Co-production: the key to company love? : studying consumer co-production and company liking and the roles of competence, product price and self-efficacy

Co-production: the key to company love?

Studying consumer co-production and company liking and the roles of

competence, product price and self-efficacy

Master thesis author: Ms. M.M.A. Jansen (BA) 11606185

Under supervision of Dr. J. Demmers

MSc in Business Administration - Marketing Track University of Amsterdam - Business School

Faculty of Economics and Business

STATEMENT OF ORIGINALITY

This document is written by Student Merel Maria Avalon Jansen who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

TABLE OF CONTENTS

2.2 Co-creation influencing consumer attitudes...12

2.3 Introducing co-production...13

2.4 Explaining co-production...13

2.5 Consumer traits influencing willingness to co-produce...15

2.5.1 Competence...16

2.6 Influenced corporate attitudes...17

2.6.1 Corporate attitudes and co-creation...17

2.6.2 Corporate attitudes and co-production...19

2.7 Product category...20 2.8 Self-efficacy...22 2.9 Theoretical framework...24 3. METHODOLOGY...25 3.1 Experiment...25 3.1.1 Scenario approach...25 3.2 Measurement of variables...26 3.2.1 Independent variables...27 3.2.2 Dependent variables...28 3.3 Data collection...29 4. ANALYTICAL STRATEGY...30 4.1 Missing data...30 4.2 Recoding values...30

4.3 Computing scale means...30

4.4 Factor analysis...31

5. RESULTS...33

5.1 Sample...33

5.1.1 Manipulation check...35

5.3 PROCESS Model 4...38 5.4 PROCESS Model 14...39 5.5 Discussion...39 6. GENERAL DISCUSSION...40 6.1 Theoretical contributions...44 6.2 Managerial implications...45

6.3 Limitations and suggestions for future research...46

REFERENCES...48

APPENDIX 1. DESCRIPTION SCENARIOS...55

LIST OF FIGURES AND TABLES

FIGURE 2. Results of Mediation and Moderated Mediation Analysis...39

FIGURE 3. Survey imagery...55

TABLE 1. Exploratory Factor Analysis for Feelings of Competence and Self-Efficacy; rotated component matrix...32

TABLE 2. Summary Demographics...34

TABLE 3. Mean Scores for Feelings of Competence per Condition...37

ABSTRACT

With an increasing number of companies introducing co-production initiatives, following the world's best-known example IKEA, scholars have paid significant attention to the concept in the past. They found that consumer engagement in co-production, such as putting together one's own furniture, enhances feelings of competence and increases willingness to pay as well as product liking. Mochon, Norton and Ariely (2012) call this the IKEA-effect and found it to be irrational, as co-production requires more effort and time than buying a ready-made product. Strikingly, previous studies had not yet clarified what happens to consumers' attitudes towards the company in question after engaging in co-production activities. By means of a between-subjects experimental survey design, this study measured consumers' corporate attitudes after participating in co-production for products differing in price and attempted to explain the effect by also measuring feelings of competence and self-efficacy. Results showed that, contradictory to expectations, company liking decreased when consumers were asked to co-produce. Feeling of competence showed to be a significant mediator for this effect, which could in turn increase company liking. Self-efficacy and product price were no significant moderators and could thus not explain the negative relationship between co-production and company liking. Overall, this research has made important steps towards closing the research gap on co-production and corporate attitudes. Moreover, results indicate that companies should be wary of blindly chasing the success formula's of IKEA or HelloFresh, as it may harm their customers' perceived company liking. Firms may however be able to influence this effect by increasing consumers' feelings of competence.

1. INTRODUCTION

In 2014, the well-known Dutch coffee company Douwe Egberts launched a completely new concept that had been held secret for months: the D.E. Coffee Kitchen. Companies, hospitals and universities alike were introduced to a portable coffee corner that allowed everyone to 'be a barista' by making consumers feel like they are brewing their own coffee (Fygi, 2014). In 2015, Nescafé launched a similar concept with premium coffee vending machines, with its core campaign message also communicating that everyone is a barista (Griffiths, 2015). In previous literature, this concept has been studied and defined as co-production: consumer participation in the company production of goods and services (Bendapudi and Leone, 2013). This includes 'brewing' one's own coffee with help from a D.E. and Nescafé coffee machine, but also putting together furniture of IKEA or baking a cake with a company produced mix. Co-production can be seen as a sub-activity of the more extensively studied concept of co-creation, where 'the process of creation of value is affected by customer's skills and knowledge' (Cossío-Silva, Revilla-Camacho, Vega-Vázquez and Palacios-Florencio, 2016, p. 1622). The difference between these two concept lies in the fact that co-creation invites consumers to engage in value-creation activities throughout the company production process, for example with new product development, whereas in the case of co-production, consumers only self-assemble the end-product.

The success and popularity of co-creation activities for both the company and consumers is clear and can partly be explained by the recent shift towards companies becoming more customer-oriented as opposed to product-oriented (Lusch, Vargo and O'Brien, 2007). Where companies used to see marketing purely as transferring ownership of goods and their physical distribution (Savitt, 1990), also defined as the goods-dominant logic by Lusch et al. (2007), a shift can be observed towards the service-dominant logic (S-D logic). Instead of viewing the units of output as the central component of exchange with a passive consumer,

this logic acknowledges the consumer as being a co-creator of value together with the company (Lusch et al., 2007). One of the best-known examples of co-creation is relying on consumer creativity by engaging them in completely new product development, such as a T-shirt design or a new type of Lays crisp flavour. Co-creation has raised various questions amongst scholars in the past decade, ranging from what motivates consumers to invest their time and money to co-create with a firm to how co-creation can lead to increased experienced enjoyment and perceived feelings of empowerment of consumers (Füller, Mühlbacher, Matzler and Jawecki, 2009). Proving that introducing co-creation initiatives is not only beneficial from a consumer point of view, previous studies have also found that co-creation increases brand attachment, brand engagement and brand attitudes (Kull and Heath, 2016) and positive corporate attitudes (Fuchs and Schreier, 2011). These results seem fairly straightforward to explain, partly because ultimate consumer satisfaction can be achieved by altering a product or service according to personal style preferences, but also because consumers value a high degree of company customer-orientation and the excitement of co-creating.

