New product adoption and sales performance from the importer perspective

IMM-07083; No of Pages 9 Industrial Marketing Management xxx (2014) xxx–xxx

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Industrial Marketing Management

New product adoption and sales performance from the importer perspective Ci-Rong Li a,1, Chen-Ju Lin b,⁎ a b

Fuqing Branch of Fujian Normal University, School of Economics and Management, No. 1, Xiaoyuan Xincun, Longjiang Road, Fuqing City Fujian Province, 350300, China Tzu Chi College of Technology, Department of Marketing and Distribution Management, 880, Sec.2, Chien-kuo Rd., Hualien City, 970, Taiwan

a r t i c l e

i n f o

Article history: Received 12 December 2011 Received in revised form 4 August 2014 Accepted 4 August 2014 Available online xxxx Keywords: New product adoption Exporter–importer relationship Technology–environment–organization framework International marketing

a b s t r a c t From an international business setting, this paper investigates how importers determine new product adoptions and how exporters diffuse new products to offshore markets through importers. Using the technology– environment–organization framework, we examine the effect of innovative characteristics of selected new products, importer-specific organizational capability, and exporter-specific environmental factors, on the adoption of new products by importers. Our sample included 585 new products from 152 local import firms nested in 34 foreign export firms. The results indicate that product meaningfulness, product superiority, and customer familiarity facilitate importer success in new product adoption. Importer host-market experience enhances new product adoption and moderates the relationship between adoption and sales performance. Exporter influence of market reputation in the host market and product-innovation capability is beneficial in promoting new products for enhanced sales performance. Instead of a single focus on new product adoption, we used a crosslevel model to test the factors that foster new product adoption by importers. © 2014 Published by Elsevier Inc.

1. Introduction Global markets have resulted in numerous manufacturers increasingly launching new products into foreign markets. A manufacturer launching a new product into a foreign market, as an exporter, relies heavily on a foreign distributor or importer because of importer control of local market access (Aulakh & Gencturk, 2008). To launch a new product successfully into foreign markets, an exporter needs to be assured that the new product will be accepted by foreign importers, who provide important channels in foreign markets. Although studies have recognized the importance of channel distributors adopting new products to the success of the new product or to the diffusion of innovation (Hultink, Tholke, & Robben, 1999; Kaufman, Jayachandran, & Rose, 2006; Lin & Chang, 2012), few studies have explored how importers adopt a new product in the context of foreign market entry. The lack of research in this area is surprising, particularly because fostering importers' continued adoption of a new product, which requires psychological acceptance for the product (commitment) and exerting efforts for its introduction (effort), appears to be complex. Importer commitment to new product adoption involves an importer accepting and internalizing new product goals, whereas the effort of new product adoption refers to the extent to which an importer strives to introduce and sell the new product. To address the issue abovementioned, we adopt the technology– organization–environment (TOE) framework (Tornatzky & Fleischer, ⁎ Corresponding author. Tel.: +886 3 8572158x2632. E-mail addresses: [email protected] (C.-R. Li), [email protected] (C.-J. Lin). 1 Tel.: +86 591 85222439.

1990). Tornatzky and Fleischer (1990) suggested an innovation adoption model in which innovation adoption occurs at the firm level, which may be influenced by factors related to technology, organization, and environment context. The Rogers theory of innovation diffusion, one of the most widely applied theories in the explanation of firmlevel innovation adoption, also supports the notion that innovation adoption may be influenced by these three contexts (Rogers, 1983). Based on the TOE framework, we argue that adoption of new products by importers is based on factors in organizational and environmental contexts, and new product characteristics. We systematically examine three contexts of the innovation adoption model to clarify the drivers and conditions under which new product adoption by importer influences new product sales performance in the context of foreign market entry. Because each adoption decision of a new product is organized into foreign importers that in turn are nested within exporters (Bianchi & Saleh, 2010), the capability of foreign importers (organizational context) and exporter innovative experience (environmental context) might have cross-level direct and interaction effects on each new product adoption decision. Thus, in this study, answering Frambach and Schillewaert's (2002) call for the examination of the micro–macro links of organizational innovation adoption, we conducted a multiplelevel framework of new product adoption by importers and considers how an exporter increases new product adoption by a foreign importer from a single product-level to an exporter level. Thus, our study contributes to the international marketing and innovation adoption literature in several ways. First, by investigating the acceptance or adoption of new product from an importer perspective, we extended the previous innovation adoption studies that focus

http://dx.doi.org/10.1016/j.indmarman.2014.10.014 0019-8501/© 2014 Published by Elsevier Inc.

