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This is to certify that the

dissertation entitled

A RECONCEPTUALIZATION 0F PREANNOUNCEMENT:
ANTECEDENTS AND OUTCOMES RELATED TO
NEW PRODUCT SUCCESS

presented by

Kim E. Schatzel

has been accepted towards fulﬁllment
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Ph. D . degree in Marketing

 

 

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I.

A RECONCEPTUALIZATION OF PREANNOUNCEMENT:
ANTECEDENTS AND OUTCOMES RELATED TO NEW PRODUCT SUCCESS

BY

KIM ELIZABETH SCI-LATZEL

A DISSERTATION

Submitted to
Michigan State University
in partial fulﬁllment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and Supply Chain Management

1999

ABSTRACT

A RECONCEPTUALIZATION OF PREANNOUNCEMENT:
ANTECEDENTS AND OUTCOMES RELATED TO NEW PRODUCT SUCCESS

By

Kim Elizabeth Schatzel

This research examines new product success based antecedents and outcomes of a
ﬁrm’s propensity to preannounce via the development and testing of a model that, ﬁrst,
goes beyond competitive and economic antecedents and outcomes that have been the
primary focus of previous preannouncement research and, second, investigates
preannouncements as strategic marketing communications aimed at inﬂuencing the
perceptions and attitudes of a broad array of industry stakeholders. The empirical study
uses a sample of 290 CEOs and Presidents from industries characterized as manufacturers
of new products and tests the measurement and conceptual models via conﬁrmatory
factor analysis and structural equation modeling, respectively. Within the context of the
model, the results indicate that competitive equity building, deﬁned as a ﬁrm’s tendency
to pursue a high proﬁle leadership position within its industry, is the main driver of a
ﬁrm’s propensity to preannounce. Regarding outcomes, the ﬁndings indicate that a ﬁrm’s
propensity to preannounce positively inﬂuences the ﬁrm’s new product success through

both industry receptiveness and the ﬁrm’s ability to marshal resources.

Copyright by
KIM ELIZABETH SCHATZEL
1999

This dissertation is dedicated to my husband and best friend, Trevor Iles, whose
love and support has helped me to always seek new challenges in life; my son, Matthew,
who I am conﬁdent will grow to be a man that I will greatly admire; my daughter,
Katherine, who has shown me that being a mother is the greatest gift of all; and my
parents, Elizabeth and Herbert Schatzel, for the unwavering love and encouragement they

have always offered me.

ACKNOWLEDGEMENTS

This is to gratefully acknowledge the assistance of my dissertation committee: Dr.
Roger Calantone, my dissertation chair, for his guidance, encouragement, and for
“keeping me on time and on purpose”; Dr. Cornelia Droge for teaching me how to write;
Dr. Richard Spreng, for his insights on construct development; and Dr. Donald Bowersox
for his helpﬁtl comments regarding managerial implications. I would also like to thank
my husband, Trevor Iles, for his total dedication to the proofreading and editing process,
as well as his numerous and valuable “practitioner” insights. Lastly, thanks to two of my
doctoral colleagues, Anthony Roath and Tunga Kiyak, for their camaraderie and senses

of humor —- they made the journey fun.

TABLE OF CONTENTS

LIST OF TABLES ..................................................... viii

LIST OF FIGURES ...................................................... ix

1 INTRODUCTION

1.1 Background ...................................................... 1
1.2 Gaps in Previous Research ......................................... 4
1.3 Purpose of the Dissertation .......................................... 6
1.5 Methodological Basis for Answering Research Objectives ................ 7
1.6 Research Questions Addressed ....................................... 8

2 CRITICAL REVIEW OF LITERATURE AND HYPOTHESES

DEVELOPMENT
2.1 Overview of Market Signaling ...................................... 10
2.2 Review of Previous Preannouncement Conceptualizations. . . . . . . . . . . . .. . . .. 12
2.2. 1 Deﬁnition ............................................... 12
2.2.2 Content .................................................. 13
2.2.3 Timing .................................................. 13
2.2.4 Target Audience .......................................... 16
2.2.5 Channel of Communication. ................................ 19
2.2.6 Intensity ............................................... .20
2.2.7 Towards An Improved Conceptualization. .................... .20
2.3 Antecedents ofPreannouncement Propensity . . . . . . . . .. . . . . . . . . . . . . . . . . ...25
2.3.1 Overview ............................................... 25
2.3.2 Product Development/Adoption Antecedents ................... 26

vi

2.3.3 Competitive Antecedents .................................. 32

2.3.4 Towards An Improved Theoretical Framework ................. 33
2.3.5 A Model of Preannouncement Antecedents. . ..................... .34
2.4 Preannouncement Outcomes ........................................ 48
2.4.1 Overview . .............................................. 48
2.4.2 Likelihood of Competitive Response Motivators ................ 48
2.4.3 Likelihood of Investor Response Motivators ................... 53
2.4.4 Towards An Improved Theoretical Framework ................. 55
2.4.5 A Model of Preannouncement Outcomes ...................... 56

