The perils of pleasing: Innovation-stifling effects of customized service provision

Matthijs J. Janssen (Corresponding author), Koen Frenken, Elena M. Tur, Alexander S. Alexiev

Research output: Contribution to journalArticleAcademicpeer-review

1 Citation (Scopus)
32 Downloads (Pure)

Abstract

Sensing customer needs capabilities generally help firms to utilize customer feedback. Yet, as research linking micro-economics to industrial dynamics has shown, a strong focus on such feedback may prevent an adequate response to more promising market developments. We analyse this tension for firms providing customized services, whose innovativeness heavily depends on customer input. By drawing upon an NK search model, we simulate various interactive search strategies. Our simulations result in hypotheses concerning the strategies’ relation to innovation-based turnover. We use survey data from 292 firms to substantiate our expectations empirically. Both our simulation and regression results point to a positive influence on turnover of sensing customer needs and of customer feedback. While the interaction effect is positive for non-customizing service providers, it is negative for their customizing counterparts. The latter group may fail to exploit their inventiveness, as they concentrate on tuning new services to the specific needs of existing customers rather than turning them into more widely marketable innovations.

Original languageEnglish
Pages (from-to)1231-1264
Number of pages34
JournalJournal of Evolutionary Economics
Volume32
Issue number4
Early online date2 Aug 2022
DOIs
Publication statusPublished - Sept 2022

Bibliographical note

Funding Information:
This work is based on the research project 'United We Stand: open service innovation in the North-Wing of The Netherlands’ funded under the Peaks in the Delta program (grant no. PID 091007). We gratefully acknowledge the financial support of the Dutch Ministry of Economic Affairs, the provinces of North-Holland and Utrecht and the Cities of Amsterdam and Utrecht.

Keywords

  • Capabilities
  • Customer feedback
  • Customization
  • Evolutionary search
  • NK
  • Simulation

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