Significantly less studied and perhaps more difficult to explain the success of is the concept of co-production, where the final product outcome remains the same and an increase in product liking is due to factors such as exerted effort and not customization (Norton, Mochon and Ariely, 2012). Mochon, Norton and Ariely (2012) have studied co-production and have found what they call the 'IKEA-effect'. Results in their experiments show that co-produced products, for example origami, IKEA boxes or Legos, were perceived as higher in value than the ready-made alternative. Moreover, engaging in co-production lead to increased willingness to pay, feelings of competence and feelings of success. These findings seem to reveal irrational consumer behaviour, as perceived product liking increases together with time and effort needed to invest. Multiple studies have replicated these findings (Dohle, Rall and

Siegrist, 2014; Hunt, Geiger-Oneto and Varca, 2012; Franke, Schreier and Kaiser, 2010), showing that people like self-created objects more than objects that were created by someone else.

This raises an interesting question: what happens to corporate attitudes when consumers engage in co-production activities? For co-creation, an increase in favourable corporate attitudes, such as in the study of Fuchs and Schreier (2011), is explained by increased perceived customer orientation, in this case because participants were asked to submit new product ideas and vote for which product should be brought to market. However, as co-production requires consumers to put in both effort and time to assemble a product, but at the same time has shown to increase feelings of competence, it is unclear what may happen to perceived corporate attitudes subsequently. Depending on both product price and perceived self-efficacy, this study proposes engaging in co-production leads to an increase in company-liking through feelings of competence. The extent to which feelings of competence increase company liking is anticipated to depend on perceived self-efficacy, in a way that consumers high in self-efficacy are more likely to assign feelings of competence to oneself as opposed to towards the company. Participants low in self-efficacy are more likely to attribute feelings of competence to the firm in question, leading to higher company liking. It is also anticipated that product price may mediate the effect between co-production and company liking, with lower-priced co-production products resulting in increased company liking compared to higher-priced products.

This research addresses the gap previous literature has left regarding co-production and corporate attitudes by answering the following research question: To what extent does consumer participation in co-production influence perceived consumer company liking?

This study will contribute to current literature in several ways. First, it will re-establish previous findings on co-production by studying its relationship with feelings of competence. In addition, this research will identify the extent to which these feelings might influence consumers' perceived company liking as a result. For scholars, this study will help to gain deeper understanding as to what the reason might be behind an increase or decrease in corporate attitudes after engaging in co-production, an area that has been neglected in previous studies. Acknowledging the importance of self-efficacy and different product categories in co-production, operated as product price in this thesis, which is highlighted in calls for future research by previous studies (Franke et al., 2010; Bendapudi and Leone, 2003) this study will also shed a light on how both concepts might moderate the relationship between co-production and perceived corporate attitudes.

As more and more companies jump on the bandwagon of co-production, with IKEA being the current best-known example, it is necessary for firms to know how co-production may affect corporate attitudes. A firm's expectation of consumers to co-produce might either be a unique key to favourable corporate attitudes or a recipe for disaster. In one way, the results of this study may bring about a new way of achieving favourable corporate attitudes for companies. In case this study shows the benefits of providing consumers with an opportunity to produce, this may be a unique chance for companies to introduce co-production in its product- or service offerings to achieve positive corporate attitudes and sustainable competitive advantage. Alternatively, this study may show practitioners that it is not always beneficial for companies to offer consumers the opportunity to co-produce, perhaps depending on one's personal characteristics and the product price.

The remainder of this article is structured as follows: first of all, a review on current literature will be provided in order to gain better understanding regarding co-production, its influence on consumer attitudes and its possible influence on corporate attitudes. Then, the

research design and research methods for this study will be provided. Lastly, the results will be discussed as well as its theoretical and managerial implications and suggestions for future research.

2. LITERATURE REVIEW

This chapter provides an extensive overview of literature on the concepts of co-creation and co-production and its effects on consumers and companies. Firstly, the concept of co-creation will be defined in order to set the stage for explaining co-production. Secondly, it will be explained how consumers can be influenced by engaging in co-production activities and what motivates them to participate. Then, it will be described how company success is influenced by co-creation and co-production and how corporate attitudes come into play, which is currently where the biggest research gap regarding co-production can be identified. Lastly, an overview of previous literature will show how product price and perceived self-efficacy can be identified as the two most important concepts to take into account when studying co-production and corporate attitudes.

2.1 Introducing co-creation

Ever since a clear link has been established between competitive advantage and superior performance (Barney, 1991), companies have been on a continuous quest on how to achieve competitive advantage. This essential advantage can be defined as 'how a firm applies its operant resources to meet the needs of the customer relative to how another firm applies its operant resources' (Lusch et al., 2007, p. 8). These resources include intangible factors such as know-how and skills and are different from tangible, operand resources such as raw materials. Interestingly, a shift is noticed from consumers being seen as operand resources towards them being seen as operant resources. To illustrate, whereas consumers used to be

treated solely as a resource to be acted upon, consumers are now identified as valuable partners that can co-create value together with a firm (Vargo and Lusch, 2004). The latter is also called the service-dominant logic (S-D logic), which is based upon the assumption that individuals and organizations are interwoven for reciprocal service provision (Lusch et al, 2007) and value creation. Even the concept of the Four P's (price, promotion, place and product), introduced by McCarthy in 1960 as the basis for every marketing initiative, has seen a re-introduction with a company's consumers at the core. For example, the promotion factor is now reoriented towards conversation and dialogue with the consumer as opposed to one-way, mass communication. Moreover, price is rather a value proposition created by both sides than a pure decision of the company (Lusch and Vargo, 2006). To conclude, the manufacturer is no longer the sole creator of value; creating value is now a collaborative process that includes consumers (Ind and Coates, 2013).

Because of this crucial shift in marketing, the concept of co-creation has been studied extensively in previous literature, all defining the concept differently. Besides varying definitions, studies show that co-creation can entail different activities per study or firm. For example, Fuchs and Schreier (2011) see co-creation as a type of innovation where consumers are empowered to assist in making company choices regarding completely new product development. Verhoef, Reinartz and Krafft (2010) mention a well-known example of this type of empowerment from the crisp company Lays that asked its customers to develop a new crisp flavour. In short, co-creation can most accurately be defined as 'the value that is added to products in the production process by customers' (Lusch et al., 2007, p. 11).

2.2 Co-creation influencing consumer attitudes

Besides the fact that companies are better able to cater towards consumer wants and needs by incorporating co-creation activities, multiple studies have found that consumers benefit from engaging in co-creation as well, which can explains the success of co-creation.

