Relationship between User Innovation Activities and Market Performance: Moderated Mediating Effect of Absorptive Capacity and CEO’s Shareholding on Innovation Performance

Eun Hwa Lee, Choo Yeon Kim and Jae Wook Yoo
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Eun Hwa Lee: College of Business Administration, Konkuk University, Seoul 05029, Korea
Choo Yeon Kim: College of Business Administration, Konkuk University, Seoul 05029, Korea
Jae Wook Yoo: College of Business Administration, Konkuk University, Seoul 05029, Korea

Sustainability, 2020, vol. 12, issue 24, 1-18

Abstract: Although user innovation has been regarded as an important source of firms’ competitive advantage, the internal processes and mechanisms involved in the relationship between firms’ user innovation activities and market performance are seldom studied. By applying moderated mediation analyses, we examine (1) whether firms’ user innovation activities have a positive impact on market performance and (2) how and under what conditions user innovation activities can have a positive impact on a firm’s market performance. The findings on a sample of Korean manufacturing firms indicate that user innovation activities significantly increase firms’ innovation performance, which consequently leads to superior market performance (confirming the mediation effect of innovation performance). Additionally, we observe the positive mediation effect of innovation performance only in firms with higher levels of absorptive capacity (confirming the moderated mediation effect of absorptive capacity). Further analysis confirms that the positive interaction effects between user innovation activities and absorptive capacity on market performance through innovation performance were more pronounced for firms with higher Chief Executive Officer (CEO) shareholding levels (confirming the moderated mediation effect of CEO’s shareholding). Our findings provide theoretical and practical implications on the successful implementation of user innovation strategies.

Keywords: user innovation; absorptive capacity; CEO’s shareholding; innovation performance; market performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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