Performance Effects Of User Interaction On New Firm Growth

Industrial evolution is a process of continuous entry, exit and growth of firms. New firms supply impetus for industry development through their own growth, change and shape the whole industry ecosystem. From a more macro perspective of economy and society, new firms are of great importance in creating wealth, supplying jobs and prompting social stability. However, survival and growth are not so natural and easy, new firms suffer from serious pressure and risk due to "liability of newness".In the view of network resource, it is not an optimal or necessary way to adopt internal growth mechanism for new firms totally depending on themselves. As firms’ network member, demand side (customer or user) can contribute as firm assets. But the focus of resource-based view is internal, thus underestimates the particularity of demand side. In recent years, some researchers propose a demand-side approach by thinking that the value of resource is determined by demand and demand heterogeneity decides firms’heterogeneity and competitive advantages to some extent.This study focuses on the core problem of "how user interaction affects new firm growth". On the basis of reviewing achievements and limitations of extant literature, the following problems are identified:(1) How user interaction affects new firm growth? To be specific, what is the mode of each dimension of user interaction affecting new firm growth;(2) What is the mediating effect of new product development in the relationship between user interaction and new firm growth;(3) How new product feature, stage of firm life and perceived environmental characteristics moderate the relationship between user interaction and new firm growth.In order to answer these questions, this study combines theoretical reviewing and empirical testing as the research methods. The contents include two major parts:one is the mediating mechanism of the relationship between user interaction and new firm growth, including model building and hypothesis developing, empirical testing; another one is the moderating mechanism of the relationship between user interaction and new firm growth, including model building and hypothesis developing, empirical testing. Questionnaire is used to collect data, and the sample is from new firms in ICT sector. Statistical methods include exploratory factor analysis, confirmatory factor analysis, hierarchy regression analysis and discrete responsive dependent variable regression analysis, etc. Research process and conclusion are as follows:First, the direct relationships between user interaction breadth, user interaction depth and new firm growth. Interaction breadth positively affects new firm growth, while the relationship between interaction depth and new firm growth is inverse U-shaped.Second, the partial mediating effects of new product development in the relationship between user interaction and new firm growth. Interaction breath affects new firm growth mainly through new product number, while the mediating effect of product developing speed is relatively weak; interaction depth through both new product number and new product developing speed. However, with the increase of depth, the negative effects of user dominance and lock-in effects on developing opportunities will be stronger and stronger, and finally the whole effect of interaction depth turns to be negative.Third, product innovativeness is an important contingent factor affecting the relationship between user interaction and new firm growth. Although there is no difference of user interaction breadth’s effects in two innovativeness context, namely new to the firm and new to the market, its effect sizes on new product number and product developing speed are the opposite; the maximum growth achieved by user interaction depth is higher for products new to the market than for products new to the firm, while elasticity of interaction depth is higher for products new to the firm than for products new to the market.Fourth, stage of firm life is an important contingent factor affecting the relationship between user interaction and new firm growth.User interaction breadth has a greater effect on growth for firms in earlier stage than for firms in later stage. However, this difference is not achieved by new product number or product developing speed, and it is theoretically supposed to be firm-level factors like organizational visibility or legitimacy.Both the maximum of growth achieved by and extreme point that brings this maximum of user interaction depth are greater for firms in later stage than for firms in earlier stage. On the left of the extreme point, interaction depth has a greater effect on growth for firms in earlier stage, but its negative effect will increase quickly to overwhelm positive effect, and finally goes against new firm growth.Fifth, perceived environmental characteristics are important contingent factors affecting the relationship between user interaction and new firm growth.The increase of perceived environmental unpredictability will decrease the positive effects of user interaction breadth on new firm growth. The increase of perceived environmental rapidity will increase the positive effect of user interaction breadth on new firm growth, while decrease the positive effect of user interaction depth on new firm growth.These conclusions above help us to understand the mediating mechanism and contingent attributes of "user interaction’s effects on new firm growth". The main contributions of this study are as follows:First, by combining network resource view and demand-side approach, this study clears the theoretical logic of demand-side factors’effect on firm growth, supplying a relatively integrated framework to understand the special meaning of demand-side on firm growth.Second, this study meticulously analyzes and summarizes the attributes of user interaction, and constructing two variables "interaction breath" and "interaction depth" to examine the influencing modes of user on new firm growth by referring to the idea of "breadth" and "depth" in complexity theory.Third, this study identifies the functional paths of user interaction affecting new firm growth by model building and empirical testing. The contributions of user to firms are not only embodied in knowledge spillover, but also visibility spillover and implicit endorsement. Fourth,this study identifies the contingent attributes of user interaction affecting new firm growth from three perspectives——product,stage of firm life and perceived environmental characteristics——by model building and empirical testing.