The Adoption of Electronic Innovations with Indirect Network Externalities that Compete with Standalone Physical Products

The authors consider how a change in product form impacts the adoption decision for an innovative product based on digital technology. Examples of changes in product form often arise in products that feature indirect network externalities, such as MP3 players, PDAs and e‐readers. Existing research suggests that, for innovations with indirect network externalities, the consumer's hardware adoption decision is influenced by the availability of complementary products. However, these studies of complementary products tend to focus on products that exist only as complementary products, such as DVDs, CDs, and video games. This research focuses on the case of an innovative hardware product that uses digital complementary products that compete with standalone versions of the same products. The authors argue that high levels of experience with a standalone product that competes with an innovative hardware/software bundle should increase the consumer's appreciation of (1) the utilitarian benefits of the hardware/software bundle and (2) the hedonic benefits of the standalone product, some of which may not be transferable to the electronic hardware. An analysis of data collected from 549 potential adopters of e‐readers in Japan support these hypotheses. The findings have important implications for the design and marketing of digital innovations that involve a change in product form.

[1]  Cliff Lampe,et al.  The Benefits of Facebook "Friends: " Social Capital and College Students' Use of Online Social Network Sites , 2007, J. Comput. Mediat. Commun..

[2]  Mara Lederman,et al.  Software Exclusivity and the Scope of Indirect Network Effects in the U.S. Home Video Game Market , 2007 .

[3]  Maureen Morrin,et al.  Does it Make Sense to Use Scents to Enhance Brand Memory? , 2003 .

[4]  K. Pauwels,et al.  Effects of Word-of-Mouth versus Traditional Marketing: Findings from an Internet Social Networking Site , 2009 .

[5]  S. Stremersch,et al.  Indirect Network Effects in New Product Growth , 2007 .

[6]  J. Arndt.  Role of Product-Related Conversations in the Diffusion of a New Product , 1967 .

[7]  Robert M. Schindler,et al.  Internet forums as influential sources of consumer information , 2001 .

[8]  C. Fornell,et al.  Evaluating structural equation models with unobservable variables and measurement error. , 1981 .

[9]  N. Ellison,et al.  Social capital, self-esteem, and use of online social network sites: A longitudinal analysis , 2008 .

[10]  E. Rogers,et al.  Diffusion of innovations , 1964, Encyclopedia of Sport Management.

[11]  Richard L. Celsi,et al.  The Role of Involvement in Attention and Comprehension Processes , 1988 .

[12]  Kalle Lyytinen,et al.  Organizing for Innovation in the Digitized World , 2012, Organ. Sci..

[13]  Amiya K. Basu,et al.  Indirect Network Externality Effects on Product Attributes , 2003 .

[14]  R. Lawson,et al.  The Consumption of Music as Self-Representation in Social Interaction , 2009 .

[15]  Mark E. Parry,et al.  Personal Word of Mouth, Virtual Word of Mouth, and Innovation Use , 2013 .

[16]  D. Dillman.  Mail and telephone surveys : the total design method , 1979 .

[17]  Jeffrey T. Prince,et al.  Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry , 2013 .

[18]  A. Greenwald,et al.  Audience Involvement in Advertising: Four Levels , 1984 .

[19]  Mariëlle E. H. Creusen,et al.  The Different Roles of Product Appearance in Consumer Choice , 2005 .

[20]  Mark E. Parry,et al.  The Impact of Word of Mouth Sources on the Perceived Usefulness of an Innovation , 2013 .

[21]  Mark E. Parry,et al.  The Effect of Personal and Virtual Word‐of‐Mouth on Technology Acceptance , 2012 .

[22]  M. Iansiti,et al.  Entry into Platform-Based Markets , 2012 .

[23]  George S. Day,et al.  Market Driven Strategy: Processes for Creating Value , 1990 .

[24]  Pradeep Chintagunta,et al.  Tipping and Concentration in Markets with Indirect Network Effects , 2008, Mark. Sci..

[25]  P. M. Podsakoff,et al.  Self-Reports in Organizational Research: Problems and Prospects , 1986 .

