All Publications
Digital technologies enable employees at all levels to participate in distributed decision-making. We examine the design principles, benefits, and challenges of a new type of distributed decision-making: internal crowdfunding. We build on a five-year case study of internal crowdfunding contests at Siemens AG to deepen our understanding of the design principles of internal crowdfunding and its potential for corporate innovation. Based on this data, we discuss the three design choices in internal crowdfunding (contributors, configuration, and control), find four key benefits (decentralization, cross-collaboration, institutionalization, and intrapreneurship), and identify three key challenges (dealing with rejected ideas, evaluation biases, and implementation and follow-on funding) and potential actions by managers to overcome them. The paper contributes to both the emerging literature on internal crowdfunding and the literature on distributed decision-making.
This study investigates the sources of disruptive innovation. The disruptive innovation literature suggests that these do not originate from existing customers, in contrast to what is predicted by the user innovation literature. We compile a unique content-analytical dataset based on 60 innovations identified as disruptive by the disruptive innovation literature. Using multinomial and binomial regression, we find that 43% of the sample disruptive innovations were originally developed by users. Disruptive innovations are more likely to originate from users (producers) if the environment has high turbulence in customer preferences (technology). Disruptive innovations that involve high functional (technological) novelty tend to be developed by users (producers). Users are also more likely to be the source of disruptive process innovations and to innovate in environments with weaker appropriability. Our article forges new links between the disruptive and the user innovation literatures, and offers guidance to managers on the likely source of disruptive threats.
Although many organizations strive for radical or disruptive new ideas, many fall short of their goals. We propose that a primary reason for this failure is rooted in the individuals responsible for innovation: while they seek novel ideas, they prefer familiar ones. While prior research shows that individuals are biased against ideas with high objective novelty, it has overlooked the role of subjective novelty, i.e., the extent to which an idea is novel or unfamiliar to an individual idea evaluator. In this paper, we investigate how such subjective familiarity with an idea shapes idea evaluation in innovation. Drawing on research from psychology and marketing on the mere exposure effect, we argue that familiarity with an idea positively affects the evaluation’s outcome. We present two field studies and one laboratory study that support our hypothesis. This study contributes to the understanding of cognitive biases that affect innovation processes.
Research Summary
Companies are increasingly opening up decision-making, involving employees on all levels in distributed—and purportedly “hierarchy-free”—decision processes. We examine how hierarchy reaches into such “democratized” systems, arguing that it is a source of homophily that biases idea evaluation decisions. Using a data set from internal crowdfunding at one of the world's largest industrial manufacturers, we show that idea evaluators overvalue hierarchically similar others' ideas. Competition in the form of lateral closeness dampens this bias, whereas uncertainty in the form of novelty amplifies this bias. We contribute to the literatures on decision biases in centralized versus distributed innovation and on structural similarity as a driver of employee behaviors.
Managerial Summary
Many companies are starting to involve employees on all levels in strategic decisions, so as to curb hierarchical rigidities and integrate multiple perspectives. However, such distributed decision-making opens the door to new biases and, ultimately, suboptimal strategic decisions. In the context of internal crowdfunding at a large industrial manufacturer, we show that employees evaluate hierarchically similar others' ideas overly favorably. Thus, hierarchy is not just a source of rivalry, but also of identification, leading to favoritism among hierarchical peers. Further, employees are particularly likely to assess ideas based on hierarchical similarity rather than content if the ideas are novel and therefore hard to evaluate. We provide suggestions for the design of distributed decision-making systems.
