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Master Thesis Organization Studies 2013-2014
Is the willingness to cannibalize part of the
“assimilation” or the “demarcation” approach? An empirical study of the antecedents of the willingness to cannibalize in a new
product and a new service innovation context.
Tilburg University
Department of Social and Behavioral Sciences
Master Organization Studies
Jonathan Verhulst
2
Master Thesis Organization Studies 2013-2014
Is the willingness to cannibalize part of the
“assimilation” or the “demarcation” approach? An empirical study of the antecedents of the willingness to cannibalize in a new
product and a new service innovation context.
Author- Student
Jonathan Verhulst
ANR: 652979
Supervisor Details:
Supervisor 1: Prof. Dr. Ir. V.A. Gilsing
Supervisor 2: Prof. Dr. L. Oerlemans
MTO evaluator: Dr. J. Gelissen
Title of Master Thesis Circle
(Breakthrough) Innovation & External Collaboration
Tilburg, August, 2014
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Table of Contents
List of figures and tables ..................................................................................................... … 5
Preface and Acknowledgements ................................................................................................ 6
Abstract ...................................................................................................................................... 7
1. Introduction ..................................................................................................................... 8
1.1 Research problem ............................................................................................................. 8
1.2 Research question. .......................................................................................................... 10
1.3 Scientific relevance. ........................................................................................................ 11
1.4 Practical relevance. ......................................................................................................... 12
1.5 Structure of the thesis. .................................................................................................... 13
2. Theoretical framework. ................................................................................................. 14
2.1 The willingness to cannibalize ....................................................................................... 14
2.1.1 The dimensions of the willingness to cannibalize. ...................................................... 16
2.2 The three barriers to innovation. ..................................................................................... 17
2.3 Current customer orientation .......................................................................................... 19
2.4 Future market focus. ....................................................................................................... 20
2.5 Risk tolerance. ................................................................................................................ 21
2.6 Moderator: Product vs. Service innovations. .................................................................. 22
2.6.1 The input of product and service innovation activities. ............................................... 22
2.6.2 Process of product and service innovation activities. ................................................. 24
2.6.3 Output of product and service innovation activities. ................................................... 26
2.6.4 Additional differences ................................................................................................. 27
2.7 Theoretical mechanism and hypotheses regarding the moderator. ................................. 29
2.8 Conceptual model ........................................................................................................... 32
3. Methodological framework ........................................................................................... 33
3.1 Research design .............................................................................................................. 33
3.2 Data collection & Sample strategy ................................................................................. 33
3.3 Measurement .................................................................................................................. 37
3.3.1 Dependent variables: The willingness to cannibalize. ................................................. 37
3.3.2 Independent variables: Risk tolerance, future market focus and current customer
orientation. ............................................................................................................................ 40
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3.3.3 Moderator and Control variables: size, age ................................................................. 41
3.4 Data analysis ................................................................................................................... 42
3.4.1 Quantitative data analysis ............................................................................................ 42
3.4.2 Qualitative data analysis. ............................................................................................. 43
4. Results ........................................................................................................................... 45
4.1 Descriptive Statistics ...................................................................................................... 45
4.2 Hierarchical multiple regression (OLS) ......................................................................... 47
4.3 Direct effects on the willingness to cannibalize ............................................................. 47
4.4 Moderating effects. ......................................................................................................... 48
4.5 Summary quantitative results ......................................................................................... 51
4.6 Qualitative results ........................................................................................................... 52
5. Discussion ..................................................................................................................... 58
5.1Theoretical implications .................................................................................................. 66
5.2 Managerial implications ................................................................................................. 67
5.3 Limitations and future research directions ..................................................................... 68
5.4 Research quality indicators ............................................................................................. 72
5.5 Conclusion ...................................................................................................................... 74
Reference list. ........................................................................................................................... 75
Appendix A: Table of operationalization ............................................................................ 80
Appendix B: The questionnaire. ........................................................................................... 82
Appendix C: SPSS output. .................................................................................................... 86
Appendix D: Topic Guide .................................................................................................... 89
Appendix E: Coding scheme ................................................................................................ 91
Appendix F: Coding matrices ............................................................................................... 92
Appendix G interview transcripts. ........................................................................................ 95
5
List of figures and tables
Figure 1 Conceptual model…………………………………………………………………....32
Table 1. The core similarities and difference between product and service innovations………28
Table 2: Characteristics of participating organizations……………………………………….36
Table 3: Results of factor analysis ‘The willingness cannibalize’……………….……..…….40
Table 4: Descriptive Statistics & inter-correlation of variables………………………………. 47
Table 5: Output of the independent T-tests……………………………………………………49
Table 6: OLS regression for the willingness to cannibalize…………………………………..51
Table 7: Acceptance and rejection of the hypotheses…………………………………………53
Table 8: Overview of the product and service innovators…………………………………….54
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Preface and Acknowledgements
This is the end
Beautiful friend
This is the end
My only friend
The end.............
This song, written by The Doors represents the end of my enduring student life. I hereby present
my master thesis, which is the final part of my student life and of the master program
Organization studies. After graduating Management, Economics and Law, I decided to go to
Tilburg University to follow the master program Organization studies. I perceived writing a
master thesis as an enjoyable time with many ups and downs. In particular, finding a relevant
topic for conducting a research was the most challenging task. I am grateful that I had the
opportunity to conduct an academic research within Tilburg University, and I am grateful for
all the support I had during this entire process.
In the first place I would like thank the respondents who participated in this research. My special
gratitude goes to my supervisor, Prof. Dr. Ir. Victor Gilsing, who kept me motivated and who
kept believing in me. Furthermore, he inspired me to push myself to the limit, to remain critical
about my own work, and he simulated me to conquer problems on my own. Furthermore, I
would like to thank my second reader, Prof. Dr. Leon Oerlemans for his constructive and
valuable feedback concerning my concept version of this thesis.
Special gratitude goes to my mates Roel and Ate for reviewing each other’s work. The frequent
trips to Tilburg University were very useful. I perceived a lot of help and support from you
guys!
Last, but certainly not least, I would like to thank my girlfriend, friends and family for their
support during my two years at Tilburg University!
Thanks to you all!
Jonathan Verhulst
Tilburg, August, 2014
7
Abstract
Radical innovations are of great importance for the growth of an organization and the economy
(Chandy, Tellis, and Prabhu, 2009). Radical innovations have the potential to create and destroy
existing markets. And they have the potential of bringing down incumbent firms that neglect to
innovate and it can push small outsiders into the top position. Past research asserts that one way
to develop radical product innovations is the willingness to cannibalize. The willingness to
cannibalize is defined by Chandy and Tellis (1998) as the extent to which a firm is prepared to
reduce the actual or potential value of its investments for creating and introducing new product
and new service innovations. This definition implies that a firm “recognizes that pursuing new
opportunities may involve shifting the focus from current resources to exploring new resources,
even if this means sacrificing current sources of profit” (Daneels, 2008, p.523). This concept
proved to be an important predictor of radical product innovation since it ensures that a firm
stay constantly at the leading edge of innovation. The relationships between the antecedents of
the willingness to cannibalize in new product innovation contexts is already known in the
literature. However, the differences between product and service is not exposed. Therefore this
study tries to capture and fill this theoretical gap. This research problem is also related to the
debate whether product and service innovations are fundamentally different. Hypotheses are
formulated and tested empirically by applying Hierarchical multiple regression analyses, using
a sample size of 97 firms. Furthermore, semi- structured interviews were conducted to explore
the results of the quantitative part in debt. The main findings are that risk tolerance and future
market focus have a strong positive effect on the willingness to cannibalize, while there is a
curvilinear (inverted u-shape) relation between current customer orientation and the willingness
to cannibalize. Furthermore, no moderating effects were found between product and service
innovations. The findings of this study provides valuable insights to the innovation literature,
and whether new product and new service innovations are similar regarding their relation with
the willingness to cannibalize. Furthermore, the findings of this study provides valuable insights
for mangers and policy makers that seek to enhance their new product and new service
innovation capabilities.
Keywords: The willingness to cannibalize, service innovation, innovation, product innovation,
corporate culture, organizational culture, breakthroughs innovations.
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1. Introduction
This introduction section will provide insight in the research problem for this thesis. This
research problem will result in the formalization of the research question. Subsequently, the
scientific and practical relevance will be presented. At the end of this section, the structure of
this thesis will be further explained.
1.1. Research problem
According to the Dutch consultancy firm Berenschot, firms that innovate develop higher levels
of turnover and profit, compared to firms that neglect to innovate (Berenschot, 2014). The
underlying reasoning is that each euro invested in an innovation will be recouped, which makes
the investment in innovation profitable.
The literature defines two types of innovation, radical and incremental innovation. Radical
innovations are defined in this thesis by Ahuja and Lampert (2001) as: ”Such inventions serve
as the basis of new technological trajectories and paradigms and are an important part of the
process of creative destruction in which extant techniques and approaches are replaced by new
technologies and products” (Ahuja and Lampert, p.521). Incremental innovations are defined
as “exploitative innovations designed to meet the needs of existing customers or markets”
(Benner and Tushman, 2003, p. 243). In addition, Abernathy and Clark (1985) state that firms
which engage in incremental innovation “are more about to improve their existing knowledge
and skills, improve established designs, expand existing products and services, and increase
the efficiency of existing distribution channels “ (Abernathy and Clark, 1985, p.5).
Nowadays, it is well known that radical innovations are of great importance for the growth of
a firm and the economy (Chandy, Tellis, and Prabhu, 2009). Radical innovations have the
potential to create and to destroy existing markets, the potential of bringing down incumbent
firms who do not innovate and it can push small outsiders into the top position. Schumpeter
(1942) defines this as creative destruction. Scholars confirmed that radical innovations are of
great importance for a firm survival in the long term (Geroski, Machin, and Reenen, 1993).
There have been frequent investigations concerning radical innovation, and why certain firms
outperform their competitors (Wieandt, 1994). Wieandt (1994) states that firms who did not
adapt to the patterns of market creation and destruction through radical innovation face more
chance of failure. Chandy and Tellis (1998) state that the corporate culture of a firm improves
a firms capacities to adjust to the patterns of market creation through radical product
innovations.
9
The corporate culture refers “to a core set of attitudes and practices that are shared by the
members of the firm. A corporate culture ensures that a firm stay constantly at the leading edge
of innovation” (Chandy, Tellis and Prabhu, 2009, p. 6). This master thesis uses the terms
“organization culture” and “corporate culture” interchangeably.
This corporate culture was the reason for the perceptible shift in the literature concerning the
drivers for radical innovation. In the past, scholars believed that government policy and labor,
capital and culture at the national level were powerful predictors for radical innovation (e.g.
Archibgui and Coco, 2005; Damanpour, 1991). Nowadays, this view is contradicted, by
asserting that the corporate culture is a stronger predictor of radical product innovation
(Chandy, Tellis and Prabhu, 2009). The organization culture obtained his importance due to
that the markets for labor and capital have been evolving in capitalist economies for more than
400 years, the increased convergence across developed and emerging nations in labor and
capital accessibility, and that the human product is unique; it is slowly developing within firms,
it is tacit, hard to define and to transport (Chandy, Tellis and Prabhu, 2009).
This master thesis does not empircally research the corporate culture of the firm. Instead, this
study will reserach the antecedents of the corporate cuture, and the relationships among them.
Chandy, Tellis and Prabhu (2009) state that the corporate culture consists of the following
attitudinal variables: the willingness to cannibalize, future market focus and risk tolerance.
The willingness to cannibalize proved to be an important predictor of radical product innovation
(Chandy and Tellis, 1998; Chandy, Tellis and Prabhu, 2009). The original concept of the
willingness to cannibalize was developed by Chandy and Tellis (1998). The willingness to
cannibalize is in this thesis defined as the extent to which a firm is prepared to reduce the actual
or potential value of its investments for creating and introducing new product and new service
innovations (Chandy and Tellis, 1998). The other attitudinal variables, future market focus and
risk tolerance proved to have a positive relationship with the willingness to cannibalize in a new
product innovation context. The importance of future market focus on the willingness to
cannibalize is that it encourages a firm to evaluate its limitations of its current technology, and
to understand the future trends and technologies. Risk tolerance stimulates a firm to give up a
certain stream of profits from current product and service in order to invest in new and emerging
technologies (Chandy and Tellis, 1998). Moreover, the introduction of a new product or a new
service innovation is crowed with risk (Greve, 2003).
10
One barrier of the willingness to cannibalize is a firm current customer orientation, since current
customers are often focusing on existing product and service. And knowledge from different
technological domains (external collaboration) have more chance of becoming a radical
(breakthrough) innovation (Phene et al., 2006). Therefore, a firm current customer orientation
hampers the willingness to cannibalize.
Hitherto, there is a gap in the literature regarding the moderating effect of current customer
orientation, future market focus and risk tolerance on the willingness to cannibalize in a new
product and a new service innovation context. This gap is present since the majority of our
understanding of service innovation is copied from manufacturing innovation (Gallouj and
Weinstein, 2007). Moreover, less attention is paid to the service innovation literature since this
sector was seen as lagging in term of innovativeness (Leiponen, 2012).
However, the literature has distinguished some differences between product and service
innovations. Service innovators do not pursue conventional R&D activities for their innovations
input (Djellal and Gallouj, 2001). Sundbo (1997) asserts that service innovations are easily
copied, and therefore, continuous improvement of service innovations is important, and this
continuous improvement of service sector impacts on the initiation of radical innovations (Hipp
and Grupp, 2005). Djellal and Gallouj (2001) claim that “the process of innovation in services
is very rapid, and arises mainly from the fact that innovation in services have an incremental
nature, and often results from intra or extra service imitation” (p. 63-65). Patent protection is
almost impossible for service innovators. And product innovators have more ‘specialized
investments’ obtained during their innovation activities. Therefore, product innovators often
face more financial risks when they cannibalize their current product. And the service sector
does innovate more intensively relative to the product innovators. Furthermore, product
development often happens via cross-functional teams, while a new service innovation is often
developed ‘ad hoc’. Furthermore, services are created and consumed at the same time. With
this reasoning, the expectation is now that these, among others, abovementioned differences
influence the willingness to cannibalize in a new product and a new service innovation context.
1.2 Research question.
“To what extent do risk tolerance, future market focus and current customer orientation
influence the willingness to cannibalize, and to what extent do these relationships differ for
product and service innovations?
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1.3 Scientific relevance.
The scientific relevance of this study is that it has the aim to make three key contributions.
First, this study aims to solve a gap in the literature regarding the moderating effect of current
customer orientation, future market focus and risk tolerance on the willingness to cannibalize,
which is a theoretical gap this study will try to fill. The relationship between customer
orientation, future market focus and risk tolerance on the willingness to cannibalize in a new
product context has already been researched, but not when the sample size consists of both
product and service innovators. The importance of the willingness to cannibalize is obviously,
since it is part of a firm innovative culture, which proved to have a strong relationship with
radical product innovation (Chandy, Tellis and Prabhu, 2009). And the willingness to
cannibalize in particular is a strong predictor of radical product innovation (Chandy and Tellis,
1998; Chandy, Tellis and Prabhu, 2009). Notwithstanding the importance of radical innovation
for firms and the economy, it is remarkable that there has not been much research about the
antecedents of radical innovation for the service sector, while there has been plenty of research
of the antecedents for radical product innovation (cf. Ahuja and Lampert, 2001). To my
knowledge, this will be the first study which will research these three independent variables
and the willingness to cannibalize as dependent variable in a new product and new service
innovation context. An important remark is that this study will research the differences between
product and service innovations and not the differences between product and service firms. The
explanation is that the boundaries between product and service firms are getting more ‘fuzzy’,
product firms develop next to their products also services, and service firms develop next to
their services also product innovations (Cusumano, et al., 2014). Instead, this thesis will
research the differences between product and service innovators.
Second, this research problem is also related to the debate whether product and service
innovators organize their innovation activities differently. There are two contradicted views
observable in the literature. The first is known as the “assimilation approach” (e.g. Coombs
and Miles, 2000; Tether, 2005; Leiponen and Drejer, 2007). The reasoning within this approach
is that service product innovators innovate in a fundamentally similar way. Coombs and Miles
(2000) state that: “service innovation is not distinctive; it can be studied and organized in ways
familiar from analysis of manufacturing”.
12
The opposite view is the “demarcation approach”, (e.g. Gallouj and Weinstein, 1997; Gadrey
and Gallouj, 1998), which states that “service firms and their innovation activities are highly
distinctive, following dynamics and displaying features that require new theories and
approaches to measurement from those developed in the context of manufacturing” (Leiponen,
2012, p. 155). Therefore, is the willingness to cannibalize part of the “assimilation approach”
or the “demarcation approach”?
Third, investigating service innovation in general is important due to that it is remarkable that
still little is known about how the service sector innovates, since service innovators are
responsible for 75% of GDP in industrialized economies (CIA, 2009). Nearly all of our
understanding of service innovation is copied from manufacturing innovation (Gallouj and
Weinstein, 2007). Lately, increasing attention has been paid to the service innovation literature
(e.g. Evangelista, 2000; Gallouj, 2002; Drejer, 2004; Howels and Tether, 2004; Miles, 2005).
The reason why less attention is paid to the service innovation sector is that service innovators
in the past were seen as lagging in term of innovativeness (Leiponen, 2012). Furthermore, the
European community innovation surveys (CIS) were often focused on the manufacturing
sector. And in these surveys, it was hard for service innovators to record their own innovation
activities, due to their intangible and the interactive nature of many services (Tether, 2005).
While the OECD (2005) states that the service sector will be the source of growth in
employment in industrialized economies. To summarize, an increased attention in the service
innovation literature is of great importance for the scientific literature (Leiponen, 2012).
1.4. Practical relevance
Innovation success is of great importance for a firm survival in the long term. In the fast
changing and dynamic environment, the introduction of an innovation may contain the perfect
advantage for organizations, but such an innovation is a challenge as well. But how do firms
accomplish their innovation targets? And what distinguishes a successful innovator from a non-
successful one? Chandy, Tellis and Prabhu (2009), found evidence that the corporate culture of
a firm is a strong predictor of radical product innovation, which makes it a valuable framework
for practitioners and policymakers that are interested in scientific insights on how to organize
for their innovation activities. In particular, the willingness to cannibalize proved to be an
important predictor of radical product innovation (Chandy and Tellis, 1998; Chandy, Tellis and
Prabhu, 2009).The practical implications for this study will result in offering practitioners and
policymakers scientific insights on how to enhance their innovation performance.
13
Moreover, the results drawn from this study could be used to determine whether a strong current
customer orientation is detrimental for the willingness to cannibalize. And if an innovator
should combine both current customer orientation and future market focus strategies. This study
will also deal with the risk dilemma, i.e. does risk tolerance diminish the inertia barrier? To sum
up, the outcome of this study will explain to what extent an innovator should deal with the
tradeoff between current customer orientation and future market focus, and to what extent these
relations differ for product and service innovators. The results from this study will give insight
to what extent attitudinal variables of corporate culture are related to each other. Moreover,
previous research of Chandy, Tellis and Prabhu (2009) proved that the corporate culture of the
firm is far more important than the use of patents or R&D budgets. Lastly, this study will result
in offering a framework which makes it possible for an innovator to evaluate systematically
their own innovation policies and innovation capabilities.
1.5 Structure of the thesis
This thesis is organized as follows. Within section two, “Theoretical Framework” the main
variables will be further explained. Moreover, this part of this thesis is about the main variables
and their relation with each other, which will result in the formulation of multiple hypotheses.
Within the next section, section three “Methodological Framework” the research methods will
be addressed. This part of this thesis explains what the research design is, which data analysis
techniques are taking and how to confirm or reject the hypotheses. In Section four “Results‟,
the results of the analyses are explored to see whether the hypotheses are confirmed or rejected.
