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Product innovation and the evolution of demand in the U.S. footwear market
Version: 10/Sept/07
ABSTRACT: This paper analyses the evolution of demand and the changing nature of
product innovation as a market grows and matures. Consumer evaluations of an
innovative product do not exclusively rely on new technological functions, i.e. the
technological product design, but also on the perception of symbolic and aesthetic
features of new products, i.e. the product form design. We argue that earlier in a
technology life cycle functional product design drives for consumption growth. Later,
when product technology has stabilized, symbolic and aesthetic evaluations become
relatively more important for consumers’ value perceptions. Analysing the U.S.
footwear market to test our hypotheses, we show that shifting the dominant locus of
innovation away from product and production technology toward product form design
accelerates market growth. Using time-series analysis we show that the U.S. footwear
market starts to grow again after a period of stagnation, because of a surge in
trademark registrations as an indicator for innovation in product form designs, given
stagnant shoe patent registrations, measuring new technological product designs. We
outline how innovation processes and new product features change as the demand side
evolves.
ACKNOWLEDGEMENTS: This paper has partly resulted from my work at the Max
Planck Institute of Economics, Jena, Germany. I am very grateful to Ulrich Witt for
funding of this project. Also I would like to thank Virginia Acha, Andreas Chai, Paola
Criscuolo, Wilfred Dolfsma, David Gann, Jens Krüger for the comments and help.
The product life cycle is a central rallying point for how different disciplines view the
the theoretical concept of the industry life cycle explains how firms evolve over the
life cycle of a product’s technology. In this sense, this theory rests on strong
focus of most of the strategy and organizations literature has been on what is
essentially the ‘supply side’ of technical change (Nelson & Winter, 1982; Teece &
Pisano, 1994). Breaking away from this tradition, this paper analyses the evolution of
(Adner, 2004; Adner & Levinthal, 2001; Guerzoni, 2007; Malerba, Nelson, Orsenigo,
& Winter, 2007; Priem, 2007; Windrum, 2005). Given the lack of empirical work
focusing on demand evolution, the paper is one of the first formal analyses of the
notable exception.
Concretely, this paper aims at answering the question how consumers’ perceptions of
product innovations and, hence, the value that they attribute to different
technological design, but also on the perception of symbolic and aesthetic features of
new products, i.e. product form design (Rindova & Petkova, 2007). We link Rindova
analysis of the intrinsic value of product novelty and its effect on consumer
products dominate the value perceptions of consumer. Later in the industry life cycle,
1
when most functional requirements of consumers are increasingly met (Adner, 2004;
Aoki & Yoshikawa, 2002; Witt, 2001) and/or product technology has stabilized
(Adner, 2004), symbolic and aesthetic features of new products become relatively
more important for consumers’ value perceptions. Shifting the dominant locus of
innovation away from product and production technology toward product form design
economics that is grounded in the criticism that the evolution of the demand side is
underresearched (Adner, 2004; Aoki et al., 2002; Aversi, Dosi, Fagiolo, Meacci, &
Olivetti, 1999; Bianchi, 1998; Malerba, 2006; Priem, 2007; Witt, 2002). Furthermore,
product life cycle, i.e. as product technology stabilizes, contributes to the study of
‘low-tech” industries (von Tunzelmann & Acha, 2005). Using patents and trademarks
In the next section of the paper, we develop hypotheses about the changing nature of
product innovations that drive the market growth over time. We theoretically analyse
changes on the demand and on the supply side. In section 3, we introduce the data and
which in turn provides stable industry’s boundaries. This enables us to analyse the
effect of innovation in product form design on market growth, separate from the effect
2
of innovation in technological product designs: The U.S. footwear market is
processes, albeit trademark registrations in the U.S. shoe market have surged since
innovation in product form design (while patents are a measure of new technological
designs), we statistically show that the U.S. footwear market starts to grow again after
statistically show that this structural break in market growth rate is driven by the
shifting of the innovation focus from technological product design toward innovation
in product form designs. In section 4, this paper presents the result of our time-series
analysis of the introduced data. Section 5 discusses these results to develop our
II. Theory
The correlation between innovation and market growth holds independent of the
maturity of a market (Bils & Klenow, 2001). Nevertheless, the issue has been raised
that changes in the nature of demand and innovation occur as markets grow and
mature (Aoki et al., 2002; Guerzoni, 2007; Lancaster, 1991, pp. 59; Malerba, 2005;
Malerba et al., 2007; Witt, 2002). In this section, we first theorize about consumer
(Henderson & Clark, 1990; Lancaster, 1991; 1966). However, consumers need to
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understand how to use the technological features of products to attain the services that
they want (Griffith, 1999; Rindova et al., 2007; Saviotti, 1996). Consumers have to
service characteristics, the product offers them (Saviotti, 1996). Taken this consumer-
attribute to new products relies on their perception and sense-making their new
features (Griffith, 1999; Moreau, Lehman, & Markman, 2001; Rindova et al., 2007).