Etgar (2007) describes that consumer benefits of co-creation can be divided into three types: economic benefits, psychosocial benefits and social drives. The economic benefits for consumers to co-create are mostly for economic rewards such as cost reduction (Etgar 2006, in Etgar, 2007) and risk reduction (Taylor, 1974, in Etgar, 2007), as a certain product can be fully altered to a consumer's personal wants and needs. Ideally, the price of a product, which includes the monetary price but also required sacrifice in terms of risk to buy a product, should be as low as possible (Verhallen and Van Raaij, 1986). This partly explains the success of co-creation. Furthermore, the psychosocial benefits of co-creation can be deemed as strong as well. Holbrook (2006, in Etgar, 2007) divides these benefits into intrinsic and extrinsic, where intrinsic benefits refer to fun, play, excitement and variety seeking and extrinsic benefits refer to uniqueness and the possibility to self-express. Lastly, the social drives of co-creation mostly consist of seeking status, social esteem (Holbrook, 2006, in Etgar, 2007) and control (Lusch, Brown and Brunswick, 1992 in Etgar, 2007).

Moreover, Jawecki (2008, in Roberts, Hughes and Kertbo, 2014) defines three types of co-creation: independent innovating, joint innovation and direct collaboration with a firm. Roberts, Hughes and Kerbo (2014) found that the motivation to innovate in collaboration with a firm in specific is mostly opportunity- and goal-based. Participants see it as an opportunity to influence a firm's product development and raise awareness for customer ideas.

2.3 Introducing co-production

A concept that has not been as extensively studied as co-creation in previous literature is a sub-activity of this concept: co-production. This lack of literature on co-production is striking, as many direct co-production collaboration trends between firms and consumers have recently emerged. An example of this is the founding of HelloFresh in 2011, which is a meal-kit company that provides consumers with only the basic ingredients and recipes for a complete dinner. The actual cooking is left to the consumer. Many other examples can be identified that point to an increase in firm co-production initiatives, such as the earlier mentioned example of Douwe Egberts, but also every single introduction of a new IKEA product.

This trend has shown to open up unique opportunities for firms to increase multiple factors, such as customer satisfaction and loyalty (Bendapudi and Leone 2003), but might also influence corporate attitudes in a less positive way. The following chapters will elaborate on previous studies on production and what customer traits influence willingness to co-produce. Finally, it will be discussed how consumer engagement in co-production may influence corporate attitudes and how perceived self-efficacy and the product category may affect these attitudes.

2.4 Explaining co-production

In the case of co-production, consumers are invited to engage in value co-creation activities later on in the company production process, as opposed to earlier in the process with, for example, completely new product development. The definition used for co-production in this research is given by Lusch et al., (2007, p. 11), who state that 'co-production involves the participation in the creation of the core offering itself, and therefore, probably more appropriately (than value-co-creation) referred to as co-production.' In other words, co-production differs from co-creation in such a way that consumers are not invited to come up

with new product ideas, but rather to take responsibility for activities that firms are traditionally responsible for.

Various researchers have studied this activity before, mainly focussing on the way in which engaging in co-production benefits consumers. They have attempted to explain the irrational behaviour that engaging in co-production seems to cause. Rational thinking would imply that value attributed to a product should be lessened when consumers are asked to put in effort and time when comparing it to a ready-made product, as an increase in consumer costs can be observed. However, Mochon et al. (2012) have studied co-production and its influence on attitudes and found the opposite effect, which they have called the 'IKEA-effect'. They show that when participants co-produced a LEGO-car, the 'builders' were willing to pay more for their creation than the non-builders. This is explained by the finding that people place more value on their own creations than on the exact same product created by someone else (Norton et al., 2012).

In the same experiment of Mochon et al. (2012), the activity of co-production also evoked feelings of competence and success. This is explained by the assumption that creating products fulfils consumers' need to signal competence to themselves and others. Subsequently, these feelings of competence also lead to increased valuation of the product. Other studies support these findings of the IKEA-effect, such as Dohle et al. (2014), who show that self-prepared foods received higher liking ratings than foods prepared by others. Furthermore, Hunt et al. (2012), find a similar effect for co-producing fresh produce, where consumers assumed responsibility for distribution, market-timing and financial risk, which showed to positively correlate with better product satisfaction.

In a similar fashion, studies on the 'I designed it myself' effect encounter comparable results. This effect describes how self-designed products are more positively evaluated than 'off-the-shelf' products, even if they are exactly the same (Moreau and Herd, 2009), which

negates the effect of preference fit. Multiple studies found that this effect can be ascribed to exerted effort (Norton et al., 2012) and psychological ownership and, again, feelings of competence (Franke et al., 2010).

2.5 Consumer traits influencing willingness to co-produce

Although the benefits of co-production for the consumer may be clear, not every consumer seems to be equally willing to participate. As consumer participation is of key importance for the co-production process to succeed, it is important to know what specific traits or behaviours may affect willingness to co-produce. This way, firm expectations can be managed and companies may learn how to influence consumers to participate. Differences between motivations to co-create and to co-produce can be identified. Füller, Matzler and Hoppe (2008) studied the willingness to co-create, or innovate in their study, in the case of brand communities. They conclude that task motivation, skills, innovativeness, task involvement, community identification, and brand trust in a brand community positively influence participation in open innovation projects. They also identified that consumers' creativity was an important determinant to share knowledge with the company. Creative people have shown to be more willing to engage in new product development than less creative ones (Füller, 2007).

For co-production, however, consumer motivations to participate are slightly different. Ahmad (2016) found that a participant's feelings of competence and perceived self-efficacy are of main importance for willingness to engage in co-production and that these feelings are influenced by one's openness to experience, agreement and emotional stability traits. Furthermore, he states that autonomous motivation and intrinsic rewards had a positive correlation with the outcome of co-production behaviour. What is meant by autonomous motivation is that the consumer encourages him- or herself to co-produce, motivated by

underlying feelings such as enjoyment and enthusiasm. Conditions for this autonomous motivation are ideal when perceived competence to deal with the activity of co-production is high (Ahmad, 2016). Xie, Bagozzi and Troye (2008) found similar results, showing that 'prosumption propensity', which implies that buyers produce products for their own consumption, such as cooking, is a function of attitude towards success, the process and perceived self-efficacy. Moreover, Mochon et al. (2012) confirm that feelings of competence play a critical role in consumer participation in co-production, showing that willingness increased when their feelings of competence were threatened.

Willingness to participate in co-production thus depends on specific consumer traits and especially on perceived self-efficacy and feelings of competence. This can be explained by the fact that experiencing feelings of pride and having learnt something useful encourages the desire to participate in the activity again (Ahmad, 2016). As will be described in the following sections, it is likely that consumers' feelings of competence and perceived self-efficacy are crucial factors when attempting to explain the effect of co-production on company liking.

