial screen and 156 articles in a refined search). In this review, we (1) inductively categorize the articles into decision-making topics arranged along the primary activities associated with entrepreneurshipopportunity assessment decisions, entrepreneurial entry decisions, decisions about exploiting opportunities, entrepreneurial exit decisions, heuristics and biases in the decision-making context, characteristics of the entrepreneurial decision maker, and environment as decision context; (2) analyze each context using a general decision-making framework; (3) review and integrate studies within and across decision-making activities; and (4) offer a comprehensive agenda for future research. We believe (hope) that this proposed review, integration, and research agenda will make a valuable contribution to management scholars interested in decision making and/or entrepreneurship.
Though price and quality are recognized as important tactical and strategic variables for a marketing manager, few empirical data are available on the behavior of price or the correspondence between price and quality over time. The authors report results for three hypotheses derived from product life cycle theory, dynamic pricing policy, and economic information theory about price trends, price convergence, and the correspondence between price and quality among brands in 62 durable product forms. Results strongly confirm the hypotheses that prices converge as well as decrease in real terms. The decline in price variation apparently results from a narrowing of prices by all relevant competitors. Brands entering or exiting a category counterbalance one another and are nearly as likely to be priced below as above a category mean. Reduced correspondence between price and quality levels over time suggests that as pricing flexibility declines, competition may occur in the form of promotional expenditures rather than relative quality improvements. Implications of these findings for marketing strategy and consumer welfare are discussed.
Innovation contest communities are virtual tools for corporations to integrate external knowledge and creativity into the innovation process. Built on both the principle of competition and the advantages of a collaborative community, innovation contest communities constitute special interaction phenomena. The present study explores how different co-operation behaviours, namely reciprocal giving, initial altruistic giving and free-riding, influence the quality of participants' ideas on an open virtual contest platform with more than 2,000 members and more than 4,000 submissions. Our findings show that reciprocity and free-riding are substantial behavioural elements of innovation contest communities leading to different outcomes regarding quality of submitted ideas. With this study, we contribute to a better theoretical understanding of distinctive types of co-operation and free-riding among individuals in the context of open innovation, extending theories of the evolution of co-operation.
The collection and analysis of behavioral telemetry in digital games has in the past five years become an integral part of game development. One of the key challenges in game analytics is the development of methods for characterizing and predicting player behavior as it evolves over time. Characterizing behavior
is necessary for monitoring player populations and gradually improve game design and the playing experience. Predicting behavior is necessary to describe player engagement and prevent future player churn. In this paper, methods and theory from kernel archetype analysis and random process models are utilized
to evaluate the playtime behavior, i.e. time spent playing specific games as a function of time, of over 6 million players, across more than 3000 PC and console games from the Steam platform, covering a combined playtime of more than 5 billion hours. A number of conclusions can be derived from this large-scale analysis, notably that playtime as a function of time, across the thousands of games in the dataset, and irrespective of local differences in the playtime frequency distribution, can be modeled using the same model: the Weibull distribution. This suggests that there are fundamental properties governing player engagement as it evolves over time, which we here refer to as the Playtime Principle. Additionally, the analysis shows that there are distinct clusters, or archetypes, in the playtime frequency distributions of the investigated games. These archetypal groups correspond to specific playtime distributions. Finally, the analysis reveals information about player behavior across a very large dataset, showing for example that the vast majority of games are players
for less than 10 hours, and very few players spend more than 30-35 hours on any specific game.
When individual consumers develop products for their own use, they in part expect to be rewarded by the use value of what they are creating (utilitarian user motives), and in part expect to be rewarded intrinsically by such things as the fun and learning experience derived from creating it (hedonic user motives). This paper shows a first-of-type study to understand the relationship between individual consumers' motives to innovate and the novelty and utility of the solutions they develop. The theoretical framework integrates self-determination theory and goal-setting theory.The major findings of this study are that utilitarian user motives positively affect the utility of user-developed innovations. In contrast, hedonic user motives drive solution novelty; the more an innovator is “in it for fun,” the more novel the solution developed. However, hedonic user motives also have an inverted U-shaped relationship with solution utility. When the dominant motive for developing an innovation is the joy of the creative process rather than use value, the utility of what is developed is negatively affected. These findings are of research interest, and can be of significant practical interest to producers hoping to benefit from user-developed innovations. For the first time, it has been possible to show that the adjustment of hedonic rewards, for example by means such as gamification, can affect the nature and utility of solutions individuals create.
Innovative new ventures are at the heart of economic development, particularly when these startups are created by employee, academic, and user innovators. We synthesize across literature streams examining each phenomena to document distinctions between firms originating from different “knowledge contexts.” We then integrate the knowledge context into Teece's (1986) theoretical framework identifying factors that impact a firm's ability to profit from innovation. Doing so allows us to develop stylized facts and predictive propositions pertaining to differences in the innovative contributions, roles played in shaping industrial dynamics and evolution, and performance outcomes for startups stemming from the three entrepreneurial origins. These propositions provide unique insights into the causes of patterns of industry evolution, contribute to theory in the areas of entrepreneurship and industry evolution, and yield important policy and managerial implications.
Although pricing is one of the strongest drivers of profitability, little empirical research has examined how a firm should organize pricing internally. This research draws on the information-processing view of organizational design to conceptualize a framework of how firms organize their pricing authority both within the sales function and across the sales, marketing, and finance functions. The authors find a nonlinear, inverted U-shaped relationship between the vertical delegation of pricing authority and profitability as well as a positive relationship between the horizontal dispersion of pricing authority across sales, marketing, and finance and profitability. Another key finding is a positive interaction between vertical delegation and horizontal dispersion, indicating that firms need to jointly design vertical delegation and horizontal dispersion. In addition, the results identify price-related market dynamism as a moderator of the horizontal dispersion of the pricing authority-profitability relationship and emphasis on margin-based incentives as a moderator of vertical delegation of the pricing authority-profitability relationship. The authors also analyze the relationship between the organizational design of pricing authority and sales growth.
In this paper we report upon a first empirical exploration of the relative efficiency of innovation development by product users vs. product producers. In a study of over 50 years of product innovation in the whitewater kayaking field, we find users in aggregate were approximately 3× more efficient at developing important kayaking product innovations than were producers in aggregate. We speculate that this result is driven by what we term “efficiencies of scope” in problem-solving. These can favor an aggregation of many user innovators, each spending a little, over fewer producer innovators benefitting from higher economies of scale in product development. We also note that the present study explores only one initial point on what is likely to be a complex efficiency landscape.
Thirty years ago, Hirschman and Holbrook (1982) advocated greater attention to hedonic consumption and the myriad ways in which consumers seek pleasure and enjoyment. A thorough review finds that the topic has much appeal and that consumer research has made significant progress toward understanding some of its parameters. However, many questions remain unanswered, particularly with regard to understanding the sources of pleasure, the manner in which consumers seek it, and the ways in which consumers might alter their hedonic consumption decisions to maximize pleasure and happiness. We assess three decades of research on hedonic consumption, emphasizing areas of greatest potential for future exploration.