The effects of platform governance mechanisms on customer participation in supplier new product development
Introduction
Recent advancements in information and communication technologies have led to the prevalence of business-to-business (B2B) digital platforms (e.g., Alibaba.com; Amazon Business). A B2B digital platform offers an infrastructure to facilitate buyer–seller interactions in a two-sided market (Chakravarty, Kumar, & Grewal, 2014) and enables firms to obtain more business opportunities at a relatively lower cost than in physical markets (Muzellec, Ronteau, & Lambkin, 2015). As companies become increasingly dependent on these digital platforms, many of them are now using these platforms as a source to contact and cooperate with customers (i.e., organizational buyers) to develop new products, rather than only to sell products. For example, since OEM suppliers frequently engage customers for new product development (Fang, 2008, Fang et al., 2008), and many of them increasingly rely on digital platforms, Alibaba.com set up a channel in its B2B marketplace where OEM suppliers can engage their customers for new product development2.
To enhance the success of NPD, suppliers encourage their customers to participate in the product development process in which the customers are expected to share technical advice and business information (Fang, 2008). However, even though B2B platforms enable efficient interactions between customers and suppliers, customers sometimes are reluctant to participate in supplier NPD projects. First, an NPD project is an emergent process (La Rocca et al., 2016, Wang and Chung, 2013), and it often creates unexpected problems (Hofman, Faems, & Schleimer, 2017). Customers are concerned about these uncertainties and face difficulties in finding common approaches with the supplier to deal with the uncertainties (Noordhoff et al., 2011). Second, customers may suffer from losing specific assets such as critical business knowledge and sensitive information through the participation process (Noordhoff et al., 2011). Third, there may be concerns about potential opportunism due to divergent goals and a lack of trust (Noordhoff et al., 2011, Oinonen et al., 2018, Zeng et al., 2017). For example, each actor may direct the development process toward their interests, which can lead to opportunistic behaviors when they do not share common interests. Prior research suggests that a virtual environment creates additional uncertainties for customers due to the lack of physical and direct contacts through which customers can better assess the quality of the products and the supplying firms (Chakravarty et al., 2014, Pavlou and Gefen, 2004). As Grewal et al. (2010, p. 47) maintain, “electronic markets lack the tangibility and visibility of a physical infrastructure, and the ability for anonymous participation creates questions about the accurate representation of products and trades.” Although firms are increasingly active on B2B digital platforms, little is known about how firms can better facilitate customer participation in this new yet important channel.
According to transaction cost analysis (TCA; Williamson, 1985, Rindfleisch and Heide, 1997, Geyskens et al., 2006), governance mechanisms can engage customers in inter-firm cooperation by reducing behavioral uncertainties, external uncertainties, and opportunism. Prior research on inter-firm cooperation has suggested that appropriate control mechanisms can potentially facilitate inter-firm interactions (e.g., customer participation in NPD) by stimulating mutual understanding and shared expectations, preventing suppliers’ unwelcome conduct, and thus decreasing ineffective NPD (e.g., Das and Teng, 2002, Inkpen and Currall, 2004, Blomqvist et al., 2005, Smets et al., 2013, Oinonen et al., 2018). In the online virtual environment, formal controls may not be sufficient to govern inter-firm interactions because higher information asymmetry in this environment may lead to insufficient information for customers to execute formal controls (Chakravarty et al., 2014). Informal control mechanisms, which rely on social influence, provide potential solutions for facilitating customer participation on B2B digital platforms (Gligor and Bozkurt, 2021, Smets et al., 2013). Yet, limited research has examined how informal controls influence customer participation in this online virtual environment. Drawing on the transaction cost analysis (e.g., Williamson, 1985, Rindfleisch and Heide, 1997), we propose that, when NPD projects are coordinated via B2B digital platforms, informal controls based on governance mechanisms on the platform can potentially facilitate customer participation on these platforms. According to TCA, both suppliers and customers can be opportunistic, and the perceived transaction cost can influence the extent to which a customer is willing to participate in its supplier’s NPD in the online environment. To reduce the transaction cost and opportunism, platforms can provide governance mechanisms to control firm behaviors. In this study, we focus on two important mechanisms commonly employed by B2B digital platforms, namely macroculture and collective sanctions. Macroculture captures the shared assumptions, conventions, and values supporting the coordination of interdependent activities among a group of independent individuals or organizations (Abrahamson & Fombrun, 1994). Collective sanctions refer to network members punishing other members who violate group norms, values, or goals, ranging from rumors to ostracism and sabotage (Axelrod, 1985). Both mechanisms can provide a certain level of governance on a platform, which may help firms better engage their customers in NPD projects.