2.5.1 Competence

Feelings of competence are different from perceived self-efficacy and can best be described as feelings of pride associated with the created product, as pride is closely linked to experiences of success (Mochon et al., 2012), which are deeply embedded in human nature (Furby, 1991). Dahl and Moreau (2007) even note that feelings of competence were the most frequently mentioned motivation for engaging in creative tasks, such as co-production, as self-created products signal both a competent identity to the self (Mochon et al., 2012) and to others (Thompson and Norton, 2011). Mochon et al. (2012, p. 367) conclude in their study

that 'feelings of competence play a critical role in consumers' propensity to engage in self-creation and in the benefits customers reap from self-self-creation.'

First of all, this study will replicate earlier research by studying the relationship between co-production and feelings of competence. This study proposes that participation in co-production will not only lead to increased perceived feelings of competence, it may also be an important mediating factor in the way consumers see the company that offered them the opportunity to co-produce.

H1: There is a positive relationship between participation in co-production and feelings of competence.

2.6 Influenced corporate attitudes

Previous studies have clarified the benefits of co-production for consumers and what influences their motivation. However, an even more important aspect that is of interest is how inviting consumers to co-produce benefits companies. Where co-creation can mainly be identified as a driver of firm innovation (Chen, Tsou and Ching, 2011), co-production may be the most important key to achieving overall sustainable competitive advantage, something that is said to be the essence of brand positioning (Keller, 1993).

2.6.1 Corporate attitudes and co-creation

Research has shown that offering consumers the opportunity to co-create will allow firms to become more customer-oriented, which is likely to result in sustainable competitive advantage over other companies who do not choose to incorporate co-creation in its production process (Lusch et al. 2007). Secondly, studies show that consumer involvement through co-creation increases perceived service performance (Cheung and To, 2011) and trust

(Revilla-Camacho, Cossío-Silv and Vega-Vázquez, 2014). Moreover, Fuchs and Schreier (2011) found that co-creation, defined as customer empowerment in their study, positively impacts corporate attitudes. Participants that were shown T-shirts that were co-created by other users, held favourable corporate associations of the firm. Both the empowerment to submit ideas and the empowerment to vote for which products should be marketed, were found to lead to more favourable corporate attitudes. Consumers increasingly appreciate a firm's attempt to increase customer orientation, especially because consumer attitudes towards totalitarian companies that exert too much power tend to be negative (Bernstein, Zellner and Coy, 2000). A similar effect for co-creation was found by Kull and Heath (2016), whose study concludes that brand attitude, brand engagement and brand attachment increased when consumers are allowed to choose which charity a firm donates to. They showed that by increasing participants' empowerment to co-create and thus sharing an activity with the firm, their relationship with that firm increased. They also show that, even when participants saw the brand for the first time, consumer attachment increased when being let to determine a campaign's donation recipient. Furthermore, Cossío-Silva et al. (2016) found a positive relationship between co-creation and attitudinal loyalty to the firm. By conducting personal interviews at personal care centres, such as the hairdresser's and gyms, they show a causal relation between value co-creation (which was measured in terms of information sharing and personal action) and attitudinal loyalty (which was measured by the two dimensions purchasing intention and recommendation to third parties).

Most of the results above can either be explained by customization, allowing consumers to design a product or service according to their liking (Dellaert and Stremersch, 2005; Franke and Piller, 2004) or a strong consumer appreciation for a company's effort to ask for their input. However, in the case of co-production it gets slightly more complicated to

explain changes in corporate attitudes, as they cannot be explained by customization or personal creative input, but rather by other factors.

2.6.2 Corporate attitudes and co-production

Auh et al. (2007) show that co-production is significantly related with attitudinal loyalty, but not with behavioural loyalty. They measured this within the financial services sector, showing that co-production, measured as the extent to which participants work cooperatively with an advisor, results in higher commitment to the organization. Moreover, a study by Bendapudi and Leone (2003) shows that when participants were exposed to a fictive person 'Pat' in the condition that he was to assemble a shelf himself, instead of buying one at a store, customer satisfaction with the firm increased amongst participants. In contrast with the studies on co-creation mentioned before, this research by Bendapudi and Leone seems to be the only one that has studied co-production in relation to firm attitudes to date. However, both studies of Auh et al. (2007) and Bendapudi and Leone (2003) leave room for questions, as it remains unclear what the exact reason may be behind increased positive firm attitudes.

Therefore, the current research will attempt to provide an explanation for increased positive corporate attitudes after consumer engagement in co-production. When a consumer engages in co-production with a company, this study proposes that it has a positive effect on liking the company through feelings of competence. This proposition is based on findings that consumers are more likely to develop positive attitudes towards a company when they have had a favourable experience with the company (Park, Park and Dubinsky, 2011). An example of this may be a successful attempt at co-production, such as putting together one's own piece of furniture. In the case of co-production, this can be explained by the halo effect. The halo effect is a widely studied psychological phenomenon and can be defined as the influence of a global evaluation on other, subsequent evaluations. Nisbett and DeCamp Wilson (1977, p.

250) even state that 'global evaluations may be capable of altering perceptions of relatively unambiguous stimuli, about which the individual has sufficient information to render a confident judgement'. In short, this could mean that as soon as a consumer feels competent after having self-produced a product, he or she may tend to be biased and evaluate the company involved just as positively, even though he or she may, in another case, render an independent assessment of the company.

This leads to the second and third proposition stating that when people engage in co-production, anticipating they will feel competent, the extent to which they will like the company increases. The anticipation that consumers will feel competent after engaging in co-production will be studied, but can be taken as a given, based on extensive previous research which was summarized previously.

H2: There is a positive relationship between participation in co-production and company liking.

H3: The relationship between participation in co-production and company liking is mediated by feelings of competence.

2.7 Product category

Although a significant part of research has been conducted on co-production and its effects, researchers have often failed to include different product categories in its experimental designs. In previous literature on co-production, it is usually the case that product quality is held constant and only the activity of co-production is manipulated. Fuchs and Schreier (2011) highlight the importance of this research gap and call for future research that study whether previously reported findings on co-production hold for products differing in quality. They did incorporate three product categories in order to measure perceived risk and the

difference between categories with regards to the degree of empowerment. T-shirts were generally perceived as low-risk, whereas furniture had medium risk and bicycles were perceived as high risk. However, no significant differences were found between the categories with regards to changed corporate attitudes. For all three categories, empowering participants to co-create (where users created the design and companies produced the design) resulted in increased favourable corporate attitudes compared to scenarios where participants were not empowered. The authors note that further research is necessary in order to test whether similar results hold for product differing in quality in future studies.

