Wharton Customer Analytics
Research Paper Series
The Impact of User-Generated Content On Product Innovation
Our research investigates the impact of user-generated content (UGC) on product innovation. Prior research has focused on the role of UGC as a form of consumer-to-consumer communication that enhances product promotion. Our research focuses on the role of UGC as a form of consumer-to-developer communication that facilitates product innovation. Specifically, we examine the impact of two categories of UGC (i.e., contributions that reflect user ideas and contributions that contain user-generated solutions) on two innovation outcomes (product improvement and market response). We apply this categorization to a longitudinal sample of nearly 5,000 open source software projects and jointly model the impact of idea-centric and solution-centric contributions on these innovation metrics. In contrast to commonly held thought, our results suggest that the impact of UGC is not strictly positive, but varies according to both the type of UGC as well as the metric of product innovation. Collectively, our research provides a broadened conceptualization of UGC and suggests that user contributions may both help and hinder product innovation.
The recent rise in user-generated content (UGC) is dramatically reshaping the marketing landscape (Marketing Science Institute 2008). An increasing number of knowledgeable and connected consumers are no longer content with merely choosing and using a company’s products; they also want to contribute to the development and promotion of these offerings (O’Hern and Rindfleisch 2010; von Hippel 2005). These contributions have fueled the rise of new ventures such as Jones Soda, Threadless, and YouTube, and are being creatively leveraged by a growing collection of established firms such as Dell, Intuit, and Procter & Gamble (Chafkin 2008; Cook 2008; Huston and Sakkab 2006). These changes in marketing practice also challenge marketing thought, as the rise of user contributions disrupts established paradigms regarding the roles of firms and consumers (Vargo and Lusch 2004).
In recent years, a growing number of scholars have begun to investigate the impact of UGC on various marketing outcomes (Chevalier and Mayzlin 2006; Godes and Mayzlin 2004; Li and Hitt 2008; Mayzlin 2006; Moe and Trusov 2011). Although this emerging research provides important contributions to our understanding of UGC, it is characterized by a singular focus on consumer-to-consumer communications, and suggests that the power of UGC lies in its ability to draw attention to a product and promote it via word of mouth. Thus, much of the extant UGC research has focused on contributions that are evaluative in nature, such as product ratings and reviews (e.g., Amazon.com, Yelp.com). However, emerging research in the user innovation domain suggests that user contributions can also be creative in nature, ranging from requests for specific product enhancements (e.g., Dell IdeaStorm) to actual product modifications (e.g., The Sims and Firefox). These latter forms of UGC serve as a means of consumer-to-developer communication, and provide a mechanism for consumers to contribute ideas and solutions that may directly influence product innovation. Although a growing body of research suggests that consumer contributions enhance the innovation process of many firms, this work is seldom cited in the UGC literature (see Piller and Ihl 2009 for a review).
Our research seeks to address this gap and contribute to the emerging UGC literature by assessing the impact of a wider array of UGC activity on product innovation. Given our broadened perspective and focus on product innovation, we define UGC as original contributions by a product’s users aimed at fellow users and/or product developers. These contributions provide product developers with either information regarding how a product performs or how it can be improved (i.e., idea-centric UGC), or information containing actual solutions to product-related problems (i.e., solution-centric UGC). Although marketing’s existing UGC literature predominantly focuses on idea-centric UGC in the form of ratings and reviews, we consider both types of UGC and suggest that these two categories of contributions vary in their impact on product innovation. Our definition and conceptualization enriches the extant UGC research by incorporating insights from related research in the domain of user innovation (e.g., Franke and Shah 2003; Lüthje et al. 2005; Thomke and von Hippel 2002; von Hippel 2005). This conceptualization serves as a point of distinction from prior UGC research in marketing, which generally views user contributions as a form of word of mouth communication rather than as a creative means of product innovation.
Using open source software (OSS) as our empirical context, we test our conceptualization by jointly examining the impact of two different categories of UGC (idea-centric vs. solutioncentric) on two different innovation metrics (product improvement vs. market response) across a longitudinal sample of 4,978 OSS projects. Our analysis reveals both positive and negative effects of UGC on innovation performance and indicates that the type of UGC that impacts product improvement is different from the type of UGC that impacts market response. Thus, our results suggest that the effects of UGC are more nuanced than previously recognized. Our research contributes to both marketing theory and practice. We enhance marketing theory by presenting an expanded conceptualization of UGC that reflects the multiple ways in which users can participate in developing and promoting new products. We enhance marketing practice by offering managerially relevant insights regarding how to utilize UGC to enhance both internal (i.e., product improvement) and external (i.e., market response) innovation metrics.