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

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on new product adoption from a customer perspective (Gielens & Steenkamp, 2007; Hoffmann & Broekhuizen, 2010) or a buyer perspective (Everdingen, Sloot, Nierop, & Verhoef, 2011; Hultink et al., 1999). Such an extension is useful, as it provides a new issue expanding the research arena of international marketing and innovation adoption. Second, as Frambach and Schillewaert (2002) suggested, one of the gaps to fill in the innovation adoption literature is to expand the research to the micro–macro links to seek multilevel generalization of theory, because of an innovation adoption decision influenced by multiple level factors. Thus, this research may contribute to prior studies by examining a multi-level framework. Finally, we develop a model addressing the relationship between new product adoption by importers and new product sales performance. New product adoption by channels or importers does not lead to higher sales performance, because of potential customer resistance or other market conditions (Eng & Quaia, 2009). Understanding the conditions under which new product adoption by importers influences new product sales performance in the foreign market becomes salient. 2. Literature review and hypotheses On the surface, a typical decision-making process of importing innovative products from foreign exporters is associated with an importer that perceives need, and then accepts, and adopts the selected new products to make profit in host country marketplace. Referring to Rogers (1983, 2004) innovation diffusion model, four prior influential conditions were noticeable in the early stage of promoting new product including adopter's previous technology experience, perception on market demand, the extent of product innovation, and social system and norms. An importer may not only need to evaluate its own organizational capability of launching a new product but also to assess the new product profession provided by exporters, and the marketability of the new product (Bianchi & Saleh, 2010; Cateora, Gilly, & Graham, 2001). Rogers (1983) diffusion concept proposed that the relative advantages

of product innovation technology can be a decisive factor for adopting a new product. When entering the Roger's decision and implementation stages, an importer should consider the environmental elements such as intangible market reputation, and the stability of reciprocal relationship between an importer and its associated exporters. An exporter has to seek alternatively global importers to manage host country marketing and channel distribution because of their familiarity with local environments (Liang & Parkhle, 1997). Therefore, another environmental determinant that affects the implementation and confirmation of a new innovation by an importer is the unpredictability of the host country market. Based on the contextual elements from the Rogers theory, we further adopt the view of technology–organization–environment TOE in new technology adoption (Hong & Zhu, 2006; Wang, Wang, & Yang, 2010; Zhu, Dong, Xu, & Kraemer, 2006) underlying our theoretical framework, consisting of three exogenous multi-level variables. We employ new product characteristics to represent the technology aspect of innovation diffusion, consider importer organizational capability of marketing products, and use exporter partnership and host country uncertainty to address the environmental appropriateness of innovation diffusion. Fig. 1 illustrates the research model of our study. 2.1. New product adoption The success of introducing a new product to foreign countries requires local importer acceptance and support because it involves a series of channel activity efforts in the host country market (Bianchi & Saleh, 2010; Lin & Chang, 2012). New product adoption by importers requires a considerable assessment process, from knowledge awareness and cost-benefit analysis to the final adoption (Rogers, 1983). For each import decision, importers must recognize a need and general solution of the host country market, evaluate product characteristics, consider supplier (exporter) credibility, and analyze performance before accepting specific new products from international exporters (Kaufman et al., 2006; Liang & Parkhle, 1997). A commitment to

Fig. 1. The research model.

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

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promote exporter-specific new products shows that importers accept these products because they believe they can manage the risk and earn profits from them. Such new product adoption leads to certain importer market advantages but also leads to the follow-up cost of managing a distribution channel, marketing mixes, and activities. Previous studies have defined new product adoption as the degree to which a firm devotes its commitment and effort to the goal of selling a new product (Atuahene-Gima, 1997; Hultink & Atuahene-Gima, 2000). We expanded the definition to fit new product adoption by importers in the setting of an international trading relationship. 2.2. The effect of new product adoption by foreign market importers Importer adoption of a new product in the host country involves substantial energy and mental capability. Learning to internalize new knowledge in a sales operation is also time-consuming (Hultink & Atuahene-Gima, 2000). Commitment to a new product is particularly worthy of dedication when a firm continually attempts to raise its sale performance by catering to daily changing demands. Importer efforts to promote specific new products activate the adoption of selected new products to the host country market (Atuahene-Gima, 1997; Hultink & Atuahene-Gima, 2000). An importer that believes the selected new product is more beneficial compared with other products will exert itself to increase new product sales with marketing resources and management. The extent of importer commitment and effort on exporter's new products influences the resultant performance of new product sales. Therefore, we predict that a high extent of new product adoption provides an opportunity for importers to gain a significant market share, to generate a high level of sales volume, and to achieve the set elevated sale target. Therefore, we propose the following hypothesis: H1. The greater the extent of importer adoption of a new product, the greater the sales performance of the new product.

