Barry L. Bayus

An Empirical Study of Innate Consumer Innovativeness, Personal Characteristics, and New-Product Adoption Behavior

This article explores the relationships between innate consumer innovativeness, personal characteristics, and new-product adoption behavior. To do this, the authors analyze cross-sectional data from a household panel using a structural equation modeling approach. They also test for potential moderating effects using a two-stage least square estimation procedure. They find that the personal characteristics of age and income are stronger predictors of new-product ownership in the consumer electronics category than innate consumer innovativeness as a generalized personality trait. The authors also find that personal characteristics neither influence innate consumer innovativeness nor moderate the relationship between innate consumer innovativeness and new-product adoption behavior.

Network Effects and Competition: An Empirical Analysis of the Home Video Game Industry

Building on the resource‐based view of the firm, we advance the idea that a firms customer network can be a strategic asset. We suggest that network effects are a function of network size (i.e., installed customer base) and network strength (i.e., the marginal impact of a unit increase in network size on demand). We empirically study these network effects in the 16‐bit home video game industry in which the dominant competitors were Nintendo and Sega. In the spirit of the new empirical IO framework, we estimate a structural econometric model assuming the data are equilibrium outcomes of the best fitting noncooperative game in price and advertising. After controlling for other effects, we find strong evidence that network effects are asymmetric between the competitors in the home video game industry. Specifically, we find that the firm with a smaller customer network (Nintendo) has higher network strength than the firm with the larger customer base (Sega). Thus, our results provide a possible explanation for this situation in which the firm with a smaller customer network (Nintendo) was able to overtake the sales of a firm with a larger network size (Sega). Copyright

The Market Evolution and Sales Takeoff of Product Innovations

In contrast to the prevailing supply-side explanation that price decreases are the key driver of a sales takeoff, we argue that outward shifting supplyand demand curves lead to market takeoff. Our fundamental idea is that sales in new markets are initially low because the first commercialized forms of new innovations are primitive. Then, as new firms enter, actual and perceived product quality improves (and prices possibly drop), which leads to a takeoff in sales. To provide empirical evidence for this explanation, we explore the relationship between takeoff times, price decreases, and firm entry for a sample of consumer and industrial product innovations commercialized in the United States over the past 150 years. Based on a proportional hazards analysis of takeoff times, we find that new firm entry dominates other factors in explaining observed sales takeoff times. We interpret these results as supporting the idea that demand shifts during the early evolution of a new market due to nonprice factors is the key driver of a sales takeoff.

Crowdfunding Creative Ideas: The Dynamics of Project Backers in Kickstarter

Entrepreneurs are turning to crowdfunding as a way to finance their creative ideas. Crowdfunding involves relatively small contributions of many consumer-investors over a fixed time period (generally a few weeks). The purpose of this paper is to add to our empirical understanding of backer dynamics over the project funding cycle. Two years of publicly available data on projects listed on Kickstarter is used to establish that the typical pattern of project support is U-shaped — in general, backers are more likely to contribute to a project in the first and last week as compared to the middle period of the funding cycle. We further establish that this U-shape pattern of support is pervasive across projects, including both successfully and unsuccessfully funded projects, those with large and small goals, and projects in different categories. We then empirically explore the dynamics associated with several factors, including collective attention effects from platform sorting options, the role of family and friends in supporting projects, the effects of social influence, and the role of project updates over the project funding cycle.

The Financial Rewards of New Product Introductions in the Personal Computer Industry

Based on data from firms in the personal computer industry, we study the effect of new product introductions on three key drivers of firm value: profit rate, profit-rate persistence, and firm size as reflected in asset growth. Consistent with our theoretical development, we find that new product introductions influence profit rate and size; however, we find no effect on profit-rate persistence. Interestingly, we also find that the effect of new product introductions on profit rate stems from a reduction in selling and general administrative expenditure intensity rather than through an increase in gross operating return. Notably, firms decrease their advertising intensity in the wake of a new product introduction. Firm profitability in this industry apparently benefits from new product introductions because new products need less marketing support than older products.

