The Determinants of Seller-Buyer Interactions during New Product Development in Technology-Based Industrial Markets

Abstract

A growing body of literature indicates that the new product development (NPD) process in technology-based, industrial markets is characterized by collaborative seller-buyer relationships. Unfortunately, the extant literature is deficient in some significant ways. For example, there is no theoretical framework that explicates the content of these relationships. Also, there is little empirical research on the antecedents or consequences of these relationships. Therefore, managers seeking guidance on how to manage their NPD relationships have lacked appropriate insights. Not surprisingly, ineffective relationship management is a major contributor to new product failure in such settings. Against this background, this study develops and tests a model of seller-buyer interactions during NPD. The model is based on the relationship marketing literature and is rooted in Transaction Cost Analysis (TCA). It was tested using data from 296 small to mid-sized firms in a variety of technology-based, industrial markets. It specifies product co-development, education, and post-installation product knowledge generation as three key behavioral dimensions that characterize seller-buyer interactions during NPD. Our results indicate that the intensity with which these dimensions are undertaken vary with buyer-related (i.e., perceived buyer knowledge and prior relationship history) and innovation-related (i.e., product customization and innovation discontinuity) characteristics. For example, perceived buyer knowledge has a positive impact on product co-development while innovation discontinuity has a positive impact on education. Further, we find that a seller's satisfaction with undertaking these behaviors is moderated by the technological uncertainty in the seller's industry. As a case in point, satisfaction with undertaking product co-development is reduced when technological uncertainty is high. Collectively, the overall support we find for our model can help NPD managers optimize their relationships with buyers during NPD.

Knowledge management and innovation in knowledge-based and high-tech industrial markets: The role of openness and absorptive capacity

“…In this sense, as Athaide andZang (2011) or Huggins (2010) remark, the seller-buyer and inter-organizational network interactions are essential in new product development in technology-based industrial markets. This reasoning points directly to a new innovation management paradigm, labeled as 'collaborative innovation' or 'open innovation' (Chesbrough, 2003), where firm's knowledge management for innovation, knowledge and intellectual capital exploration, retention, and exploitation, are inside and outside firm's boundaries (Lichtenthaler, 2009).…”

“…Firms that seek to gain sustained competitive advantage through knowledge utilization depend on their absorptive capacity. Close interactions between the firm and its customers and lead users during the new product developments increase the chance of product innovation successfully (Athaide and Zang, 2011), by understanding buyer's needs and preferences. An earlier and deeper supplier involvement emerges as one of the most effective ways to improve new product development (Clark, 1989).…”

Boundaries of R&D collaboration

“…As the existing empirical work on organizational boundaries in an R&D context typically utilizes single theories, such as transaction cost efficiency (Athaide and Zhang, 2011;Eng and Wong, 2006), competence (Verona, 1999;Yasuda, 2005), power (Gulati and Sytch, 2007;Mayer and Nickerson, 2005), or organizational identity (Tripsas, 2009), many of the earlier studies neglect the interplay between different boundary conceptions, particularly in the context of R&D relationships. This is surprising because, first, boundary decisions play a particularly important role in R&D relationships, where knowledge asymmetries are great, and second, because of the emphasis placed on the interplay between boundary conceptions by Santos and Eisenhardt (2005, p. 503), who suggested that the conceptions may coevolve and exert a joint impact.…”

Utilizing customer knowledge in innovation: antecedents and impact of customer involvement on new product performance

“…But very few studies have taken the firm's perspective to look at the organizational mechanisms needed to facilitate customer involvement (Foss et al 2011). Table 1 presents a summary of recent empirical Meuter et al 2005 • Competences and experiences Auh et al 2007;Eisingerich et al 2014;Guo et al 2013;Meuter et al 2005;Xie et al 2008 • Locus of control and role clarity Büttgen et al 2012;Dong et al 2008;Guo et al 2013;Meuter et al 2005;Xie et al 2008 • Relationship with the firm such as satisfaction and commitment Auh et al 2007;Dong et al 2008;Eisingerich et al 2014 • Perceptions of communication, interaction and goal congruence with service providers Auh et al 2007;Guo et al 2013 • Expected benefits of innovation Franke et al 2006 • Psychological and social benefits such as enjoyment, recognition and self enhancement Jeppesen and Frederisken 2006;Nambisan and Baron 2009 • Knowledge, skills, experiences and resources Franke et al 2006;Füller et al 2008;Füller et al 2012;Magnusson 2009;Mahr and Lievens 2012;Schreier and Prügl 2008;Schweitzer et al 2014 • Locus of control Schreier and Prügl 2008;Smets et al 2013 • Relationship with the firm such as trust and closeness Athaide and Zhang 2011;Füller et al 2008;Mahr et al 2014;Kosonen et al 2013 • Perceptions of the co-creation process such as openness, fairness and support Balka et al 2014;…”