2.3. Determinants of new product adoption by importers 2.3.1. The technology context New product adoption implies that importer acceptance of new product technology provides a wide selection of new products (Haines, 2007) by enhancing a diverse product supply. Early, in the widespread model of technology acceptance, Davis, Bagozzi, and Warshaw (1989) proposed that the product advantage such as product usefulness and ease of use could influence on customer perception of product acceptance. Hence, an importer obtains market profits through international trading in the marketplace by introducing new products; thus, it must distinguish specific product technologies by extraordinary superiority and competing features from among numerous innovative products. Previous studies of new product development have identified positive product characteristics of advanced technology according to two essential components: product meaningfulness and product superiority (Atuahene-Gima, 1995; Calantone, Chan, & Cui, 2006). Product meaningfulness is the extent to which existing or potential customers perceive the attributes and functionalities of a new product to be beneficial or useful (Im, Hussain, & Sengupta, 2008). Importers use product meaningfulness to satisfy existing customer preferences and requirements to raise market sales, to maintain market profits, and to increase market survival. A new product with greater product meaningfulness leads to improved market acceptance, and higher market sales. Product superiority is the extent to which a new product outperforms a product of competing value according to the existing functionalities and attributes of all competitive products. A new product with these positive characteristics bears more improvements and advancements to generate better performance (Zhou & Nakamoto, 2007). An importer may satisfy existing market customers and thereby maintain specific market sales; however, it may also explore new products with fresh or unique

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functionalities and attributes to attract more extensive market groups seeking product superiority. To enlarge market territory and become a long-lasting firm to better compete in the marketplace, an importer must continually introduce or adopt superior new products to create a market advantage. Prior research has also found customer familiarity to be a critical determinant of new product success, which is the extent to which the attributes and functionalities of new products are understood and used by existing or potential customers (Calantone et al., 2006). When a customer is familiar with a new, product, the customer concludes that the new product requires minor effort to learn to use it and perceives the full advantages of the new product to easily meet customer criteria for its usefulness. Therefore, a new product with high customer familiarity may be extensively accepted by targeted customers in the market and is likely to be adopted to create high market sales for a trading importer. Therefore, we propose the following hypothesis: H2. The greater (a) the product meaningfulness; (b) the product superiority; (c) customer familiarity, the greater is the adoption of a new product by an importer. 2.3.2. Organizational context Drawing on the organizational context of the TOE framework, we focus on organizational contextual dimensions related to importer capability and competence of market management to adopt new products in three aspects, including importer market-launch capacity, hostmarket experience, and risk aversion of management. Compared with its main competitors, a firm may have an advantageous position if it possesses distinctive resources and capabilities to invest in the launch of a new product. These types of resources are embodied in a firm's ability to accelerate the diffusion process and adoption rate of new products in the market by distributing new products through a wide network, or developing effective marketing strategies for promoting new products (Day & Wensley, 1988; Debruyne et al., 2002). In addition to the routine operation in the existing product market, the increasing emphasis on creating outstanding market shares could cause firm overload with the available resources for launching a new product. Thus, the more market-launch capability a firm possesses, the better the opportunity a firm has to successfully introduce a new product to the market. An importer must continually introduce new products to satisfy the emerging needs of customers and to resist attacks from rivals in the host market. Because an importer must sustain a certain level of market sales by introducing new products, it must accumulate increased local market experience in selling its product to serve targeted customers. Market experience is likely to be the requisite knowledge base that supports sales people in learning new sales methods to provide new products for local customers (Behrman & Perreault, 1984). This type of experience assists an importer to grasp advanced market information promptly and to master customer tendencies and potential expectations to adopt an appropriate new product (Atuahene-Gima, 1997). Importers selling a new product face numerous uncertainties that include unknown, unevaluated costs and out-of-control marketing turbulence with added risks from other importers. A conservative importer that has given up on discovering new customer preferences and meeting their needs may attempt to lower its risks by selecting an antiquated or market-proven product instead of a novel or innovative one (Atuahene-Gima, 1993). When it may be unfavorable to engage in innovative and risk activities, an importer may resist adopting a new product because it has relatively deeper concerns about avoiding failure. Thus, an importer tends to avoid adopting a new product if it emphasizes risk aversion. Therefore, we propose the following hypothesis: H3. The greater is (a) the market-launch capacity; (b) the host-market experience; and the less (c) the risk aversion, the greater is the adoption of a new product by an importer.

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

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2.3.3. The moderating effect of a host market experience on an importer The extent of market management experience represents the level of a company's understanding and insight, and ability to grasp market dynamics. This intangible ability enables an importer to quickly judge market survey statistics, to determine customer perception, and to forecast the future performance of certain product introductions to avoid failure and loss (Behrman & Perreault, 1984). Host market experience guides an importer to align its commitment and effort onto the right track during new product promotion. Consequently, correct market decisions result in accurate sales actions that enhance achievement and transcend originally targeted sales performance. Therefore, we propose the following hypothesis: H4. The effect of new product adoption on new product sales performance is more positive when host market experience is higher than when it is lower.

2.3.4. The moderating effect of importer market-launch capacity Success in new product sales requires a certain amount of marketlaunch resources that can be used to support a marketer's attempts to accomplish its performance goal. A marketer is capable of successfully competing with rivals when it possesses sufficient capacity to speedily introduce, widely distribute, and effectively promote a new product (Atuahene-Gima, 2005). Market-launch capacity reinforces a firm's ability to manage market competition, environmental uncertainty, and market turbulence. Such capacity becomes a specific instrument to facilitate success in new product sales, and consequently aids an importer to raise its market opportunity to achieve its expected sales performance goals. Therefore, we propose the following hypothesis: H5. The effect of new product adoption on new product sales performance is more positive when market-launch capacity is higher than when it is lower.

