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

Author

Listed:
  • Matthijs J. Janssen

    (Utrecht University
    Dialogic Innovatie en Interactie)

  • Koen Frenken

    (Utrecht University)

  • Elena M. Tur

    (Eindhoven University of Technology)

  • Alexander S. Alexiev

    (ESSCA School of Management)

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.

Suggested Citation

  • Matthijs J. Janssen & Koen Frenken & Elena M. Tur & Alexander S. Alexiev, 2022. "The perils of pleasing: Innovation-stifling effects of customized service provision," Journal of Evolutionary Economics, Springer, vol. 32(4), pages 1231-1264, September.
    • Handle: RePEc:spr:joevec:v:32:y:2022:i:4:d:10.1007_s00191-022-00784-5
    DOI: 10.1007/s00191-022-00784-5
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    More about this item

    Keywords

    Customer feedback; Customization; Capabilities; Evolutionary search; NK; Simulation;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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