[26]  Dwayne D. Gremler,et al.  Electronic word-of-mouth via consumer-opinion platforms: What motivates consumers to articulate themselves on the Internet? , 2004 .

[27]  C. Shapiro,et al.  Network Externalities, Competition, and Compatibility , 1985 .

[28]  Neil Gandal,et al.  The Dynamics of Technological Adoption in Hardware/Software Systems , 1997 .

[29]  Rebecca K. Ratner,et al.  The Impact of Private versus Public Consumption on Variety-Seeking Behavior , 2002 .

[30]  Simona Botti,et al.  The Locus of Choice: Personal Causality and Satisfaction with Hedonic and Utilitarian Decisions , 2011 .

[31]  Mark E. Parry,et al.  Incorporating network externalities into the technology acceptance model , 2009 .

[32]  Per E. Pedersen,et al.  Intentions to use mobile services: Antecedents and cross-service comparisons , 2005 .

[33]  Neil Gandal.  Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities , 1994 .

[34]  H. Ohashi.  The Role of Network Effects in the US VCR Market, 1978-1986 , 2003 .

[35]  Fred D. Davis,et al.  A critical assessment of potential measurement biases in the technology acceptance model: three experiments , 1996, Int. J. Hum. Comput. Stud..

[36]  Matthew T. Clements,et al.  Direct and Indirect Network Effects: Are They Equivalent? , 2004 .

[37]  C. Kemerer,et al.  Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market , 2014 .

[38]  Stefan Stremersch,et al.  The Effect of Superstar Software on Hardware Sales in System Markets , 2009 .

[39]  E. Hirschman,et al.  Hedonic Consumption: Emerging Concepts, Methods and Propositions , 1982 .

[40]  James C. Anderson,et al.  STRUCTURAL EQUATION MODELING IN PRACTICE: A REVIEW AND RECOMMENDED TWO-STEP APPROACH , 1988 .

[41]  William H. RedmondP.  When Technologies Compete: The Role of Externalities in Nonlinear Market Response , 1991 .

[42]  Kevin E. Voss,et al.  Measuring the Hedonic and Utilitarian Dimensions of Consumer Attitude , 2003 .

[43]  J. Zaichkowsky.  Measuring the Involvement Construct , 1985 .

[44]  Terry L. Childers,et al.  HEDONIC AND UTILITARIAN MOTIVATIONS FOR ONLINE RETAIL SHOPPING BEHAVIOR , 2001 .

[45]  John G. Lynch,et al.  Communication Effects of Advertising versus Direct Experience When both Search and Experience Attributes Are Present , 1995 .

[46]  R. Batra,et al.  Measuring the hedonic and utilitarian sources of consumer attitudes , 1991 .

[47]  Todd J. Arnold,et al.  Individual Differences in the Centrality of Visual Product Aesthetics: Concept and Measurement , 2003 .

[48]  Patrick A. Scholten,et al.  A hedonic approach to testing for indirect network effects in the LCD television market , 2013 .

[49]  Terry Clark,et al.  Consumption as Self-Presentation: A Socioanalytic Interpretation of Mrs. Cage , 1999 .

[50]  P. Bentler,et al.  Cutoff criteria for fit indexes in covariance structure analysis : Conventional criteria versus new alternatives , 1999 .

[51]  V. Zeithaml.  Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence: , 1988 .

[52]  E. Walther,et al.  Why sad people like shoes better: The influence of mood on the evaluative conditioning of consumer attitudes , 2004 .

[53]  D. Jain,et al.  Modeling the Evolution of Markets with Indirect Network Externalities: An Application to Digital Television , 1999 .

[54]  Sarah J. S. Wilner,et al.  Networked Narratives: Understanding Word-of-Mouth Marketing in Online Communities , 2009 .

[55]  Richard P. Bagozzi,et al.  Specification, evaluation, and interpretation of structural equation models , 2012 .