This study will focus on differences between product qualities based on price. This decision is based upon previous studies that have shown that the concept of quality is often linked directly to price. High prices usually signal high quality, prestige and 'being a big spender' (Lichtenstein, Ridgway and Netemeyer, 1993), whereas lower prices are more likely to signal lower quality and sometimes worse brand performance than higher priced items (Nowlis, Kahn and Dhar, 2002). Moreover, a high product price represents that expensive inputs were used by the manufacturer, suggesting to consumers that they are paying for superior quality (Sharma and Garg, 2016). Consumers also perceive price as an indicator of sacrifice, where a higher price represents higher monetary sacrifice (Dodds, Monroe and Grewal,1991).

This could mean that consumers have higher expectations of companies selling higher priced items in terms of brand performance and perceive higher sacrifice. As engaging in co-production implies that a consumer takes on part of the responsibility that a company used to take, consumers often expect products that require co-production to be lower in price. This is in line with the way in which IKEA markets' its business: cheap products and striving towards continuously lower prices (Fitzgerald, 2017). However, even IKEA offers basic products, such as closets, ranging from €166,- to a staggering €800,-. Higher priced products that

require co-production or products that are similarly priced as the ready-made alternative are anticipated to result in consumer annoyance and decreased company liking. After all, when a consumer decides to purchase a high-priced product that requires co-production, he or she is neither saving on money nor on required effort. Alternatively, when the product that requires co-production is lower-priced, this is more in line with consumers' common associations with co-production products. Thus, lower-priced products that require co-production are likely to result in better company liking, due to them being in line with what a consumer expects.

To conclude, this study hypothesizes that, although consumers feel competent after engaging in co-production, consumers will hold less favourable corporate attitudes when it involves higher priced, or luxury, products. It is anticipated that for lower priced, or basic, items, the opposite effect will occur, meaning an increase in company liking.

H4: The relationship between participation in co-production and company liking is moderated by product price, so that it increases company liking when it entails a basic product, but decreases company liking when it entails a luxury product.

2.8 Self-efficacy

Besides increased feelings of competence, the other aspect of co-production that was deemed of most significant importance by previous researchers was perceived self-efficacy in the process. This concept has been studied extensively by Bandura (1982, p. 122), who defines self-efficacy as 'self-appraisals of operative capabilities that function as one set of proximal determinants of how people behave, their thought patterns, and the emotional reactions they experience in taxing situations.' Or in short, how people judge their own capabilities.

Self-efficacy has been an intensively used mediator in previous studies as it has shown to significantly moderate a wide spectrum of factors, from perceived risk (Keith, Babb,

Lowry, Furner and Abdullat, 2015) to organizational perception (Lee, Haley and Yang, 2017). Interestingly, in the field of co-production, self-efficacy has mainly been studied as a concept that affects consumers' willingness to co-produce. Several studies found that a high degree of self-efficacy positively influences the tendency to co-produce (Auh, Bell, McLeod and Shih, 2007; Ford and Dickson, 2012; Bovaird, Van Ryzin, Loeffler and Parrado, 2015). What remains unclear is what happens when consumers experience low levels of self-efficacy, but engage in co-production anyway. Bendapudi and Leone (2003) even stress in their directions for future research that a consumer who feels a lack of expertise, which can be interpreted as low perceived self-efficacy, but feels forced to co-produce may make more negative attributions about co-production.

Perceived self-efficacy is thus crucial in a way that it affects customer self-evaluation, but even more importantly, that it may affect company evaluation. Van Beuningen, de Ruyter and Wetzels (2010) measured to what extent perceived self-efficacy might affect perceived service value of a firm. They manipulated the degree of perceived self-efficacy amongst consumers and found that when the degree of self-efficacy increased, perceived service value also increased.

This study takes a different approach, as it is proposed that high feelings of competence are the crucial factor for positive company evaluation and not high levels of self-efficacy. Instead, high levels of self-efficacy are expected to cause more negative company evaluations. This purposely implies that feelings of competence and perceived self-efficacy are seen as two different constructs on which participants may score oppositely. This can be explained as follows. Whereas engaging in co-production has previously shown to directly result in pride of the product and one-self, also defined as feelings of competence, participants can still score low on perceived self-efficacy if they lack confidence in their own capabilities.

High scores on feelings of competence, measured in pride, and low scores on self-efficacy, or the other way around, can thus exist simultaneously.

This train of thought results in the following anticipated results. People with high-perceived self-efficacy are likely to be confident individuals who attribute successful engagement in co-production and feelings of competence to their own capabilities and skill, resulting in lower scores on company liking. However, people with low perceived self-efficacy may be more likely to attribute successful co-production resulting in feelings of competence to the company, in a way that purely the company in question made them feel good, resulting in high company liking.

H5: The relationship between feelings of competence and company liking is moderated by self-efficacy, so that this relationship is stronger for lower values of self-efficacy.

2.9 Theoretical framework

For the purpose of providing a clear overview of the hypotheses for this study, a theoretical framework has been created which is shown in Figure 1.

H1+ H5- H3+ H2+ H4-

FIGURE 1. Theoretical Framework Co-production (yes/no) Feelings of competence Self-efficacy Product price (basic/luxury) Company liking

3. METHODOLOGY

This chapter will discuss the way in which the proposed hypotheses in the theoretical framework were studied with an experimental design, why a scenario approach was most appropriate and what sample was used. Moreover, an explanation of all variables used for this thesis will be given.

3.1 Experiment

To answer the proposed hypotheses, a quantitative study was conducted by means of a true experimental design in an online survey by using the survey programme Qualtrics. A 2 (co-production/non co-production) x 2 (basic/luxury) between-subjects design was used where participants were randomly assigned by the software to one of four conditions, prior to measuring their perceived company liking, feelings of competence and self-efficacy.

3.1.1 Scenario approach

A scenario approach was used for the manipulation in four different conditions because of several reasons. First of all, it allowed the manipulation of co-production of furniture; something not easily replicated in another way considering the limited time frame available for this thesis. Secondly, as respondents were likely to be familiar with either the scenario of putting together furniture or receiving it ready-made at home, imagining the scenario was relatively uncomplicated. It was decided to let respondents 'play themselves' in the scenarios, granted that previous research has shown contradictory findings regarding this approach.