Finally, in Section five “Conclusion and discussion‟, an answer to the research question will
be given, and some further interesting topics about theoretical- and practical implications are
given. Furthermore, the research quality indicators will be addressed. Moreover, the limitation
of this research will be addressed. This thesis will be concluded by giving conclusions and
answering the research question.
14
2. Theoretical framework
This section is committed to the main variables and their relationships of this study. First, the
dependent variable will be addressed followed by the three independent variables. Moreover,
the differences between the innovation activities of product and services innovators will be
addressed. Furthermore, the theoretical mechanism is given from which the hypotheses of this
study are taking. Lastly, the conceptual model will show the relationship between the dependent
and the independent variables.
2.1. The willingness to cannibalize
The willingness to cannibalize is defined by Chandy and Tellis (1998) ‘as the extent to which
a firm is prepared to reduce the actual or potential value of its investments for creating and
introducing new product and new service innovations’ (Chandy and Tellis, 1998). This
definition implies that an innovator “recognizes that pursuing new opportunities may involve
shifting the focus from current resources to exploring new resources, even if this means
sacrificing current sources of profit” (Daneels, 2008, p. 523). Chandy and Tellis (1998)
developed this concept in order to produce a unifying framework that explains how
organizational factors affect radical product innovation (Chandy and Tellis, 1998). The
willingness to cannibalize was in that model an important organizational factor that influenced
radical product innovation.
The willingness to cannibalize is according to Chandy, Tellis and Prabhu (2009), part of the
corporate culture of a firm. The corporate culture refers “to a core set of attitudes and practices
that are shared by the member of the firm. A corporate culture ensures that a firm stay
constantly at the leading edge of innovation” (Chandy, Tellis and Prabhu, 2009, p. 6). This
master thesis uses the terms “organization culture” and “corporate culture” interchangeably.
The corporate culture of a firm proved to be an important predictor of radical product innovation
(Chandy and Tellis, 1998; Chandy, Tellis and Prabhu, 2009). The importance of the corporate
culture on the innovativeness of a firm is due to that 1) Markets for labor and capital have been
evolving in capitalist economies for 400 years. 2) Increased convergence across developed and
emerging nations in labor and capital accessibility. 3) The human product is unique; it is slowly
developing within firms, it is tacit, hard to define and transport (Chandy, Tellis and Prabhu,
2009).
15
This finding of the importance of the corporate culture on the innovativeness of a firm ignited
a perceptible shift in the literature, since past research believed that government policy and
labor, patents, R&D budgets, capital and culture at the national level were powerful predictors
of radical product innovation (e.g. Archibgui and Coco, 2005: Damanpour, 1991).
The willingness to cannibalize proved to be an important predictor of radical product innovation
(Chandy and Tellis, 1998; Chandy, Tellis and Prabhu, 2009). Two other attitudinal variables,
future market focus and risk tolerance form, together with the willingness to cannibalize a firm
corporate culture. To summarize, the corporate culture of a firm consists of the following
attitudinal variables; the willingness to cannibalize, future market focus and risk tolerance.
(Chandy, Tellis and Prabhu, 2009).
It is important to denote that this study does not empirically research the corporate culture of
a firm. Instead, this study will research the attitudinal variables of the corporate culture and to
what extent these attitudinal variables are related to each other. In particular, this study will
research the antecedents of the willingness to cannibalize in a new product and in a new service
innovation context. These antecedents are already discussed in the introduction, and these
variables will be addressed in more depth in the upcoming sections.
16
2.1.1 The dimensions of the willingness to cannibalize
The willingness to cannibalize is a complicated concept within the meaning of its
operationalization. Chandy and Tellis (1998) identified multiple concepts in their theoretical
part of their paper. They argued that the willingness to cannibalize consists of the willingness
to cannibalize assets, willingness to cannibalize organizational routines and the willingness to
cannibalize sales. Assets refers to tangibles, (e.g. machines, and products) and intangibles, like
knowledge. Organizational routines refers to procedures that a firm performs to complete its
day-to-day activity. And sales refers to a loss in sales of a current product/service due to the
introduction of a new product/service (Chandy and Tellis, 1998). In their ’measures‘ section,
Chandy and Tellis (1998) discussed their factor analysis. It was not clear whether the
exploratory factor analysis of items regarding the willingness to cannibalize resulted in one or
multiple constructs. Chandy and Tellis (1998) mentioned only “that the results indicated
satisfactory levels of validity for all the constructs” (p. 480). They state that they dropped items
with had a low item-to- total correlation, but they did not discuss whether the exploratory factor
analysis resulted in one or multiple factors of the dimensions of the willingness to cannibalize.
Nevertheless, in their empirical analysis, they operationalized the willingness to cannibalize as
one construct. Furthermore, they did not mention this limitation in their discussion part.
Nijssen, et al., (2005; 2006) unrevealed the willingness to cannibalize by asserting that the
willingness to cannibalize is a multi-dimensional construct, consisting of the willingness to
cannibalize sales, the willingness to cannibalize investments and the willingness to cannibalize
organizational routines (Nijssen, et al., 2005; 2006). The exploratory factor analysis,
eigenvalue >1, resulted in three clean factors. Subsequently, their empirical analysis consisted
of three constructs, and thus three dependent variables. These three concepts showed strong
similarities with the dimensions of Chandy and Tellis (1998). This study will use the three
concepts of Nijssen, et al., (2006) as one construct, since that operationalization was more
directed to both product and service innovations. The operationalization of Chandy and Tellis
(1998) was only directed to product innovations, which might induce bias, since this study
investigates both product and service innovations. This study follows Chandy and Tellis (1998)
since they operationalized the willingness to cannibalize as one dependent variable. The
underlying reasoning is that diving the dependent into multiple dependent variables could cause
ambiguities, since there is not a universal finding whether it consists of one, or multiple
dependent constructs. However, the factor analysis in section three (methodological section)
will provide an answer whether this study can use one, or multiple dependent variables.
17
2.2 The three barriers to innovation
Current customer orientation, future market focus and risk tolerance proved to have an effect
on the willingness to cannibalize in a new product innovation context. These variables share a
common resemblance. They are all related to one of three barriers for innovation (Gilsing,
2012). These barriers are the ‘economic’, the ‘cognitive barrier’ and the ‘social/psychological’
barriers. Subsequently, these barriers hampers a firm willingness to cannibalize. These barriers
are part of the obstacles a firm faces while considering to create (radically) new business. Two
of these barriers are part of the corporate culture of a firm, risk tolerance and future market
focus, and current customer orientation hampers that culture, since current customer are often
focusing on existing products and services. And that focus inhabits external collaboration.
Moreover external collaboration is important for obtaining external knowledge to develop
radical innovations (Phene, et al., 2006).
Current customer orientation has a potentially relation with the ‘economic barrier’. Ahuja and
Lampert (2001) argue that the underlying reasoning why large established firms neglects to
create breakthrough inventions is perhaps due to ‘the lack of motivation’ (the economic
perspective). Firms with a strong current customer orientation face the danger that they will
become financially too dependent on their customers, and are therefore reluctant to “burn the
bridges that brought the firm across” (Christensen, 1997). As a result, those firms are afraid to
give up their current and perhaps profitable product or services. Chandy, Tellis and Prabhu
(2009) state that a great impediment to continuous innovation is the flow of profits from exiting
products and services.
Future market focus is related to the ‘cognitive barrier’, since a firm could not have enough
cognitive understanding about the constantly changing and dynamic environment. Cognitive
complexity refers “to the complexity of the knowledge structures in a cognitive system, and it
describes the sophistication of those cognitive structures that are used for organizing and
storing cognitive contents” (Curseu, et al., 2007, p. 188). Firms which have such a future market
focus, have on the other hand enough cognitive complexity to understand and evaluate the
potential of new technologies, trends, competitor’s and customers (Christensen and Bower,
1996). Ahuja and Lampert (2001) define this ‘as their lack of ability’ to introduce breakthrough
inventions (the organizational perspective).
18
Finally, risk tolerance is related to the ‘social/psychological’ barrier, due to fear and
complacency among peers (Gilsing, 2012). Chandy, Tellis and Prabhu (2009) state that it is of
great importance that managers have a tolerance for risk. Because giving up a certain revenue
from existing product and service, in order to invest in uncertain new product and services it is
almost necessary that a firm has a tolerance for risk. (Chandy, Tellis and Prabhu, 2009).
In addition, Wieandt (1994) states that it is far more difficult for firms to create an entire new
market than in comparison with market development. The underlying reasoning is that a firm
in market development has the opportunity to build on existing relationship with, among others,
suppliers and customers. When a firm creates an entire new market, such existing relationships
does often not exist (Wieandt, 1994). And the strategy for market development entails a smaller
amount of suck investment, which is therefore less risky. Sunk investments implies that people
future actions are influenced by the investments that they already have done in the past, “even
though they rationally should not be taken into account” (Chandy and Tellis, 1998, p. 478).
19
2.3 Current customer orientation
The first independent variable is current customer orientation, which refers “to the degree to
which a firm believes it should try to understand and satisfy current customer’s needs and
demands” (Nijssen, et al., 2005, p. 1402). Close involvement with the current customers give
firms the opportunity to receive direct feedback from these current customers, and with that
direct feedback, firms have the opportunity to fulfil the constantly changing needs and demands
from these current customers. However, too close contact with these current customers could
cause that firms pay too much attention on the demands from their current customers and less
consideration for emerging trends and technologies (Bonner and Walker, 2004). Nijssen, et al.,
(2005) state that current customer search results in better and improved products or services but
that those new product and services are developed with current technology rather than with
upcoming technology. Christensen and Bower (1996) state that firms which are very current
customer oriented fail to recognize new trends and technologies. Current customer oriented
firms often develop product and services which have an incremental characteristic (Narver and
Slater, 1998). Atuahene-Gima (2005) states that a current customer’s orientation negatively
influences the introduction of a radically new product or services. And such radically new
product and service are of great importance for the long term success of a firm (Geroski,
Machin, and Reenen, 1993). External collaboration and external knowledge are important
antecedents for creating radical innovations (Singh and Fleming, 2009).The introduction of a
radical innovation is often realized by collaborating beyond the organizational boundaries, for
instance via interfirm collaboration (Laursen and Stalter, 2006). And knowledge from different
technological domains have more chance of becoming a radical (breakthroughs) innovation
(Phene et al., 2006), since external collaboration could result in knowledge from different
technological domains which is beneficial for creative recombination. Current customers are
often focusing on existing product and services instead of searching for new technologies.
Therefore, current customers impede a firm tendency to discovery potentially radical
innovations via external collaboration beyond their organizational boundaries. Previous
research showed that the willingness to cannibalize is an important predictor of radical
innovation (Chandy and Tellis, 1998; Chandy, Tellis and Prabhu, 2009). As a consequence, it
is the expectation that current customer orientation has a negative effect on the willingness to
cannibalize. Based on the above discussion, the following hypothesis is formulated:
H1: There is a negative relationship between current customer orientation and the willingness
to cannibalize.
20
2.4 Future market focus
Future market is defined as a focus that encourage firms to evaluate the limitations of the current
technology and the search for emerging and new technologies that may become dominant in
the future (Chandy, Tellis, and Prabhu, 2009). Chandy and Tellis (1998) define future market
focus as: “the extent to which a firm emphasizes future customers and competitors relative to
their current customers and competitors (Chandy and Tellis, 1998, p. 479). Firms with a future
market focus show a tendency to discover new market developments and business possibilities,
beyond the current products and services and beyond the demands from their current customers.
Future market focus firms are long term oriented, they understand that they have to adjust to
the constantly changing and dynamic environment. Future market focus “broadens the horizon
of managers and alerts them to new technologies, competitors and customers” (Chandy and
Tellis, 1998, p. 479). Firms with a future market focus recognizes that obsolesce could arise
when a firm choose to continue with the existing technology and with the existing product and
services, and eventually, this could lead to a major loss in their market position (Chandy et al.,
2003). Firms with a future market focus could have enough cognitive complexity to understand
the dynamics and complexity of their environment. Cognitive complexity refers “to the
complexity of the knowledge structures in a cognitive system, and it describes the sophistication
of those cognitive structures that are used for organizing and storing cognitive contents”
(Curseu, et al., 2007, p. 188). Therefore, these firms understands that the introduction of a new
service and a new product innovation is inevitable to keep ahead of the competitive environment
(Nijssen, et al., 2005). Consequently, such firms are prepared to make the current stream of
profits from the existing product and services obsolete, in order to invest in new product and
service innovations (Chandy and Tellis, 1998). Firms with a future market focus show a
stronger tendency to cannibalize relative to firm that have not a future market focus (Chandy
and Tellis, 1998). Based on the above discussion, the following hypotheses is formulated:
H2: There is a positive relationship between future market focus and the willingness to
cannibalize.
21
2.5 Risk tolerance
The third independent variable is risk tolerance. Risk tolerance “is an attitudinal component
referring to a firm tendency to take risk in their actions that varies across distinct decision
contexts” (Vermeulen and Curseu, 2008, p 44). Risk tolerance refers to a firm that thinks that
it is important to take often risky decision, to engage in untested business ventures and that is
important to take often calculated risks (Chandy, Tellis, and Prabhu, 2009). The introduction
of a new (radical) innovation could result that the industry will change dramatically, but
launching such a new product or service is crowed with risk. Greve, (2003) states that “an
innovation launch is strongly affected by risk considerations because it is a strategic decision
that involves judging whether the risk of the innovation is acceptable to an organization”
(Greve, 2003, p. 689). In addition, when a firm decides to launch a new product or a new service
innovation, such an innovation has to be aligned with the general strategy of the firm, and thus,
such innovation has to take many obstacles. Chandy and Tellis (1998) state that firms which
show a tendency to cannibalize ‘are prepared to reduce the actual or potential value of its
investments for creating and introducing new products and services’ (Chandy and Tellis, 1998).
This latter refers to a firm’s attitude towards risk since they are prepared to give up existing
revenues by introducing new products or services, which makes the existing product and service
innovations obsolete (Chandy, Tellis, and Prabhu, 2009). Nijssen et al., (2005) state that firms
which have a tolerance for risk are more entrepreneurial relative to firms that have a risk averse
attitude. Firms which have a tolerance for risk will be more inclined to cannibalize their current
product and services. Therefore, risk tolerance is an important, though, not a necessary attitude
for firms that are willing to cannibalize. Based on the above discussion, the following
hypothesis is formulated:
H3: There is a positive relationship between risk tolerance and the willingness to cannibalize.
22
2.6 Moderator: Product vs. Service innovations
This section is committed to the organization of both product and service innovations, and the
differences regarding their innovation processes and activities. This section addresses the
fundamental differences between product and service innovations. Based on these differences,
the moderating hypotheses are formulated. The differences are explained using the Input-
Processes-Output model.
The moderator of this study is innovation in two sectors (product and service innovations). A
moderation effect is also defined as an interaction effect. Keith (2006) defines an interaction as
“those instances when the effect of one variable depends on the value of another variable”
(Keith, 2006, p. 132). Warner (2013) states that when interaction is present, the slope to predict
Y from X, differs across scores on the X2 control variable, in other words, the nature of the X1,
Y relationship depending on scores on X2 (Warner, 2013, p. 611). An example of a moderator
is environmental turbulence (divided in present or not present, which could affect the
conceivable relationship between the independent and dependent variable.
2.6.1 The input of product and service innovation activities.
Service innovators often use different inputs for their innovation activities. Those innovation
activities are often less systematic, and service innovators perform less standard R&D activities
when compared to the product innovators (Djellal and Gallouj, 2001). Sundbo (1997) and Miles
(2007) confirmed this assertion that new service development often happens by informal and
ad hoc committees, rather than formal R&D business units. Consequently, service innovators
produce their innovation activities with the help of project teams which consists of employees
from different departments. Product innovators develop their innovation activities often within
R&D teams on a systematic basis, like cross-functional teams (Djellal and Gallouj, 2001).
Product innovators obtain often more ‘specialized investments’. Chandy and Tellis define this
as: “specialized investments are investments that lose value if they are not applied to a specific
technology” (Chandy and Tellis, 1998, p. 477). Product innovators which are successful with
their current product, possess often many specialized investments for that specific product. And
those investments are gathered via years of labor by a firm R&D manager, and those
investments will eventually become obsolete. Consequently, those managers are reserved to
give up their current successful product, which is related to the ‘sunk cost fallacy’, which means
that “people future action are influenced by expenditures that already have been made, even
though they rationally should not be taking into account” (Chandy and Tellis, 1998, p. 478).
23
Leiponen (2005) argues that R&D budgets are not statistically significant connected with the
introduction of a new service, while the introduction of a new product is statistically significant
connected within the manufacturing sector. Leiponen (2001) concluded that knowledge
intensive service firms (KIBS) deliberately refused to constitute a formal R&D team, since
these firms argue that is of great importance that employees are part of the innovation processes,
and that these employees interact closely with their customers. Hence, the collaboration
regarding their innovation processes with the current customers comes into play (Leiponen,
2001). Service innovators develop their innovations often with direct interaction and with co-
production of their customers. Within the product sector this direct interaction is less common.
Another discrepancy is that service innovators often use the knowledge of consultancies
agencies as source for their innovation and collaboration activities relative to manufacturing
innovators (Tether and Tajar, 2008). However, product innovators often use the knowledge of
universities and other research institutes as source for their innovation or collaboration activities
(Arnundel, et al., 2007).
The nature of services is as follows. A service is often intangible and perishable. A service
innovation often starts with an idea, based on a noticed problem of a customer. And this stage
is often characterized as fuzzy. The emergent idea is often adjusted via iterative steps and it is
an interactive process. It is therefore often difficult for service innovators to develop their
innovation in a structured fashion, like most product innovators do. Moreover, the nature of a
product development is often characterized as a formal and a rational planned process.
Tether (2005) states that service innovators are more likely to use “soft” sources of knowledge
(e.g. human skills, collaboration with customers), whereas manufacturing innovators use more
“hard” sources of knowledge as input for their innovation activities (e.g. hardware, R&D
expenditures). Therefore, the most important input for the service sector is the investment in
human resources (Coombs and Miles, 2000). Miles (2005) states that the R&D activities of
service innovators face more difficulties to be captured by researches in the past, since the
European innovation surveys are oriented towards manufacturing innovators; making them
therefore less valuable.
24
2.6.2 Process of product and service innovation activities
Djellal and Gallouj (2001) claim that “the process of innovation in services is very rapid, and
arises mainly from the fact that innovation in services have an incremental nature, and often
results from intra or extra service imitation” (p. 63-65).
Sundbo (1997) and Miles (2007) state that new service development often happens by informal
and ad hoc committees rather than formal R&D business units. Sundbo (1997) researched the
process of the innovation activities within service innovators. Sundbo (1997) argues that ‘a
balanced empowerment system’ is a common innovation system within the service innovation
sector. This latter implies that the majority of the firm is involved in the innovation activities
of a firm. This indicates that the innovation process within service innovators could be defined
as a social one (Sundbo, 1997). Taken together, a service innovation process entails an
interactive process, in which a given problem is solved. And after a service is launched, there
are many improvements, which is defined as ‘after- innovation’ (Miles, 2007).
Gallouj and Djellal, (2010) explain that service innovators possess a dual structure; “an
informal, loosely coupled interaction structure among employees, and a formal management
structure which expresses the official goals, norms and values of the organization” (Gallouj
and Djellal, 2010, p. 541). Subsequently, the top management has now the task to apply the
new innovation into a firm strategic objectives. The top management has an important task in
emphasizing the innovation goals and to empower the employees to show innovative behavior,
i.e. to create a climate for innovation and thus to inspire their employees.