In diesem Kapitel unterscheiden wir zwei Arten von Start-ups in der Logistik: nutzerbasierte und produzientenbasierte Start-ups. Sehr wichtig für den Erfolg eines Start-ups ist, neben der Geschäftsidee selbst, auch der Zugang zu Ressourcen. Ziel des Kapitels ist es, nutzer- oder produzentenbasierte deutsche Logistik-Start-ups zu analysieren und für ihren Erfolg benötigte Ressourcen zu identifizieren. Dazu wurden Interviews mit 19 deutschen Logistik-Start-ups durchgeführt, auf deren Basis erste Hypothesen formuliert werden. Die Ergebnisse legen nahe, dass Innovation in deutschen Start-ups eher produzentenbasiert ist, beide Arten von Innovation (sowohl produzenten- als auch nutzerbasierte) in der Logistik aber erfolgreich sein können. In beiden Fällen scheint bei den erfolgreichen Start-ups jedoch eine enge Verknüpfung mit der Logistikindustrie vorzuliegen, ob als Zulieferer von komplementären Ressourcen oder als Kunde.
Absorbing external knowledge is crucial for innovation within the organization. One way of tapping external knowledge sources is to rely on employees who reach out across the firm's boundary to external stakeholders and address knowledge sets located beyond the organizational boundary. However, such employees are likely to identify with the stakeholders they reach out to which exposes them to potentially conflicting demands—with positive or negative effects for their employing organization. We investigate whether and how their dual identification with the organization and with users, and the potential identity conflicts this engenders, affects their job satisfaction and innovativeness. We study a sample of 243 employees in two industries, revealing that perceived conflict between organizational identification and user identification detracts from job satisfaction if and only if employees are strongly identified with both targets. We find also that identity conflict is indirectly and negatively related to innovative work behavior through job satisfaction. Our paper contributes to the literature on the benefits and risks of employee ties to external stakeholders. We contribute also to research on embedded users by elucidating under what conditions they are most valuable to their employing organizations.
A growing body of literature has been focusing on the question how individuals in organizations combine exploitation and exploration so as to help organizations become ambidextrous. We take a knowledge-based perspective to understand employees’ explorative and exploitative behaviors and conceptualize knowledge-based precursors to these behaviors along two dimensions: (1) focus on internal and external knowledge (level of existing knowledge vs. absorptive capacity) and (2) knowledge domain (need vs. solution knowledge). This focus addresses two significant gaps in the ambidexterity research (Lavie et al. 2010; Raisch et al. 2009): (1) the tensions of focusing on internal vs. external knowledge and (2) the interactions between different knowledge domains.
Recent studies have identified that employees can be lead users of their employing firm's products, and valuable sources of product innovation, residing within organizational boundaries. We extend this line of thought by recognizing that employees can be lead users with regard to internal work processes. We define work process-related lead userness (WPLU) as the extent to which employees experience unsatisfied process-related needs ahead of others, and expect high benefits from solutions to these needs. We hypothesize a positive association with user innovation in the workplace, evidenced by the development of tools, equipment, materials and methods. We test a moderated mediation model delineating how and when WPLU is related to user innovation within organizational boundaries. Drawing on survey data from 104 employees and 13 supervisors in a forensic services organization, we find that WPLU contributes to user innovation via engagement in innovative work behavior, especially when employees have higher self-efficacy (perceived capability to overcome obstacles) and lower job autonomy (situational constraints on the job).
Extant research emphasizes that consumers use mass customization toolkits to create products they consider to be unique, and that perceived uniqueness is an important part of customer value. This research investigates the conditions of the customer's quest for uniqueness. It is motivated by the observation that decisions are often driven by others’ choices and a desire to fit in, rather than to be distinct. We hypothesize that consumers are more inclined to choose uniqueness for hedonic product attributes but tend toward conformity in utilitarian attributes, and that consumers’ need for uniqueness and product involvement moderate the choice. In a series of experiments, we find support for most hypotheses. We introduce conformity as a driver of choice behavior in mass customization toolkits and suggest that mass customization can best be seen as enabling consumers’ preferred mix of uniqueness and conformity. Our results also inform managerial practice, highlighting that mass customization toolkits should consider customers’ uniqueness and conformity requirements. We suggest reducing the number of utilitarian options while increasing the variety for hedonic attributes.
