Lead users, diffusion and adoption of innovations in networks of children

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Lead users, diffusion and adoption

of innovations in networks of

children

Final thesis: MSc Business

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Final thesis: MSc Business Administration: Marketing Management Author: Linda Molenmaker

Student number: s1384996

Date: 10th December 2007, Groningen Faculty: Business Management Professor RUG: Mr. J. Kratzer

Second professor RUG: Ms. M. C. Achterkamp

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Abstract:

Purpose: The goal of this research is to fill the gap in lead users’ research under children. An effort is

made to analyze the characteristics of lead users in social networks of children. Furthermore, their role in the adoption and diffusion of innovations is examined.

Design/methodology/approach: An experiment is conducted at primary schools in the Netherlands,

with children aged between 8 and 12 years. An innovation is introduced in a social network (school class). Lead users are identified and their adoptive behaviour is examined.

Findings: The following characteristics of lead users are identified in this study. Lead users have an

efficient place within a social network, which allows them to receive diverse and non-redundant information. They have a higher familiarity with the product category, and they are perceived as experts by their peers. Finally, lead users are more likely to be boys than girls. This study discovers as well that there is a significant positive relationship between lead userness and the current use of the innovation and the intention to use it in the future.

Research limitation/implications: This research is only performed in one kind of product category in

one particular market. Additional research should strengthen the findings of this research and explore the possibilities to generalize these findings. Further research should focus more on exploring additional characteristics of lead users, which will enhance the identification of lead users in networks of children. From a marketing point of view it would be interesting to investigate the influence of media on lead users and a lead users’ ability to influence the diffusion of an innovation.

Originality/value: This paper is unique together with the paper of Kunst and Kratzer (2007), because

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Introduction

If an organization wants to innovate, it faces countless questions. An important capability of an organization that intends to innovate is to identify the right user to involve in the development process of an innovation (Lettl, 2007). Consequently the following main question will arise: Which customer should be chosen? The answer to this question can be found with a research on lead users.

Research concerning lead users and social networks is increasing. Von Hippel (1986) is one of the pioneers in the study of lead users. He defines lead users as consumers who are ahead of the trends in the market. According to him are lead users a vital resource to an organization (von Hippel, 1986; Urban and von Hippel, 1988). Besides using lead users in the development process, they also play an important role in the adoption and diffusion of innovations in social networks (Rogers, 1962; Schreier et al, 1007). The paper of Kunst and Kratzer (2007) is the first scholar paper that makes an effort to map social networks of children and identify opinion leaders and lead users. This paper is an addition to that research, but it will focus more detailed on lead users in social networks of children.

The main research question of this paper is: What are the characteristics of lead users and which role do they play in the adoption and diffusion of innovations? The goal of this research is to fill the gap in lead users’ research under children. Research regarding children is unique, especially in this area. This while children’s marketing shows great potential (Gunder and Furnham, 1998), since children influence demand in various ways. They have their own demand; they influence others, like their parents, and they are our market of the future (Mc Neal, 1992).

This paper contributes to innovation research under children in three ways. First by identifying the characteristics of lead users in networks of children. If an organization can identify lead users they can be integrated in the R&D process (von Hippel, 1986; Urban and von Hippel, 1988; Lüthje and Herstatt, 2004; Franke et al. 2006; Franke and Shah, 2003). New products based on concepts developed by lead users are proven to have a greater market appeal (von Hippel and Urban, 1988; Morrison et al., 2000; Lüthje and Herstatt, 2004). Secondly, it contributes by examining the perceived expertise of lead users (Schreier et al., 2007), since this can play an important role in the diffusion of an innovation (Rogers, 1962). In the last place, it contributes by analyzing the adoptive behaviour of lead users. According to literature lead users have a high likelihood to develop their own solutions for their needs (von Hippel, 1986; Urban and von Hippel, 1988; Morisson 2000 Franke et al., 2006; Franke and Shah, 2003, Schreier et al, 2007). But, the question remains if they are also the first to adopt innovations (Urban and von Hippel, 1988; Morrison et al., 2004; Schreier et al., 2007). This study will analyze if lead users have a more positive opinion about innovations and if they are the first to adopt them. The paper is organized in the following manner. First the development of the hypotheses is presented through a literature review. Prior research about the characteristics of lead users is explored. The emphasis will be on the following characteristics; efficiency within a network, familiarity with product category and perceived expertise. Subsequently literature concerning their adoptive behaviour is examined. After the literature review, a description of the empirical study and the sample is given, followed by a presentation of the results. The paper ends with a discussion of those results and limitations and implications for further research.