Gallouj and Weinstein (1997) state that a new service development does not have to start with
a priori planning, but it is possible that such a new service development process starts in
practice. The definition of such an innovation is ‘an ad hoc’ one, which is a “solution to a
particular problem posed by a given client” (Gallouj and Weinstein, 1997, p.549). To sum up,
a service innovation process is often characterized a one which starts as an emergent idea from
practice, the R&D budget and departments are often absent and the innovations are rarely a
radical one. And such an innovation is not developed in a structured manner. Furthermore, the
knowledge resources involved in the innovation process is of great importance.
The developed service innovations are not necessarily related to the open innovation model of
Chesbrough (2003). This model “assumes that useful knowledge is widely distributed, and that
even the most capable R&D organization must identify, connect to, and leverage external
knowledge sources as a core process in innovation.” (Chesbrough, 2003, p. 3).
25
Chesbrough (2003) found evidence that when a firm decided to use external knowledge and
external collaboration for their innovations which is outside of the organization boundaries, this
innovations had more chance of survival. Hipp and Grupp (2005) assert that service innovators
are operating within relatively lose coupled networks. These networks have numerous forms,
with less cooperation, and external knowledge is transferred less formalized. This implies that
innovation are also developed outside the boundaries of a firm. The reasoning why service
innovation are not necessarily connected with the open innovation model, is that a service
innovations seldom have an obvious goal. Moreover, what they develop can’t be captured like
manufacturing innovators. They capture their innovation activities with their research and
developments budgets. And a research and development department is often absent within the
service sector. Furthermore, a service innovation can just stop due to that an employees has to
some other work (Sundbo, 1997). This implies that a service innovation could be characterized
as a labile process.
One of the differences between new product and new service innovations is that a new product
development often happens via cross-functional teams. Brown and Eisenhardt (1995) state that
a successful product development is dependent of a thorough planning. And that product needs
to have superior characteristics, which could be easily sold within ‘an attractive market’.
Furthermore, the plan has to be executed with the help of a good coordinated cross-functional
team with the support from their senior managers. Taken together, a product that is well
planned, implemented, and appropriately supported will be a success” (Brown and Eisenhardt,
1995, p. 348).
In addition, Brown and Eisenhardt (1995), argue that the ‘disciplined problem-solving
perspective’ is contributory for successful product development. This implies that new product
success is due to autonomous team with the discipline of a heavyweight leader, strong top
management, and a strong product vision. The outcome is a quick, new productive development
process (Brown and Eisenhardt, 1995). To sum up, the production process within the product
sector entails a more standardized production processes than in comparison with the service
sector.
26
2.6.3 Output of product and service innovation activities
The output of both sectors is often different. Product innovators develop often tangible products
whereas service innovators often develop intangible services. Furthermore, it is difficult to
measure the outcome of a service innovation, because service innovators don’t often use
‘rational project management tools’ (Gallouj and Djellal, 2010). In addition, “service
innovation is not an isolated, clearly goal- oriented process based on a plan of what to realize
that can be expressed physically such as a manufacturing research and development (R&D)-
based innovation can” (Gallouj and Djellal, 2010, p. 282).
Tether (2005) states that product innovators develop in general more product and or process
innovations, relative to service innovators, that develop more organizational innovations.
Organizational innovation refers to innovations within the firm, like a sales procedure, like a
new delivery service. They have the purpose to improve the day-to-day activities of a service
innovator.Tether (2005) found that 53% of service innovators introduced an organizational
change as innovation. Product innovators declared that 25% had introduced an organizational
change as innovation. Product innovators introduced often a new product (54%), and a new
production processes (56%).
Sundbo (1997) asserts that service innovation are easily copied, and therefore, continuous
improvement of service innovations is required. Services are easily copied due to its often
intangible characteristics which implies that patent protection is difficult. Tether (2005) follows
this statement that continuous improvement is a necessary condition for service firms “because
service outputs tend not to have an independent physical existence, service innovations can be
invisible and therefore difficult to record. They can also be difficult to reproduce, consistently
or exactly, time after time. This also relates to the flexibility of services. Service firms often
constantly adapt and reform their activities to provide solutions to changing and differentiated
customer requirements” (Tether, 2005, p. 155).
In addition, patent protection plays a minor role for service innovators relative to the product
sector (Hipp and Grupp, 2005). Djellal and Gallouj (2001) and Leiponen (2012) mentioned the
often impossibility of protecting the innovation activities of service firms. Service innovators
protect their innovation activities mostly via secrecy, complexity and lead times (Tether, 2007).
Hipp and Grupp (2005) state that service innovation is hard to measure due to the intangibility.
Therefore, there is a demand for new empirical service innovation models.
27
The current models are more biased towards the manufacturing sector (Hipp and Grupp, 2005).
In addition, service innovators face difficulties in determining whether they have developed a
new service at all, and what kind of service they developed (Tether, 2005; Hipp and Grupp,
2005).
2.6.4 Additional differences
The knowledge intensive service sector (hereafter called KIBS) is more innovative in
comparison with other service sectors, and also even more innovative relative to some
manufacturing innovators (Windrem, et al., 2010). Consequently, the statement that the service
sector is lagged relative to manufacturing innovators is rejected. Service innovators innovate
differently. Nevertheless, service innovators shift more to the manufacturing side; the
organization of their innovation activities become more systematic. And technology will plays
a more important role, as well as the R&D budget becomes more vital for service innovators.
Although, the service sector has some core discrepancies relative to product innovators: the
current customer involvement is vital for service innovators, the innovation in service
innovators is characterized via small changes. And person-to-person contact (non-technologic)
will remain a core characteristic for almost of service innovation activities, “and relatively more
loosely-coupled organization system, characterized by less R&D, more corporate
entrepreneurship, strategic guidance, and service professional trajectories” (Sundbo and
Gallouj, 2000, p. 23). Finally, service are characterized by heterogeneity, inseparability and
perishability which is obvious different from the product innovators, where they often produce
tangible product.
28
In order to give a clear overview of the differences between the innovation activities of the
product and the service innovators, table 1 is presented below.
Table 1. The core similarities and difference between product and service innovations.
Similarities Differences
Product innovators develop also service innovations, and service
innovators also develop product innovations.
Service innovators show a stronger tendency to launch incremental
innovations.
High-tech KIBS are much like other high-tech firms (R&D and
technology acquisition). Large service firms often organise their R&D
like manufacturers.
Service innovators use less formal R&D processes, such as cross-
functional teams, which are very important in the process of new
product development.
Strong commitment and support from the top management is vital in
order to produce both product and services innovations.
The output of the innovation activities is different: service outputs tend
not to have an independent physical existence, service innovation output
can be invisible.
Both product and service innovators have to take risk while
cannibalizing their own product/service.
Patent protection plays a minor role for service innovators; service
innovation are therefore easily copied.
The corporate culture of a firm is a vital condition for both product and
service innovators in order to develop innovation success.
Product innovators have more specialized investments obtained during
the development process of a new product.
Customer involvement is important for both sectors, although this
customer involvement in a service context is more important.
Organisational change is relatively more common for service innovators
as a characteristic of a new service development.
Attention to the current market is vital for both sectors. Also, paying
attention to future market trends is essential.
Consumers and clients, as well as staff, can be important sources of
innovation and often have to be engaged in the process of creating or
rolling out new services.
Both the intrinsic value of the product/service, including unique
benefits to customers, high quality, attractive cost, and innovative
features, is the critical success factor for both product and service
innovators.
Service innovators cooperate with different partners as source for their
innovation input and collaboration activities.
The successful transfer of tacit knowledge within and between
organizations is both important for product and service innovators.
Services are created and consumed at the same time.
The new product/service has to fit with firm competencies and market
needs.
A priori planning is more vital for a new product development success.
And a new product development often happens via cross-functional
teams.
The process of innovation is services is very rapid, and arises mainly
from the fact that innovation in services have an incremental nature, and
often results from intra or extra service imitation.
29
2.7 Theoretical mechanism and hypotheses regarding the moderator
This section is dedicated to the theoretical mechanism concerning the moderating hypotheses.
This study will research whether there are moderating effects between product and service
innovations. This study does not make the difference between product and service firms, since
product firms develop also service innovations, and service firms develop also product
innovations. This study makes the distinction between product and service innovations. The
argumentation of the hypotheses is based on the differences addressed section (2.6).
Chandy and Tellis (1998) state that current customer orientation is detrimental for the
willingness to cannibalize. Current customer orientated firms could face the danger that they
will be financially too dependent on the current customers. Therefore, they are reluctant to
cannibalize. In addition, Christensen (1997) states that being too close to the current customers
encourages the reduced attention to emerging and new technologies. Sundbo (1997) states that
“service firms often constantly adapt and reform their activities to provide solutions to
changing and differentiated customer requirements” (p. 155). Consequently, current customers
do want the latest services and therefore are service innovators willing to cannibalize their own
services. Product innovators show a stronger tendency to develop technological innovations
which are often more valuable relative to service innovations. And product innovators develop
their business models on maintenance service, which means that product innovators are afraid
that cannibalization will result in reduced customer satisfaction. A service innovation is
perishable, a product innovation is not. Service innovators have the advantages that direct
customer’s involvement in the innovation processes could be beneficial for the renewal of their
services, they could define ideas on what is most important for further development. The
increasing technology developments could be results in new possibilities for direct customer
involvement in service innovations, and those technology developments are rapid. Therefore,
service innovators are less afraid that a new service will result in a reduction of current customer
satisfaction, since service innovators have to constantly adapt and reform their new services.
Consequently, it is the expectation that the negative relation between current customer
orientation and the willingness to cannibalize becomes less negative for service innovations.
H4a: The relation between current customer orientation and the willingness to cannibalize is
positively moderated by service innovations.
H4b: The relation between current customer orientation and the willingness to cannibalize is
negatively moderated by product innovations.
30
Firms with a future market focus are rather proactive instead of reactive. Those firms search for
new technologies and trends (Brown & Eisenhardt, 1997). Above all, those firms are more long-
term oriented relative to firms which have not a future market focus (Chandy and Tellis, 1998).
Furthermore, “it broadens the horizons of managers and alerts them to new technologies,
competitors and customers” (Chandy and Tellis, 1998, p. 479).
Gallouj (2001) states that “the process of innovation in services is very rapid, and arises mainly
from the fact that innovation in services have an incremental nature, and often results from
intra or extra- sector imitation” (Gallouj, 2001, p. 63-65). This implies that service innovators
have to constantly monitor the environment regarding new innovations. Product innovators
have to do this as well, but the service sector innovate more often (Tether, 2005). Furthermore,
the innovation intensity is stronger within the service sector (OECD, 2005), which requires a
stronger future market focus for service innovators.
Hipp and Grupp (2005) and Djellal and Gallouj (2001) argue that it is harder for service
innovators to protect their intangible innovators than compared to manufacturing innovators
(service innovation are almost impossible to protect via patents, due to their intangibility
character). Their empirical part proved that patent protection in the service sector does not have
a large share, while product innovators rely most of the time on some kind of intellectual
property protection (Hipp and Grupp, 2005). In addition, service innovators often change and
adapt their activities to offer solutions to the changing and differentiated customer requirements
(Tether, 2005). Due to the, among others, growing competition for service innovators, and the
often difficulty of protecting the innovation activities for service innovators, it is now the
presumption that the positive relationship between future market focus and the willingness to
cannibalize will be stronger for service innovations.
H5a: The relation between future market focus and the willingness to cannibalize is positively
moderated by service innovations.
H5b: The relation between future market focus and the willingness to cannibalize is negatively
moderated by product innovations.
31
Greve (2003) states that the introduction of a new product or service innovation almost
requisites risky behavior, since “an innovation launch is strongly affected by risk considerations
because it is a strategic decision that involves judging whether the risk of the innovation is
acceptable to an organization” (Greve, 2003, p. 689).
Leiponen (2005) states that R&D budgets and patents have a smaller impact in a new service
context, since a R&D department is often absent within the service sector. This implies that it
is hard to record the independent R&D activity of a service innovator. A service innovation is
performed by composing a project team which consists of employees of different departments
(Leiponen, 2005). Sundo and Gallouj define a service innovation process as: “relatively more
loosely-coupled organization system, characterized by less R&D, more corporate
entrepreneurship, strategic guidance, and service professional trajectories” (Sundbo and
Gallouj, 2000, p. 23). Product innovators are more characterized by ‘specialized investments’.
Chandy and Tellis (1998) define this as: “specialized investments are investments that lose
value if they are not applied to a specific technology (p. 477). Product innovators which are
fortunate with their current product, own many specialized investments. And those investments
are gathered via years of labor by the R&D managers. Consequently, those managers are
restrained to give up their current successful product, and giving up this product fosters risk.
Product innovators face more the ‘sunk cost fallacy’, which means “that people future actions
are influenced by expenditures that already have been made, even though they rationally should
not taking into account”. (Chandy and Tellis, 1998, p.478). Brown and Eisenhardt (1995) state
that a successful product development is dependent of a thorough planning. And that product
needs to have superior characteristics, which could be easily sold within ‘an attractive market’.
Furthermore, the plan has to be executed with the help of a good coordinated cross-functional
team with the support from the senior managers (Brown and Eisenhardt, 1995). Also, service
innovations are created and consumed at the same time. Therefore, product innovators have
more value to lose when they cannibalize their current product. This implies that risk tolerance
is more important. Subsequently, the reasoning is now that the positive relationship between
risk tolerance and the willingness to cannibalize will be stronger for product innovations.
H6a: The relation between risk tolerance and the willingness to cannibalize is positively
moderated by product innovations.
H6b: The relation between risk tolerance and the willingness to cannibalize is negatively
moderated by service innovations.
32
2.8 Conceptual model
H3 + H6a - H5a- H4a +
H2+
H1- H6b + H5b+ H4b-
Figure 1: Conceptual model
The willingness to
cannibalize
Risk tolerance
Current Customer
orientation
Product innovations
Service innovations
Future market focus
33
3. Methodological framework
The sections one and two described the research problem and the theoretical background of this
study. In the latter, the dependent and independent variables were further described.
Subsequently, it is now important to explain which methodological approaches will be used in
order to gather the data and to analyze that. This section begins with explaining the research
design and the way the data was collected. Finally, the structure of the initial data analysis will
be addressed.
3.1 Research design
This research used a cross sectional research design, since it took place at one single point in
time (Bryman, 2008), in a deductive fashion (Ritchie & Lewis, 2003). Within this design, a
quantitative and a qualitative approach was chosen. Within the quantities part, a survey was
chosen which made it possible to confirm or reject the hypotheses which were addressed in the
theoretical framework. The qualitative part had to purpose to explore the results of the
quantitative part in dept. The combination of both approaches increased the stability of the
conclusions drawn in social science (Bryman, 2008). The combination of both approaches
referred to ‘methodological triangulation’ (Ritchie & Lewis, 2003), which increased the
reliability of this study. The firm was the unit of analysis since all the used variables were
characteristics of a single organization, and the respondent was the unit of observation, since
an organization member has to fill in the questionnaire. The condition was that a firm should
have met the criterion of having introduced at least one new or significantly improved
product/services in last three years. Moreover, the respondent needed to have a thorough picture
about the entire firm and the research and development procedures/processes. When the firm is
a smaller organization, the survey had to be filled in by the (managing) director, when the firm
was larger, the survey had be filled in by a business unit or R&D manager.
3.2 Data collection & Sample strategy
This research had the purpose to investigate the possible moderating effect that current
customer orientation, future market focus and risk tolerance had on the willingness to
cannibalize in a new product and a new service innovation context. It was therefore necessary
to collect data from both product and service innovators. The first step was to approach firms
within the network of the researcher. The goal was to approach 230 firms within that network,
and approximately 40 firms outside the network of the researcher.
34
Furthermore, data was gathered by approaching multiple sector associations. This research used
a purposive sampling strategy (Ritchie & Lewis, 2003), since firms needed to have ten or more
employees, and a firm should have met the criterion of having introduced at least one new or
significantly changed product or service in the last three years. If not, no valid statements about
causality could be made. Since this study was concerned about innovations that already toke
place in the past three years, a cross section design was applicable. This study was concerned
about innovation that have already taken place in the last three years. If the innovation was not
yet launched, a longitudinal research design was required.
Furthermore, the researcher used three sources to search for product and service innovator. First
the network of the research was used, which consisted of both product and service innovators.
Second, a relative which had above all connections with 100 service innovators. Lastly, a
relative which had above all 100 product innovators connections. This ensured that a sampling
bias was not of major concern.
The actually data was collected via an online questionnaire which was send by email to all the
respondents. The operationalization of the questionnaire was based on existing scales, adapted
from Chandy, Tellis and Prabhu (2009), and Nijssen, et al., (2005:2006). The respondent had
to answer eight general questions regarding the firm and a total of 18 statements. All the items
were measured using a 5 points Likert scale, which ranged from strongly disagree to strongly
agree. Before the questionnaire was sent, a pretest of this latter was done. The questionnaire
was sent to some potentially respondents, which eventually resulted in the adjustments of some
survey items. The survey was positioned in appendix A. In order to determine whether the
innovator had introduced a service or a product innovation, the question: What is the core
activity of your firm? Answer possibility 1). Delivery of services (service sector). Or answers
possibility 2). The production of products (manufacturing sector), was asked. In addition, the
following questions were asked in order to determine whether the respondent was valuable
within the sampling population: Are you actively involved within the innovation processes of
your firm? And do you have a management function?
Unfortunately, multiple sector associations refused to cooperate due to that they argued that the
privacy of their clients could be impaired. It was therefore only possible to approach product
and service innovators within the network of the researcher. The advantage of this refusal to
cooperate was, that it was doable to actually monitor the innovators, and to pick only firms
which met the research criterion. In order to achieve enough response, lots of effort was taken.
35
In total 267 firms were approached, 231 within the network of the researcher and 36 without.
In these latter occasions, the researcher invited R&D manager via LinkedIn to participate. In
total 110 firms cooperated (41% response rate). There were 13 firms which did not introduced
a new product/service in the last three years. In these conditions, the cases were deleted.
In the end, ninety-seven (36 % response rate) firms cooperated which met the criterion of having
introduced a new product/service in the last three years. The demographic characteristics of the
sample size was shown on the next page.
The second step was to gather the qualitative data. This research selected four participants
which had filled in the questionnaire. Furthermore, the semi structured interviews had the
purpose to gather in debt qualitative findings of the relationships between current customer
orientation, future market focus and risk tolerance on the willingness to cannibalize (see
appendix D, topic guide). The table of operationalization was used as input for the topic guide
(appendix A, table of operationalization). It was important to select innovators which had a
clear core activity, since this research investigated the differences between product and service
innovations. And the boundaries between product and service innovators was mentioned as
increasingly ‘fuzzy’. For instance, Rolls Royce, where customers are now paying for the engine
usages and maintenance contracts, were they in the past just bought the product (Cusumano, et
al., 2014). In addition, this research choose to pick three service innovators and one product
innovator. The reason was that the theoretical framework of this research addressed that little
was known about how the service sector innovate (Leiponen, 2012). The service innovators had
as core activity the delivery of frozen products, a rental concept for private individuals and the
last service innovator delivered consultancy services. The product innovator was a
manufacturer of transport systems for the horticulture. All the respondents were actively
involved within the launched innovations. It was important to denote that the qualitative data
was not used to provide any confirmative results or conclusion, but it had only the purpose to
provide deeper insights of the quantitative data and to provide deeper insights as an addition to
the quantitative data.
36
Table 2: Characteristics of participating organizations.