Innovation researchers recognize that the uncertainty with regard to the value
Diverging from these studies, nevertheless remaining close to the literature on the
social construction of technology (Bijker, 1995), Rindova and Petkova (2007) argue
that the evaluation of new products depends on the consumers’ perception of the
Lancaster, 1991). Rindova and Petkova (2007) explore how the outer form, in which a
which the innovation’s value is construed and perceived. They argue that by
aesthetic properties, innovating firms also endow their products with cues that trigger
Rindova and Petkova articulate how such cognitive and emotional responses underlie
initial perceptions of value and theorize how innovating firms can influence them
through product form design. Their framework explains how product form contributes
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to perceptions of value by modulating the actual technological novelty of a product
Rindova and Petkova (2007) articulate how product form can be used strategically to
achieve specific cognitive and emotional effects and enhance the initial customer
perceptions of the value of an innovation. They exemplify two different ways of how
product form design is strategically used to increase the value of a product. Product
form design can be used to decrease the perceived incongruity of radical technological
product forms can be designed to increase this cognitive incongruity for incremental
technologically radical innovation in the home entertainment market, but its form was
latter case is Apple’s iMac, which has not been a radical technological innovation, but
its form design distinguished it from other products in the market and made it the
most successful personal computer ever sold. Apple was able to increase the
In economics, the quality of ‘novelty’ of a product design as such has been analysed
about emotional responses to novel and aesthetic stimulation (Berlyne, 1971). Bianchi
novelty for consumers.1 She mentions examples of consumer behaviour with respect
to fashion and collecting, but does not explicitly conceptualize about features of
1
Bianchi (2002, 2003) elaborates on the dynamics of fashion as been essentially driven by the intrinsic
value of novelty to consumers.
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product innovations. So, the distinction between technological product design and
exploit to establish the importance of novel and aesthetic stimulation for consumer
from the older and other ones, and that this implies that it is generally evaluated
positively by consumers due to the intrinsic value of the ‘new’. In short, we hold that
innovative product form designs can trigger positive evaluations due to the intrinsic
value of novelty, even though the technologically product design remains (relatively)
stable.
Now, we theorize about the relative importance of technological product design and
product form design over a product’s life cycle. Our basis argument is that product
form designs gain importance for mature product technologies, because they provide
Our argument resonates that consumer requirement must be satiated with respect to a
2001) in order for product form design to become the main source of consumption
a market mature (Witt, 2001), expressing itself in a decreasing marginal utility that
consumers derived from new functional product characteristics (Adner et al., 2001),
feature, become relatively more important. Symbolic and aesthetic stimuli do not
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underlie the same satiation processes as the functionality of products, because of the
intrinsic value of ‘novelty’ for consumers (Bianchi, 2002; Scitovsky, 1976; Witt,
2001).
Now, we want to reflect our argument about the changing importance of technological
product design and product form design against theories of industrial dynamics.