2.3.5. The environmental context For environmental determinants, we consider the noteworthy conditions of exporter readiness to collaborate with an importer, including the relationship between an exporter and an importer, the exporter's host market reputation, and the exporter's product innovation. The length of time that a business interacts with its partners influences the quality of its business association and long-term cooperation (Agnihotri, Rapp, & Trainor, 2009). Sufficient relationship length assists businesses to establish a common consensus and agreement on the objectives of new product introduction, which is built on a satisfying relationship characterized by reliability, interdependence, and reciprocal sentiments (Lee, Jeong, Lee, & Sung, 2008). A growing friendship between an exporter and importer leads to successful internal marketing. Thus, the longer the relationship between an exporter and an importer, the more new product rationale, knowledge, and professional skills the exporter is able to impart to the importer, and the more able the exporter is to convince the importer of new product objectives. Regardless of other market advantages such as low price, high quality, or wide distribution channels, a company's market reputation is one of the most critical elements affecting customer preferences to accept certain products (Kim & Cavusgil, 2009; Purohit & Srivastave, 2001), which directly influences customer willingness to select a novel product among the plentiful, newly-introduced similar products (Fombrun & Shanley, 1990). However, the inner process of customer evaluation easily internalizes firm market reputation as a unique value of an existing product. This internalization generates the Halo Effect, which influences customer perspectives of a new product that is introduced by the same firm. An importer is positively motivated to adopt a specific new product provided by an exporter who possesses a good market reputation such as LV, Gucci, Mercedes-Benz, or IBM.

In general, the market competition, product novelty or innovation that a firm possesses is an essential resource used to raise customer satisfaction in the existing market (Lin & Chang, 2012), to stimulate potential customers, and to expand new product territory. Therefore, product innovation implies that a firm may have distinctive product information, knowledge, or techniques to create an extraordinary new product. In previous research, the ability to engage in product innovation represents the degree to which a firm is able to serve and deliver a certain level of quality to its customers (Atuahene-Gima, 1997; Ozer, 2006). On the export level, the level of product innovation a specific exporter possesses is one of the imperative conditions to motivate an importer to adopt a new product. Therefore, we propose the following hypothesis: H6. The better (a) the relationship between an exporter and an importer; (b) the exporter's host market reputation and; (c) the exporter's product innovation, the greater the likelihood that a new product is adopted by importer. 2.3.6. The moderating effect of host market reputation on an exporter Firm market reputation is well established if it is perceived to deliver a product with higher brand effect and quality, reliability, or innovative value to its specific customers when compared to its market competitors. Through psychological internalization, customers transform their perception of an exporter's market reputation to the extent to which the customer believes in, is motivated by, and prefers that exporter's product in the marketplace. Customer perception of exporter reputation can be used to enhance an importer's opportunity for persuading other customers to accept the new product because the exporter is the supplier of the acceptable quality or new products with a sufficient hostmarket reputation. The level of exporter market-reputation helps a customer to trust the quality and merits of a new product that a hostmarket importer sells. Therefore, we propose the following hypothesis: H7. The effect of new product adoption on new-product sales performance is more positive when the host market reputation is higher than when it is lower. 2.3.7. The moderating effect of product innovation toward the exporter The competence of a firm to supply an innovative or novel product is the capability of a firm to exactly and speedily meet ever-changing market demands. A certain level of such ability helps marketers to create market opportunity by continually introducing new products and may encourage an importer to compete in a new market to acquire greater market territory. Referring to a marketing scheme, product innovation is typically the instrument used to maintain or raise customer satisfaction, to replace a competitor's market position, to establish the product standard, and to capture most market shares. An exporter with a high possibility of product innovation can feasibly assist an importer with a sufficient supply of new products to attract specific customers and to assist the importer to obtain market advantages in numerous market campaigns. Therefore, we propose the following hypothesis: H8. The effect of new product adoption on new product sales performance is more positive when exporter product innovation is higher than when it is lower. 3. Research methods 3.1. The sample and data collection We collected the study data from China. We first acquired a sample frame consisting of 836 local importers from 176 foreign exporters from an international consulting firm. We contacted a random sample of 100 of these 176 foreign exporters by phone to solicit participation in the