3 RESEARCH METHOD

3.1 Unit of Analysis ................................................ 62
3.2 Sampling Frame and Sampling Method ............................. 63
3.3 Constructs and Their Measures ................................... 64
3.3.1 Antecedents & Preannouncement Propensity ................... 64
3.3.2 Outcome Constructs ....................................... 68
3 .4 Measurement Model Testing Approach .............................. 71
3.5 Structural Model Testing Approach ................................. 71
4 RESULTS

4.1 Antecedent Model Results ........................................ 73
4.1.1 Response Rate ............................................ 73
4.1.2 Results of Measurement Model Testing ........................ 73
4.1.3 Results of Structural Model Testing .......................... 74
4.2 Outcome Model Results .......................................... 78
4.2.1 Response Rate ............................................ 78
4.2.2 Results of Measurement Model Testing ........................ 79
4.2.3 Results of Structural Model Testing ........................... 79

5 DISCUSSION OF CONTRIBUTIONS, FUTURE DIRECTIONS, AND

LIMITATIONS

5.1 Discussion of Contributions and Future Research Directions ............. 84
5.1.1 Reconceptualization of Preannouncement ...................... 84
5.1.2 Antecedent Model ........................................ 85
5.1.3 Outcome Model .......................................... 93
5.2 Limitations ................................................... 100
LIST OF REFERENCES ................................................ 102

vii

LIST OF TABLES

Table 1 — Previous Future Action Research ................................... 14
Table 2 - Lilly and Walters (1997) Preannouncement Timing Propositions .......... 15
Table 3 — Previous Target Audience Research ................................. 17
Table 4 — Effects of Multiple Competitive Signals on Signal Recipients ............ 21
Table 5 — Key Attributes of Preannouncement ................................. 23
Table 6 — Previously Proposed Antecedents of Preannouncement Propensity ....... . .27
Table 7 - Comparison of Competitive and Brand Equity ......................... 41
Table 8 — Previously Proposed Antecedents of Competitor Outcomes .............. 50
Table 9 — Previously Proposed Antecedents of Investor Outcomes ................ 54
Table 10- Antecedent Model Construct Measures and Reliabilities based on CFA . . . . .75
Table 11- Tests of Hypothesized Antecedent Relationships ...................... 76
Table 12- Outcome Model Construct Measures and Reliabilities based on CFA ...... 81
Table 13- Tests of Hypothesized Outcome Relationships ........................ 82

Table 14- Three Main Information-Based Drivers ............................. 86

viii

LIST OF FIGURES

Figure l — A New Product Success Model of Preannouncement Antecedents ........ 35
Figure 2 — A New Product Success Model of Preannouncement Outcomes .......... 57
Figure 3 — Model of Antecedents Incorporating Research Findings ................ 77
Figure 4 - Model of Outcomes Incorporating Research Findings .................. 83
Figure 5 — Total Effects on New Product Success ............................. . 99

Chapter 1

INTRODUCTION

1.1 Background

Firms communicate with a variety of current and prospective industry participants
such as buyers, employees, channel members, investors, competitors, and other industry
observers and experts. Often the communication focuses on what a ﬁrm intends to do.
Eliashberg and Robertson (1988) deﬁned a ﬁrm’s formal and deliberate communication
of intended future market actions, such as a new product introduction or price change, as
a preannouncement.

For the ﬁmi, preannouncement is a highly appealing and strategic marketing
communication tool. It is appealing to management as a low cost signal to competitors,
customers, and other industry participants of the ﬁrm’s ﬁxture intended actions. Notions
of the future inﬂuence both competitor and buyer behavior in many product categories,
especially durables and high technology goods. The use of preannouncements as a means
to articulate the ﬁrm’s ﬁlture intentions provides a valuable management tool that can
reduce buyer uncertainty and switching costs, impact market inﬂuencers (e. g., industry

experts and observers), encourage standardization, preempt competitor action, trigger a

hasty competitor reaction, and effectively position general opinion regarding the
company. Preannouncements, as compared to traditional advertising, are relatively quick
and inexpensive for the ﬁrm to produce and thus provide an efﬁcient and timely means of
response to marketplace queries such as new product status, future R&D efforts, and joint
venture plans.

However, preannouncement risks also exist. Preannouncements can trigger a
response by a competitor. For example, new product preannouncements give competing
ﬁrms the opportunity to shorten Ieadtimes related to new product imitation, as well as
initiate actions within the marketplace that distort new product introduction results, such
as price promotion on competing products. Another preannouncement risk is product
line cannibalization through postponement; that is, buyers delay purchases of existing
product lines in anticipation of the new product. Risks to ﬁrm reputation are also present
and result if the preannounced action goes unﬁtlﬁlled. Lastly, preannouncement risks
include the possible triggering of antitrust response such as those related to price ﬁxings
charges (e.g., airline industry) and the creation of market overhang by new product
preannouncements.