Adner et al., 2001; Aoki et al., 2002; Lancaster, 1991; Witt, 2001), or on the sheer
lack of technological innovation (Tripsas, 2007). In the latter case, new innovation
technologies that were developed in other industry sectors (Tripsas, 2007). Adner
(2004; 2001) holds that late in an industry life cycle, firms place renewed emphasis on
are characterized by stable technology, i.e. low tech industries or industries with
beyond von Tunzelmann and Acha (2005), our argument focuses on how products can
be differentiated even if the functional product design remains stable using new
We have argued that even if technological product designs remain stable or are only
marginally changed, consumers value new products for their new product form
designs. This implies that firms should be able to increase sales by focussing on
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innovation in form design, as product technology stabilizes in maturing or low-tech
industries. So, at the aggregate level, a mature market that is characterized by little
designs.
This change in the nature of product innovation has not been statistically analysed
with respect to the stylized fact of the correlation between the growth of consumption
The section describes the evolution of the U.S. footwear market in order to test our
hypotheses about the evolution of the demand side. We choose this industry for its
clear-cut delineation over time due to the stability of the core technological
architecture of a ‘shoe’. This allows us to assign data series like patents, trademarks,
expenditure etc. to this market for time period of over 70 years. We elaborate on the
methods that we will use to test our analysis and then in the next section present the
results.
shoes per year. (Mack, 1956; Szeliski & Paradiso, 1936), while in 2003 the average
U.S. citizen bought 7.8 pairs per year (AAFA, 2005). Figure 1 shows the development
of real shoe expenditure per capita (ShExp) on the left scale and the percentage of
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shoe expenditure of per capita with respect to real personal income on the right scale.
The U.S. footwear market grows continuously between 1929 and 2005, hinting at an
overall characterization of footwear as a normal good (income elasticity > 0). The
early empirical studies of the U.S. footwear market by Szeliski and Paradiso (1936)
and Mack (1956) classify shoes as normal goods till the 1950s.
FIGURE 1: Real shoe expenditure per capita and its relation to real disposable income per
capita, U.S., 1955-2003 [US$ of the year 2000] (Bureau of Economic Analysis, National
Income and Product Accounts, 2003)
.012 .014
Shoe consumption per capita (2000)
Contrary to these earlier studies of U.S. shoe consumption, later studies mention
product variety, new designs, and fashion as the main drivers of consumption growth
(Barff & Austen, 1993; Hadjimichael, 1990; Weisskoff, 1994), but do not provide any
statistical analyses on this topic. Present market studies of the U.S. footwear market
stress the importance of fashion and new designs for the growth of this market. Kim
(2003) finds structural change and an increase of income elasticity in U.S. demand for
clothes and shoes in 1970, but shows no theoretical ambition to explain this change.
9
Figure 1 illustrates this structural change as the share of income spent on footwear is
decreasing between 1930 and the early 1970s, and then increases since the late 1970s.
Figure 2 plots the registrations of patents and trademarks in the U.S. footwear market
(United States Patent and Trademark Office, 2007a, , 2007b). A patent for an
invention is the grant of a property right to the inventor, issued by the United States
Patent and Trademark Office. Generally, the term of a new patent is 20 years from the
date on which the application for the patent was filed in the United States. The right
conferred by the patent grant is “the right to exclude others from making, using,
offering for sale, or selling” the invention in the United States or “importing” the
invention into the United States. Patents are classified by categories, among which
one is “Footwear” (No. 36) and one is “Boot and shoe making” (No. 12). Figure 1
shows annual registrations in these patent categories. Today, 14 out of the top 15
organizations holding active patents in the U.S. footwear market are firms focused on
the athletic shoes (United States Patent and Trademark Office, 2007b).
A trademark is a word, name, or symbol that is used in trade with goods to indicate
the source of the goods and to distinguish them from the goods of others. Trademark
rights, issued by the United States Patent and Trademark Office, may be used to
prevent others from using a confusingly similar mark, but not to prevent others from
making the same goods or from selling the same goods or services under a clearly
different mark. Trademarks are classified in a similar way like patents. Here the
relevant category includes clothing and shoes, which why we search for the explicit
filing, and it is removed, if the trademark will not or is not used for shoes.