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

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study. We explained the study purpose to the foreign export firms, with 56 foreign exporters agreeing to participate. The executives who managed the firm export operations were requested to provide their five major local import firms. We then randomly selected at least three local importers from each of these foreign export firms, for a total of 364 local importers for this stage. We called each local importer to identify a sales manager and two or three sales team members as the key informants. The key informants of each local importer were asked to select and describe three to five of the recent new products that their firm had introduced to the local market. Because of missing data and the exclusion of new products introduced to the market in less than 6 months, our sample included 585 new products from 152 local import firms nested in 34 foreign export firms (19.3% of the population). Of the 585 new products adopted by importers, 37% were consumer product, and 63% were industry product. Of the 152 local import firms, 63 were either between foreign firms and their wholly-owned subsidiaries or through marketing joint ventures between the firms and their importers, and 89 were with independent importers. On average, these of importers had 167 employees (S.D. = 76.51) and US$ 2.3 million in sales. These importers were involved in importing industrial or consumer goods from exporters in Asian countries (35%), European countries (18%), and North/South America (47%). To eliminate the potential concerns of common method bias (CMV), we separated the informants according to the analysis level of variables (Atuahene-Gima, 2005). Informants of each local importer provided data for measuring each new product selection to its sales performance with Level 3 variables, including new product characteristics as the technology context, new product adoption, and new product sales performance. In the second phase, each of the two salesperson informants assigned respective scores on the Level 1 variables of the importer's organizational context and on Level 2 variables of the environmental context. We used an on-site interview approach in which a trained interviewer scheduled an appointment with each key informant, presented each one with the survey questionnaire, and collected the questionnaires upon completion. They were asked to deliberately assign a single rating based on consensus among those informants, following previous studies investigated in China (Chu, Li, & Lin, 2011; Li, 2013). The product selected had been in the market for an average of 13.4 months. We compared participating foreign export firms with nonparticipating firms for which we had data on sales and R&D expense. Analyses of variance (ANOVA) showed no significant differences between the two groups. In addition, we also compared participating local importers with the non-participating importers with regards to firm size, industry, and sales. The result of ANOVA indicated that there were no significant differences between the two groups. 3.2. Measures, reliability, and validity of constructs Closely following existing research on product advantage, we measured product meaningfulness with four items (α = .78) and product superiority with three items (α = .84) adapted from Atuahene-Gima (1995) and Im et al. (2008) and newly generated items. Sales managers and sales team members rated the degree to which each of the products outperformed competing offerings along existing attributes and functionalities and how these components are beneficial to customers. We measured customer familiarity with four items (α = .75) by requesting the sales manager and sales team members to rate the extent of agreement to which existing customers are familiar with the attributes and functionalities of the new product (Rijsdijk, Langerak, & Hultink, 2011). A 3-item scale (α = .85) measured the risk aversion of management, which recorded the extent to which importers' managers avoid risks in decisions related to adopting new products (Atuahene-Gima, 1993). Importer's host market experience was measured by a single item, which rates the number of years since the importer's first activity in this market. A 4-item scale (α = .87) was developed to measure importer's market-launch capacity, which reflects the firm's ability to

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implement new product-launch activities effectively (Atuahene-Gima, 2005). We measured the relationship length between exporter and importer with a single item, which rates the number of interaction years between the exporter and the specific importer. Drawing from the work of Atuahene-Gima (1997), we measured adoption of the new product with two constructs: effort and commitment, and constructed the new product adoption by multiplying commitment and effort (Hultink & Atuahene-Gima, 2000). We measured effort with four items (α = .77) by requesting the sales manager and the sales team members to indicate the degree of effort they devoted to sales activities for the new product. A 4-item scale (α = .77) was modified to measure commitment to the new product to reflect the extent to which the sales manager and the sales team members accepted the new product and emotionally committed to making it a success. Exporter's host market reputation was measured on a 5-item scale (α = .80). Importer managers were asked to evaluate the reputation of their major exporter in the host market in three dimensions: customer value, product advantage, and innovation (Gardberg & Fombrun, 2002). Exporter's product innovation was measured with a 4-item scale (α = .76) adapted from Zahra and Covin (1993) which requested the importer managers to indicate the extent to which their exporter engaged in developing and launching its own new product compared with the exporter's primary competitors. We relied on key informants to provide subjective values of performance and to report absolute values for checking the validity of the subjective values because of the unavailability of archival sources pertaining to new product sales performance at the new product level (Autio, Sapienza, & Almeida, 2000). We measured new product sales performance (α = .79) with four items that asked the selling manager and the sales team members to rate the degree to which the objectives set for the new product had been achieved (Hultink & Atuahene-Gima, 2000). We also requested the importers' top managers to provide the actual sales growth rate for new products in each of the last 3 years. The correlation test between the average sales growth rate and the subjective new product program performance measure was significant (r = 0.25, p b .01) and supported the validity of the subjective performance. We measured host market volatility with four items (α = .70), which asked the importer manager to evaluate the host market condition in four dimensions including certainty, stability, predictability, and change (Carsion, Madhok, & Wu, 2006). We controlled for importer's ownership because independent and corporate-sponsored importers may differ in their resource levels for selling new products (0, “independent firm,” and 1, “corporate-sponsored firm”). We used firm size, measured by total sales of the previous year, to control for economies of scale in selling new products. We controlled for product type (1, “industrial goods,” and 0, “consumer goods”) as the aspect of a new product with significant effect on its performance. We then estimated a six-factor confirmatory factory analysis (CFA) for project-level variables, and another six-factor CFA for importerand exporter-level variables to assess the validity of the measures. Two models provided acceptable fit to the data [Model 1:χ2 = 210.17 (p N .05), df = 215, RMR = .02, GFI = .97, AGFI = .96, and RMSEA = .00; Model 2: χ2 = 310.49 (p N .01), df = 260, RMR = .02, GFI = .86, AGFI = .83, and RMSEA = .04]. Table 1 shows that the diagonal elements representing the square roots of the average variance extracted (AVE) for each of the constructs was greater than the off-diagonal elements, which satisfied the criterion of discriminant validity (Fornell & Larcker, 1981). Finally, the constructs previously reporting the composite reliabilities (CRs) presented in Table 1 indicated that each exceeded the accepted reliability threshold of 0.70. 4. Analysis and results Table 1 shows the means, standard deviation, correlations, and composite reliability for all level variables in this paper. The data structure

