Designing Prototypes to Encourage Customer Cocreation in the Iterative Process: The Moderating Effects of Demand and Technological Uncertainties

The iterative innovation literature recommends a basic prototype strategy because it reduces learning costs. Although customer cocreation during basic prototype iterations is assumed, the willingness of customers to engage in the iterative process remains unexamined. Basic prototypes may increase customers' cost of engagement and thus reduce their motivation to cocreate new products with firms. Therefore, research on the effects of various prototype strategies on customer cocreation during iterative product development is needed. This study explores how basic and enhanced prototype strategies affect customer cocreation and new product development as well as the moderating effects of technological and demand uncertainties. Using survey data from 261 high-tech manufacturing firms, we examined the hypotheses with hierarchical regressions analysis, and find that although both the enhanced and basic prototype strategies promote customer cocreation, the effect of the enhanced strategy is stronger. Furthermore, to ensure customer cocreation, firms should adopt the basic prototype strategy under high levels of demand uncertainty and the enhanced prototype strategy under high levels of technological uncertainty. The results challenge the prevailing recommendation on basic prototype strategy by taking willingness of customers to participate into consideration. Different moderating effects of demand uncertainty and technological uncertainty also deepen the understanding on boundary condition of iterative process.