Some studies have found that respondents show social-desirability effects, which advocates for projective scenarios instead (Bateson, 1985; Hui and Bateson, 1991). Specifically, Jones and Nisbett (1972) show that these effects are reduced when events are related to another as opposed to oneself. For this reason, in a similar study, Bendapudi and

Leone (2003) have exposed respondents to scenarios involving 'Pat' either assembling a shelf or buying furniture at a store. They asked respondents to put themselves in Pat's shoes.

However, other studies have shown that the scenario method actually works particularly well when subjects are asked to play themselves. Eroglu (1987, in Dabholkar, 1996) argues for a 'theoretical, not a theatrical approach', stating that it is hard for participants to imagine they are someone else.

For this study, it was of particular interest how respondent company liking may be affected by the respondent participating in co-production him- or herself. Therefore, it was decided to ask respondents to imagine being in the situation themselves. Also, the risk of social desirability bias could be considered low in this case, as several studies have shown that this is mainly high when subjects are perceived as sensitive (Groves, 1989; Krumpal, 2011), such as questions on sexual activity, illegal behaviour or unsocial attitudes. This was not the case for this study on co-production and company liking.

3.2 Measurement of variables

Existing scales of previous studies were used to operationalize the variables provided in the theoretical framework, which will be discussed in more detail in the following paragraph. The decision to use existing scales relies on the fact that these were previously positively tested for reliability and validity. Naturally, reliability analyses were ran for this study as well. This re-established the finding that all items reflected high internal consistency with corrected item-total correlations indicating that all items for all variables had good correlation with their total scale (all above .30). Also, none of the items would substantially affect reliability if they were deleted. In terms of the scenario approach described above, an adapted scenario from Bendapudi and Leone's (2003) study was used in order to exert control over the manipulation

of co-production and negate the need for a pre-test. Precise descriptions of all four scenarios can be found in Appendix 1.

3.2.1 Independent variables Co-production

The scenario used in the study of Bendapudi and Leone (2003) was adapted in a way to better fit this study. Meaning, in order to be able to measure perceived feelings more accurately, the product was changed from a shelf to a closet, assuming a closet takes more effort to put together than a shelf. This decision is based upon previous studies that have shown that the amount of effort required is an important indicator for the IKEA effect to occur (Norton et al., 2011; Dohle et al., 2014).

Participants were randomly assigned to one of four conditions, of which two were experimental and two were control conditions. In the control conditions scenario I and III (non co-production), respondents were asked to imagine being delivered a closet that was pre-assembled by hypothetical company The Closet Company. These control conditions were used as a baseline to later compare results for the dependent variable. In the experimental conditions scenario II and IV (co-production) respondents were asked to imagine being delivered closet parts from The Closet Company and having to assemble the closet themselves. A hypothetical company was used in order to measure true company liking without possible bias of previous company experience. A description of the company was given to provide the participants with more context.

Product price

Besides randomly dividing participants into groups based on non production and co-production, respondents were also exposed to products differing in price. In the same

scenarios I and II (basic), participants were explained that The Closet Company was a regular closet company, selling basic closets at regular prices of €219,-. In scenario III and IV (luxury), the scenarios described a luxurious closet company, selling closets at high prices of €800,-. Both prices were based on means of real closet prices, derived from the well-known Dutch furniture retailing websites of IKEA, Leen Bakker and VT Wonen.

3.2.2 Dependent variables

After reading the respective scenario, participants completed an online questionnaire asking for their attitude towards The Closet Company, own perceived feelings of competence, self-efficacy and demographics. The following paragraphs will give an explanation as to how these variables were measured.

Company liking

Company liking was measured by four items constructed by Fuchs and Schreier (2011) designed to assess consumers' attitudes towards The Closet Company (dislike/like, negative/positive, very bad/very good and not interesting/very interesting). Each item was scored on a seven-point semantic differential scale and had a Cronbach's alpha of .92.

Feelings of competence

The validated scale of Mochon, Norton and Ariely (2012) was used to measure participants' feelings of competence associated with the closet by three items on a 7-point Likert scale (strongly disagree-strongly agree), which had a Cronbach's alpha of .78. In specific, participants were asked whether they felt proud of the product and whether they planned on showing the product off to others. A third item was added to the original scale in order to measure to what extent participants felt proud of themselves, based on the scenario they were

exposed to. This decision is based on the finding of Mochon et al. (2012) that feelings of competence are closely related to feelings of pride.

Self-efficacy

Self-efficacy was measured using the nine items of Cast and Burk (2002) and had a Cronbach's alpha of .86. An example of the items used is 'I am able to do things as well as most people'. Each item was scored on a 7-point Likert scale (strongly disagree-strongly agree).

To achieve a fair degree of generalizable results and an even distribution between conditions, demographic information was gathered to assess similarity of the sample to the overall Dutch population. Thus, all participants were asked to answer questions on their demographics such as their gender (nominal variable), age (ratio variable), and educational background (ordinal variable)

Manipulation check

In order to control whether participants understood the manipulation correctly, a yes/no question was included at the end of the survey that asked if they were required to assemble the closet themselves.

3.3 Data collection

The population of interest for this study was Dutch consumers both male and female. As the sampling frame was unknown, a non-probability convenience sampling technique was used where participants were approached via email and social media. Moreover, a snowball method was used, meaning that different account holders shared the survey on social network sites such as Facebook and WhatsApp.

The survey was launched on 30 April 2018 and was kept open for 14 days until 218 respondents completed the survey, enough in order to achieve sufficient variance between the groups.

4. ANALYTICAL STRATEGY

The collected data was analysed with IBM SPSS Statistics software. First, preliminary steps were taken in order to prepare the dataset for further hypothesis analyses.

4.1 Missing data

All variables were checked for missing data with a frequency test. In total, 218 respondents participated in the experiment. A benchmark was set, requiring that all respondents had to have had finished the complete survey, by checking if they filled out the final question on education. This brought the total number of participants down to 184. Subsequently, two more respondents were deleted from the survey, as they had only filled out their demographics and no other items, finally bringing the total number of respondents to 182.

4.2 Recoding values

Recoding of counter-indicative items applied for six of nine items of the scale that measured self-efficacy. This means that they were recoded so that an agreement with the item represented high scores on self-efficacy.

4.3 Computing scale means

Scale means were computed for company liking, feelings of competence and self-efficacy. Moreover, another variable was created called 'groups', representing four values in order to

compare means between respondents for every scenario, being co-production basic/co-production luxury/non co-basic/co-production basic/non co-basic/co-production luxury.

Frequency tests did not show a wide spectrum across participants regarding age or education. This is why it was decided to recode the variables age (younger than 25 or 25 or older) and education (high school/MBO/HBO or WO bachelor and higher) into dummy variables for the further regression analyses.