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Trademarks, unlike patents, can be renewed as long as they are being used in
commerce, and they are abandoned, if they are not used anymore. So trademarks
accumulate over time, while patent licenses run out after some time. Trademark
renewals are costly and therefore indicate the economic activity associated with the
trademark.
technological change. Patent time series in figure 1 for shoes indicate innovation in
or sold by others and to indicate the source of the goods. Therefore, we hold
trademark registrations as a proxy for the variety of new product form designs in this
market, because they have explicit goal to distinguish new goods from others, using
symbolic or aesthetic features, that the trademark protects. Trademarks have been
rarely used as an indicator for innovation, but have been shown to be a good indicator
We want to illustrate the trademark registration practise of firms in the U.S. footwear
form designs. Today, trademarks are highly valued by companies; all companies in
the footwear industry that are listed on the New York Stock Exchange emphasize the
investors. The Brown Shoe Company calls its trademarks “important” and “long-lived
assets”, it registers trademarks on all its products and sometimes licences these
trademarks to third parties. Here a quote from an annual report of Nike Inc.:
We utilize trademarks on nearly all of our products and believe that having
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consider our NIKE® and Swoosh Design® trademarks to be among our most
valuable assets and we have registered these trademarks in over 100 countries.
[…] In addition, we own many other trademarks that we utilize in marketing our
Other large athletic footwear companies like Adidas-Salomon and Reebok pursue
similar general strategies of trademark registration. Wolverine World Wide, Inc., that
owns brands like Cat, Merrel, or Hushpuppies, calls on his trademarks as intangible
assets in its balance sheet. Likewise, Collective Brand Inc., the holding of
PaylessShoe Source – the largest U.S. footwear retailer – owns brands like Airwalk,
American Eagle, Champion, Keds, Tommy Hilfiger footwear, Saucony – and also
balances trademarks. We take this practise of balancing trademarks to stand for the
practices of firms to register trademarks for new products. All these footwear firms
Patent counts
0
have several hundred 500 filed for their
trademarks 1000
products (United States Patent and
Figure 2: Patent and net trademark registrations in the U.S. footwear market, 1963-
2002 (U.S. Patent and Trademark Office, 2007a, b)
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Patent registrations for shoes and shoemaking are cointegrated in their developments
till the 1970s. Both curves show high levels in the 1910s till 1930s. While
pursues a very flat lapse till the mid 1970s, when registrations take off and constantly
increases in the 1980s and 1990s. In accordance with these figures, Payson (1994, pp.
118) finds a surge in the variety of new shoes supplied since 1968. Weisskoff (1994,
p. 59) also emphasizes this increase in product variety mentioning new styles and cuts
since the 1970s. Note that registration number of trademarks and patents differ by
2. Time-series analysis
We use the introduced time series to test hypotheses 1 and 2 with data between 1930
and 2003. In all models the dependent variable is the real annual U.S. shoe
growth. The main explanatory variable is the real annual income per capita. Testing
the impact of product innovation on market growth, we hold that patent filings for
product design and product form design, respectively. These four time series – shoe
expenditure and income per capita, trademark and patent registrations – are integrated
rejected at the 5% level. The time series are nevertheless not cointegrated (Johansen,
require the correct specification of the relationship between the time-series, which is
13
in fact the subject of our analysis. So, ECM are therefore not applicable either, and we
Before the Box-Jenkins analysis, the time series are logarithmized to account for
substantial level differences between the variables, adding the prefix ‘ln’ to the
variables’ names. The annual differences in all data series are taken for the analysis,
series pass an augmented Dickey-Fuller test for unit roots at the 5% level. All models
Newey-West errors to account for the heteroskedasticity in the time series given the
lack of cointegration. All models omit regression constants because all data series are
obsolete.