Abstract Innovation occurs when knowledge about unmet customer needs intersects with knowledge about technological solutions. Both knowledge types are often located outside the firm and need to be absorbed in order for innovation to occur. While there has been extensive research into absorptive capacity for solution knowledge, a necessary complement − absorptive capacity for new customer needs − has been neglected. In an individual-level study of 864 employees from a home appliance firm, we show that need absorptive capacity is theoretically and empirically distinct from solution absorptive capacity, and that both are positively associated with employee innovativeness. Interestingly, we find asymmetric extra-domain effects: prior solution knowledge is positively related to need absorptive capacity (cross-pollination effect), while prior need knowledge is negatively related to solution absorptive capacity (attenuation effect). We contrast the cognitive underpinnings of the two absorptive capacity types, contributing to emerging scholarly thinking on the domain-specificity and micro foundations of absorptive capacity.
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 study investigates the origins of disruptive innovation. According to the canonical model, disruptive innovations do not originate from existing customers - in contrast with what the user innovation literature would predict. We compiled a unique historical and content-analytic dataset based on 62 cases identified from the disruptive innovation literature. We found that 44% of the disruptive innovations in this sample were originally developed by users. Disruptive innovations are more likely to originate from users (producers) if the environment is characterized by high levels of turbulence in customer preferences (technology). Disruptive innovations involving high functional (technological) novelty, tend to be developed by users (producers). Users are also more likely to be the source of disruptive process innovations, and to innovate in weaker appropriability environments. Our paper is among the first to link the disruptive and user innovation literatures. We contribute to both and offer guidance to managers on the likely source of disruptive threats.
Viele Innovationen basieren auf der Initiative unzufriedener Nutzer. Die Messung und Modellierung dieser sogenannten User Innovation steckt allerdings noch in den Kinderschuhen, wie dieser Beitrag zeigt. Innovationen entstehen in den Forschungs- und Entwicklungsabteilungen großer Unternehmen oder in Start-ups. Etwas vereinfacht dargestellt, bestimmt dieses Verständnis bis heute das ökonomische, gesellschaftliche und politische Nachdenken darüber, wie unsere Volkswirtschaft innovativer, wachstumsstärker und wohlhabender werden kann. Komplementär zu diesem Verständnis etabliert sich zunehmend ein neues Paradigma, das jeden einzelnen Bürger als mögliche Quelle von Innovationen in den Fokus stellt. Das Forschungsfeld der User Innovation hat u.a. drei stilisierte Fakten zu Tage
To be successful innovators, organizations must select the best ideas for implementation. Extant research shows that idea selection is distorted by a number of biases, but has failed to consider hierarchy, a key element of organizations. We examine how hierarchical distance between an idea’s creator and its evaluator affects evaluation outcomes and thus advance three competing theoretical predictions based on homophily, competition, and status. To test our predictions, we use a unique dataset from an enterprise crowdfunding initiative at Siemens where 265 employees evaluated 77 ideas by allocating corporate funds, resulting in 20,405 evaluation dyads. We find that idea evaluations are more favorable if the idea creator is hierarchically similar to the evaluator, thus supporting the homophily perspective. Idea novelty amplifies this bias, inducing more social evaluations. Our findings are robust to various specifications and tests, and are absent in a subsample where idea creators remained anonymous. We contribute to the idea evaluation research and inform organizational idea selection process designs.
Abstract Empirical studies have shown that millions of individual users develop new products and services to serve their own needs. The economic impact of this phenomenon increases if and as adopters in addition to the initial innovators also gain benefits from those user-developed innovations. It has been argued that the diffusion of user-developed innovations is negatively affected by a new type of market failure: value that others may gain from a user-developed product can often be an externality to consumer-developers. As a result, consumer innovators may not invest in supporting diffusion to the extent that would be socially optimal. In this paper, we utilize a broad sample of consumers in Finland to explore the extent to which innovations developed by individual users are deemed of potential value to others, and the extent to which they diffuse as a function of perceived general value. Our empirical analysis supports the hypothesis that a market failure is affecting the diffusion of user innovations developed by consumers for their own use. Implications and possible remedies are discussed.