4.4 Factor analysis

An exploratory factor analysis was run as a final preliminary step in order to determine whether items measuring feelings of competence were indeed measuring a different construct than the items belonging to self-efficacy. This was needed in order to confirm earlier assumptions that the constructs are not alike and that participants may score oppositely on both items. As shown in Table 1, survey items for feelings of competence reported lower factor loadings on component 1 than on component 2. Moreover, survey items for self-efficacy reported higher factor loadings on component 1 than on component 2, demonstrating that feelings of competence and self-efficacy are two separate constructs.

TABLE 1. Exploratory Factor Analysis for Feelings of Competence and Self-Efficacy; rotated component matrix

Survey item Component 1 Component 2

Feelings of competence Item 1 .16 .84 Item 2 .20 .77 Item 3 .15 .76 Self-efficacy Item 1 .66 -.21 Item 2 .61 -.22 Item 3 .71 -.29 Item 4 .80 -.19 Item 5 .70 -.21 Item 6 .83 .10 Item 7 .50 .23 Item 8 .73 .04 Item 9 .65 .22

Note: N = 182. Extraction method: Principal Component Analysis with a fixed number of factors. Oblimin with Kaiser Normalization.

5. RESULTS

First, Chi-square tests of independence were performed to examine whether the four groups were evenly divided, based on gender, age and education, to rule out that any further results found may be caused by demographic differences between groups.

Gender: The percentage of females in group 3 was 76.4%, which differed from group 1, 2 and 4 where respectively 64.1%, 67.3% and 66.7% of the participants were female. This difference, however, was not significant, X² (3, N = 182) = 1.10, p = .57.

Age: The percentage of participants younger than 25 in group 1 was 79.5%, which differed from groups 2 to 4 where respectively 76.9%, 69.1% and 67.3% was under 25. However, this difference was not significant, X² (3, N = 182) = 2.31, p = .51.

Education: Most participants had completed a WO bachelor's degree (43%) or a WO master's degree/PhD (25%). 21% of participants had finished high school or MBO (21%). The remainder finished a HBO degree (11%). A Chi-square test showed that there was no difference the groups when it comes to education, X² (9, N = 182) = 9.21, p = .42.

To conclude, the four groups, based on the different conditions, did not differ significantly in their demographics. A demographic summary can be found in Table 2.

TABLE 2. Summary Demographics

Variable Condition 1.

Co-production/Basic

Condition 2. Co- production/Luxury

Condition 3. Non co-production/Basic

Condition 4. Non co-production/Luxury Total Gender Female 25 (64.1%) 26 (66.7%) 42 (76.4%) 33 (67.3%) 126 (69.2%) Male 14 (35.9%) 13 (33.3%) 13 (23.6%) 16 (32.7%) 56 (30.8%) Age Younger than 25 31 (79.5%) 30 (76.9%) 38 (69.1%) 33 (67.3%) 132 (72.5%) 25 years or older 8 (20.5%) 9 (23.1%) 17 (30.9%) 16 (32.7%) 50 (27.5%) Educational background High school/MBO 8 (20.5%) 9 (23.1%) 10 (18.2%) 11 (22.4%) 38 (20.9%) HBO 5 (10.2%) 0 (0.0%) 10 (18.2%) 5 (10.2%) 20 (11.0%) WO bachelor 16 (41.0%) 21 (53.8%) 23 (41.8%) 19 (38.8%) 79 (43.4%) WO master/PhD 10 (25.6%) 9 (23.1%) 12 (21.8%) 14 (28.6%) 45 (24.7%) Note: N = 182

5.1.1 Manipulation-check

In order to check whether participants interpreted the manipulation correctly, a manipulation check was implemented in the survey that asked whether the participants were required to assemble the closet him- or herself. A T-test showed that 88.5% of respondents exposed to the production conditions (N = 78) and 68.3% of respondents that were exposed to the non co-production conditions (N = 104) correctly interpreted the respective scenarios (M = 0.89, SD = 0.31; M = 0.32, SD = 0.47), t(177) = -10.03, p < .001.

This indicates that not all participants understood the manipulation correctly, however the majority did.

5.2 Factorial ANOVA tests

Two Factorial ANOVA tests were conducted to compare the main effects of co-production and product price on company liking and the interaction effect between co-production and product price on company liking in order to test H1, H2 and H4. Covariates were included to partial out the effects of those variables on the effect of condition on the dependent variables. The first Factorial ANOVA was run with co-production and price as independent variables, feelings of competence as the dependent variable and self-efficacy as covariate. Results showed that there was a significant main effect of co-production on feelings of competence F(1, 177) = 13.59, p <.001, suggesting that people who engaged in co-production felt more competent (M = 5.18, SD = 0.99) than people who did not engage in co-production (M = 4.55, SD = 1.26).

The second Factorial ANOVA was run with co-production and price as independent variables, company liking as the dependent variable and self-efficacy and feelings of competence as covariates. Product price was entered as an interaction term. Results revealed that there was a significant main effect of co-production on company liking (F(1, 176) =

26.08, p <.001). However, contradictory to what was hypothesized, participants who engaged in co-production scored lower on company liking (M = 4.41, SD = 0.89) than participants who did not engage in co-production (M = 4.85, SD = 0.99). Table 3 and 4 contain the mean scores for feelings of competence and company liking per condition.

TABLE 3. Mean Scores for Feelings of Competence per Condition Condition N M SD Co-production/Basic 39 5.21 0.88 Co-production/Luxury 39 5.15 1.09 Total 78 5.18 0.99 Non co-production/Basic 55 4.60 1.10 Non co-production/Luxury 49 4.49 1.43 Total 104 4.55 1.26 Note: N = 182

TABLE 4. Mean Scores for Company Liking per Condition

Condition N M SD Co-production/Basic 39 4.53 0.79 Co-production/Luxury 39 4.30 0.98 Total 78 4.41 0.89 Non co-production/Basic 55 5.15 0.80 Non co-production/Luxury 49 4.50 1.09 Total 104 4.85 0.10 Note: N = 182

Lastly, results of the Factorial ANOVA showed that there was a significant main effect of product price on company liking (F(1, 176) = 10.81, p < .001), such that participants that were exposed to a lower-priced closet tended to score higher on company liking (M = 4.89, SD = .85) than participants that were exposed to a higher-priced closet (M = 4.41, SD = 1.04). However, the interaction effect was not significant (F(1, 182) = 2.77, p = .10), meaning that the results did not show a moderation effect for product price on company liking.

