The Determinants of Seller-Buyer Interactions during New Product Development in Technology-Based Industrial Markets

Abstract

A growing body of literature indicates that the new product development (NPD) process in technology-based, industrial markets is characterized by collaborative seller-buyer relationships. Unfortunately, the extant literature is deficient in some significant ways. For example, there is no theoretical framework that explicates the content of these relationships. Also, there is little empirical research on the antecedents or consequences of these relationships. Therefore, managers seeking guidance on how to manage their NPD relationships have lacked appropriate insights. Not surprisingly, ineffective relationship management is a major contributor to new product failure in such settings. Against this background, this study develops and tests a model of seller-buyer interactions during NPD. The model is based on the relationship marketing literature and is rooted in Transaction Cost Analysis (TCA). It was tested using data from 296 small to mid-sized firms in a variety of technology-based, industrial markets. It specifies product co-development, education, and post-installation product knowledge generation as three key behavioral dimensions that characterize seller-buyer interactions during NPD. Our results indicate that the intensity with which these dimensions are undertaken vary with buyer-related (i.e., perceived buyer knowledge and prior relationship history) and innovation-related (i.e., product customization and innovation discontinuity) characteristics. For example, perceived buyer knowledge has a positive impact on product co-development while innovation discontinuity has a positive impact on education. Further, we find that a seller's satisfaction with undertaking these behaviors is moderated by the technological uncertainty in the seller's industry. As a case in point, satisfaction with undertaking product co-development is reduced when technological uncertainty is high. Collectively, the overall support we find for our model can help NPD managers optimize their relationships with buyers during NPD.