IV. RESULTS
As the lack of cointegration has hinted at a structural break in the data, we test model
years that rolls over the time series, see table 1. The regression coefficient of income
on footwear expenditure in windows starting before 1970 are below unity, and
since 1970, i.e. the regression coefficient for income on shoe expenditure is below
unity almost all the time before 1970 and significantly and consistently above unity
after. At the beginning of the time series shown in figure 1, the share of income spent
2
Given that d log f (x) 1 x df f (x ) f (x)/ f (x) is interpreted as the elasticity of f with respect to
d log x f dx (x ) x/ x
x, i.e., the percent change in f resulting from a 1% increase in x (Hamilton, 1994, pp. 717).
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on footwear decreases (0 < income elasticity < 1), while at the end of the time series it
increases (income elasticity > 1). The growth rates of shoe expenditure are lower than
shoes as a necessity, while they are higher in the 1970s to 2003, identifying a luxury
Having established the increase in income elasticity, we use the indicators for
technological design and product form design innovation to explain this change of
addition to the adjusted R2 of the model we provide the Durbin-Watson statistic for
each model. The nonexistence of autocorrelation cannot be rejected for any of the
models. We estimate separate models for the phases with different income elasticities,
namely Model 2 and 3, and find this increase in income elasticity to significant.
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Table 1: Rolling windows estimation of a structural break
with 5, and 3 with 6 respectively). Model 4 using the complete time series indicates
that patents and trademarks have both a positive effect on the shoe consumption. The
R2 of model 4 increases significantly with respect to model 1, and also the income
explain expenditure.
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Table 2: Time-series models of the changing nature of product innovation in the U.S.
footwear market expenditure, 1930-2003
Model 1 2 3 4 5 6
Start year 1930 1930 1971 1930 1930 1971
End year 2003 1970 2003 2003 1970 2003
Observations 74 41 33 74 41 33
IV / DV dln(Shoe expenditure)
in the years 1930 to 1970, which increased the R2 with respect to model 2. This result
years 1971 to 2003, which also increased the R2 with respect to model 3. In this later
period it is trademark registrations, not those of patents that have a significant positive
Remarkably, the income coefficient determined by model 6 is below unity, i.e. the
operationalization, the increasing focus on new product form designs in the U.S.
footwear market explains why its growth is accelerated since the 1970s. To test the
robustness of this result on the reason for the increase of growth rate, table 3 shows
17
the results of a Granger causality test (1969). The result indicating that the surge in
trademark registrations precedes the surge in income elasticity, and not the other way
the acceleration of its growth since 1970. So, there are statistical reasons to belief that
the increase in product variety created by new product form designs causes the U.S.
Table 3: Granger causality (1969) test of the relation between trademark registration
and footwear consumption3
Granger causality Wald tests (lags = 2; obs = 31; start 1971, end 2003)
Variable Is NOT Granger-caused by chi2 df Prob > chi2
ln(Shoe expenditure) ln(Trademarks) 16.581 2 0.000
ln(Trademarks) ln(Shoe expenditure) 2.3263 2 0.312
V. DISCUSSION
The results of our analysis of the relation of product innovation and the market growth
have substantiated our hypotheses on the changing nature of product innovation as the
U.S. footwear market matures. These results related back to the theoretical works that
we build our hypotheses on. First, our analysis showed that the correlation between
innovation and market growth holds unrespectable of the age of the industry. Product
form design, positively influences market growth at all times. While this finding
accords with economic theory (Bils et al., 2001; Dixit & Stiglitz, 1977), our analysis
showed that this result must be further qualified, because the nature of product
innovation changes as U.S. footwear market matures. The notion that consumers get
satiated with respect to certain functional product characteristics (Lancaster, 1991, pp.
59; Witt, 2001) has been one of the building blocks for our argument. Nevertheless,
3
The lag structure for the Granger causality is established using Luetkepohl’s methods as the time
series is relatively short (n<50) (Hamilton, 1994)
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satiation and expenditure stagnation in the product category ‘shoes’ cannot be shown.