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

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Table 1 Means, standard deviation, correlations, and composite reliability. Variable

M

SD

Variable Product level

1. Selling performance 2. Commitment 3. Effort 4. Product meaningfulness 5. Product superiority 6. Customer Familiarity Composite reliability

4.74 4.64 4.66 4.66 4.43 4.59

0.71 0.64 0.64 0.65 0.65 0.54

1

2

3

4

5

6

0.69 −0.29** −0.15* −0.03 0.01 0.33*** 0.78

0.68 0.26** 0.05 0.04 −0.13* 0.77

0.68 0.15* 0.12* 0.01 0.77

0.68 0.39*** 0.04 0.78

0.84 0.03 0.80

0.65 0.75

Importer and exporter level

7. Risk aversion 8. Market launch capacity 9. Importer's experience 10. Relationship length 11. Exporter's reputation 12. Exporter's innovation 13. Host market volatility 14. Importer's ownership 15. Firm size (log) 16. Exporter's product type Composite reliability

4.53 4.56 8.11 4.90 4.77 4.49 4.82 0.36 4.16 0.61

0.64 0.63 3.21 2.35 0.44 0.43 0.45 0.48 0.68 0.49

7

8

9

10

11

12

13

14

15

16

0.81 −0.31*** −0.25** −0.36*** −0.37*** −0.02 0.24** −0.01 0.07 −0.05 0.85

0.79 0.40*** 0.53*** 0.36*** 0.07 −0.23** 0.02 −0.17* 0.09* 0.87

N.A. 0.28** 0.32*** 0.33*** −0.49*** 0.02 −0.06 0.09* N.A.

N.A. 0.14* 0.05 −0.10* 0.01 −0.15* −0.05 N.A.

0.82 0.07 −0.36*** 0.01 −0.08* 0.07 0.84

0.82 −0.14* 0.00 0.02 −0.20** 0.88

0.87 0.03 0.04 −0.10* 0.78

N.A. 0.00 0.07 N.A.

N.A. −0.12* N.A.

N.A. N.A.

Note. N =585 for product-level variables. N =152 for importer- and exporter-level variables. The diagonal elements are square roots of the AVE. * p b 0.10; **p b 0.05; ***p b 0.01.

were nested (i.e., new products were nested within importers, and importers were nested within exporters), creating a hierarchical data structure with three levels of random variation (i.e., variation among products within importers, variation among importers within exporters, and variation among exporters). Hierarchical linear modeling (HLM) has been advocated for its statistical analysis ability to account for non-independences inherent within nested data by simultaneously partitioning and modeling within-group and between-group variance (Hofmann, 1997). Therefore, we used HLM3 to test our research hypotheses because HLM allows researchers to simultaneously estimate the effect of cross-level factors on product-level outcome, and can thereby examine relationships across multiple levels. First, we use the null models to examine whether there are significant between-group variances for the two outcome variables (the adoption of new product and new product selling performance) in this paper. Second, the random effects intercept-as-outcomes models were used to test these predictable variables. Finally, we use the random effects slop-as-outcomes models to examine the moderating effects of level 2 and level 3 variables on outcome variables.

4.1. The effect of new product adoption on new product sales performance Following the approach of Joshi, Liao, and Jackson (2006), we used the deviance index reported in HLM3 analysis to compare the nested models through the difference in the deviance values and a series of chi-square values to assess model fit. We first estimated the null models to indicate that HLM3 analyses were appropriate. The results found significant level 2 (χ2 [118] = 173396, p b .01) and level 3 (χ2 [33] = 154.42, p b .001) variances in the new product sales performance. We then used random effects slope-as-outcomes models to test the effects of cross-level interactions. Model 4 in Table 2 added the cross-level effects of the Level 2 and Level 3 variables, which revealed a smaller deviance value than Model 3 and significantly better performance than Model 3 (△ χ2 [5] = 36.87, p b .001). H1, which predicts that new product adoption is positively related to new product sales performance, is supported (γ = .47, t = 6.62, p b .001).