Literature review

The research on lead users is emerging. Several studies have explored the lead user method which was first developed by von Hippel (1986). The most important and relevant research is reviewed here. Lead users

In ‘the lead user method’ of von Hippel (1986) he defines lead users by having two important characteristics: Lead users are ahead of the trends in the current market and they benefit significantly of an innovation (von Hippel, 1986; von Hippel and Urban, 1988; Lüthje and Herstatt, 2004; Morrison et al., 2000). Because of these specific characteristics, lead users are valuable to an organization in three ways. They play an important role in developing innovations, in the adoption and in the diffusion of an innovation in a network (Schreier et al., 2006).

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doing at the moment. They identify children that possess lead user characteristics and these children work together with product designers on new products. Besides that, they also have a developer kit for children, so that they can develop their own designs. The best designs are sold on the website (www.lego.com).

Efficiency in a social network

The paper of Kunst and Kratzer (2007) examined the position of lead users within a social network. Since social networks play an important role in the diffusion of innovations (Rogers, 1962). They found that lead users have a high amount of weak ties. Ties are the connections between the actors within a network. Strong ties are direct ties between actors, and weak ties can be seen as ties between the cliques in a network (Granovetter, 1973, 2005). These weak ties span structural holes. Structural holes are holes between non-redundant cliques within a network (Burt, 1992).

It is proposed that it is a lead users’ possession of weak ties, which makes them innovative and creative. Given that having a high amount of weak ties leads to receiving a lot of unique and non-redundant information. Besides that lead users span structural holes with their weak ties (Granovetter, 1973, 2005). According to Burt (1992) this will lead to having more valuable ideas and more creativity. Consequently lead users will be more familiar with alternative ways of thinking, which will enhance their view and adoption of an innovation.

Figure 1: Network efficiency (Burt, 1992)

An effective way to measure how actors span structural holes is to calculate the efficiency of an actor. Efficiency measures the number of non-redundant contacts in a network. So this actually calculates the number of structural holes per actor in the network. Efficiency is illustrated in figure 1. In network A you will have a lot redundant contacts, because you are connected with more people from the same group. In network B you have only one contact with each group, which enhances your network efficiency. It saves time and effort for an actor when it eliminates the redundant contacts and is only linked to the primary actor in each clique (Hanenberg and Ridle, 2005). These ties, which span structural holes, are almost always weak ties (Granovetter, 1973). Therefore lead users are proposed to have a high amount of efficiency. Thus,

H1: The higher the amount of "efficiency” of a child, the higher the lead-userness of a child.

Familiarity with product category

Lead users face unmet needs and as a result they are continuously looking for solutions (von Hippel, 1986; Urban and von Hippel, 1988; Lüthje and Herstatt, 2004; Schreier et al, 2006). Consequently, lead users are likely to have state of the art knowledge about the product category. Additional support for this might be drawn from the study of Lettl (2007). His research examined which characteristics of a user contribute to active development of new products. He discovered that users that were active developers acquired high competence in their own domain. With high competence in their own domain he means having knowledge and understanding of their product field. Also Lüthje(2004) found a positive relationship between the innovativeness of a user and his experience and know-how of the product field.

Thus it is assumed that lead users, since they are active developers, will have extensive knowledge and experience with the product category, which results in a high familiarity with the product category.

YOU

Network A Network B

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Therefore:

H2a: The higher the lead userness of the child, the higher the familiarity with the product category.

Scheier et al. (2006) examined the relationship between the leading-edge status of users and perceived complexity of an innovation. Perceived complexity is the degree to which it is perceived to be difficult to understand and use an innovation. This depends on a combination of the characteristics of the innovator and the innovation. Perceived complexity plays an important role in the adoption process. The higher the perceived complexity of an innovation, the lower the rate of adoption (Wejnert, 2002; Rogers 1962, 2003). Research by Bradford and Juan (2003) also discovered a negative link between perceived complexity and the adoption of an IT innovation.