A first impression was that the majority of the respondents had a management function and that
he or she was involved within the innovation processes. Firm size was reasonably normal
distributed, while firm age was too skewed. However, the most important characteristics was
the distribution of the sector type, product or service industry. In order to determine that, a
Skewness test was performed. The Skewness value was 0.496, which remained under the
threshold of -2 or +2 (Tabachnick & Fidell, 2007). This finding implied that the amount of
product and service innovators was reasonably normally distributed.
Number of employees
<10
11-50
51-250
>250
Micro
Small
Medium
Large
Frequency
13
17
21
46
Percentage
13.4%
17.5%
21.6%
47.4%
Firm age
<5
6-10
11-25
26-50
>51
Years
Years
Years
Years
Years
Frequency
14
7
37
10
29
Percentage
15.1%
7.2%
38.1%
10.3%
29.9%
Industry type
Service
Manufacturing
Frequency
60
37
Percentage
62%
38%
Job characteristics
Management function
Yes
No
Actively involved in
innovation processes
Yes
No
Frequency
71
26
79
18
Percentage
73.%
27%
81%
19%
37
3.3 Measurement
In order to conduct this research as reliable as possible, existing scales of previous inquiries
were used. This research used existing scales of Chandy and Tellis, 1998; Chandy, Tellis and
Prabhu, 2009; Nijssen, et al., 2005; 2006. These studies proved that the scales regarding the
dependent variable, the willingness to cannibalize and the independent variables, current
customer orientation future market focus and risk tolerance were reliable. Furthermore, the
operationalization of both the dependent and independent variables were described in more
depth. Lastly, the moderator and the control variables were described.
3.3.1 Dependent variables: The willingness to cannibalize
Chandy and Tellis (1998) used the willingness to cannibalize as one dimensional construct in
their empirical part. Nijssen, et al., (2005; 2006) investigated the dimensions the willingness to
cannibalize. They argued that the willingness to cannibalize was a multi-dimensional construct,
which consisted of the willingness to cannibalize sales, investments and routines (Nijssen, et
al., 2005; 2006)
A couple of years later, Chandy. Tellis and Prabhu (2009), researched again the willingness to
cannibalize. In that research they operationalized the willingness to cannibalize with only three
propositions, which resulted in a α of 0.58. It was therefore better to use to six propositions of
Nijssen, et al., (2006), because the reliabilities of those scales were satisfactory (routines= α
0.74, investments= α 0.68, sales= α 0.74). And even more importantly, Nijssen, et al., (2006)
operationalized the willingness to cannibalize in a new product and a new service context. To
sum up, the willingness to cannibalize was measured with the existing scales of Nijssen et al.,
(2006). This concept existed of a three dimensional construct, the willingness to cannibalize
sales, investments and organizational routines. Each construct existed of two items. In order to
measure this construct, the respondents were asked to answer statements regarding these items.
The response options ranged from totally disagree- to totally agree, which is a five point Likert
scale.
38
An exploratory factor analysis was performed in order to determine whether the willingness to
cannibalize was a multi-dimensional construct, and whether this study used one or multiple
dependent variables. First, it was important to evaluate the applicability of a factor analysis.
There were some rules of thump to check the usefulness of a factor analysis: 1) the Bartlett’s
Test of Sphericity was significant (P<0.000), 2) the KMO index was .720, which was higher
than the criterion of 0.6 (Pallant, 2010). 3) The items were sufficiently correlated, which means
that they had a value above 0.3 (Appendix C for the SPSS outputs). Therefore, a factor analysis
was guaranteed.
The next step was to evaluate the amount of factors. The Kaiser-Guttman rule stated that the
number of factors is equal to the number of factors with an eigenvalue greater than one. In this
thesis, component one and two had an eigenvalue higher than one (component one= 3,189 and
component two = 1,200). These two components explained 73,152 per cent of the variance. The
second rule of thumb was the Cattell’s scree test, by looking at the plot of the eigenvalues. A
straight line was drawn through the lowest eigenvalues, which resulted the two factors which
had an eigenvalue higher than this line. Therefore, two components were chosen. The next step
was to determine the way of rotation. An Oblimin rotation was chosen since the component
correlation matrix showed a strength in the relationship between the two components of 0,376.
Pallant (2010) stated that this result could cause discrepancies in the outcome due to the rotation
type, and in such occasions, an Oblimin rotation was preferred (Pallant, 2010).
In the end, the pattern and the structure matrix showed that the willingness to cannibalize
routines and investments loaded strongly on component one. The willingness to cannibalize
sales and routines loaded strongly on component two. The output of the factor analysis was
shown in appendix C and on the next page. Therefore, a clear differences between the three
dimensions of the willingness to cannibalize has not been found, because the willingness to
cannibalize investments loaded strongly on both components. This study made the decision to
combine the three concepts together since the factor analysis showed that two out of the three
concepts were in the similar component. In addition, component one had a strong eigenvalue
of 3,189 and explained 53% of the variance.
39
Pallant (2010) stated that if a research presented the output of an Oblimin rotated solution, both
the Pattern and the Structure matrix should be presented. The pattern matrix showed the factor
loading of the components, and the structure matrix showed the correlation between the
variables and the factors (Pallant, 2010). The output of both matrixes were shown below.
Table 3 Results of factor analysis ‘The willingness to cannibalize’
This output revealed that the willingness to cannibalize was a complicated concept within the
meaning of its operationalization. The output showed that there was not a clear differences
among the three constructs. It is notably that this output is not in line with previous research;
Nijssen, et al., (2005; 2006) found evidence for three components. The decision to develop new
components, based on this factor analysis induced ambiguities, since it was difficult to use one
component of the willingness to cannibalize routines and investment and one component of
sales and investment. And the differences between both components were not strong enough to
define them properly. In order to provide clearness for the reader, this study followed Chandy
and Tellis (1998), and operationalized the willingness to cannibalize as one dependent variable.
Moreover, this study was only concerned about the core definition of the willingness to
cannibalize; the extent to which a firm was prepared to reduce to the actual or potential value
of its investment for creating and introducing new product and service innovations.
To conclude, this research combined the three constructs (the willingness to cannibalize sales,
investments and organizational routines), based on the output of both matrixes and that the first
component had a strong eigenvalue of 3,189 and explained 53% of the variance, into one
dependent variable.
Pattern matrix without fixed components Component 1 Component 2
Willingness to cannibalize sales 1 -.030 .891
Willingness to cannibalize sales 2 -.034 .874
Willingness to cannibalize investments 1 .462 .461
Willingness to cannibalize investments 2 .633 .292
Willingness to cannibalize routines 1 .954 -.087
Willingness to cannibalize routines 2 .931 -.102
Structure matrix without fixed components Component 1 Component 2
Willingness to cannibalize sales 1 .305 .880
Willingness to cannibalize sales 2 .294 .861
Willingness to cannibalize investments 1 .635 .634
Willingness to cannibalize investments 2 .743 .530
Willingness to cannibalize routines 1 .921 .272
Willingness to cannibalize routines 2 .893 .248
40
The full operationalization of this research was positioned in appendix A, and the survey was
positioned in appendix B.
The items regarding the willingness to cannibalize sales existed of 1) supports new projects
even if they could potentially take away sales of existing products/services. 2) Is very willing
to sacrifices sales of existing products/services in order to improve the sales of its new products/
services. The items regarding the willingness to cannibalize investments exists of 1) tends to
invest in new promising technologies even if they causes service delivery
system/manufacturing facilities to become obsolete. 2) Has no problem replacing and thus
writing of system/machinery quickly if it will help to create a competitive advantage in the
market place. Finally, these items belong to the willingness to cannibalize routines. 1) Can
easily change it organizational scheme and processes to fit the needs of a new product/ service.
2) Quickly changes the manner in which it carries its tasks to fit the needs of a new
product/service. The respondent was asked to name a new product/service in the last three years.
This new product/service served as point of reference for all the questions regarding the
willingness to cannibalize. This resulted in a Cronbachs alpha of .823
3.3.2 Independent variables: Risk tolerance, future market focus and current
customer orientation
Current customer orientation was adapted from Desphande and Farley, (1998). In total four
items were used to measure this construct. Respondents were asked to answer the following
four propositions: 1) constantly monitors the level of commitment and orientation to serving
customer needs.2) has based its strategy for competitive advantage on understanding
customer’s needs.3) is more customer focused than its competitors.4) beliefs that it exist
primarily to satisfy and serve customers. The exploratory factor analysis, eigenvalue >1 (Test
of Sphericity was significant (P<0.000), the KMO index was .750), resulted in one clean factor,
based on an Oblimin rotation and eigenvalue above one. The Cronbachs alpha was .747.
Future market focus was adapted from Chandy, Tellis and Prabhu, (2009). In total four items
were used to measurer this construct. Respondents were asked to answer the following four
propositions: 1) our firm gives more emphasis to customers of the future relative to current
customers.2) market research efforts in our firm are aimed at obtaining information about
customers need in the future, relative to their current needs.3) we are slow to detect fundamental
shifts in our industry (R). 4) Our firm is oriented more toward the future than the present. The
KMO index was .525, which is below the criterion of .6 (Pallant, 2010). The exploratory actor
analysis found two factors. The Cronbachs alpha was 0.497.
41
Risk tolerance was adapted from Chandy, Tellis and Prabhu, (2009). In total four items were
used to measurer this construct. Respondents were asked to answer the following four
propositions: 1) managers in our firm rarely take risky decisions (R). 2) Relative to other firms,
we tend to favor higher risk, higher- return investments.3) we are reluctant to engage in in
untested business ventures (R). 4) We believe it is often necessary to take calculated risk. The
KMO index was .708, and the Test of Sphericity was significant (P<0.000). The exploratory
factors analysis, based on an Oblimin rotation and an eigenvalue >1, resulted in one clean factor.
The Cronbachs alpha was 0.658.
3.3.3 Moderator and Control variables: size, age
The moderator was operationalized via a dummy, the code 0 referred to a service innovator and
the code 1 referred to a product innovator. In order to determine whether the innovator had
introduced a service or a product innovation, the question: What is the core activity of your
firm? Answer possibility 1). Delivery of services (service sector). Or answers possibility 2). The
production of products (manufacturing sector), was asked.
Chandy and Tellis (1998) found that size was not a predictor of radical product innovation when
attitudinal variables were taking into account. This variable was categorized according to the
European Union recommendation of 2003 (small, medium and large, which were dummy
variables). This variable was chosen because Ahuja and Lampert, (2001); Gilbert, (2005) assert
that this variable affect organizational innovation. Larger firms may have more resources to
stimulate exploratory activities. However they could also lead to ineffective learning routines.
Also, according to Schumpeter (1942), size had an important influence of radical product
innovation and could therefore influenced the willingness to cannibalize.
Sorenson and Stuart researched the relationship between organizational aging and innovation
processes. They found that as firms become older, they show a tendency to exploit existing
competencies, which referred to incremental innovations (Sorenson and Stuart, 2000). And
prior researched proved that the willingness to cannibalize is a predictor for radical product
innovation (Chandy and Tellis, 1998). Consequently, organizational aging could therefore
affected the willingness to cannibalize.
42
3.4 Data analysis
In order to analyse the gathered data, the statistical program SPSS 20 had been used.
Furthermore, in order to confirm or reject hypotheses one-three, a multiple regression analyses
(OLS) has been performed. The qualitative was gathered through four semi-structured and
structured interviews.
3.4.1 Quantitative data analysis
First, after the online questionnaires were saved, those surveys were checked whether they had
missing values, errors, outliers, and violations of the assumptions underlying the statistical
technique. If a firm did not met the criterion of having introduced a new or significantly changed
product/services in the last three years, those cases were deleted. This resulted in the deletion
of multiple casus. In the end, the sample size consisted of ninety- seven firms. After mirroring
some items, the calculation of the means and the calculation of the Cronbachs alpha, a check
was done whether the use of an OLS was feasible.
First, the normality distribution of the variables were assessed. This was done by looking at the
Skewness and Kurtosis values. If these values were between -2 to +2, a normal distribution is
present (Tabachnick & Fidell, 2007). The dependent variable, the willingness to cannibalize
(Skewness= -0.745, Kurtosis= 1.072) were below the thresholds of -2 to +2. All the independent
variables were values below -2 to +2, which indicated a normal distribution. The moderator had
a Skewness of 0.496 and a Kurtosis of -1.792, which was just below the -2 to +2. Furthermore,
a Kolmogorov – Smirnov test was performed, which indicated a normal distribution. All the
Kolmogorov – Smirnov tests, for the dependent, independent variables, control variables and
the moderator variable were significant, which indicated that there was a violation of the
normality assumption. Pallant (2010) stated that this is quite common in large samples (N>30).
Nevertheless, it was more important to evaluate a whether there was a ‘violations of
homoscedasticity’.
Gilman and Hull (2007) stated that the ‘homoscedasticity’ is the most important condition to
evaluate whether an OLS technique is guaranteed. This view contradicts most statistics book
which explain the dependent variable should be normally distributed. Field (2009) stated that
“at each level of the predictor variable(s), the variance of the residual terms should be constant.
This just means that the residuals at each level of the predictor(s) should have the same
variance (homoscedasticity); when the variances are very unequal there is said to be
heteroscedasticity” (Field, 2009, p. 220).
43
This violation was more important than evaluating whether the dependent variable is normally
distributed. In this research, the dependent variable was not exactly normally distributed.
After looking at the plots of residuals versus time and residuals versus predicted value, it
become clear that there was not a ‘violations of homoscedasticity’. In appendix C, the output of
this plot was shown. Furthermore, a robustness test, the Levine’s test of equal of error variances
did not found a significant level, therefore, this violation of equal variance was not present.
To conclude, it was doable to perform an OLS regression analysis. This study used the
standardized coefficients to evaluate the relationships in this research.
In addition, within this study, single respondents filled in the questionnaire, which might had
caused single respondent bias. In order to determine that, a Harman’s single factor test on all
the variables was performed. Furthermore, the fixed number of factors was set to one and the
unrotated solution was chosen. The first factor showed a variance of 31%, which was less than
the majority of 50% of the variance. This finding implies that common method bias was not of
great concern (Podsakoff, MacKenzie, Lee and Podsakoff, 2003).
3.4.2 Qualitative data analysis
The qualitative data analysis was done by performing the three stages of Richie and Lewis
(2003). These stages were data management, descriptive accounts, and explanatory accounts
(Richie and Lewis, 2003). The first step was to transcribe all the interview with the help of
MaxQda 11, which was a qualitative data analysis software program. The data management
phase consisted of coding the transcripts with in-vivo coding and open coding based on the
table of operationalization. The in-vivo coding and open coding was done by using MaxQda
11. This program had a function were it was possible to create an output of the transcripts with
in the left side the codes and in the middle the transcripts (see Appendix G for the transcripts
and the codes). Therefore, it was possible to show all the codes in this research in an orderly
manner. In the next stage, all the codes were reviewed and reduced to a smaller amount of
codes, by creating broader categories. Eventually, these broader categories resulted in five final
categories and themes. These five categories and themes formed a ‘list of codes’. (See appendix
F for list of codes).
44
The qualitative data analysis was finished with by the exploratory phase, which consisted of
investigating the relationship between the core themes, the table of operationalization and with
the theoretical framework.
To repeat, these findings had only the purpose to provide deeper insight of the quantitative data.
The final step was to create a ‘coding matrices’, which gave a comprehensive summery of the
qualitative data of this study. This coding matrices consisted of important and striking quotes
of the respondents. This ‘coding matrices’ was used as input for the qualitative result section
(see appendix G for the coding matrices).
45
4. Results
This section provides insight in the empirical analysis of this study. First, the quantitative results
will be addressed. This section contain the descriptive statistics. Hereafter, the first three
hypotheses regarding the main affects are addressed, followed by the remaining hypotheses
concerning the moderating effects. Lastly, the qualitative results will be discussed.
4.1 Descriptive Statistics
Table 3 depicts the Pearson r coefficient which presents the correlation-coefficients between
the dependent, independent and control variables. The results revealed that no issues for
multicollinearity, since all values were below the threshold of .8 (Tabachnik & Fidell, 2005;
Pallant, 2010). Additional analysis of the control variable ‘Firm Age’, resulted in lognormal
transforming of this variable as it is slightly skewed to the right. The control variable ‘Size’ was
divided in four categories. Firm size was measured via the amount of FTE. Furthermore, these
four categories were transformed into three dummies, Size 1 (<10 FTE), Size 2 (>11-50 FTE)
and Size 3 (51-250 FTE). Table 4 present the descriptive statistics and inter-correlation of the
variables.
The correlation table shows three significant correlations between the three independent and
the dependent variable. The positive correlation between current customer orientation and the
willingness to cannibalize is (r = 0.510, p < .01). This is contrast with prior research, which
stated that current customer orientation is detrimental for the willingness to cannibalize
(Chandy and Tellis, 1998; Nijssen, et al., 2005). It is noticeably that there are positive
correlation between future market focus and the willingness to cannibalize (r = 0.335, p < .01),
and that there is a positive correlation between risk tolerance and the willingness to cannibalize
(r = 0.504, p < .01). These findings are in line with the literature of (Chandy and Tellis, 1998;
Nijssen, et al., 2005). These findings give a good impression of a possible strong correlation
between the dependent variable and the independent variables.
The three independent variables are also most of time significant correlated with each other.
Only the correlation between risk tolerance and future market focus is not significant (r = 0.148,
p > .005). The strongest correlation among the independent variables is the correlation found
between current customer orientation and risk tolerance (r = 0.323, p < .005).
46
With respect to the control variables size 1, size 2 and size 3, it is interesting to denote that they
do not have a significant correlation with the willingness to cannibalize. In addition, the
correlations are weak, ranging from (r = 0.066, p >.005), to r= -0.038, p >.005). This finding is
in line with Chandy and Tellis (1998), who stated that size is not a predictor of radical product
innovation (Chandy and Tellis, 1998). Moreover, Chandy and Tellis (1998) found a small and
non-significant correlation between firm size and the willingness to cannibalize (r = -0.04,
p >.005). Furthermore, the control variable Age (log) did not have a significant correlation with
the willingness to cannibalize (r = 0.0016, p >.005). This correlation indicates that the age of a
firm is not correlated with the willingness to cannibalize.
Descriptive statistics & inter-correlation of variables.
M Sd 1 2 3 4 5 6 7 8
1 The Willingness to cannibalize 3.66 0.72 (0.823)
2 Current customer orientation 3.85 0.60 0.510** (0.747)
3 Future market focus 2.81 0.69 0.335** 0.212* (0.497)
4 Risk tolerance 3.14 0.66 0.504** 0.323* 0.148 (0.658)
5 Firm Size 1 0.47 0.34 0.088 0.015 0.059 0.26** 1
6 Firm Size 2 0.12 0.39 0.066 0.188 -0.044 0.07 -0.18 1
7 Firm Size 3 0.18 0.42 -0.038 0.029 0.11 0.15 -0.208* -0.255* 1
8 Firm Age(log) 0.22 0.23 0.116 -0.076 0.016 -0.146 -0.509** -0.09 0.162 1
Table 4: Descriptive Statistics & inter-correlation of variables, N=97. ).Pearson Correlation *.p<.05 (2-tailed). Correlation **.p<.01 (2-tailed).
a. Dummy variable (1=Small, 2=Medium, 3=Large. Cronbachs alpha between the brackets.
47
4.2 Hierarchical multiple regression (OLS)
This section has the aim to reveal the main relationships of this study. In order to explore the
hypotheses, a stepwise multiple regression analysis is performed. The multiple regression
analysis regarding the main associations is done in two stages, first the control variables ‘Firm
Size’ and ‘Firm Age (Log)’ are entered into the first model. Second, the independent variables
‘current customer orientation’, ‘future market focus’ and ‘risk tolerance’ are added, together
with the control variables, to the second model and tested independently. The results of the OLS
regression analysis is presented in Table 5: OLS regression for the willingness to cannibalize.
