LAUSR

ABSTRACT Collaboration between firms and product users has been widely practiced to enhance the efficiency and quality of product development. We consider a collaborative product improvement setting where a sponsoring firm and product users jointly create or promote product design ideas through firm-sponsored online user innovation communities (FOUICs). Using a differential-game framework, we study a benchmark case in which product users involved in FOUICs are homogeneous in their innovative contribution capacities and propensities. We then incorporate users’ heterogeneity such that product users are distinguished into lead users and common users. Our analytical result shows that the equilibrium effort levels and utilities of both the sponsoring firm and product users may increase or decrease with a change in the output elasticities of product design ideas or in the cost elasticities of the effort levels. Moreover, lead users’ equilibrium effort level and utility are more sensitive to the elasticity parameters of product users’ effort than those of common users, and lead users obtain a higher total incentive reward than that of common users. Last, we compare the benchmark model and the extended model to identify the condition under which one model outperforms the other one for both the sponsoring firm and product users.