Since lead users are proposed to be more familiar with the product category, they will perceive an innovation as less complex (Schreier et al., 2006) and less incongruent with current products (Zhou and Nakatamo, 2007). This lower perceived complexity will enhance the adoption of an innovation. They will prefer new products with unique features, since users who do not possess this familiarity can not see the benefits of the unique features of an innovation (Zhou and Nakatamo, 2007) (Rogers, 1963). Therefore:

H2b: The higher the familiarity with the product category, the lower the perceived complexity and the

stronger a child’s adoptive behaviour. Perceived expertise

As was said before, it is plausible that lead users have an influence on the diffusion of the innovation by other actors in the network. Communication between the actors in a network plays a vital role in the diffusion of an innovation (Wejnert, 2002; Rogers, 1962). Especially in networks of children word of mouth communication plays a significant role (Kunst and Kratzer, 2007). Before children buy or start to use a product it is common knowledge that they ask their friends, classmates or family for advice. Lead users are proposed to be perceived as experts by their peers (Schreier et al. 2006). Due to their state of the art knowledge and their leading edge status, they can provide their peers with excellent information and advice about their product domain (Schreier et al. 2006). They can serve as role models, because they tend to have more experience and expertise than their peers (Venkatram, 1989). Borgatti and Cross (2003) conclude in their research that the likelihood of seeking information from a person is based on the perceptions of that person. So, if lead users are perceived as experts by their peers, the likelihood that they will be asked for advice will increase. This can influence the diffusion of an innovation within a network.

Up to now there have been no studies which explored this relationship, but some support can be drawn from lead users and opinion leadership studies. As opinion leaders are also perceived as experts by their peers (Flynn, 1994). Schreier et al. (2006) found a significant positive relationship between opinion leadership and customer leading edge state in the kite surfer industry. The leading-edge concept is practically similar to the lead user concept. Morrison (2000) found a positive relationship between a libraries’ leading edge state and opinion leadership. Therefore it is proposed that lead users will have an enhanced likelihood to be perceived as experts. Thus:

H3: The higher the lead userness of a child, the higher their perceived expertise.

The adoptive behaviour

Lead users attempt to satisfy their needs by developing their own product concepts. (von Hippel, 1986; Urban and von Hippel, 1988; Morisson 2000) Due to their specific needs, lead users are found to possess a high amount of innovation likelihood, which means that they develop their own solutions to their problems. (von Hippel, 1986; Urban and von Hippel, 1988; Franke et al., 2006; Franke and Shah, 2003) Therefore lead user differ from innovators and early adopters, since innovators and early adopters only adopt innovations and do not develop them themselves.

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in the kite surfer industry. With domain-specific innovativeness they mean an individual’s tendency to adopt new products.

However there can be expected that before adopting an innovation, the lead user must have a positive view of the innovation. Without this, the lead user will most likely not adopt the innovation. Thus the following hypothesis, consisting of two parts, is proposed:

H4a: The higher the lead userness of a child, the more positive view he will possess about the

innovation.

H4b: The higher the lead userness of a child, the stronger a child’s adoptive behaviour. Conceptual model

An overview of the hypothesis is illustrated in the conceptual model in figure 2.

Figure 2: Conceptual model

Methodology

The research was performed in school classes at primary schools in the Netherlands. Defares et al. (1971) suggest that in school classes social relationships can be easily analyzed. This makes school classes suited for this research. The research was a non-laboratory setting experiment.

To identify lead users and to measure the adoption and diffusion of an innovation, an innovation was introduced at the primary schools. This innovation was the CinekidStudio. The CinekidStudio is a free online website where children can make their own movies. The CinekidStudio is developed by the foundation Cinekid. Cinekid organizes the world’s largest media festival for children in Amsterdam. This foundation has the goal to get children in touch with media in a positive way, learning them to make their own deliberated choices about media and experience media in their own way.

The CinekidStudio was introduced to the school classes by a workshop. Children received an instruction manual, which included a 9-step plan about how they should make an animation movie. Children worked in groups of two and were guided by an instructor during the workshop.