4.3 Direct effects on the willingness to cannibalize
In the baseline model, both the control variables size and age are entered. Only the variable size
dummy 1 resulted in a significant effect (B=0.524; β=0.250, p<0.046). The first model was not
significant (F=1.364, p>0.252). The adjusted R² is 0.015 of model one. When the three
independent variables are entered in model two, all the independent variables have a significant
positive effect on the willingness to cannibalize. Furthermore, model two was found to be
highly significant (F=11.597; p=0.000), and the VIF values remained under the threshold of 10
(O’Brien), indicating no problems with regard to issues of multicollinearity. The adjusted R²
was 0.436 of model two, which was a significant R² change from the first model, and possesses
the largest explanatory power, which explained 43.6 percent of the variance in the willingness
to cannibalize.
Hypothesis one presumes that current customer orientation has a negative effect on the
willingness to cannibalize. The effect of current customer orientation on the willingness to
cannibalize is (B=0.439; β=0.367; p=0.000). This hypothesis is therefore rejected.
Hypotheses two presumes a positive relation between future market focus and the willingness
to cannibalize. The findings reveal that future market focus has a positive on the willingness to
cannibalize (B=0.213; β=0.205; p=0.011). This hypothesis is therefore confirmed.
Hypotheses three presumes a positive association between risk tolerance and the willingness to
cannibalize. The result found indeed a positive relation between risk tolerance and the
willingness to cannibalize (B=0.415; β=0.383; p=0.000). This hypothesis is therefore
confirmed.
The control variable age (Log) in model two was found to be significant (B=0.731; β=0.232;
p=0.012), whereas the control variables sizes 1, 2 and 3 are non-significant.
48
4.4 Moderating effects
The final step is to perform an OLS regression with the three moderation effects. The results of
the moderation effects are presented in table 6. These moderation effects are entered separately
in the regression models and represented three regression analyses. These results are integrated
due to provide clearness. In the third model, the control variables, the three independent
variables and a dummy for product and service innovations are entered. This dummy is
multiplied with the first independent variables, current customer orientation. In the fourth
model, the control variables, independent variables and the interaction term of future market
focus are entered. In the fifth model, the interaction term of risk tolerance is added, together
with the control and the independent variables. The reason why the interaction terms are entered
separately is due to multicollinearity problems, since entering the interaction terms together in
one model resulted in high multicollinearity problems. It is interesting to denote that the models
three, four and five are highly significant at the .000 level. The F values range from 10.048 to
10.048 within the models three, four and five. The adjusted R2 ranges from .421 to .430, which
was not a significant change from model two (Appendix C: SPSS output).
Hypothesis four presumes that the relation between current customer orientation and the
willingness to cannibalize is positively moderated by service innovations. The interaction term
of current customer orientation*‘core activity dummy’ resulted in a non-significant relation
(B=0.013; β=0.035; p=0.693). This hypothesis is therefore rejected.
Hypothesis five presumes that the relation between future market focus and the willingness to
cannibalize is positively moderated by service innovations. The interaction term of future
market focus*core activity dummy’ is also non-significant (B=0.019; β=0.040; p=0.657). This
hypothesis is therefore rejected.
Hypothesis six presumes that the relation between risk tolerance and the willingness to
cannibalize is positively moderated by product innovations. The interaction term of risk
tolerance * ‘core activity dummy’ resulted in (B= 0.010; β= 0.039; p=0.808). This hypothesis
is therefore rejected.
To sum up, none of the three moderating effects are significant. A first impression is that
multicollinearity is not major problem because the VIF values are below 10, indicating no
multicollinearity problems (O’Brien, 2007). The VIF values ranged from 1.106 to 1.834. Within
the models three, four and five, current customer orientation, risk tolerance, future market focus
remained significant within these models.
49
It is interesting to denote that this study did not find interaction effects, therefore, it is safely to
interpret the main effect in the second model (Pallant, 2010). On the next page, the full OLS is
presented. Furthermore, it is noticeably that only the control variable age (Log) is significant
within the models three, four and five. The control variable size is not significant within the
models one, two and three.
Since this study did not find any moderating effect, it is interesting to evaluate whether these
results are similar with independent T-tests. Pallant (2010) states that, an independent T-test is
useful when comparing the means of scores of two different groups, like in this study product
and service innovations. Four different independent T-tests are performed, as this study consists
of four different variables. The first independent T-test was regarding the willingness to
cannibalize. It is noticeably that the T-test found a non-significant differences between product
and service innovations. Performing the t-tests, no significance differences were found.
To sum up, among the dependent and the three independent variables, no significant differences
in the mean between product and service innovation is found (Appendix C for the SPSS outputs).
Furthermore, a robustness check is performed between a respondent who had a management
function and who had not a manager role in order to evaluate the statistically differences, since
a manager could have a better picture about the entire innovation processes. Results showed no
significant differences among managers and not managers regarding the willingness to
cannibalize. Therefore, it was legitimate to make not to a distinction between the groups in the
analysis. Furthermore, these findings support the quantitative result section by finding non-
significant differences among product and service innovations.
Table 5: Output of the independent T-test.
Test variable Grouping variable Mean Std.
Deviation
t Sig. (2-
tailed)
Mean
difference
The willingness
to cannibalize
Product
innovators
Service innovator
3.72
3.63
.707
.730
(95) -.561 .576 -.084
The willingness
to cannibalize
Management
function
Non-management
3.72
3.51
.739
.648
(95) -1.240 .218 .203
Current customer
orientation
Product
innovators
Service innovator
3.72
3.93
.541
.627
(95) .1.668
.099 -.207
Future market
focus
Product
innovators
Service innovator
2.90
2.76
.722
.673
(95) .992 .325 .143
Risk tolerance Product
innovators
Service
innovators
3.30
3.04
.653
.654
(95) -1.919 .058 -.262
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Results of Regression analysis for the Willingness to Cannibalize.
Model 1 Model 2 Model 3 Model 4 Model 5
Constant 3,217 -0.258 -0.262 -0.260 -0.259
Firm Age (Log) 0.214 0.232* 0.237* 0.237* 0.235*
Size 1 0.250* 0.060 0.074 0.075 0.069
Size 2 0.148 -0.007 -0.005 -0.005 -0.005
Size 3 0.030 -0.096 -0.089 -0.088 -0.091
Current customer orientation 0.367*** 0.374*** 0.378*** 0.373***
Future market focus 0.205* 0.200* 0.192 * 0.202*
Risk tolerance 0.383*** 0.370*** 0.370*** 0.372***
Interaction variables
Customer orientation interaction
0.035
Future market focus interaction 0.040
Risk tolerance interaction 0.022
Model Significance (F-test) 0.252 0.000 0.000 0.000 0.000
Adjusted R² 0.015 0.436 0.430 0.431 0.430
ΔR² 0.056 0.477 0.478 0.478 0.477
VIF values (Low/High) 1.180/1.488 1.074/1.608 1.106/1.822 1.231/1.790 1.099/1.834
Table 6: OLS regression for the willingness to cannibalize.
a. Dummy variable (1=Small, 2=Medium, 3=Large)
b. Dependent variable: The willingness to cannibalize.
N=97 * p<.05; ** p<.01; *** p<.001
Note: All coefficients are standardized values.
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4.5 Summary quantitative results
Within the second model, two out of the three main hypotheses are confirmed. The relationship
between customer orientation and the willingness to cannibalize is significant, but in the
opposite direction as presumed. Within the models three, four and five, none of the three
moderating effects proved to be significant. Therefore, the second model is the most applicable
and possessed the largest explanatory power, since it explained 43.6 percent of the variance in
the willingness to cannibalize. With respect to the control variables it is interesting to denote
that they did not have much effect, within model two, three, four and five, only age has a
significant positive relation with the willingness to cannibalize.
Overview of the quantitative findings in relation to the hypotheses. Proposed Finding
H1 Current customer orientation has a negative influence on willingness to cannibalize. - + β=0.367***
H2 Risk tolerance has a positive influence on the willingness to cannibalize. + + β=0.205*
H3 Future market focus has a positive influence on the willingness to cannibalize. + + β=0.383***
H4 H4a: The relation between current customer and the willingness to cannibalize is positively
moderated by product innovations.
H4b: The relation between current customer and the willingness to cannibalize is negatively
moderated by service innovations.
+
-
+ β=0.035
H5 H5a: The relation between future market focus and the willingness to cannibalize is positively
moderated by service innovations
H5b: The relation between future market focus and the willingness to cannibalize is negatively
moderated by product innovations.
+
-
+ β=0.040
H6 H6a: The relation between risk tolerance and the willingness to cannibalize is positively
moderated by product innovations.
H6b: The relation between risk tolerance and the willingness to cannibalize is negatively
moderated by product innovations.
+
-
+ β= 0.022
Table 7: Acceptance and rejection of the hypotheses.
52
4.6 Qualitative results
The results of the qualitative part will be discussed in this section. Four semi-structured
interviews were conducted (see appendix E for the topic list). The interview with the
respondents provided insights how the independent variables had an effect on the willingness
to cannibalize. Furthermore, the purpose was to provide deeper insight how they had organized
their innovation activities. The qualitative results had the purpose to clarify the quantitative
results of this study.
This research choose to pick three service innovators and one product innovator. The underlying
reasoning is that the theoretical framework of this research addressed that little is known about
how the service sector innovate (Leiponen, 2012). Furthermore, the theoretical part showed that
the differences within the service sector are stronger than the differences between product and
service innovators (Hipp and Grupp, 2005; Evangelista, 2006).
All the respondents were actively involved within the launched innovations. It is important to
repeat that the qualitative data is not used to provide any confirmative results or conclusions,
but that it only has the purpose to gather deeper insights of the quantitative data. Furthermore,
this qualitative section is organized similar to the hypotheses of the quantitative part to ensure
that the qualitative findings are an addition to the quantitative results.
The first step is to gather insights about the developed innovation and whether the respondent
was actually involved in this process. This was done by asking whether the respondent was
actually involved with the innovation. The innovations which were developed in the past three
years vary per sector. Furthermore, the respondent was asked to make a description of the
launched innovation and what his or her contribution was. The product innovator had developed
a new transport system for the horticulture, the service innovators had developed 1) A new sales
procedure 2) A rental concepts for students. 3) The introduction of an online E-learning training.
53
In order to give a clear overview of the core activity of the innovators, the reasons to launch the
innovations and the description of the innovation, table 8 is presented below.
Table 8: Overview of the product and service innovators.
The first hypothesis states that there is a negative relation between current customer orientation
and the willingness to cannibalize. Since it is not possible to evaluate exactly whether the
innovator was willing to cannibalize, the launched innovation is used as guideline for the
researcher to determine whether the independent variables had an impact on the launched
innovation. However, it was possible to calculate the mean of the respondents regarding the
dependent variable, the willingness to cannibalize (the respondents had filled in their contact
information).The mean of the willingness to cannibalize in this study was 3.66, where the
maximum mean was 5 (See Table 4: Descriptive Statistics & inter-correlation of variables).
Respondent one had a mean of 3.66, respondent two scored a 2.66, respondent three scored a
mean of 3.66, and respondent four scores a mean of 2.66.
These findings indicated that two respondents, based on their scores in the questionnaire are
potential inclined to cannibalize. The remaining results of respondent two and four are a little
more ambiguous, since they scored above 2.5 but below the mean of 3.66. However, these
results should be interpret with caution. The qualitative results revealed that real cannibalization
was not present when a new innovation was developed. The respondents mentioned that they
defined it as an increase in volume, instead of giving up an existing innovation.
The innovation Respondent one
-Delivery services of frozen
products.
Respondent two
-Manufacturer of
transport systems for
horticulture and for
laundries firms.
Respondent three
-The firm delivers
rental concepts for
computers, TV, laptops,
laundry equipment.
Respondent four.
-A consultancy firm
which delivers HR
advices for business
firms.
Reason to launch the
innovation
The firm had to make a
strategic decision since they
closed a loss making region.
The question was now how
to approach the residual
customers
One, to stay ahead of the
competition, and to save
labor. And we saw that
customers demanded for
a complete transport
system, in the past, we
did only a part of that.
The main reason was to
operate in a new market,
the students. This firm
saw other firms that were
successfully operating
within the student market
with other products.
In the past years, a certain
subsidy was gone which
resulted that the market
changed dramatically.
This firm wants to deal
with this problem by
introducing a completely
new service for their
customers, which is new
in that market.
The launched innovation A new sales procedure: the
firm introduced a tele agent
department which calls the
customers in advance which
products they would like to
buy.
We developed, based on
AVG technology, a new
transport system for the
horticulture, from the
glass house to the
processing barn, which
makes it possible to save
in labor.
A rental concepts for
students, in the past there
was only a rental concept
for private individuals.
The introduction of an E-
learning training,
whereby the training is
giving digitally, thus, via
internet.
54
Only respondent four states that cannibalization could be present, by replacing trainers via
online trainings. Respondent four states that “Cannibalization is potentially present, if the
online training reduces and replaces the amount of necessary FTE trainers. Therefore,
obsolescence of trainers could be present in the future” (Respondent four, July 7th).
The selection criterion could be that innovators which scored a mean of 3.5 out of 5 or more on
the willingness to cannibalize are appropriate for the research sample.
The quantitative results indicated that there is a positive relationship between current customer
orientation and the willingness to cannibalize. As mentioned before, respondent one and three
scored 3.66 out of 5 as mean on the willingness to cannibalize. These respondents are therefore
applicable to use in the qualitative data analysis regarding the willingness to cannibalize.
Respondent two and four are not taking into account concerning the willingness to cannibalize,
but only how the independent variables had an influence on the launched innovation, since these
respondents scored below the threshold of 3.5 out of 5 on the willingness to cannibalize.
First the results of respondents one and three will be discussed, and subsequently the results of
respondent two and four will be addressed.
The qualitative results revealed that the launched innovations were more directed towards future
customers and not towards the current customers. Furthermore, these current customers were
also not directly involved, they only provided feedback on how the improve the innovation.
Respondent one states “In the development phase, we first looked purely business, the current
customers did not have much influence. It was just a question whether we are going to do it or
not” (Respondent one, July, 2th). In addition, respondent three states “The current customers
did not have influence, since the innovation was oriented towards a new market and towards
new customers” (Respondent three, July, 4th).
The other two respondents, which scored below the threshold of 3.5 out of 5 on the willingness
to cannibalize, showed a similar relation between the current customer orientation and the
launched innovation as well. Respondent two states “The current customers did not have
influence on the innovation, since the firm looked for future customers as test panel for their
new product” (Respondent 2, July, 3th). Respondent four support this assertion; “The current
customers did not have much influence. Although the idea of developing this innovation is based
on the trends that were given by the current customers” (Respondent four, July 7th).
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In addition, all the respondents mentioned the importance of listening to the current customers,
to adjust to their needs. Respondent four states “The current customers gave especially about
technical issues feedback. And the current customers told that they would like that the training
should be more interactive. Which resulted in some adjustments of the innovation.”
(Respondent four, July, 7th). And respondent one states: “We did as much as possible to fulfil
their demands, the adjustments of the route, the frequency of calls, the time of calling”
(Respondent one, July 2th).
The second hypothesis states a positive relation between future market focus and the
willingness to cannibalize. The quantitative analysis found a strong positive association
between future market focus and the willingness to cannibalize. The qualitative results support
this relation. All the respondents talked about the importance of searching for new customers,
about the importance of upcoming trends and competitors, being distinctive from your
competitors and detecting fundamental shifts in the environment. Subsequently, they mentioned
the vital importance of being innovative. In addition, the introduced innovation are especially
directed towards future customers relative to their current customers. The respondents’ one and
three, which scored above the threshold of 3.5 out of 5 on the willingness to cannibalize, said
that “The innovation was directed toward new and unknown customers, the students”
(Respondent three, July, 4th).
In addition, the respondent one and three discussed their long term orientation. Respondent
three recognized that a new way of selling could be profitable, “We saw that in Europe, the
amount of sales via telephone of current customers is very profitable, and in the Netherlands,
such a strategy does not exist yet. We are constantly monitoring the future needs of our
customers, by reading journals, nu.nl, receiving feedback from the customers” (Respondent
one, July, 2th).
The other two respondents, which scored below the threshold of 3.5 out of 5 on the willingness
to cannibalize, mentioned a positive relation between future market focus and the launched
innovation as well. Respondent states “The innovation was directed to future customers, since
this product was co-developed with future customers. Customers do want to automate their
business processes” (Respondent two, July 3th). Respondent four stressed the importance of
being distinctive from the competitors, “If you offer the same as your competitor, you will face
difficulties in being distinctive from the competitors” (Respondent four, July 7th).
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To sum up, the strong positive relationship which was found in the quantitative analysis is also
supported by the qualitative results.
The third hypothesis postulated that there is a positive relationship between risk tolerance and
the willingness to cannibalize. The quantitative outcome is that there is a positive relation.
Furthermore, the qualitative results support this relation. Risk taking is inevitable, since the
introduction of a new innovation is crowed with risk (Greve, 2003). All the respondents
emphasized that risk taking is almost a necessary attitude while launching a new innovation.
However, the degree of risk taking differs among the respondents. In addition, all the
respondents mentioned that they have made calculated risk while launching the new innovation.
The respondents’ one and three, which scored above the threshold of 3.5 out of 5 on the
willingness to cannibalize, state that “The biggest risk we toke was that we did not have much
knowledge about the call center sector”(Respondent one, July, 3th). The other two respondents,
which scored below the threshold of 3.5 out of 5 on the willingness to cannibalize, stated that
“During the development phase, the firm cooperated with 10 firms, which induces huge
financial risk” (Respondent two, July, 3th). Respondent four argues that they have reduced their
risk taking, since “the firm had decreased their risk, by first testing the innovation at the
smallest business unit, since the impact on the firm would be small if the innovation went wrong
(Respondent four, July, 7th).
To summarize, both the respondents which scored above the threshold of 3.5 out of 5 on the
willingness to cannibalize, and those below this threshold assert that risk tolerance is an
inevitable attitude for introducing a new innovation.
The final phase of this qualitative result section consists of the three moderation hypotheses
regarding the willingness to cannibalize. Since the quantitative results did not found a
moderating effect, the three moderating hypotheses will be addressed as one hypothesis. In
addition, this qualitative section didn’t also found much differences among the respondents who
scores above the threshold of 3.5 out of 5 and those who scored below this threshold. Therefore,
the moderation hypotheses are threatened as the relation between the willingness to cannibalize
and the launched innovation.
57
The qualitative analysis didn’t also found moderating effects between current customer
orientations, future market focus and risk tolerance on the willingness to cannibalize and the
launched innovation. With respect to the influences of current customer orientation on the
willingness to cannibalize and the launched innovation, all the respondents state that there is no
direct involvement, only when the innovation is launched. Second, the influences of future
market focus on the willingness to cannibalize and the launched innovation does not differ
among the respondents. They all assert that future market trends, competitors and customers
are very important in order to survive in the long term. In addition, the majority of the launched
innovations are directed towards future customers. Lastly, the relation between risk tolerance
and the willingness to cannibalize and the launched innovation did not reveal any differences
as well. They all argued that risk tolerance is an investable attitude, while launching a new
innovation. All the respondents argue that calculated risk are investable while introducing a
new innovation.
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5. Discussion
In this section, the results of the study will be discussed in more depth. The qualitative findings
will complement the unexpected and striking outcomes of the quantitative part. The research
field of the differences and similarities between product and service innovations regarding their
innovation activities has grown (e.g. Evangelista, 2000; Gallouj, 2002; Drejer, 2004; Howels
and Tether, 2004; Miles, 2005; Leiponen, 2012; Tether, 2005). Despite the many advances, this
research field has still its limitations and there are still different perspectives on to what extent
service innovators innovate and to what extent there are differences in innovation activities
among product and service innovations.