The grth of the Internet as an information search tool provides low cost access
to preannouncements for both consumers and businesses. This access was previously
available only via more costly routes such as clipping services or personal search of
various media sources. Firms also use intranets, a conﬁdential web site for use by
authorized personnel, to distribute news items of interest regarding competitors,
suppliers, customers, and general industry conditions. The news items can be accessed

via Internet news wire services and web sites, browsed and sorted by key word (e.g.,

company name), downloaded and then distributed via the ﬁrm’s computer network.
Consumers and investors also use the Internet to search for information as part of pre-
purchase evaluation or to stay current with product and industry trends. America OnLine,
the U.S.‘s largest online service provider, provides access to such information via its
"Company News" service area where users can enter the company name or stock ticker
and receive recent press releases referencing the ﬁrms they are interested in.

Preannouncements are generally made by or are subject to the approval of senior
level management. Preannouncements in press release form are often accompanied by
quotes ﬁ’om top management. Interviews with trade business press (e.g., Business Week,
Wall Street Journal, CNBC) are another form of preannouncement where ﬁrm
management often discuss ﬁJture intended actions (e.g., new product introductions).
Additionally, key management personnel may give speeches at trade related conferences
(e. g., Economic Clubs) that include preannouncements (e. g., plans to enter a new
geographic segment).

Statements by CEOs and senior executives can be assumed to reﬂect the mindset
of the ﬁrm’s leading strategists and therefore enhance preannouncement credibility. The
control and distribution of preannouncements by senior level management suggests that
CEOs and other top level managers, via preannouncements, participate directly in the
marketing of the ﬁrm’s strategy to a broad base of market constituents (e.g., channel
members, investment community, industry observers/experts, as well as, buyers).

In short, preannouncements provide two forms of beneﬁts: (1) for ﬁrms, they are
an inexpensive and responsive communication tool with which to affect a wide range of

industry constituents and (2) for other industry participants, such as buyers, investors,

channel members, competitors, and industry observers and inﬂuencers, they are an
efficient, timely, and credible source of information regarding a ﬁrm's future actions.
1.2 Gaps in Previous Research

Previous research has largely been restricted to the examination of new product
(Chaney, Devinney, and Winer, 1991; Eddy and Saunders, 1980; Eliashberg and
Robertson, 1988; Farrell and Saloner, 1986; Heil and Walters, 1993; Lane and Jacobsen,
1995; Lilly and Hockney, 1997; Rabino and Moore, 1989; Robertson, Eliashberg, and
Rymon, 1995) and pricing preannouncements (Heil and Robertson, 1991; Heil and
Langvardt, 1994). Additionally, when examining a ﬁrm’s use of preannouncements,
previous research has wholly focused on a ﬁrm's likelihood to make a single discrete
preannouncement (e.g., a new product preannouncement), in contrast to the examination
of a ﬁrm's preannouncement propensity; the latter considers the ﬁrm's tendency to issue
preannouncements at different times, with differing content, and using different
distribution channels (e.g., press releases, executive interviews, meetings with key
customers).

Previous preannouncement research has primarily been investigated from a
competitor interplay or game theoretic perspective (Eliashberg and Robertson, 1988; Heil
and Langvardt, 1994; Heil and Robertson, 1991; Heil and Walters, 1993; Moore, 1992;
Robertson et al., 1995). Game theory largely focuses on the moves within the game and
considers neither ﬁrm-level effects, nor the inﬂuence of strategic goals (e.g., engendering
new product success) on a ﬁrm's use of preannouncements. The predominant use of this
perspective generally excludes the examination of relationships amongst a ﬁrm's

preannouncement propensity and organizational, strategic, and marketing antecedents.

Previous research regarding buyer-related preannouncement antecedents has
largely restricted its focus to the use of preannouncements as a means to reduce buyer
switching and information search costs (Eliashberg and Robertson, 1988; Farrell and
Saloner, 1986, Lilly and Walters, 1997). This perspective does not consider the use of
preannouncements as part of an information based marketing strategy directed at
inﬂuencing the formation of consumer preferences and the development of industry
standards (Carpenter and Nakamoto, 1989, 1990).

