Industrial product development with lead users as a source of Schumpeterian opportunity

Abstract

In industrial product development with customers, it is well-known that lead userness is associated with novel and commercially attractive products. We take a next step by analyzing if lead userness is related to product development that potentially affects industry-level practices. Our main hypothesis is that lead userness results in the pursuit of Schumpeterian product opportunities: disequilibrating, radical, rare, and based on new knowledge and creative activities. In contrast, at low lead userness, more Kirznerian product opportunities are expected—which maintain industry standards. The hypothesis is supported by data from 139 high-tech small firms. Next, we anticipate that factors related to the selection of lead users, and the effective processing of their inputs, moderate the connection between lead userness and Schumpeterian opportunity. As for selection, we find a stronger connection when firms collaborate with “new” customers. Conversely, when involved customers have been business partners already for a long time, the pursuit of Schumpeterian opportunities is mitigated. Also, tentative evidence is found that the connection between lead userness and Schumpeterian opportunity amplifies when involved customers are less dominant market players. Finally, when it comes to processing lead users' input, we report tentative evidence that firms' R&D intensity should be higher (indicating ability to process lead users' inputs and make continued development efforts). Our findings help to explain why lead users have been associated with industry dynamics, and provide guidance to identify “relevant” lead users when firms seek product opportunities that potentially disequilibrate their industry.