This research field consist mainly of two contracted views, the first view is known as the
“assimilation approach” (e.g. Coombs and Miles, 2000; Tether, 2005; Leiponen and Drejer,
2007). The reasoning within this approach is that service and manufacturing innovators
innovate in a fundamentally similar way. Coombs and Miles (2000) state that: “service
innovation is not distinctive; it can be studied and organized in ways familiar from analysis of
manufacturing”. The opposite view is the “demarcation approach”, (e.g. Gallouj and
Weinstein, 1997; Gadrey and Gallouj, 1998), which states that “service innovators and their
innovation activities are highly distinctive, following dynamics and displaying features that
require new theories and approaches to measurement from those developed in the context of
manufacturing” Leiponen, 2012, p. 155).
This study complements previous studies by Chandy and Tellis (1998), Chand, Tellis and
Prabhu (2009) who have studied the willingness to cannibalize in a new product context. This
study complements previous studies of Tether (2005), Leiponen (2012), and Hipp and Grupp
(2005), and Gallouj and Weinstein (1997) who investigated the differences of the innovation
activities between product and service innovators. In contrast, this study researched the
willingness to cannibalize as dependent variable, whereas Chandy and Tellis (1998) used the
willingness to cannibalize as independent variable. This study has focused on the antecedents
of the willingness to cannibalize in a new product and in a new service innovation context.
59
Before the outcome of the hypotheses will be discussed, a general discussion about the
willingness to cannibalize will be held. The qualitative results revealed that actual
cannibalization was not present, as the respondents argued. This finding indicated that future
research about the willingness to cannibalize should perhaps deal with another selection
criterion, that cannibalization is a necessary condition in order to participate in the research
sample. Previous research about the willingness to cannibalize picked innovators which had
introduced a new product or service, but whether cannibalization was present was not taking
into account. And especially when scholars used the willingness to cannibalize as independent
variable, like Chandy and Tellis (1998), Chand, Tellis and Prabhu (2009), such a stricter
selection criterion will give a more thorough and comprehensive picture of the relationship
between the willingness to cannibalize and radical innovation.
The effect of current customer orientation on the willingness to cannibalize
With respect to the effect of current customer orientation (H1), it can be concluded that this
direction is in the opposite direction as anticipated. This study found a significant positive
relationship (B=0.439; β=0.367; p=0.000). However, Chandy and Tellis (1998) and Nijssen, et
al., (2005) stated that current customer orientation is detrimental for the willingness to
cannibalize. A first impression is that this unexpected result is not caused due to the low (N=
97,) which gives reasonably strong statistical power), or due multicollinearity problems. There
is also not an internal consistency problem since the Cronbach’s alpha is 0.747. The
operationalization of current customer orientation is perhaps not enough focused on the current
customer, and could therefore have biased the positive outcome with the dependent variable. In
the table of operationalization, it could be unclear for the respondents whether the questions are
focused on the current or on the future customers, since there was only mentioned customers,
and not the words ‘current customers’ or ‘future customers’.
Another explanation is the possibility of a curvilinear relationship between current customer
orientation and the willingness to cannibalize. In order to examine this proposition, a new OLS
is performed. In the first block, both the control variables size and age are entered, and in the
second block, current customer orientation is added. In the final block, both the control as
current customer orientation as well as a squared variable of current customer orientation was
added in the full model. Results support this curvilinear relationship (inverted u- shape) between
current customer orientation and the willingness to cannibalize (the squared variable of current
customer orientation was negative, B= -.0.276; β= -1.690; p=0.027).
60
The original variable of current customer orientation remained statistically significant (B=
2.617; β= 2.189; p=0.004). Furthermore, the third model was found highly significant (F
=7.874; p=0.000), and this model had a significant change in adjusted R² from the second
model. This finding suggest that close current customer involvement is beneficial, but staying
to close to the current customer is detrimental for the willingness to cannibalize. The inverted
u-shape implies that there is a turning point, first the direction is positive and after a while, the
relation between current customer orientation and the willingness to cannibalize becomes
negative. This research is the first who acknowledged that there is an inverted u-shape relation
between current customer orientation and the willingness to cannibalize. Previous research
addressed that this relationship is a negative one (Chandy and Tellis, 1998; Nijssen, et al.,
2005). In addition, the willingness to cannibalize proved to be an important predictor of radical
innovation, and previous research mentioned the often negative relation between current
customer orientation and radical innovation as well (Atuahene-Gima (2005; Christensen and
Bower, 1996).
The literature found perhaps another explanation for this curvilinear relation. A possible
explanation for this unexpected result is that the role of the current customer is changing. In the
past, current customer had multiple contact moments with their firm, which is substituted by
technology- based encounters. Therefore, these contact moments on a daily basis disappeared.
And the technology creates a distance between the current customers and the product and
service innovators. Edvardsson, et al., (2010) state that “A paradox arises because the new
technology creates a distance between the company and its customers, i.e., customers do not
interact with employees – they meet technology. Technology not only increases the distance
between customers and employees making it more difficult for employees to understand the
customer, but also influences customers’ ability to articulate what they need and want – they
do not understand the possibilities and limitations that a complex technology may convey.”
(Edvardsson, et al., 2010, p.303). Therefore, the role of the current customer in the production
process of a new service and a new product development is perhaps changing. Due to the
increasing technology developments, it is no longer sufficient to analyze the current customers
via survey’s, but the current customer has to be directly involved within the innovation
processes. As a result, firms are better able in understanding their current customers. To
conclude, the current customer is becoming pro-active which could have biased this unexpected
relation.
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The qualitative results indicated as well that there could be a curvilinear relationship.
Respondent two, who asserted that “The amount of products that is created by the firms is 50-
50, 50% of the current customers, and 50% of the ideas were created by the firm” (Respondent
2, July, 3th). Respondent one, who scored above the threshold of 3.5 out of 5 on the willingness
to cannibalize said that “They were not directly involved, but they were involved in the sense of
that the service has to be aligned with the demands on the current customers” (Respondent
one, July 2th). However, the qualitative results reveal that this relation is perhaps also a negative
one, since the innovation were directed towards future customers and that the current customers
were not directly involved within the innovation processes. These current customers provided
the innovator with feedback on how to improve the innovation. Therefore, interpreting the
qualitative results concerning this relation is a little bit more ambiguous; it is not a clear positive
or a negative association, which could be caused due to the inverted u-shape relation between
current customer orientation and the willingness to cannibalize.
The relation between future market focus and the willingness to cannibalize
With respect to the second hypothesis, which states that future market focus has a positive effect
on the willingness to cannibalize, it can be concluded that this hypothesis is confirmed. Future
market focus proved to be an important predictor of the willingness to cannibalize because
future market focus avoids an innovator from becoming inert and search for technologies
elsewhere than the current product, technologies and consumers. Subsequently, a future market
focus broadens the horizon of managers to alert them of emerging trends and technologies
(Chandy and Tellis, 1998).
This result is in line with previous research performed by Chandy and Tellis (1998) and Chandy,
Tellis and Prabhu (2009). They found that firms which have their market focus on the future,
were more capable of producing truly breakthrough innovations. It is notable that the qualitative
result confirmed the importance of future market focus on the development of a new product
or service. Respondent four states “The firm recognized that the customers are changing,
current customer are becoming less loyal, and they will go faster to the competitors. Also,
customers have less time for a training, and people are more working at home. Which will make
it harder to take time to participate in a training of two days” (Respondent four, July, 7th). In
addition, respondent one states “We saw that in Europe, the amount of sales via telephone of
current customers is very profitable, and in the Netherlands, such a strategy does not exist yet.
62
We are constantly monitoring the future needs of our customers, by reading journals, nu.nl,
receiving feedback from the customers” (Respondent one, July, 2th).
The relation between risk tolerance and the willingness to cannibalize
Hypothesis three presumes a positive association of risk tolerance on the willingness to
cannibalize. Based on the results of this study, it can be concluded that this hypothesis is
confirmed. It is notably that this result is in line with previous research performed by Chandy
and Tellis (1998) and Chandy, Tellis and Prabhu (2009), where they state that the impact of
risk tolerance on radical innovation is particular strong. (Chandy, Tellis and Prabhu, 2009).
This indicates that risk tolerance is a great importance for the willingness to cannibalize since
it is risky to give up a current, certain stream of profit.
It is interesting to denote that the qualitative findings supports this statement as well.
Respondent one states “The biggest risk we toke was that we did not have knowledge about the
call center sector” (Respondent one, July, 2th). Subsequently, respondent three said: “The risk
was that the firm was operating in a market which could not exists” (Respondent three, July,
4th).
To sum up, the results of the main effects are in general comparable with the empirical parts of
previous studies from Chandy and Tellis (1998) and Chandy, Tellis and Prabhu, (2009);
Nijssen, et al., (2005). The results find that this study are consistent with previous studies.
However, this research contrasted previous research of Chandy and Tellis (1998) and Nijssen,
et al., (2005) by finding an inverted u-shape relation between current customer orientation and
the willingness to cannibalize, while this relation was presumed to be negatively.
It is not customary to make casual interferences from regression analysis, although this study
has proven that future market orientation and risk tolerance are important attitudes for
predicting the willingness to cannibalize, and they form together with the willingness to
cannibalize, a firm innovative culture (Chandy, Tellis and Prabhu, 2009).
The moderation effects on the willingness to cannibalize
The next section will discusses the moderating hypotheses. It is interesting to denote that all the
three the moderating hypotheses are highly non-significant, therefore, the discussion of these
hypotheses will be done together. A first impression of the unexpected outcome for all the
moderating hypotheses is that it could not be caused due to the problem of multicollinearity.
63
Another reason why there is not a moderating effect could be due to the low statistical power
(Warner, 2013). Although the N=97 is reasonably high, the amount of product and service
innovators is not equally distributed in the sample size (service innovators N=60, product
innovators N= 37). In order to get a statistical power of .80, a N of >100 is required (Warner,
2013) Therefore, it was better if both sector were more equally presented, for instance, 100
service innovations and 100 product innovations.
Another explanation can be find in the literature. There are three core reasons for explaining
the unexpected results. First, the sample size of service innovators consisted for the majority of
KIBS (knowledge intensive business service). Second, the boundaries between product and
service innovators are getting more ‘fuzzy’. Third, the differences within the service sector are
stronger than the difference between product and service innovators, i.e. the service sector is
characterized by heterogeneity. These three core reasons will now be discussed in debt.
First, the sample size of service consisted above all of knowledge intensive business service
(hereafter KIBS). KIBS firms are according to Gallouj, “KIBS firms are organizations that are
particularly representative of this economy, since knowledge constitutes both their main input
and output, the activity of KIBS providers can be said to consist of the production of knowledge
from knowledge.” (Gallouj, 2002, p. 256).
Howells (2000) states that KIBS firms will be the top innovating sector in the future. Some
example of KIBS firms are that they are characterized by: the traditional professional services,
for example, legal, accountancy, management consultancy firms, marketing services,
engineering, recruitment, financial advice services, business design and the creative business.
And those firms rely upon professional knowledge (Miles, 1995). And often, KIBS firms
possesses levels of high-qualified workers. In addition, these firms are mostly concerned with
providing knowledge-intensive inputs to the business processes of other organizations, but also
to non-business sectors.
Miles (1995) states that KIBS are much like other high-tech product innovators (R&D and
technology). And large service firms often organize their R&D like manufacturers. To sum up,
the research sample consisted of particular KIBS firms (approximately 45% of the total of 60
service innovators), and that could be the reason why there was not a moderating effect between
product and service innovations. The big impact of the KIBS innovators could have biased this
research since those firms show strong similarities with product innovators regarding their
64
innovation activities (examples of KIBS within this research sample were consultancy firms,
investment banks, accountants, recruitment and marketing firms).
The sample size of the semi-structured interviews consisted of one KIBS innovator, a HR
Consultancy firm. This gave the researcher the opportunity to explore whether the theoretical
findings regarding KIBS innovators are similar to the findings in this study. The results show
strong similarities with the before mentioned characteristics of KIBS. This consultancy firm
has its own R&D department, which is quite uncommon for service innovators, since the
majority of the service innovation were developed ‘ad hoc’. And product innovators have often
their own R&D department. Furthermore, this service innovator is the only who diagnosed that
cannibalization of previous innovations could be present, the other participant of the qualitative
part defined their innovation as an increase in volume rather than giving up a current product
or service. Respondent four states that “The firm has its own R&D department. Furthermore,
this firm has an innovation policy, which implies that employees get exemptions. Employees are
allowed to spend less time on their daily work, in order to participate in innovation activities.
This firm has the purpose to be distinctive from their competitors, by introducing innovations
on a regular base” (Respondent four, July, 7th).
This indicates that the management encourages their employees to act innovative, to develop
innovation on a regular basis. This KIBS recognized that being innovate is very important to
keep ahead of the competition, “If you offer the same as your competitor, you will face
difficulties in being distinctive from the competitors” (Respondent four, July, 7th). This KIBS
has also collaborated with an external firm regarding the technical part of their innovation. It is
therefore interesting to denote that this KIBS has the same characteristics of a KIBS described
by Miles (1995). This service innovator develop their innovations via external collaboration,
which is more common for product innovators.
Second, the boundaries between product and service innovators are getting more ‘fuzzy’. Balin
and Giard (2006), state that the boundaries between psychical goods and services innovators
are disappearing. In the past, those boundaries were every clear. Service innovators and
especially KIBS show strong relationships with product innovators. Therefore, the outcome of
this study could have been effected due to reducing differences between product and service
innovators. Product innovators show a tendency to complement their business models with
services. In order to differentiate from other product innovators in matured markets, product
innovators add services to their products. The sale of a car or a tractor, for instance, results in
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loans, leasing contracts, maintenance and repair. In the automobiles sector, large firms generate
lots of revenues from their services (Cusumano, et al., 2014). In some cases, the new service
substituted the revenues gathered via their products.
Product innovators have the opportunity to add a service which is either a complement of the
current product or a substitute of the current product. When there is a substitute strategy, the
current customers are purchasing the service instead of the product. For instance, Rolls Royce,
where customers now are paying for the engine usages and maintenance contracts, were they
in the past bought the product (Cusumano, et al., 2014). This is some form of cannibalization.
The reason why firms choose to pick a substitution strategy is related to industry life cycle
(Utterback, 1994). Cusumano, et al., (2014) state that in the ‘ferment phase’ product innovators
show the strongest tendency to introduce substitution services, due to the high levels of
uncertainty in the ferment phase. Product innovators want to persuade their customers by
offering the product functionality as service, where the current customers pay for the usage of
the product instead of purchasing the product. (Cusumano, et al., 2014). Therefore, the
boundaries are getting fuzzier, which might be the reason why there is not a moderating effect
between product and service innovators.
Third, the differences within the service sector are stronger than the difference between product
and service innovators, i.e. the service sector is characterized by heterogeneity. Evangelista
(2006) states that the differences based on Community Innovation Survey (CIS) data, within
the service sector are stronger compared to the differences between product and service
innovators. This heterogeneity is related to the differences in input and output, the type of
innovation, and the technological and knowledge outputs that they bring to other sectors
(Evangelista and Savona, 2003). Evangelista (2000) states that the service sector is
characterized by three main sectors: “technology users, which rely heavily on the use of tangible
technological assets (e.g., transport, wholesale, waste disposal); science and technology- based
and technical consultancy sectors, specialized in the provision of codified knowledge (such as
R&D, engineering and technical services); and interactive and IT- based sectors (such as
financial services, advertising, business services), which are distinctive in innovating through
software and maintaining close relations with customers and clients” (Evangelista, 2000, p.
670). Therefore, the heterogeneity of the service sector could have been the reason why there
was not a moderating effect. The qualitative results support this assumption. Among the three
service innovators, the way of organizing the innovation activities was very different, the
consultancy innovator developed their innovation like product innovators and the other two
66
service innovators developed their innovation ‘ad hoc’, respondent one states “The innovation
was characterized as ‘ad hoc’, there is not a R&D departments, and everyone in the firm can
bring ideas of new innovations. Our entrepreneurship is important for our innovation
activities” (Respondent one, July, 2th).
To sum up, the unexpected outcome of the absent of moderating effects, the explanation is that
this might come due to the low statistical power, that the sample size of service innovators
consisted above all off KIBS innovators, that the boundaries between product and service
innovators are disappearing and that the differences within the service sector are stronger in
comparison with the differences between product and service innovators.
Furthermore, with respect to the control variables, it is notably that did not have much statically
influence on the willingness to cannibalize. The outcome that size did not have a relation with
the willingness to cannibalize is in line with Chandy and Tellis (1998), where they stated that
when attitudinal variables are taking into account, firm size does not have much influence on
the willingness to cannibalize and radical innovation. Due to the absent of a statically significant
relationship of size on the willingness to cannibalize, the reliability of this study is improved.
5.1 Theoretical implications
This study has made its contribution to the innovation literature in different ways. First, this
study solved a theoretically gap in the literature. This gap was that the original concept of
Chandy and Tellis (1998) was not researched in both a new product and a new service
innovation context.
Second, this research has focussed on the differences between the innovation activities of
service and product innovators. The literature does not have a unanimous answer to what extent
there are difference among both sectors. And investigating service innovation in general is
important due to that it is remarkable that still little is known about how the service sector
innovates, since service firms are responsible for 75% of GDP in industrialized economies
(CIA, 2009). And nearly all of our understanding of service innovation is copied from the
manufacturing innovation (Gallouj and Weinstein, 2007). There are two contradicted views
observable in the literature regarding the differences between product and service innovators.
The first is known as the “assimilation approach” (e.g. Coombs and Miles, 2000; Tether, 2005;
Leiponen and Drejer, 2007). The reasoning within this approach is that service and
manufacturing innovators innovate in a fundamentally similar way.
67
Coombs and Miles (2000) state that: “service innovation is not distinctive; it can be studied and
organized in ways familiar from analysis of manufacturing”. The opposite view is the
“demarcation approach”, (e.g. Gallouj and Weinstein, 1997; Gadrey and Gallouj, 1998), which
states that “service firms and their innovation activities are highly distinctive, following
dynamics and displaying features that require new theories and approaches to measurement
from those developed in the context of manufacturing” Leiponen, 2012, p. 155).
Third, this study is the first which found a curvilinear relationship (inverted u-shape) between
current customer orientation and the willingness to cannibalize. In recent studies, this
relationship was presumed to be a negative one (Nijssen, et al., 2005).
Fourth, this study confirmed, based on data triangulation, the importance of future market focus
and risk tolerance on the willingness to cannibalize. These relationships were found before, and
are in line with the findings of Chandy and Tellis (1998); Nijssen, et al., (2005); Chandy, Tellis
and Prabhu, (2009), where these scholars found a positive relationships of future market focus
and risk tolerance on the willingness to cannibalize. In addition, this research if the first who
used both qualitative and quantitative data to examine these relationships.
5.2 Managerial implications
The aim of this study was to research the antecedents of the willingness to cannibalize in a new
product and in a new service context. The importance of the willingness to cannibalize is
obviously, since it is part of an innovative culture which proved to have a strong relationship
with radical product innovation (Chandy and Tellis, 1998; Chandy, Tellis and Prabhu, 2009).
Furthermore, scholars confirmed that radical innovations are important for a firm survival in
the long term (Geroski, Machin, and Reenen, 1993). Developing innovation is an important but
difficult managerial responsibility. And due to the fast changing environments, the development
of innovations contain a strong advantage, but developing innovations contain many difficulties
as well. Therefore, this study offers practitioners and policymakers new scientific insights on
what the positive and negative drivers are of the willingness to cannibalize.
