Developing a Valid and Reliable Measure of Product Innovativeness for Entrepreneurship Research

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Douglas, Evan

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Wright, Owen

Senyard, Julienne

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Innovation generates new products and services, introduces new ways of conducting business, and ultimately increases business profits, national income, and consumer wellbeing. Therefore, being innovative is key for any business, because it provides competitive advantages, enables product differentiation, reduces production costs, improves dynamic capabilities, and strengthens absorptive capacities. Moreover, innovation is vital if entrepreneurial new and small firms are to survive and to compete with larger and established firms. Consequently, there is great academic and practical interest in defining and measuring innovation. However, to date, measures of innovation have lacked reliability and consistency across products, across industries, and across time. In this thesis, a new way of measuring innovativeness through a direct and objective assessment of product innovation is proposed that can be applied to any product in any market. It is especially useful for entrepreneurial new and small firms, because most current measures of product innovativeness have been developed in the context of larger firms and do not apply well to new and small businesses that do not have an explicit R&D department or budget, and few if any patent applications in the early stages of their existence. In any case, firm-level measures tend to focus on antecedent and consequential measures that do not correlate well with innovativeness at the product level, which is of prime importance to entrepreneurs and their investors. Some measures do focus on the product level, but these tend to be subjective (reliant on opinions); may be simplistically categorical (e.g. radical vs. incremental); and may be ordinal (e.g. Likert scales) rather than cardinal objective measures. To rectify these measurement, reliability, and consistency problems, an authentic measure of product innovativeness is developed that is direct (i.e. measured at the product level); assesses observable innovations in the product (i.e. output driven); objective (i.e. independent of manager or customer opinion); contemporaneous (i.e. reflective of the specific timing of the innovation) and results in a continuous cardinal measure that can indicate absolute values of product innovativeness. This new measure ensures validity, as it focuses directly on the product’s innovations, and consistency across observations, as it systematically measures observable novel aspects of the product, such that the measure can be verified externally by a third party. For researchers, this new measure will facilitate reliable inter-firm comparisons and enable longitudinal studies of product innovativeness, its causal antecedents, and its consequences. The new measure will also prove useful for entrepreneurs and their investors, as it will provide more reliable and comparative information on the innovativeness of new products relative to others. It is equally applicable to product innovation by larger firms, and in that context could be tested for efficacy against the established measures. The new measure of product innovativeness integrates multiple gradations of both technical novelty and market novelty using complex algorithms that nonetheless reduce to a simple spreadsheet calculation (or an “app”) that computes the “compound product innovativeness score” effortlessly. Application of the new measure is demonstrated, both cross-sectional and longitudinal studies, in the context of the U.S. smartphone industry.

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Thesis (PhD Doctorate)

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Doctor of Philosophy (PhD)


Dept of Marketing

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Technical novelty

Market novelty

Product innovation

Product newness

Innovativeness measures

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