5.3 PROCESS Model 4

A mediation analysis was performed in PROCESS with Model 4 (Hayes, 2012) with company liking as a dependent variable, co-production as the independent variable and feelings of competence as a potential mediator whilst controlling for price, age, gender and education in order to test H3.

Results showed that the direct effect of co-production on company liking is -0.66 (p <.001), which suggests that company liking is negatively affected when participants were asked to co-produce, compared to when there was no co-production needed. This held even when the mediator feelings of competence was added in the model. This re-establishes the previous finding that there is a direct negative effect of co-production on company liking.

The results also showed that participants who co-produced, but that differ by one unit in their level of feelings of competence are estimated to differ by b = .39 (p <.001) in company liking. The sign of b is positive, which means that those relatively higher in feelings of competence are estimated to be higher in company liking. A bias-corrected bootstrap confidence interval level for the indirect effect based on 5000 bootstrap samples was entirely above zero (.11 to .41), indicating that participants engaging in co-production feel more competent which in turn translates into greater company liking. This argues for a partial

mediating effect of feelings of competence, as the direct effect was still significant, as previously stated.

5.4 PROCESS Model 14

Lastly, a moderated mediation analysis was run in PROCESS with Model 14 (Hayes, 2012) in order to test the last hypothesis, H5. The model of this hypothesis was significant with F(8, 173) = 10.93, p <.001, R² = .34. Subsequently, the significance of the interaction effect was checked in order to see if perceived self-efficacy was a significant moderator on the mediator feelings of competence. The interaction outline obtained from the analysis states that the interaction effect was not significant (p = .44).

.63** .39** .03

-0.66**

FIGURE 2: Results of Mediation and Moderated Mediation Analysis Note: N = 182. ** p < .001

5.5 Discussion

First of all, results showed that participants who co-produced felt more competent than participants who did not, which replicated findings of previous studies (Mochon et al., 2012; Norton et al., 2012; Dahl and Moreau 2007). This means that H1 is supported, which stated that there is a positive relationship between co-production and feelings of competence.

Co-production Feelings of competence Company liking Self-efficacy

Secondly, H2 is rejected, as co-production showed to have a negative effect on company liking, as opposed to the positive effect that was hypothesized. Participants assigned to the co-production conditions showed significantly lower ratings of company liking than participants in the control conditions. A particularly interesting finding is that H3 can be supported, as feelings of competence showed to be a significant mediator on the relationship between co-production and company liking. Results showed that co-producing participants high in feelings of competence tended to like the company more than participants who scored lower on feelings of competence. To conclude, both H4 and H5 are rejected, as product price did not show to moderate the effect between co-production and company liking. Moreover, self-efficacy was not a significant moderator on the mediator feelings of competence.

6. GENERAL DISCUSSION

Previous studies on the IKEA-effect and the 'I designed it myself' effect showed interesting results with regards to co-production positively affecting a range of consumer attitudes, such as product liking, feelings of empowerment and feelings of competence (Franke et al., 2010; Füller et al., 2009; Mochon et al., 2012). Firstly, this study confirmed these findings regarding feelings of competence, by showing a positive relationship between engaging in co-production and feelings of competence with a between-subjects experiment design. Participants who were asked to imagine assembling their own closet showed higher levels of feelings of competence than participants who imagined receiving the closet ready-made at home.

Secondly, this study examined the relationship between co-production and company liking. Whereas the concept of co-creation had received significant attention from scholars in previous studies with regards to its relationship with corporate attitudes, such as brand attitude, engagement and attachment (Kull and Heath, 2016), trust (Revilla-Camacho et al.,

2014) and attitudinal loyalty (Cossío-Silva et al., 2016), research on these effects for co-production was lacking. Previous literature on co-co-production seemed to point to a likely increase in company liking when asking consumers to co-produce. Bendapudi and Leone (2003) confirmed this assumption and found that customer satisfaction with a firm increased when participants imagined hypothetical consumer Pat opting for putting together furniture himself when compared to buying it ready-made. This thesis, however, showed an interesting opposite effect. Participants that were randomly assigned to the co-production condition showed low levels of company liking when compared to participants in the non co-production condition. This finding held for both the basic closet and the luxury closet. This result was contradictory to what was initially expected, but may be assigned to multiple factors, which will be explained later in this section. Furthermore, it was also hypothesized that company liking was influenced by feelings of competence, which it was, but that this effect could be moderated by self-efficacy. This was based on previous findings indicating that perceived self-efficacy was one of the most important factors influencing a consumers' willingness to co-produce. Taking this one step further, the assumption was made that self-efficacy was a crucial factor in the mediation effect of feelings of competence. Consumers with high-perceived self-efficacy were expected to score low on company liking through feelings of competence, assigning these feelings completely to oneself as opposed to the company. However, as results showed that this moderation effect was not significant, an increase or decrease in company liking could not be explained by consumers' levels of perceived self-efficacy.

Future research is necessary to confirm exact underlying mechanisms to explain the decrease in company liking for participants engaging in co-production, however it may be ascribed to the product category, the hypothetical company or even to the true essence of

co-production. An elaboration will be given on these possible explanations in the following paragraphs.

Product category

Previous studies on the IKEA-effect have found that an important part for the effect to occur is dependent on exerted effort. As Norton et al. (2012) demonstrated, the effort of assembling both storage boxes and origami resulted in increased valuation for the product as well as higher willingness to pay. This is a fairly well known construct that has been discussed in other literature as well, such as Festinger (1957) who showed that the more effort people put into an activity, the more they come to value it. Based on these findings, the experimental setting in this thesis featured a closet that had to be assembled. This was changed from the original scenario of Bendapudi and Leone (2003), in which assembling a shelf resulted in increased customer satisfaction with a firm. However, it might have been the case that participants imagined the activity of assembling a closet to be more difficult and high-risk than a shelf, similarly to the study of Fuchs and Schreier (2011). Their research showed that participants rated the co-production of furniture as higher in risk than, for example, T-shirts. Research has shown that in the case of self-designing products, the design effort necessary should be as low as possible (Dellaert and Stremersch 2005; Huffman and Kahn 1998; Randall, Terwiesch and Ulrich, 2007). Perhaps these findings hold for consumer engagement in co-production as well, making it important for companies to strike the perfect balance between sparking feelings of success and competence on the one hand and not making the co-production activity too difficult and high-risk on the other hand. Studies on the IKEA-effect have mainly investigated co-production of fairly basic, low-risk products, such as origami, LEGO and storage boxes. Future research could clarify whether the decrease in company liking found in this study may have been due to consumers perceiving a closet to be