Two weeks after the introduction of the CinekidStudio a second visit to the school was made. The second visit consisted of filling in a self-administrated questionnaire by all the children, which participated in the workshop. The self administrated questionnaire contained the Syracuse-Amsterdam-Groningen (SAGS) form and 20 questions (Defares et al., 1971). The majority of the questions had a 5-point Likert-type scale. Borges (2003) concluded that such a scale is the best to use with young children.

Sample

Five schools within the Netherlands were randomly chosen. These schools varied in location and size to obtain a varied sample. The CinekidStudio is suited for children starting from the age of eight years old. In the Netherlands, primary school children which are eight years old can be found in the fifth grade. Every school had at least two grades that were included in the sample. In total there were 297 respondents of age between 8 and 12. Table 1 gives an overview of the grades which participated.

H4a,b H2a H3 H2b H1

Lead users

Efficiency Perceived expertise Familiarity

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Grade Age Included in sample

5 8-9 years 2

6 9-10 years 4

7 10-11 years 4

8 11-12 years 3

Table 1: Overview of the grades in the sample

For the analysis of the networks, a full network sampling method was used (Hanenberg and Ridle, 2005). The social networks in these classes were measured by the SAGS scale. This scale was specifically developed by Defares et al. (1971) to measure the sociometric status of all the children in the network. The sociometric status refers to the degree to which children are liked and disliked by the children in their network. (Gifford-Smith and Brownel, 2003) All the children in the class receive a list of all their classmates (actors). For each actor a 5-point Likert-type scale has to be administered asking if he will turn to this actor if he feels sad. The strength of the ties between the actors was measured by the five possible categories.

Operationalization of the variables

Lead userness: Lead userness was measured with six questions on a 1-to-5 Likert-type scale. The

questions are based on earlier performed research on lead users. This includes the two characteristics of a lead user (von Hippel, 1986) and the research by Lüthje and Herstatt (2004), which refers to the dissatisfaction of a user with products on the current market. These concepts were translated into a scale suited for children. This scale is illustrated in appendix 1. Cronbach’s alpha was 0,7, which means that the internal consistency was high enough to merge the indicators into a single measure of a lead userness

.

Perceived expertise: Perceived expertise was measured with three questions on a 1-to-5 Likert-type

scale. These three questions were chosen based on previous research on opinion leadership by Cory (1971), since opinion leaders are perceived as experts by their peers. The questions were adjusted so that they are comprehensive for children. The scale can be found in appendix 1.This scale is reliable with a Cronbach’s alpha of 0,6 and that validates the transformation of the three questions in a single measurement of perceived expertise.

Efficiency: Efficiency measures what proportion of an actor’s ties with his surrounding actors (neighborhood) are "non-redundant." Efficiency shows how much impact an actor is getting for each unit invested in using ties. (Hanenberg and Ridle, 2005) This measure is calculated with UCINET VI (Borgatti et al., 2002).

Adoptive behaviour: The adoptive behaviour is measured by the amount of times the children used the CinekidStudio after the introduction. A second question was asked to determine the intention to use the CinekidStudio in the future. Both questions were measured on a 1-to-5 Likert-type scale.

Opinion about the innovation: This variable measures if the children liked making movies with the CinekidStudio. This was measured by asking if they liked the CinekidStudio on a 1-to-5 Likert-type scale.

Familiarity with product category: The familiarity with the product category was measured by the familiarity with playing games on the internet. It is proposed that the amount of playing online games influences their knowledge of online applications, such as the CinekidStudio. This variable was also measured on a 1-to-5 point Likert-type scale.

Control variables

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Age: Age is included because the peer relationships that a child has changes in a systematic way when children get older (Gifford-Smith and Brownel, 2003). It is also common knowledge that skills and understanding will change when children get older. This could influence the familiarity and the adoption of an innovation as well as the perceived expertise of a child.

Associations: As Burt (1992) proposed, being part of different groups can influence the creativity and innovativeness of actors in a network. With the SAGS scale the position of the actors within their school classes was measured. In addition it could be possible that the actors are part of other networks beside their school classes. Examples of such a network are; sport clubs and other free time associations like theatre. Children were asked to administrate the association they are part of besides school. The number of associations was counted.