Moreover, because the interactions between customers and suppliers are carried out on the platform, we propose that the effectiveness of the aforementioned informal governance mechanisms will be potentially influenced by the characteristics of the digital platform and the customers. For example, when a platform is more accessible for business actors, especially suppliers, customers may have more concerns about the quality of the participant pool. They may tend to rely more on platform governance to safeguard their exchanges. In addition, when customers have diverse needs for a product, a supplier needs more information from a customer to develop this product. The customer may perceive more risks as more information needs to be shared. Overall, this study intends to investigate the following questions:
Q1. How do governance mechanisms provided by B2B digital platforms (i.e., macroculture and collective sanctions) affect customer participation in supplier NPD on B2B digital platforms?
Q2. How do platform accessibility and customer need heterogeneity moderate the relationship between platform governance mechanisms and customer participation?
To answer these questions, we collected data from 277 B2B firms that are actively conducting businesses on B2B digital platforms. Our findings reveal that while macroculture has a direct impact on customer participation and might be more effective when customers present diverse needs, collective sanctions tend to be dependent on the accessibility of a platform and the level of customer need heterogeneity.
The present study brings several important contributions to the extant literature and managerial practices. First, it contributes to the B2B governance literature by going beyond the dyadic view and examining B2B interactions in the online environment. The traditional dyadic view only considers the role of inter-firm governance mechanisms on B2B interactions. Our findings suggest that, in the online virtual environment, platform governance mechanisms play key roles in facilitating customer participation for the hyperconnected environment in which actors have relatively easier access to alternative information within the platform. Second, our study brings new insights into the literature that investigates B2B digital platforms by showing that macroculture and collective sanctions affect customer participation in supplier NPD on a digital platform in different ways. Finally, by investigating the contingencies around the effects of platform governance mechanisms, our study uncovers the dynamics in this platform governance process in the virtual environment and thus calls attention from the management to closely examine their environmental contexts (e.g., platform feature and customer needs) when facilitating customer participation in a digital platform.
Section snippets
Insights from in-depth interviews
Because there has been little academic research on using B2B digital platforms to facilitate customer participation in new product development, we conducted eight in-depth interviews for exploratory purposes (two customers and six suppliers). The interviewees are managers working in companies that rely on B2B digital platforms to conduct businesses, such as Alibaba.com and Amazon Business. Our focus was to understand the motivations and barriers in using digital platforms to facilitate new
Transaction cost analysis
Transaction cost analysis assumes that decision-makers have constraints in information processing and communication when making rational decisions in a business exchange (Williamson, 1985, Rindfleisch and Heide, 1997, Geyskens et al., 2006). These constraints become problematic in uncertain environments where circumstances are changing (i.e., environmental uncertainty) and the performance of a business partner is not stable (i.e., behavioral uncertainty). Environmental uncertainties can lead to
Sample and data collection
In this study, we aim to investigate how informal governance mechanisms on a B2B digital platform affect firms’ willingness to participate in their suppliers’ new product developments. Following previous studies on digital platforms and B2B marketing which used panel data (Bart et al., 2005, Wuyts et al., 2009), we collected our data by purchasing access to a list of B2B panels provided by a leading marketing research firm based in the United States. Because we are interested in understanding
Analysis and results
Before we tested our hypotheses, we first performed a Confirmatory Factor Analysis (CFA) to examine the overall model fit. Then, we examined the potential threat due to common method bias. Finally, we tested the hypotheses using a regression analysis that is considered more efficient for examining moderating effects (Cui & Wu, 2016).
Discussion
B2B digital platforms have become increasingly popular for firms to increase their business presence. However, while those platforms provide convenient access for firms to engage their customers, they also create new challenges for both the suppliers and customers as information asymmetry results from virtual interactions (Swaminathan et al., 2020). Our in-depth interviews with managers confirm our propositions that online digital platforms provide both opportunities and challenges for B2B
Declaration of Competing Interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
References (73)
- et al.
Playing the collaboration game right — Balancing trust and contracting
Technovation
(2005) - et al.
Technology-enabled value co-creation: An empirical analysis of actors, resources, and practices
Industrial Marketing Management
(2016) Network governance: A cross-level study of social mechanisms, knowledge benefits, and strategic outcomes in joint-design alliances
Industrial Marketing Management
(2014)- et al.
Environmental orientation and corporate performance: The mediation mechanism of green supply chain management and moderating effect of competitive intensity
Industrial Marketing Management
(2012) - et al.
Customers' participation in product development through crowdsourcing: Issues and implications
Industrial Marketing Management
(2013) - et al.
Platforms in service-driven manufacturing: Leveraging complexity by connecting, sharing, and integrating
Industrial Marketing Management
(2016) - et al.