Findings from the study suggest that risk tolerance and future market focus are important drivers
of the willingness to cannibalize, since these outcomes are found before (Chandy and Tellis,
1998; Chandy, Tellis and Prabhu, 2009; Nijssen, et al., 2005). Chandy, Tellis and Prabhu (2009)
explained that the innovative culture of a firm consist of the willingness to cannibalize, future
market focus and risk tolerance. The outcome of this study addresses the importance of risk
tolerance and future market focus as important attitudes, which is part of the innovative culture
68
of a firm. In particular, the willingness to cannibalize, future market focus and risk tolerance
are attitudes with stimulate the development of radical innovations (Chandy, Tellis and Prabhu,
2009). The findings of Chandy, Tellis and Prabhu (2009) reveal that it is not about patents and
R&D expenditure, and these finding are robust (Chandy, Tellis and Prabhu, 2009). Therefore,
mangers should not only rely on R&D budgets and patents, but as Chandy and Tellis and Prabhu
(2009) state: “Policy makers who rely exclusively on the plausible matrices of scientific talent,
patent and intellectual property may be missing the real battle taking place. The battle is within.
It is a cultural one; between glorifying the past or being paranoid about the future” (Chandy,
Tellis and Prabhu, 2009, p. 16).
Furthermore, the results suggest that managers should focus on both the current customers as
well as management attention towards future customers and markets in order to detect new
customers needs and emerging technology trends. However, too much focus on the current
customers is detrimental for the willingness to cannibalize. The qualitative results addresses the
importance of being innovative, to listen to the current customers and to detect fundamental
changes in the environment. In general, this study gave suggestion for managers how they can
improve their organizational abilities to develop new innovations.
5.3 Limitations and future research directions
Like any study, this research suffers from some limitations which could also use as avenues for
further research. First, the cross sectional design makes it difficult regarding the inferences
about causality. Further research recommendations should contain a longitudinal study design.
Second, the research sample was quite small. And the data was collected from single
respondents in the firm, which could have biased the results. In the future, multiple respondents
should represent a firm single answers.
Third, the operationalization of the willingness to cannibalize induced problems. The factor
analysis did not show clean factors for the three dimensions of the willingness to cannibalize.
Therefore, it was not possible to divide the dependent variable in to multiple dimensions. This
finding contrast prior research of Nijssen, et al., (2005; 2006) which state that the willingness
to cannibalize is a multi-dimensional construct. They find empirical evidence of those three
clean factors which represent that multi-dimensional construct. This study should not made a
distinction between the three dimensions, and this research should instead use the original
operationalization of Chandy and Tellis (1998), since their empirical analysis consisted of only
one construct. In order to determine whether the different dimensions show different results, an
69
addition multiple regression analysis is conducted. The dependent variable is divided into two
concepts, based on the factor analysis in section three. These factor scores were saved as
regression variables. Subsequently, the same analysis was done as in section four, the only
differences is the dependent variable consists of two parts. The first OLS has as dependent
variable Factor 1, table 3 below show the result of the factor analysis.
Table 3: Result of factor analysis ‘The willingness to cannibalize’
It is interesting to denote that the results of the first OLS show strong similarities with the
original OLS in this research, where the dependent variable consisted of the willingness to
cannibalize sales, investment and routines. With respect to the control variables size and age,
none of them was significant. Furthermore, current customer orientation and risk tolerance have
a positive association with all the five models. Future market focus was only significant within
model two and three. The second interesting finding is that none of the moderating relationships
are significant. In addition, the models two, three, four and five are significant, based on the
Anova test. The R2 is very similar to the original OLS, in this case, the R2 is .433, in the second
model. This model is chosen since there was not a moderating effect present. The second OLS
entered factor two as dependent variable. The way of entering the variables into the blocks is
the same as the above mentioned OLS. The findings indicated that the results are worse relative
to the above mentioned OLS. First, the R2 is .265 in the second model, the main relationships
are obvious worse, the standardized coefficients are lower, and the presumed positive
association between future market focus and factor 2 is not significant. And risk tolerance and
current customer orientation are only significant at the p<0.05, where they were before
significant at the p<0.000 level. These findings implies that the decision to combine the three
constructs into one dependent variables is legitimate, if the constructs were divided, the results
are ambiguous and harder to interpret.
And this research found evidence that dividing the dependent variable into multiple construct
negatively contributes to the clearness of the willingness to cannibalize since these results are
hard to discuss, e.g. why do these results differ so much between the factors, and why is future
Pattern matrix without fixed components Component 1 Component 2
Willingness to cannibalize sales 1 -.030 .891
Willingness to cannibalize sales 2 -.034 .874
Willingness to cannibalize investments 1 .462 .461
Willingness to cannibalize investments 2 .633 .292
Willingness to cannibalize routines 1 .954 -.087
Willingness to cannibalize routines 2 .931 -.102
70
market focus and current customer orientation not significant anymore, explaining these results
would be difficult.
Fourth, the model of innovation that was used in the study was quite simple. Further research
should consists of a more comprehensive model, since variables, other than used in this research
could affect the willingness to cannibalize. Another limitation was that the questionnaire did
not asked what kind of innovation was introduced in the last three years. The literature section
of this study found evidence that service innovators face difficulties in defining what type of
innovation they have introduced. Furthermore, the discussion of this study showed that the
service sector is highly heterogeneous, therefore, it was better if there was a question in the
questionnaire in what type of sub sector a service innovator was operating. Although the
measurements of the variables were quite satisfactory, the items were operationalized via a
limited number of items, which negatively affect the external validity. Furthermore, while
selecting innovator for this study, the actual presence of cannibalization was not taking into
account.
The qualitative result section showed that, although the innovators had introduced a new
product or service in the last three years, the actual cannibalization of an existing product or
service was not present. Previous researches about the willingness to cannibalization did this
also not taking into account (e.g. Chandy and Tellis, 1998; Chandy, Tellis and Prabhu, 2009).
Such a strict requirement could give a more comprehensive and more valid picture of the
relation between the willingness to cannibalize and radical innovation. This limitation is never
mentioned before by other scholars like Chandy and Tellis, (1998); Chandy, Tellis and Prabhu,
(2009).
71
There are many possibilities for further research. In the first place, it could be interesting to
use the organizational performance feedback as independent variable. Cyert and March, (1963)
developed this theory, which offers a good departure in order to explain why firms make risky
decisions regarding their innovation (Greve, 2003). Henrich Greve adjusted Cystert and March
classic 1963 Behavioural Theory of the Firm. Greve (2003) researched how firms react to their
own business performance. He asserts that a firm’s performance below a company’s aspiration
level is often the reason why firms change their strategic reorientation and why firms get
involved in risk taking behaviour. Therefore, does organizational performance feedback explain
the willingness to cannibalize?
Another possibility for further research is to research whether industry dynamics influence the
willingness to cannibalize. Are market leaders less willing to cannibalize? The willingness to
cannibalize is not researched yet in the public sector, are the results generalizable to that sector?
Finally, there should be studies which will research whether the willingness to cannibalize is
beneficial for the financial performance of a firm. And such a study should be longitudinal,
since the cross sectional does not give a through picture.
When studying the willingness to cannibalize as independent variable and radical innovation as
dependent variable, the study should evaluate whether cannibalization is present or not. This
limitation is already discussed in the qualitative results section. If this extra requirement is
taking into account, the internal validity of the study will be improved. Furthermore, there is
little research about cannibalization actual is and how often this takes place and how this differs
for product and service innovators. Therefore, multiple case studies about the willingness to
cannibalize could function as a methodical approach to answer that question. Another research
possibility is to what extent does the willingness to cannibalize influences radical innovation
and to what extent does this relationship differ for product and service innovations. The
literature stated that service innovators do not often develop radical innovation. The expectation
is now that is relationship differs between product and service innovators. And such a research
design should be a longitudinal one.
This study found evidence for an inverted u-shape relation between current customer orientation
and the willingness to cannibalize, which was found to be a negative association. Therefore,
more research is needed to find uniformity and consensus among the direction of this
relationship.
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5.4 Research quality indicators
This study used quantitative data to answer the research and qualitative data was used to make
sense of some striking quantitative result. The usage of both data sources refers to data
triangulation, which increased the qualitative and comprehensiveness of this study (Bryman,
2008). In order to assess the quality of this research, multiple quality indicators were taking into
account.
Construct validity: This study tried to ensure the construct validity in three ways. First, the
concept used in this study proved to be reliable in the past (Chandy and Tellis, 1998; Chandy,
Tellis and Prabhu, 2009; Nijssen, et al., 2005: 2006. Subsequently, these scales were first tested
among a test panel which resulted in the adjustment of some scales. This panel consisted of
people whom also participated in this research. Second, the topic guide and the coding scheme
of the verbatim transcripts were based on the table of operationalization, in a way that the
constructs were measuring what they supposed to measure. Lastly, a factor analysis was
performed on all the five variables to check the internal consistency of the scales, and to
determine whether the scales in the literature are equivalent with the scales in this research.
Therefore, the construct validity of this research is considered to be high.
Internal validity: The internal validity of this study was considered to be low, due to the cross
sectional design. However, this research tried to increase this internal validity as much as
possible by sending the questionnaire to R&D managers and mangers since they have a more
comprehensive picture about the innovation processes and activities. Also, this study selected
only innovators which had introduced a new product or service in the last three years. Moreover,
multiple T-tests were performed in order to investigate whether there were differences among
product and service innovators, and whether there were statically differences among managers
and non-managers. These T-tests increased the credibility of the outcome of the regression
analysis since they didn’t found any differences among product and service innovators as well.
The internal validity was increased due to the addition of two control variable which could bias
the relationship between the three independent and the dependent variable. Finally, using both
quantitative and qualitative data sources, which refers to data triangulation, increased the
internal validity (Bryman, 2008). The internal validity was increased by performing an addition
OLS based on the output of the factor analysis. The analysis of the regression for factor 1 had
strong similarities with the original OLS of this study. The findings of the regression for factor
2 were obvious less interpretable and useful. The decision to combine the constructs as one
yields the strongest exploratory power and was therefore legitimate.
73
External validity: The external validity of this study was acceptable due to the amount of
respondents (97) and the response rate, (36%). This response rate was important because a
response rate lower than 20% means that the people who answered the survey are very different
from the majority of the population and such a study is likely to be unaccepted (Burton and
Steane, 2004). In addition, this research tried to pick innovators which are different from each
other to ensure that there was enough variance among the respondents. This was done by
viewing the LinkedIn profiles of the respondents to gather information about his or her
knowledge about the research and development processes and to evaluate whether the
respondents was applicable in this research. Furthermore, the researcher used three sources to
search for product and service innovator. First the network of the research was used, which
consisted of both product and service innovators. Second, a relative which had above all
connections with 100 service innovators. Lastly, a relative which had above all 100 product
innovators connections. This ensured that a sampling bias was not of major concern.
Reliability was related to the consistency of the measure. Although a cross sectional design does
not ensure a strong reliability, multiple contributions were taking in order to ensure a reliable
study. First, the amount of respondents, 97, is high. The research process was described in detail
which made it possible to look back at the entire research process. Furthermore, there were
strong conditions asked for respondents if they were applicable in this research. The criterion
of having introduced a new product/service in the last three years ensured that the answers from
the respondent regarding dependent and the independent variables were not biased. Because if
an innovator did not met this criterion, the answers were not useful. In addition, the usage of
both quantitative and qualitative sources increased the reliability of this research. Within the
questionnaire, the respondents were asked voluntarily to describe their introduced innovations,
and the description of the launched innovation was used as guideline to answer the statements
regarding the willingness to cannibalize. The interviews were semi-structured which ensured
that the interviews were comparable. Furthermore, the coding schema and the coding metrics
made it possible for the reader to evaluate whether the conclusions drawn from the qualitative
data were valid. To conclude, this design of this study is reliable since it is possible to repeat
this research (Bryman, 2008).
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5.5 Conclusion
The aim of this study was to research the antecedents of the willingness to cannibalize in a new
product and in a new service innovation context. Empirical results found evidence that current
customer orientation, future market focus and risk tolerance influence the willingness to
cannibalize. Future market focus and risk tolerance proved, as expected, to have a strong
positive effect on the willingness to cannibalize. Customer orientation proved to have a
curvilinear relation (inverted u shape) with the willingness to cannibalize. The qualitative
results of this study confirmed most of the hypotheses, except the direction of the relation
between current customer orientation and the willingness to cannibalize. This relation was a
little more ambiguous, since the innovations were more directed towards future customers, but
the current customers gave feedback on how to improve the innovation. Although, the
curvilinear relation (inverted u shape) could be the explanation for the problems of defining the
direction of the effect between current customer orientation and the willingness to cannibalize.
This study did not find a moderating affect between product and service innovators. Therefore,
the conclusion is that the willingness to cannibalize is part of the “assimilation approach” (e.g.
Coombs and Miles, 2000; Tether, 2005; Leiponen and Drejer, 2007). Since the reasoning within
this approach is that service and product innovators innovate in a fundamentally similar way.
The qualitative results revealed that future market focus and risk tolerance were both of great
importance for both the product and the service innovators. With respect to current customer
orientation, for both the product and the service innovators, it is noticeably that they didn’t had
direct influence. They gave only feedback on how to improve the innovations.
However, this study found evidence that the differences within the service sector are perhaps
stronger than the differences between product and service innovators. Hipp and Grupp (2005)
and Evangelista (2006) found comparable evidence by asserting that the differences within the
service sector are stronger than the differences between the product and the service sector. This
implies that taking only the service sector into account, the willingness to cannibalize could be
part of the “demarcation approach”. This study made an important contribution to the
innovation literature, by providing useful empirical insight that should be taken into account
for further clarification of the original framework of Chandy and Tellis (1998). The importance
of the service sector is growing, since the assertion that service innovators were seen as lagging
in term of innovativeness is rejected. However, many ambiguities about this sector still exists.
Therefore, more research is of great importance to understand this sector.
75
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80
Appendix A: Table of
operationalization
Dependent variables:
The willingness to cannibalize:
Independent variables:
Risk tolerance
Future market focus
Customer orientation
Control variables
Size
Age
Variable Definition Dimension Indicator Calculation of score
The Willingness to cannibalize ‘the extent to which a firm is prepared to reduce the actual or potential value of its
investments for creating and introducing
new products and services ‘ (Nijssen et
al., 2005;2006)
Willingness to cannibalize sales: It’s disposition to introduce new products/
services that will diminish the sales of its
current products/services.
Willingness to cannibalize investment: It’s disposition to introduce new products/
services that will make previous
investments obsolete.
Willingness to cannibalize organizational
routines: It’s disposition to introduce new
products/ services that will make current organizational skills and routines obsolete.
Respondents (firms) will be asked 1) Whether they supports new projects even
when they harm sales from existing
products.
2) Whether the firm is willing to sacrifice
sales of its existing products to improve sales for new products.
Respondents (firms) will be asked 1) Whether the firm tends to invest in new,
promising technologies which results that
old machine to become obsolete.2) Whether the firm has no problem
replacing and thus writing off machinery.
Respondents (firms) will be asked:
1) Can the firm easily change its
organizational scheme and processes for new product.
2) Can the firm quickly adopt new
working procedures if this is required for developing new product?
5 point Likert scale, which range from strongly disagree- strongly agree
5 point likert scale, which range from strongle disagree- strongly agree.
5 point likert scale, which range from
strongle disagree- strongly agree.
Current customer orientation Customer orientation refers as the degree
to which a firm believes it should try to
understand and satisfy current customers’ needs and wants. (Source: Desphande and
Farley, 1996; Nijssen et al., 2005)
Close involvement with current customers
is important, but to close contact results in
reduced attention for new emerging trends and new technologies.
Respondents (firms will be asked:
1) Constantly monitors the level of
commitment and orientation to serving customer needs.
2) Has based its strategy for competitive
advantage on understanding customer’s needs.
3) Beliefs that it exist primarily to satisfy
and serve customers. 4) Is more customer focused than its
competitors.
5 point likert scale, which range from
strongle disagree- strongly agree.
81
Future market focus
Future market is defined as the degree to which a firms predisposition of openness
to new market trend and business models
Source: Chandy and Tellis, 2009; Miles and Snow, 1978)
A future market orientation forces a firm to realize the limitations of the current
technology and the emerges of a new
generation of technology that may become dominant in the future
Respondents (firms will be asked: 1) Our firm gives more emphasis to
customers of the future relative to current
customers. 2) Market research efforts in our firm are
aimed at obtaining information about
customers need in the future, relative to their current needs.
3) We are slow to detect fundamental
shifts in our industry. (R).
4) Our firm is oriented more toward the
future than the present.
5 point likert scale, which range from strongle disagree- strongly agree.
Risk Tolerance
Risk tolerance refers to firms that are
willing to take risk, i.e. is more entrepreneurial ( Chandy, Tellis and
Prabhu., 2009)
It is important that a firm is willing to
foster and promote a tolerance for risk to make that essential trade off.
Respondents ( firms) will be asked:
1) Managers in our firm rarely take risky decisions. (R)
2) Relative to other firms, we tend to
favor higher risk, higher- return investments.
3) We are reluctant to engage in in
untested business ventures.(R). 4) We believe it is often necessary to take
calculated risk
5 point likert scale, which range from
strongle disagree- strongly agree.
Size
Chandy and Tellis (1998), found evidence
that size is not a predictor of radical
product innovation.
Average number of employees in 2013-
2014.
Respondents (firms) will be asked to give
the total number of economically active
employees in the period of 2013-2014. The will be further coded into dummy
variables
<10 ……
11-50…..
51-250….. >250…….
Age
Sorenson and Stuart (2000 states that older firms put less emphasis on
exploration.
The number of years since a company is founded subtracted from the current year.
Respondents (firms) will be asked when the firms was established. The will be
further coded into dummy variables.
<5……. 6-10……
11-25…..
26-50….. >51……
Appendix B: The questionnaire.
Datum: 6-5-2014
Onderwerp: Onderzoek naar invloed kannibalisatie op innovatiesucces.
Beste meneer/ mevrouw,
Mijn naam is Jonathan Verhulst. Momenteel ben ik bezig met mijn master scriptie voor de
opleiding Organisatiewetenschappen aan de Universiteit van Tilburg. Deze scriptie staat in het
teken van de bereidheid om te kannibaliseren. Kannibaliseren is het fenomeen dat de introductie
van een nieuw product/dienst ten koste gaat van de omzet van bestaande producten/diensten.
Voorbeeld: De website van bijvoorbeeld de NRC kannibaliseert de gedrukte editie van de NRC.
De bereidheid om te kannibaliseren wordt gezien als een belangrijke organisatie conditie voor
toekomstig innovatie succes. Daarnaast concludeerde Consultancybureau Berenschot in het
onderzoek ‘Strategy Trends 2014’ dat bedrijven die investeren in innovatie dit ruimschoots terug
verdienen.
Het doel van dit onderzoek is om te verklaren waarom bedrijven willen kannibaliseren.
Vervolgens wordt er gekeken naar mogelijke verschillende tussen diversen sectoren in Nederland.
Met behulp van wetenschappelijke maatstaven en deskundige begeleiding van twee hoogleraren,
namelijk de heer Prof. Dr. Ir. V.A. Gilsing en de heer Prof. Dr. L. Oerlemans wordt dit onderzoek
uitgevoerd. Als blijk van dank kan ik de conclusies van dit onderzoek naar u opsturen. Mocht u
hiervoor interesse hebben dan sta ik u graag persoonlijk of via de mail te woord. Het invullen van
de enquête duurt 5-10 minuten. Al uw antwoorden zijn op basis van volledige anonimiteit.
Als u op deze link klikt, komt u bij de online enquête terecht.
Ik kijk uit naar uw reactie.