Results and findings

Data was obtained with the SAGS scale network, which was put in matrices to illustrate the relationships between the actors in the network. Before analyzing these matrices, they were first transposed using the network analysis program UCINET (Borgatti et al., 2002). This means that the rows and columns of the original matrix were interchanged. After transposing, the matrices were symmetrised. This was validated, because this research only analyses the connections between actors and does not examine the direction of the ties. The symmetrical matrices were created by taking the lowest value of the administrated friendship between two actors. According to the paper of Kunst and Kratzer (2007) friendship should be reciprocate, so the lowest value should be taken. The valued symmetrical matrices were used to calculate the efficiency of the actors within the network. Efficiency

Regression analysis was used to examine the characteristics of a child, which determine lead userness of a child. The results can be found in table 2. Looking at the control variables age, gender and associations, there can be concluded that only gender has a significant influence on lead userness. Boys are more likely to possess lead userness. Subsequently, efficiency was added and the explained variance increased with 1,5 percent. Efficiency has a significant positive effect on lead userness and this leads to accepting H1.

a_{. Unstandardized coefficients are shown (standard errors in parentheses). Two-tailed tests are reported; * p < .05, ** p < .01.}

Table 2: Multiple regression analysis lead userness.

Familiarity

An additional regression analysis was performed to determine if lead userness has an influence on product category familiarity. Table 3 shows that this is indeed the case. Lead userness has a significant positive influence, therefore we accept H2A. Besides lead userness, also age is a significant influence. Only in this case there is a negative relationship.

Table 3: Multiple regression analysis familiarity

Perceived expertise

This research proposed that lead userness has a positive influence on the perceived expertise of a child. The results illustrated in table 4 show that this is proven. Thus we accept H3. After adding lead userness to the regression analysis the explained variance increased with 20 percent. The control variable age had a negative influence, but this was only significant with an alpha of 0.05.

Variables Model 1 Model 2

Constant 2,024** ,744 Gender -,406** -,415** Age ,068 ,073 Associations ,014 ,026 Efficiency 2,353* Adjusted R2 0,058 0,073

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Table 4: Multiple regression analysis perceived as expertise

Adoptive behaviour

Our analysis of the adoptive behaviour of the lead users starts with analyzing if they like the CinekidStudio. The results in table 5 illustrate that lead userness is not related to liking the studio, so there is no support for H4a. The results also show that older children are expected to not like the CinekidStudio and the more association’s children are part of the more they like the CinekidStudio.

Table 5: Multiple regression analysis liking CinekidStudio

The actual adoptive behaviour was examined with a regression analysis for current use of the CinekidStudio, and the intention to use the CinekidStudio in the future. The results of the regression analysis, with as dependent variable “Current use”, are illustrated in table 6. All control variables show no significant relationship with using the CinekidStudio. Subsequent lead userness was added and it is positively and significant related to current use, this led to accepting H4b. H3b proposes that familiarity with the product category will have a positive influence on a child’s adoptive behaviour, but in the sample there was no significance influence on the current use of the CinekidStudio. So H3b is rejected.

Table 6: Multiple regression analysis Current use of CinekidStudio

The same regression analysis is performed to determine the variables that influence the intention to use the CinekidStudio in the future. These results can be found in table 7. Also in this case, Lead userness is positive and significantly related, providing additional support to accept H4b. Familiarity is also not related to future use, thus H3b is not accepted. The only difference with the regression model for current use is that age has a significant negative influence on the intention to use the CinekidStudio in the future use.

Table 7: Multiple regression analysis intention for future use CinekidStudio

Constant 3,108** 2,043** Gender -,052 ,156 Age -,064 -,098* Associations ,016 ,008 Lead userness ,523** Adjusted R2 -0,005 0,207

Constant 5,973** 5,762 Gender ,059 ,101 Age -,199** -,206** Associations ,095* ,094* Lead userness ,105 Adjusted R2 0,06 0,065

Variables Model 1 Model 2 Model 3

Constant 2,682** 1,793* 1,370 Gender -,116 ,056 ,054 Age -,073 -,102 -,085 Associations ,086 ,080 ,081 Lead userness ,437** ,411** Familiarity ,092 Adjusted R2 -,001 ,081 0,083

Variables Model 1 Model 2 Model 3

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Discussion and conclusion

This research emphasizes on lead users in networks of children, and is an addition to the research of Kunst and Kratzer (2007). Research on lead users is emerging, since lead users can be vital to organizations in several ways: Their identification can enhance their involvement in the development of new products and they are proposed to play a vital role in the adoption and diffusion of an innovation.