Multi-sided platforms
International Journal of Industrial Organization
(2015) - et al.
Customer involvement in new product development in B2B: The role of sales
Industrial Marketing Management
(2016) - et al.
How does customer orientation (in) congruence affect B2B electronic commerce platform firms' performance?
Industrial Marketing Management
(2020) - et al.
Multi-sided platforms in B2B contexts: The role of affiliation costs and interdependencies in adoption decisions
Industrial Marketing Management
(2020)
Two-sided Internet platforms: A business model lifecycle perspective
Industrial Marketing Management
Institution-based trust in interorganizational exchange relationships: The role of online B2B marketplaces on trust formation
The Journal of Strategic Information Systems
Provider and relational determinants of customer solution performance
Industrial Marketing Management
Collaborating to create: The Internet as a platform for customer engagement in product innovation
Journal of Interactive Marketing
The moderating role of managerial ties in market orientation and innovation: An Asian perspective
Journal of Business Research
How does green innovation affect supplier-customer relationships? A study on customer and relationship contingencies
Industrial Marketing Management
Partner selection in B2B information service markets
International Journal of Research in Marketing
Buyer-supplier matching in online B2B marketplace: An empirical study of small-and medium-sized enterprises (SMEs)
Industrial Marketing Management
The dyadic structure of exchange partners’ governing-agency social capital and opportunism in buyer–supplier relationships
Journal of Business Research
Macrocultures: Determinants and consequences
Academy of Management Review
Managing seller–buyer relationships during new product development
Journal of Product Innovation Management
An evolutionary approach to norms
American Political Science Review
Are the drivers and role of online trust the same for all web sites and consumers? A large-scale exploratory empirical study
Journal of Marketing
How open is this Platform? The meaning and measurement of platform openness from the complementers’ perspective
Journal of Information Technology
Users as innovators: A review, critique, and future research directions
Journal of Management
Open platform strategies and innovation: Granting access vs. devolving control
Management Science
The economic efficiency of corporate culture
Strategic Management Journal
Customer orientation structure for internet-based business-to-business platform firms
Journal of Marketing
The effectiveness of customer participation in new product development: A meta-analysis
Journal of Marketing
Utilizing customer knowledge in innovation: Antecedents and impact of customer involvement on new product performance
Journal of the Academy of Marketing Science
Alliance constellations : A social exchange perspective
Academy of Management Review
Common methods bias: Does common methods variance really bias results?
Organizational Research Methods
Strategies for two-sided markets
Harvard Business Review
Toward an integrative perspective on alliance governance: Connecting contract design, trust dynamics, and contract application
Academy of Management Journal
Customer participation and the trade-off between new product innovativeness and speed to market
Journal of Marketing
Influence of customer participation on creating and sharing of new product value
Journal of the Academy of Marketing Science
Cited by (7)
B2B digital platform adoption by SMEs and large firms: Pathways and pitfalls
2023, Industrial Marketing ManagementSocial media use: A review of innovation management practices
2022, Journal of Business ResearchCitation Excerpt :Second, we included seven contingency factors that impact social media use for innovation. Notably, social media capabilities (e.g., IT, knowledge, big data, and AI capabilities) (Arora et al., 2021; Candi et al., 2018; Durmuşoǧlu & Barczak, 2011; Mikalef et al., 2021) and social media governance (Mikalef et al., 2020; Roberts et al., 2016; Wei et al., 2021) play moderating roles at the organizational level. At the network level, network orchestration and structure (Bilgram et al., 2008; Carlson et al., 2018; Chirumalla et al., 2017; Chuang, 2020; Dwivedi et al., 2021; Frey, Lüthje, & Haag, 2011; Hautz, Füller, Hutter, & Thürridl, 2014; Hienerth, Lettl, et al., 2014; Jeppesen & Laursen, 2009; Li et al., 2021; Mahr, Lievens, & Blazevic, 2014; Marchi, Giachetti, & De Gennaro, 2011; Martinez, 2015) together with platform features’ richness (Hienerth, Von Hippel, et al., 2014; Piller et al., 2012; Stanko, 2016) and platform control (Boudreau, 2010; Luo & Toubia, 2015) moderate the impact of social media use for innovation on NPD performance.
The effects of digital platform expectations, information schema congruity and behavioural factors on mobility as a service (MaaS) adoption
2024, Information Technology and PeopleOlder Individuals and Digital Healthcare Platforms: Usage Motivations and the Impact of Age on Postadoption Usage Patterns
2023, IEEE Transactions on Engineering ManagementTo be more independent or more dependent? The evolution mechanism of co-innovation between digital platforms and content creators
2023, Journal of the Operational Research Society