4.2. The effects of technology, organizational, and environmental contexts The results of the null model from HLM3 found significant Level 2 (χ2 [118] = 164.90, p b .01) and Level 3 (χ2 [33] = 99.24, p b .001) variances in new product adoption. Accordingly, we used the random effects intercept-as-outcomes models to predict importer adoption of new products. Table 2 shows that product meaningfulness (γ = .10, t = 2.69, p b .01), product superiority (γ = .13, t = 3.21, p b .001), and customer familiarity (γ = .25, t = 5.63, p b .001) had a positive and significant effect on importer adoption of new products. These results support H2a, H2b, and H2c. The effect of management risk aversion on importer adoption of new products was negative but non-significant (γ = − .04, t = − 1.41, n.s.); thus, H3c is not supported. The results we obtained for importer host-market experience (γ = .01, t =2.14, p b .05) had positive and significant effects on importer adoption of new products, whereas the effect of market-launch capacity was nonsignificant (γ = −.02, t = −.52, n.s.). These results support H3b, but not H3a. Exporter host-market reputation was unrelated to importer adoption of new products; thus, H6b is not supported. Finally, the result shows that the effects of relationship length (γ = .04, t = 3.46, p b .001) and exporter product innovation (γ = .08, t = 2.12, p b .05) on importer adoption of new products are positive and significant. The results support H6a and H6c. In Model 4 of Table 2, H4 is supported because the relationship between new product adoption and new product sales performance is more positive when importer host-market experience is higher than when it is lower (γ = .09, t = 3.64, p b .01). H5, which suggests that the relationship between new product adoption and new product sales performance is more positive when market launch capacity is higher than when it is lower, is supported (γ = .30, t = 2.07, p b .01). In support of H7, the data in Model 4 show that new product adoption has a more positive effect on new product sales performance when exporter host market reputation is higher than when it is lower (γ = .53, t = 3.47, p b .01). The data do not support H8 (γ = .07, t = .43, n.s.), which predicts that the relationship between new product adoption and new product sales performance is more positive when exporter product innovation is higher than when it is lower.

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

C.-R. Li, C.-J. Lin / Industrial Marketing Management xxx (2014) xxx–xxx

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Table 2 Hierarchical linear modeling results for the adoption of new product and new product selling performance. NPA

New product selling performance

Model 1

Model 2

Model 3

Variables

P.E.

(t-value)

P.E.

(t-value)

Intercept Level 1 variables Product meaningfulness Product superiority Customer familiarity New product adoption (NPA) Level 2 variables Risk aversion of management (RAM) Importer's host market experience (IHME) Market launch capacity (MLC) Relationship length (RL) Level 3 variables Exporter's host market reputation (EHMR) Exporter's product innovation (EPI) Level 1 Χ level 2 interactions NPA X IHME NPA X MLC Level 1 Χ level 3 interaction NPA X EHMR NPA X EPI Control variables Host market volatility (γ010) Importer's ownership (γ020) Firm size (γ030) Product type (γ001) Model deviance

0.13

(5.35)***

4.83

(52.04)***

0.10 0.13 0.25

(2.69)** (3.21)** (5.63)***

P.E.

Model 4 (t-value)

P.E.

(t-value)

4.66

(81.16)***

4.65

(79.23)***

.58

(4.74)***

.47

(6.62)***

−.04 .01 −.02 .04

(−1.41) (2.14)* (−.52) (3.46)***

−.06 −.01 −.05 .03

(−1.10) (−1.05) (−1.10) (1.58)

−.06 −.01 −.03 .05

(−1.12) (.91) (−.59) (2.57)*

−.02 .08

(−.63) (2.12)*

.01 −.08

(.17) (−.93)

.07 −.06

(.86) (−.66)

−.02 −.05 .00 −.01 441.52

(−.47) (−1.54) (.07) (−.27)

.02 −.05 −.02 −.05 1190.32

(.20) (−.85) (−.28) (−.40)

.07 −.02 .03 .01 1060.77

(.82) (−.46) (.70) (.18)

.09 .30

(3.64)** (2.07)*

.53 .07

(3.47)** (.43)

.04 −.02 .04 .02 1023.90

(.38) (−.32) (1.02) (.29)

†p b0.1, * p b0.05, ** p b 0.01, *** p b0.001. Note: P.E. = parameter estimate.

5. Conclusions 5.1. Discussion Most previous work on international marketing has contributed to discovering factors that influence the adoption of cross-national new products by foreign customers or sellers at a single level (Hultink et al., 1999). However, these studies have not adequately explored new product adoption from the importer perspective, which largely influences international market success. Instead of a single focus on new product adoption by customers, we adopted the Rogers B2B contextual model (1983) concept of product innovation diffusion and the TOE framework (Zhu, Kraemer, & Xu, 2006). We used a multilevel model to examine how TOE dimensions (characteristics of new product technology, importer commitment to channel management, and exporter actual strength) influence new product adoption from the importer perspective. By delineating and supporting our complex, multilevel relationships, we have extended previous theory on TOE (Tornatzky & Fleischer, 1990) and the multilevel process leading to a new product adoption (Frambach & Schillewaert, 2002). In doing so, we provide a more comprehensive understanding of the drivers and conditions under which new product adoption by importers influence new product sales performance. The results indicate that three of the technology factors, including product meaningfulness, product superiority, and customer familiarity, facilitate the success of new product adoption by importers because of the substantial product benefits creating market opportunity (Atuahene-Gima, 1995; Calantone et al., 2006; Im et al., 2008). Our findings confirm the importance of new product's functionalities and attributes as suggested by TOE (Tornatzky & Fleischer, 1990) by showing that these elements reinforce importer perceived usefulness and feasibility of new product launch. The organizational effect of importer management risk aversion on importer adoption of new products is negative but non-significant, possibly because importers who tend to adopt new