This implies that studies of the evolution of consumption need to focus at the product
characteristic as their unit of analysis (Guerzoni, 2007), because at the level of the
analysis of changing consumer motivations cannot be execute at this level. So, at the
level of product category the correlation between innovation and market growth
product form designs. The distinction between innovation in product form designs and
technological product design (Rindova et al., 2007) was able to explain differences in
market growth phases in the U.S. footwear market. This distinction was based on an
technology and service characteristics of new products (Saviotti, 1996). We link this
product because of its functionality. We argue here that theorizing about changes in
Adner (2004; 2001) holds that late in an industry life cycle firms place renewed
consumer motivations, we argue and show that, given that product technology
19
innovations become more important for the market growth late in an industry life
model of the succession product and process innovations, we hold that the surge in
product form design innovations in the U.S. footwear industry since the 1970s is
outside of their model. It seems that what we observe in this market is a third wave of
innovation, namely in product form design, late in the product life cycle, and that this
wave expands the market considerably. To sum up, the main result of this paper is
that we have empirically shown that even when product technology remains relatively
This leads us to the limitations of this paper. We decided to analyse long time-series
data to study the dynamics of innovation-driven market growth over time. The
approach we use comes with inevitable limitations that arise from the data that we
use. Focusing on aggregate market growth we cannot make claims about individual
believe that we analysed how market growth is correlated with product innovation,
and that we showed the very nature of product innovation changes over time in this
The sudden surge in trademark registrations in the 1970s implies a change in the
practice of protecting new products in the U.S. footwear market, which potentially
would be spurious to our analysis. Nevertheless, since this surge is due to firms’
as the market matures, this surge is coherent with our theory. However, it is beyond
the research focus and space limits of this paper to answer why firms started filing
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trademarks in the large volumes precisely in the 1970s, as we want to show here the
importance of trademarks and the change in the demand environment for firms. The
explanation we proposed was that, given that product technology stabilized in (some
segments of) the footwear market, technological design cannot distinguish products
anymore, so product form design becomes more important for product differentiation.
Patent registrations are relatively stagnant since the 1950s and cannot explain the
dynamic; in fact, most patents are registered in the U.S. footwear market by firms
focused on the athletic shoes. Nevertheless, athletic footwear firms like Nike, Adidas-
Salomon, Reebok also register trademarks for most of their products to protect the
differentiations. They are also among the organizations with most trademark
registrations in the market. So, even for technologically innovative shoes the form
design is protected, which links the argument on how radical product form design can
designs. This argument applied to this context relies on the assumption that
of patents for shoes and shoemaking till the 1970s and the lack thereof later on. As
imports of shoes become increasingly important since the 1970s (Weisskoff, 1994),
affected the trademark registration practise, because U.S. firms needed to heighten
barriers to entry for low-cost producers abroad. So, there might be a link between
changes in the industry architecture and the practise of managing intellectual property
21
rights like trademarks to be analysed in future studies. Producing in low wage
countries like South Korea, Taiwan in the 1970s, and later in Vietnam and China
might have been the trigger to enable firms to introduce this ever increasing variety of
new product designs in the U.S. footwear market (Weisskoff, 1994). The bottom line
is that this acceleration in product varieties was driven by new product form designs,
and this in turn led to the acceleration of growth in the U.S. footwear market.
The use of trademarks as well as patents as indicators for innovation can be and is
and management despite these criticisms, the analysis of trademark is not – yet
(Mendonca et al., 2004). A common criticism is that firms do not rely exclusively on
these protections of their intellectual property, and therefore the observations of patent
or trademark registrations are biased as firms have particular reasons why they
register or not. We have seen that the use of trademarks dramatically changes in the
1970s, but we have argued that this change in the practice of using trademarks
actually strengthens our point about the increasing importance of product form
designs, because it is the firms’ choice to file more trademarks. Today’s brand and
trademark licensing even implies that trademarks are direct means in value-generating
processes for firms and not merely protection of some valuable product and its design.