Characteristics of lead users

Innovations based on concepts developed by lead users are proven to have a greater market appeal (von Hippel and Urban, 1988; Morrison et al., 2000; Lüthje and Herstatt, 2004). So it is valuable to organizations to have a profile of lead users to identify themselves. This study makes a first effort to develop such a profile of lead users in networks of children. Several characteristics are proven to significantly contribute to the lead userness of a child.

The first characteristic is network efficiency. Lead users have more weak ties than other actors, which gives them a more efficient place within a network. This unique position provides them with access to diverse and non redundant information from different cliques within a network (Granovetter, 1973, 2005). Also gender is connected to lead userness. In this sample, there are more boys who are lead users than girls. A possible explanation for this finding could be that boys are more risk taking (Ginsburg et al., 2007). Further research should explore this explanation. Finally, lead userness is found to be positively related with perceived expertise. Since lead users have state of the art knowledge and are perceived as experts, they have great potential to be asked for advice by their peers. (Schreier et al., 2006; Morrison, 2002).

Adoptive behaviour of lead users

Frequently, lead users are stipulated as having high innovation likelihood (von Hippel, 1986; Franke et al, 2006; Franke and Shah, 2003; Morisson, 2000), but the question remains if lead users are the first to adopt an innovation. (Urban and von Hippel, 1988; Morrison et al., 2004; Schreier et al., 2007) This research confirms that this is indeed the case in networks of children. Lead userness proved to contribute to current use and the intention to use the innovation in the future. A striking finding was that lead userness was not significantly related with liking the innovation. This is interesting, because it suggests that for lead users it is not necessary to like an innovation to adopt it. A possible explanation could be that the innovation does not meet the specific needs of the lead users (von Hippel, 1986). Lead users perceive it as the best of the alternatives, but in meantime they long for a more advanced innovation which will fulfill their needs. Additional research should explore if this is indeed the case for children

Familiarity with the product category was expected to have a positive influence on the adoption of the innovation, but this was not proven. A possible explanation could be that familiarity with the product category restrains the ability to visualize the benefits of substantial novel product attributes (von Hippel, 1986). In the last place, adoptive behaviour is influenced by the age of a child. Older children have significant less intention to use the innovation in the future. It is possible that older children do not find the innovation challenging after using it.

Limitations and suggestions of further research

Further research is necessary to support the conclusions of this research. This research was only performed on the implementation of one kind of innovation in one kind of market. Thus, the external validity is low. Advanced research with diverse products and markets is necessary to generalize the conclusions of this research. A suggestion is to focus on the kind of innovation, discontinues or continues, as this can influence the role of adopters within a network (Venkatraram, 1989).

Children influence demand in various ways and they are our market of the future, which shows great potential (Mc Neal, 1992; Gunder and Furnham, 1998). This makes it valuable to construct a profile of children who are lead users. Therefore further research should focus more on identifying the characteristics of lead users in networks of children. There are still a lot of characteristics of lead users that are not examined yet in the area of children. For instance their innovation-relevant resources, like information supply and in-house knowledge base (Franke et al. 2006).

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can be explored more carefully. This could be analyzed together with the influence of media, since media can have a significant influence on the diffusion of innovations (Rogers, 1962). It would be interesting to analyze which kind of media has the most influence on lead users and what is the most efficient timing of these media is. Simulation research of Delre et al. (2007) shows that timing of media activities is crucial.

These are just a few suggestions, but there is a lot more potential to perform research on lead users and especially in networks of children.

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Appendix 1: Scale lead userness and perceived expertise

Scale lead userness:

1. I think that toys should be nicer and more advanced. (1-always to 5-never) 2. I invent toys myself. (1-always to 5-never)

3. I think I can better invent and advance toys than adults. (1-always to 5-never)

4. I invent new toys thinking that I will be somehow rewarded for it. (1-always to 5-never) 5. I am normally the first to adapt new toys. (1-always to 5-never)

6. I would prefer to be the only one having new toys. (1-always to 5-never) Scale perceived expertise:

1. I tell my friends about a new toy that I have. (1-always to 5-never)