Truth or Consequences: An Analysis of Vaporware and New Product Announcements

The software industry practice of announcing new products well in advance of actual market availability has led to allegations that firms are intentionally engaging in vaporware. The possible predatory and anti-competitive implications of this behavior recently surfaced in the antitrust case United States v. Microsoft Corporation. Taking the perspective that a new product announcement is a strategic signal between firms, we consider the possibility that intentional vaporware is a way to dissuade competitors from developing their own competing new products. An examination of empirical data for the software industry suggests that some firms may use vaporware in a strategic manner. We then formulate and analyze the preannouncement and introduction timing decisions in a game theoretic model of two competing firms. We find that vaporware can be a way for a dominant firm to signal its product development costs, and that intentional vaporware can deter entry. We also show that there is a curvilinear relationship between development costs and announcement accuracy, i.e., firms with high or very low product development costs make accurate product announcements, while firms with intermediate product development costs intentionally engage in vaporware. Empirical support for these theoretical results is also found in the software industry data. Finally, we discuss the beneficial and harmful consequences of vaporware, and the associated implications.

Are Product Life Cycles Really Getting Shorter

This article takes a close look at the conventional wisdom which holds that product life cycles are getting shorter over time. Barry Bayus reviews several empirical studies directly or indirectly related to this phenomenon and discusses some empirical examples of life cycles for various products and brands in rapidly evolving categories. Generally speaking, he finds no strong empirical support for shrinking product life cycles at the industry, product category, product technology, or product model level. The article explores several implications of this finding and discusses various speculations on the rationale underlying this widespread assertion.

New-Product Strategy and Industry Clockspeed

We study how industry clockspeed, internal firm factors, such as product development, production, and inventory costs, and competitive factors determine a firms optimal new-product introduction timing and product-quality decisions. We explicitly model market demand uncertainty, a firms internal cost structure, and competition, using an infinite-horizon Markov decision process. Based on a large-scale numerical analysis, we find that more frequent new-product introductions are optimal under faster clockspeed conditions. In addition, we find that a firms optimal product-quality decision is governed by a firms relative costs of introducing new products with incremental versus more substantial improvements. We show that a time-pacing product introduction strategy results in a production policy with a simple base-stock form and performs well relative to the optimal policy. Our results thus provide analytical support for the managerial belief that industry clockspeed and time to market are closely related.

Forecasting sales of new contingent products: An application to the compact disc market

Abstract Estimating the sales potential of new products before an actual launch is a major problem confronting marketing and new products managers. Several modeling efforts for both new durable products and consumer package goods have been reported. An area which has received little explicit treatment, however, is that of new contingent product sales. A specific case of such products is the close relationship between software (consumables or accessory items subject to repeat good required for use of the software). Examples of this relationship include video cassette recorders and VCR tapes; microcomputers and floppy diskettes; and cameras and photographic film. In this article Barry Bayus discusses a practical method for estimating hardware and software sales of such products. Effects due to different market segment behaviors, pricing, awareness levels, and purchase intentions are incorporated into the model. Results from a study of the compact disc prerecorded audio market by RCA/Ariola are presented in order to illustrate how the model can be applied and how the results are useful in making managerial decisions.

Accelerating the Durable Replacement Cycle with Marketing Mix Variables

In many established product categories, a large component of sales is due to the replacement of existing units. Because of the long expected lifetime of durables, replacement decisions can often be postponed by the consumer. In light of this, one marketing strategy for manufacturers of such products may be to accelerate the timing of product replacement decisions for buyers planning to replace. In this article, Barry Bayus presents the results of his investigation of the effect of marketing efforts on shortening the replacement cycle. Such information can be used by new product managers to forecast more accurately long-term sales and to help decide when to introduce new products (e.g., with enhanced features). Using data on color television purchases, he shows that the marketing variables of price, advertising, new features and styling are related to the timing of discretionary replacements. Further, these data suggest that price has the most impact in accelerating replacement purchases.