So, today’s practise almost guarantees that all new distinguishing features of new
The focus on one market or industry always raises concerns about the generalizability
of the findings from that one setting; in particular if this market was chosen for its
model character. So, comparative studies between different industries should be made
to validate our findings. Focusing on the U.S. footwear market, we have qualified
Adner’s (2004) notion of resurge in product innovation in later stages of a product life
22
cycle. Nevertheless, his examples of computers and video recorders show that the
characteristics, which are sometimes radical – like the change between different CPU
designs – but that the service characteristics of the products only change
incrementally, i.e. within a given set of parameters, without changing the parameter
patterns, for personal computer, or to strong network effects between video tapes,
stores, etc. and recorders. So, comparative studies have to account for stability in
technology and service characteristics, and maybe even the reasons for these
stabilities. We have argued for product form design to drive consumption of products
important features to increase sales, like for mobile phone or music players. This
implies that nature of consumer practises, for example their visibility to other
consumers, have to be taken into account as well to choose comparative case studies.
Again, however, the exploratory nature of the research and the need to pay significant
attention to issues of longitudinal analysis and data availability constitute, in our view,
legitimate reasons for our decision to curtail in some ways the complexity of the
empirical setting for the study. Despite its inevitable and obvious limits, we believe
that our research offers new insights for both theory development and managerial
practice, and represents a useful starting point for future research in many directions.
VI. CONCLUSIONS
The present paper analysed the evolution of demand and the changing nature of
product innovation as a market grows and matures. Starting from the theoretical
23
accounts that consumer evaluations of an innovative product do not exclusively rely
on new technological functions, i.e. technological product design, but also on the
perception of symbolic and aesthetic features of new products, i.e. product form
design.
We argued that earlier in a technology life cycle functional product design drives
consumption growth. Later, when product technology has stabilized, symbolic and
products are not or only incrementally innovative with respect to their technological
product design. The paper tested this theoretical account on how the nature of product
innovation changes by analysing the growth process of the U.S. footwear market
between 1930 and 2003. Our statistical analysis show that innovation in technological
product design positively affects consumption growth in the early phase of the
industry evolution, while product form design innovations propels market growth in
The paper’s results contribute to the stream of research on demand evolution and
economics (Malerba, 2006; Witt, 2002). In addition, the paper contributes to research
The rise of the importance of innovation in product form design for market growth
implies that the appropriation regime changes in the U.S. footwear industry (Malerba,
2002), i.e. the way that the producer of knowledge can appropriate the benefits from
it. New product form designs can be imitated more easily by competitors than new
technological product designs, if products are increasingly valued for their innovative
product form design, this implies that competition increases due to easier and more
24
imitation by competitors. The increased competition due to the increased ease-of-
imitation of new products also implies that trademark registrations become ever more
important for firms, because they protect new and easy-to-imitate product form
designs; thus, this process of increasing importance of trademarks can be called self-
reinforcing.
Moreover, if changes in the demand environment affect the value of firm resources
(Adner & Zemsky, 2006), then this urges incumbent to reconfigure their resources,
but it also opens up opportunities for new entrants. In effect, Windrum (2005) stresses
the entrance of new producers in the innovation cycle late in the industry life cycle.
Analyses of the U.S. footwear industry find significant changes over time (Audia,
Sorensen, & Hage, 2001) and emphasis the importance of imports and new entrants
(Korzeniewicz, 1992; Weisskoff, 1994). So, the observed change in the nature of
product innovation in the U.S. footwear industry does not only have implications at
So, taking a consumer perspective on value creation (Priem, 2007), we propose that
given the absence of significant technological design innovations, firms can expand
their market by demand differentiation using new product form designs. The question
is whether the resources and capabilities, firms need to do that, change, as the demand
environment changes. We know that firms probably need distinct resources and
capabilities to develop new products (Brown & Eisenhardt, 1995; Verona, 1999). It is
highly probably that a change in the nature of product innovation implies that
that firm rely less on technological capabilities and more on marketing capabilities for
innovating in product form design than in technological product design. Along our
hypotheses we would propose that as product form design become more important,
25
marketing capabilities become more important for firm performance. In any case,
such changes in the demand environment as we observe in this market urge for an
resources (Srivastava, Fahey, & Christensen, 2001). As this change in the demand
particularly important for firms in “low tech” industries (von Tunzelmann et al.,
2005).
VII. REFERENCES
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