[56]  Jeffrey Graham,et al.  Finding the “Missing Link”: Advertising's Impact on Word of Mouth, Web Searches, and Site Visits , 2007, Journal of Advertising Research.

[57]  Joann Peck,et al.  To have and to Hold: The Influence of Haptic Information on Product Judgments , 2003 .

[58]  Ravi Dhar,et al.  A behavioral decision theory perspective on hedonic and utilitarian choice , 2005 .

[59]  Fred D. Davis,et al.  User Acceptance of Computer Technology: A Comparison of Two Theoretical Models , 1989 .

[60]  Terry L. Childers,et al.  Individual Differences in Haptic Information Processing: The "Need for Touch" Scale , 2003 .

[61]  Viswanath Venkatesh,et al.  Model of Adoption and Technology in Households: A Baseline Model Test and Extension Incorporating Household Life Cycle , 2005, MIS Q..

[62]  Minsoo Park,et al.  Diffusion of a new product under network effects: the US DVD market , 2006 .

[63]  Myeong-Cheol Park,et al.  Mobile internet acceptance in Korea , 2005, Internet Res..

[64]  Charlotte H. Mason,et al.  The link between attractiveness of “Extrabrand” attributes and the adoption of innovations , 1999 .

[65]  R. Dhar,et al.  Consumer Choice between Hedonic and Utilitarian Goods , 2000 .

[66]  M. Pentecost,et al.  The Innovator's Solution: Warum manche Unternehmen erfolgreicher wachsen als andere , 2018 .

[67]  Viswanath Venkatesh,et al.  A Longitudinal Investigation of Personal Computers in Homes: Adoption Determinants and Emerging Challenges , 2001, MIS Q..

[68]  Fred D. Davis.  Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology , 1989, MIS Q..

[69]  Greg Kitzmiller,et al.  INTERNATIONAL MARKETING RESEARCH , 2003 .

[70]  J. Cacioppo,et al.  Central and Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involvement , 1983 .

[71]  E. Hirschman,et al.  The Experiential Aspects of Consumption: Consumer Fantasies, Feelings, and Fun , 1982 .

[72]  P. Bone,et al.  Does it Matter If it Smells? Olfactory Stimuli as Advertising Executional Cues , 1998 .

[73]  Richard T. Gretz.  Hardware quality vs. network size in the home video game industry , 2010 .

[74]  Scott D. Johnson,et al.  Influences on consumer use of word-of-mouth recommendation sources , 1997 .

[75]  C. Shapiro,et al.  Systems Competition and Network Effects , 1994 .

[76]  E. Walther.  Guilty by mere association: evaluative conditioning and the spreading attitude effect. , 2002, Journal of personality and social psychology.

[77]  Timothy Paul Cronan,et al.  On the Test-Retest Reliability of Perceived Usefulness and Perceived Ease of Use Scales , 1993 .

[78]  Jen-Her Wu,et al.  What drives mobile commerce?: An empirical evaluation of the revised technology acceptance model , 2005, Inf. Manag..

[79]  Peter A. Todd,et al.  Perceived Usefulness, Ease of Use, and Usage of Information Technology: A Replication , 1992, MIS Q..

[80]  Kenneth W. Koput,et al.  Software variety and hardware value: A case study of complementary network externalities in the microcomputer software industry , 1998 .

[81]  Venkatesh Shankar,et al.  Network Effects and Competition: An Empirical Analysis of the Home Video Game Industry , 2002 .

[82]  Donna L. Hoffman,et al.  Measuring the Customer Experience in Online Environments: A Structural Modeling Approach , 2000 .

[83]  Wei-Min Hu,et al.  An Empirical Analysis of Indirect Network Effects in the Home Video Game Market , 2006 .

[84]  William R. Darden,et al.  Work and/or Fun: Measuring Hedonic and Utilitarian Shopping Value , 1994 .

[85]  I. Bruner.  Music, Mood, and Marketing: , 1990 .

[86]  June Lu,et al.  Personal innovativeness, social influences and adoption of wireless Internet services via mobile technology , 2005, J. Strateg. Inf. Syst..