Met vriendelijke groet,
Jonathan Verhulst
E-mail:[email protected]
Mobiel nummer: 06-53348390
Jonathan Verhulst profiel
83
Deel 1. Algemene vragen over u en uw organisatie.
1.In welk jaar is uw organisatie opgericht?
(Invullen in cijfers, bijvoorbeeld: 1980, geef een indicatie als dit niet bekend is.
Als uw organisatie is overgenomen, neem dan het jaartal van overname.)
…………………………
2. Wat was de omzet van de organisatie waarvoor u werkt in het jaar 2013? <0 miljoen euro >0 - <1 miljoen >1- <5 miljoen euro >5- <10 miljoen euro
>10- <15 miljoen euro
>15- <-20 miljoen euro
>20- <30 miljoen euro
>30- <35 miljoen euro
>35- <40 miljoen euro >40- <50 miljoen euro
>50 miljoen euro
3. Wat is de grootte van de organisatie waarvoor u werkt?
(Geef een indicatie indien dit niet precies bekend is) ..... werknemers (in FTE)
4. Heeft u een leidinggevende functie binnen het bedrijf waarvoor u werkzaam
bent?
Ja
Nee
5. Bent u actief betrokken bij het innovatieproces binnen deze organisatie? Ja
Nee 6. Wat is de kernactiviteit van uw organisatie? Het leveren van diensten
(service/diensten sector)? Het produceren van
producten (industriële sector)?
De volgende vragen hebben betrekking op het innovatieproces binnen uw
organisatie. -Service wordt gezien als een oplossingen voor klanten vraagstukken definieert
als niet tastbaar, eventueel in samenwerking met klanten. -Producten zijn oplossingen die tastbaar en gefabriceerd zijn. Daarnaast kunnen
deze worden opgeslagen.
7. Heeft uw organisatie in de afgelopen drie jaar tenminste een nieuw of
significant gewijzigd product of service gelanceerd? Dit product of dienst dient
nieuw te zijn voor uw bedrijf, maar niet per se nieuw voor uw sector of markt. U hoeft dit product of dienst ook niet zelf te hebben ontworpen.
Ja Nee
8. Beschrijf een voorbeeld van een nieuw geïntroduceerd product/dienst in de afgelopen drie jaar (Let op! Dit is niet verplicht)
9. Met wie werkt uw organisatie samen om innovatieve producten of diensten op de markt te brengen?
(Meerdere antwoorden mogelijk)
Klanten Concurrenten Universiteiten
Consultantbureaus Brancheverenigingen Leveranciers Overig Er vindt geen samenwerking plaats
84
Deel 2. De volgende stellingen hebben betrekking op de mate waarin uw bedrijf is bereid om te veranderen op strategisch gebied, en of uw organisatie bereid is om
bestaande opbrengsten van producten of diensten op te offeren om nieuwe producten of diensten te lanceren. Lees elke stelling goed en beslis in hoeverre de stellingen van
toepassing zijn op uw bedrijf. Er zijn daarbij vijf antwoordmogelijkheden variërend van ‘zeer mee oneens’ tot 'zeer mee eens’.
Neem een voorbeeld van een nieuw geïntroduceerd product/dienst in de afgelopen drie jaar binnen uw organisatie in gedachte op basis waarvan u de volgende stellingen beantwoordt.
Mijn organisatie stimuleert projecten om nieuw producten/diensten te ontwikkelen, zelfs als deze projecten ertoe kunnen leiden dat de verkoop van bestaande producten/diensten afneemt.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie is bereid om verkopen van bestaande producten/diensten op te offeren in het belang van het verbeteren van nieuwe producten/diensten.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie neigt ernaar om te investeren in nieuwe, veel belovende technologieën zelfs als dit betekent dat bestaande service/productie faciliteiten overbodig worden.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie heeft geen probleem met het snel vervangen en dus afschrijven van service/machine faciliteiten als dit helpt om een concurrentie voordeel in de markt te creëren.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie kan gemakkelijk haar procedures en processen veranderen om te voldoen aan de eisen van nieuwe producten/diensten
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie verandert snel de manier waarop zij haar taken uitvoert om te voldoen aan de eisen van nieuwe producten/diensten.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Deel 3. Dit deel gaat over de risicobereidheid bij het nemen van strategische
beslissingen binnen uw organisatie. Geeft u per stelling aan in welke mate u het oneens/eens bent met de stelling. Lees elke stelling goed en beslis in hoeverre de
stellingen van toepassing zijn op uw bedrijf. Er zijn daarbij vijf antwoordmogelijkheden variërend van ‘zeer mee oneens’ tot 'zeer mee eens’.
Managers binnen mijn organisatie nemen zelden risicovolle beslissingen.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
In vergelijking met andere bedrijven neigt mijn organisatie de voorkeur te hebben voor hogere risico’s en hogere rendementen.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie gaat niet graag een samenwerking aan met onbekende ondernemingen.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie gelooft dat het noodzakelijk is om vaak ingecalculeerde risico’s te nemen.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
85
Deel 4. Dit laatste deel gaan over het type klant waarop mijn organisatie zich richt. Geeft u per stelling aan in welke mate u het oneens/eens bent met de stelling. Lees
elke stelling goed en beslis in hoeverre de stellingen van toepassing zijn op uw organisatie. Er zijn daarbij vijf antwoordmogelijkheden variërend van ‘zeer mee
oneens’ tot 'zeer mee eens’.
Mijn organisatie legt meer nadruk op toekomstige klanten dan op de huidige klanten.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie probeert voornamelijk met marktonderzoek informatie te verkrijgen over de behoeftes van de toekomstige klant.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie is traag in het reageren op fundamentele wijzigingen in onze omgeving. (bv. concurrenten, technologie en regelgeving)
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie is meer gericht op de toekomst dan op het heden.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie houdt continu in de gaten of de organisatie nog voldoet aan de wensen van de klant.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie haalt haar concurrentievoordeel uit het begrijpen van de wensen van de klanten.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie bestaat voornamelijk om klanten te bedienen en tevreden te houden.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Mijn organisatie is meer klantgericht dan haar concurrenten.
Zeer mee oneens
Mee oneens
Neutraal
Eens
Zeer mee eens
Heeft u nog vragen op opmerkingen, dan kunt u deze in onderstaand veld kwijt.
Deze enquête is anoniem. Wilt u echter de conclusies van dit onderzoek ontvangen, vul dan hieronder
uw e-mail adres in.
e- mail adres:
Hartelijk dank voor het invullen van deze enquête.
Indien u heeft aangegeven de conclusie te willen ontvangen, kunt u eind augustus bericht ontvangen.
Met vriendelijke groet,
Jonathan Verhulst
86
Appendix C: SPSS output
87
88
Output of the T-tests.
Independent Samples Test
Levene's Test for
Equality of Variances t-test for Equality of Means
F Sig. t df
Sig. (2-
tailed)
Mean
Differ
ence
Std. Error
Differ
ence
95% Confidence
Interval of the
Difference
Lower Upper
Willingness to
cannibalize
EVA ,154 ,695 -,561 95 ,576 -,08461 ,15085 -,38408 ,21486
EVNA -,565 78,272 ,574 -,08461 ,14969 -,38260 ,21338
89
Appendix D: Topic Guide
Thema 1: De innovatie+ achtergrond informatie over het bedrijf
- Wat kunt u vertellen over de nieuwe innovatie:
- Waarom is deze innovatie ingevoerd?
- Door wie is deze innovatie ingevoerd (wie waren erbij betrokken)?
- Wat veranderde er door deze innovatie?
- Is door de invoering van deze nieuwe innovatie een bestaande innovatie overbodig
geworden?
- Zijn er bedrijfsonderdelen opgeofferd voor deze innovatie, die nu overbodig zijn
geworden? (omzet, investeringen, organisatie handelingen)
Introductie
Jonathan Verhust
Universiteit van Tilburg – Organization Studies
Interview is vervolg op de resultaten analyse van de enquête.
Onderzoek gaat over de bereidheid om te kannibaliseren.
Interview duurt 30 minuten
Antwoorden, zowel vragenlijst als interviews, worden vertrouwelijk behandeld
Doelstellingen:
Dieper inzicht verkrijgen waarom de innovatie is geïntroduceerd.
Inzicht krijgen hoe de organisatie tot nieuwe innovaties komt; de organisatie van de
innovaties (R&D team, ad hoc innovaties?)
Hoe deze innovatie tot stand in gekomen
Was deze innovatie gericht op de huidige of op de toekomstige klanten?
Wat er veranderde binnen de organisatie door de invoering van de innovatie.
Welke bedrijfsonderdelen werden opgeofferd
Wie heeft mee gewerkt aan deze innovatie?
Was de innovatie risicovol
Was de innovatie gericht op de korte of de lange termijn?
90
Thema 2: De invloed van de huidige klanten op het ontwerp van de innovatie.
- Welke rol hebben de huidige klanten gespeeld bij het ontwerp van de innovatie?
- Waren zij direct betrokken?
- Hoe zou u de invloed van de huidige klanten op daadwerkelijk gelanceerde innovatie
omschrijven?
- In welke mate bepalen zij het uiteindelijke resultaat? (positief verband, negatief of
parabool?)
Thema 3: Risico bereidheid + korte/ lange termijn focus van de innovatie
- Hoe zou u de genomen risico’s omschrijven die werden genomen door het invoeren van
deze innovatie?
- Waren deze risico’s vooraf ingecalculeerd?
- Waren de genomen risico’s in lijn met de strategie van uw bedrijf?
- Wat voor termijn focus heeft deze innovatie (korte of lange termijn?)
- Was deze innovatie vooral gericht op de huidige of op de toekomstige klanten?
- Waarom is er gekozen voor deze focus?
- Heeft u nog overige opmerkingen inzake dit interview?
Afsluiting
- Hartelijk dank voor de deelname
- De resultaten worden opgestuurd
- Mocht u nog vragen of opmerkingen hebben, dan hoor ik dat graag.
- Uw antwoorden worden vertrouwelijk verwerkt.
91
Appendix E: Coding scheme
Category Codes Definition
General information
Function of the respondent Function of the respondent.
Information about the firm Information about the firm of the
respondent.
The launched innovation.
Description of the launched innovation.
The innovation Reason to launch the innovation The underlying reason why to launch the
innovation.
Participation for developing the innovation The people who were actually involved in
the development of the innovation.
Impact of the innovation The impact that the innovation had on the
firm.
Evaluation of the innovation success Was the developed innovation a financial
success or not.
Organization of the innovation activities
Actual cannibalization of existing
innovations.
Whether a firm develops innovation ‘ad
hoc’ or at a regular base.
Whether cannibalization was present while
launching the new innovation.
Relation current customer
orientation and the
innovation launch
Current customer involvement in the
innovation development processes.
The influence that the current customers
have on the development of the innovation
Direct involvement Whether there was a direct involvement of
the current customers in the innovation
Indirect involvement Whether there was an indirect involvement
of the current customers in the innovation
U-shaped relationship Whether there was a U-shaped relationship.
Positive association Whether there was a positive relation
between current customers and the
innovation launch
Relation between future
market focus and the
innovation launch
Future market focus Whether the innovation was oriented
towards the future customers relative to
current customers.
Long term orientation This firm is more future oriented than the
present.
Detecting fundamental shifts Whether the firms is able to detect
fundamental shifts in the industry.
Relation between risk
tolerance and the innovation
launch
Taken risks Does the firm took often necessary risk
while launching the innovation
In calculated risk Does the firm believe that it is necessary to
take calculated risks?
Managerial risk Do managers take risky decisions?
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Appendix F: Coding matrices
Respondent one Respondent two Respondent three Respondent four
General information
Function of the respondent Regional sales manager Project Manager Controller Senior Consultant
Information about the firm Delivery services of frozen products. Manufacturer of transport systems for
horticulture and for laundries firms.
The firm delivers rental concepts for
computers, TV, laptops, laundry
equipment.
A consultancy firm which delivers HR
advices.
The launched innovation. A new sales procedure: the firm
introduced a tele agent department which
calls the customers in advance which
products they would like to buy.
We developed, based on AVG
technology, a new transport system
for the horticulture, from the glass
house to the processing barn, which
makes it possible to save in labor.
A rental concepts for students, in the past
there was only a rental concept for
private individuals.
The introduction of an E-learning
training, whereby the training is giving
digitally. Thus, via internet.
The innovation
Reason to launch the innovation The firm had to make a strategic
consideration since they closed a loss
making region. The question was now
how to approach the residual customers
One, to stay ahead of the competition,
and to save labor. And we saw that
customers demanded for a complete
transport system, in the past, we did
only a part of that.
The main reason was to operate in a new
market, the students. This firm saw other
firms that were successfully operating
within the student market with other
products.
In the past years, a certain subsidy was
gone which resulted that the market
changed dramatically. This firm wants to
deal with this problem by introducing a
completely new service for their
customers, which is new in that market.
Participation for developing the innovation The management board and the marketing
departments, sales department and the
regional sales manager and the country
manager Benelux.
The R&D department has developed
the idea to launch this innovation, the
management board gave their
approval. And new customers.
The marketing department, the controller
which made the cost-benefit analysis. An
external marketing bureau developed to
new website.
The management board decided to
develop a distinctive training for the
market. A completely new service for this
market. A project team was eventually
responsible.
Impact of the innovation The way of thinking in the firm. In the
past, the firm did only did sales at home,
which now happens via tele agents, thus
by telephone.
The impact was that the firm could
now offer a total package for their
customers, which made the firm
interesting for mainly foreign
horticulturist.
The firm is now able to engage in more
markets, and therefore, to be more people
of services. The amount of customers is
increased.
In the future, it could be possible that is
innovation will cannibalize some part of
the firm. For example, if the demand for
the internet training will be high, we will
need less consultants to give that training
Evaluation of the innovation success The innovation is a success, although the
lost some customers. The firm learned a
lot of their mistakes.
The innovation was a success, since
the firm have now more potentially
new customers, which desires the
system.
The innovation is a success, every month,
the firm gets 50 new customers.
In the beginning the amount of trainings
was reduced, but now there is a 20% more
trainings sold, which is very good is this
market.
Actual cannibalization of existing innovations. Not present, increase in volume. Not present, increase in volume. Not present, increase in volume. Cannibalization is potentially present, if
the online training reduces and replaces
the amount of necessary FTE trainers.
Therefore, obsolescence of trainers could
be present in the future.
93
Organization of the innovation activities The innovation was characterized as ‘ad
hoc’, there is not a R&D departments,
and everyone in the firm can bring ideas
of new innovations. Our entrepreneurship
is important for our innovation activities.
The R&D department is responsible
for the development. The
management board give their
approval and an external firm was
responsible for the electronics, since
our firm does not have knowledge
about that.
There is not one department responsible,
the innovation are developed ‘ad hoc’.
Before this innovation, the firm did not
innovate at all. In the past, the firm only
developed services intern. This
innovation was the first they developed.
The firm has its own R&D department.
Furthermore, this firm has an innovation
policy, which implies that employees get
exemptions. Employees are allowed to
spend less time on their daily work, in
order to participate in innovation
activities. This firm has the purpose to be
distinctive from their competitors, by
introducing innovations on a regular base.
Relation current customer orientation and the
innovation launch
Current customer involvement in the innovation
development processes.
In the development phase, we first looked
purely business, the current customers did
not have much influence. It was just a
question whether are we going to do it or
not.
The current customers did not have
influence on the innovation, since the
firm looked for future customers as
test panel for their new product.
The current customers did not have
influence, since the innovation was
oriented towards a new market and
towards new customers.
The current customers did not have much
influence. Although the idea of
developing this innovation is based on the
trends that were given by the current
customers.
Direct involvement Inapplicable Only the future customers. Inapplicable Inapplicable
Indirect involvement In the fine tuning phase, the current
customers had influence on the
adjustments of the innovation.
With other innovation, the current
customers had indirect influence on
the new products.
Inapplicable This firm constantly monitors the
feedback from their current customers
regarding adjustments for their
innovations.
U-shaped relationship They were not directly involved, but they
were involved in the sense of that the
service has to be aligned with the
demands on the current customers.
The amount of products that is created
by the firms is 50-50, 50% of the
current customers, and 50% of the
ideas were created by the firm
Inapplicable The firm adjust the innovation based on
the experience of the current customers. It
is not possible to adjust all the feedback
from the current customers to the E-WOR
innovation, but the feedback on the
technical part is applicable for the E-
WOR.
Positive association We did as much as possible to fulfil their
demands, the adjustments of the route, the
frequency of calls, the time of calling.
The current customers have influence
regarding the functionality, how to
improve some things.
Inapplicable The current customers gave especially
about technical issues feedback. And the
current customers told that they would like
that the training should be more
interactive. Which resulted in some
adjustments of the innovation.
94
Relation between future market focus and the
innovation launch
Future market focus The innovation had two focuses, one was
to remain the turnover in the closed region;
and the long term focus was that we will
use the learned knowledge of this
innovation to use this for future more sales
by telephone.
The innovation was directed to future
customers, since this product was co-
developed with future customers.
Customers do want to automate their
business processes.
The innovation was directed toward new
and unknown customers, the students.
The innovation was developed toward the
current as well as to the future customers,
due to a changing market and that there is
a strong competitive intensity.
Long term orientation Our long term vision is that we want to do
more sales via telephone. We also want to
reduce delivery costs, by reducing the
number of stops at the door of the
customers, by making better forecast.
Firm do want to reduce their labor cost,
and our product makes that happen.
The firm wanted to expand their business
and to engage in new and untested
markets.
If you offer the same as your competitor,
you will face difficulties in being
distinctive from the competitors.
Detecting fundamental shifts We saw that in Europe, the amount of sales
via telephone of current customers is very
profitable, and in the Netherlands, such a
strategy does not exist yet. We are
constantly monitoring the future needs of
our customers, by reading journals, nu.nl,
receiving feedback from the customers.
The firm recognized that the previous
product was not aligned with the
changing customer demands. And the
firm released that in order to stay ahead
of the competition, a new total package
for the horticulture market was
necessary.
The firm saw that other firms, not
competitors were operating in the students
market. Therefore, the firm realized that
they could also engage in that market. The
firm was the first who offered a rental
concepts for students regarding the
products they rent.
The firm recognized that the customers are
changing, current customer are becoming
less loyal, and they will go faster to the
competitors. Also, customers have less
time for a training, and people are more
working at home. Which will make it
harder to take time to participate in a
training of two days.
Relation between risk tolerance and the
innovation launch
Taken risks The biggest risk we toke was that we did
not have knowledge about the call center
sector.
During the development phase, the
firm cooperated with 10 firms, which
induces huge financial risk.
The risk was that they engaged in a market
without testing it with new customers and
panels.
The firm had decreased their risk, by first
testing the innovation at the smallest
business unit, since the impact on the firm
would be small if the innovation went
wrong.
In calculated risk We did realize that we would lose
customers who did not like the new way
of selling via telephone.
The firm did made calculated risk by
buying two new products.
The risk is that you have to invest, the
new website, the flyers, hiring of more
employees.
The firm knew that they will lose current
customers, since some current customers
do not like this new online training
service.
Managerial risk The managers had to adjust the working
conditions, the managers had to train the
employees. They had to make new
business plans.
The managers had to take the risk that
cooperating with new customers
could be detrimental for the firm
The risk was that the firm was operating
in a market which could not exists.
The managers, which will give the new
training, had to adjust to the new training
as well.
95
Appendix G interview transcripts
Name Job function Company PP
Interview 1 Rob…… Regional sales man Undisclosed 72-78
Interview 2 Louis…. Project Manager Undisclosed 79-82
Interview 3 Juul… Controller Undisclosed 83-86
Interview 4 Pieter….. Senior Consultant Undisclosed 87-92