products may attempt to expand the product market; therefore, they are inclined toward market risk instead of an aversive strategy (Leonidou, Palihawadana, Chari, & Leonidou, 2011). Our result indicates that importer host-market experience enhances new product adoption and moderates the relationship between adoption and sales performance. This implies that importers who promptly grasp market dynamics are inclined to zealously adopt new products and to master customer tendencies and potential expectations that lead them to adopt appropriate new products and obtain superior market performance through such experiences. In addition, our findings imply that exporter's capacity of product innovation may encourage importers to adopt their new products. Although innovation technology play a dominant role in new product launch (Rogers, 1983), the effect of production innovation capacity on product adoption have rarely been studied. Thus, our results extend capability perspective to the link between product innovation and new product adoption. Finally, our findings highlight the important role that organizational and environmental influences play in affecting the link between product-level adoption and performance. Both TOE and Roger's model suggest the drivers of new product adoption or innovation adoption, but little attention has been devoted to the interaction between the drivers and production adoption. We found that the effect of adoption on performance is positively moderated by importer host-market experience, importer market-launch capacity, and host market reputation in the transnational trading context. Regarding importer marketlaunch capacity and host-market experience, both represent the ability of an importer to capture market opportunity, explore potential customer needs, and recognize the key customer preference that had a greater impact on new product launch success. Hence, both abilities may allow importers to realize the full performance benefit of new product adoption. Exporter market reputation positively moderates the performance effect of new product adoption by importers, in support of the argument that it provides psychological support for importers because customers have believed that an exporter can

Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014

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deliver a product with higher quality, reliability or innovative value. Thus, exporter market reputation may increase the willingness of importers to involve new product launch process, and subsequently increase new product sales.

5.2. Managerial implications and limitations With coming of the age of borderless economy, more and more market traders-importers and exporters- aggressively seek opportunity to expand their business territories through transnational commerce (O'Cass & Julian, 2003). From the exporter perspective, they need to excite importers' commitment and efforts to adopt their new products to continuously satisfy cross-national market customers. Under the exporter–importer context of international marketing, the findings of our study suggest that exporters must simultaneously consider the effect of new product characteristics, their assistance on the performance of new product launch, and the marketing ability of importers in the whole international new product launch process. In the product level, we caution exporters that providing relative advantages for new products and maintaining their familiarity for consumers are the necessary condition to attract importers' attentions, because both organizational and environmental contexts also influence the importers' acceptance of new products. In addition of the new product advantage, exporters need to seek elder importers because they usually have many market experiences in host market or have superior marketing capacity that influence the extent of new product adoption and subsequently product sales. Furthermore, importers with longer relationship also should be considered because the two trading parties with confidence not only excite the adoption of importers but also facilitate to cooperate with each other. As a result, choosing elder importers or importers with longer relationship also is requisite for exporters to ensure the success of new product launch. In the level of exporter characteristics, exporters must understand that their key resources for introducing new products in the host market are critical for the adoption of importers and its performance benefits. Because if exporters have superior innovation capability by which consumers will likely to believe the new product with more advantages than other competitor, such branch images help importers practically sell their new product with the confidence as face their consumers. Exporter reputation also has such effect that help importer more easily persuade consumers to buy or use that not only encourages importers to adopt new products but facilitate new product launch. This study includes several limitations. First, the generalizability of the results is somewhat confined because the empirical data was derived only from a sample of firms in China. Therefore, the particular economic environment in China could critically influence the outcome of similar research. Second, we relied on informants for reporting the objective performance measures rather than on archival data, which were unavailable, particularly in transitional economies. We adopted the alternative strategy of using knowledgeable informants to report objective performance measures from the appropriate suggestions of numerous previous studies (Autio et al., 2000). Finally, this study does not manipulate variables of interest sequentially and thus the data for this study are cross-sectional rather than longitudinal. As a result, the endogeneity problem may arise and reduce confidence in causality assumptions. Thus, new product sale performance may affect the subsequent new product adoption. However, this reciprocal relationship is not a theoretical concern so far and existing studies show more interests in which factors contribute to sale performance. Notwithstanding that, the relationships among the constructs proved in the present study should be generalized with great care in terms of a correlational way in that the longitudinal data is absent. Future researches are suggested to adopt a longitudinal design to tease out the linkages revealed in this study.

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Please cite this article as: Li, C.-R., & Lin, C.-J., New product adoption and sales performance from the importer perspective, Industrial Marketing Management (2014), http://dx.doi.org/10.1016/j.indmarman.2014.10.014