Another research gap concerns the examination of preannouncement outcomes,
which has been wholly limited to the behavioral responses of competitors (Eliashberg and
Robertson, 1988; Heil and Langvardt, 1994; Heil and Robertson; 1991; Heil and Walters,
1993; Moore, 1992; Robertson et al., 1995) and investors (Chaney, Devinney, and Winer,
1991; Downes and Heinkel, 1982; Eddy and Saunders, 1980; Lane and Jacobsen, 1995)
to individual preannouncements. This perspective does not consider the possible effect of
preannouncements on attitudes, and excludes the examination of preannouncement
consequences related to other important market constituents such as buyers, employees,
channel members, and industry inﬂuencers and observers. Examination of attitudinal
outcomes related to these groups is particularly relevant given that previously proposed
motivators of preannouncement include the ﬁrm's desire to build support and interest for
a product, reduce market uncertainty, and enhance ﬁrm image.

Lastly, the literature reﬂects few empirical studies regarding either
preannouncement antecedents or outcomes. Most studies have been conceptual (Heil and
Robertson, 1991; Heil and Langvardt, 1994) and the few empirical studies that have been

done focus on analyzing managerial interviews (Lilly and Walters, 1997; Rabino and

Moore, 1989) and smaller, convenience samples of 100 or less (Eliashberg and

Robertson, 1988; Heil and Walters, 1993; Moore, 1992).

In summary, previous research gaps include:

the use of a narrow conceptualization that does not do justice to the complexity and
breadth of preannouncement's content and its application;

the predominance of a competitor interplay or game theoretic research perspective
that largely excludes antecedent effects related to organizational, strategic, and
marketing variables;

the examination of buyer related antecedents largely from the perspective of
switching cost and information search effects;

the investigation of outcomes primarily from the perspective of competitor and
investor behavioral responses to individual preannouncements;

the limited number of robust and rigorous empirical preannouncement studies.

1.3 Purpose of the Dissertation

The purpose of this dissertation is to extend the research on preannouncement by

addressing the previous research limitations identiﬁed in Section 1.2. Thus, the research

objectives include:

1)

2)

3)

4)

Developing a broader conceptualization of preannouncement that includes a larger
scope of preannouncement content, investigates a ﬁrm's propensity to issue numerous
preannouncements, and provides for an improved characterization of
preannouncements.

Modeling the antecedent conditions that inﬂuence a ﬁrm’s propensity to preannounce
by developing a conceptual framework that incorporates previously unexamined
organizational, strategic, and marketing factors.

Model outcomes by developing a conceptual framework incorporates the
consideration of attitudinal outcomes related to buyers, employees, channel members,
and industry inﬂuencers and observers.

Extending the generalizability of results, as compared to previous studies,
by improving upon the characteristics of the sample frame and data
collection techniques.

The research will be restricted to the study of preannouncement antecedents and
outcomes related to a ﬁrm's goal of engendering new product success. This restriction is
selected to ensure that the research is particularly relevant to managers and provides for
the development of an integrated antecedent/outcome framework.

1.4 Methodological Basis For Answering Research Objectives

This dissertation will make use of survey methodology as its primary means for
data collection. Top management's key roles in preannouncement activity, both as a
source of content and sanction, motivates their use as key informants. Given the sensitive
nature of the information provided in survey responses, a single key informant will be
used. This also provides the advantages of anonymity and reduced risk to the respondent
thus increasing the likelihood of their candid response (Kohli, 1989). Regarding self-
report bias, previous empirical research has largely concluded that the areas of
organizational culture, structure, and processes are relatively free of covariate inﬂation
effects (Crampton and Wagner, 1994).

The sampling frame will be comprised of senior level executives of private and
public sector U.S.-based ﬁrms that conduct business activities necessary for the
development, supply, and marketing of new products and/or technologies. The selection
of this sampling frame ensures that the respondents will be cognizant of buyer, channel
member, employee and investor related issues that may impact a ﬁrm's preannouncement
actvities.

The study’s constructs will be tested for convergent and discriminant validity using
conﬁrmatory factor analysis (Fomell and Larker, 1981) and measurement reliabilities

will beevaluated using Cronbach’s alpha coefficient. The testing of hypotheses will be

performed using structural equation modeling (SEM). This method will provide for the
testing of interdependencies and interrelationships among constructs, as well as an
examination of total antecedent effects on focal dependent variables.
1.5 Research Questions Addressed

Based on the objectives set forth for this dissertation, the following three research
questions will be investigated:
1. What is the appropriate conceptualization of preannouncement that incorporates:

a. a marketing communications scope of strategic breadth (i.e., beyond
new product introduction and pricing information);

b. the consideration of a ﬁrm's preannouncement propensity in contrast to
a ﬁrm's likelihood to issue single discrete preannounements; and

c. a framework of preannouncement attributes that can be used to
characterize preannouncements?

2. What is the appropriate conceptual framework of antecedents that incorporates:

a. the reconceptualized preannouncement construct;

b. conditions that inﬂuence preannouncement propensity including
previously unexamined organizational, strategic, and marketing
factors; and

3. What is the appropriate conceptual framework of preannouncement outcomes
that:

3. includes the investigation of previously unexamined attitudinal
outcomes related to buyers, employees, channel members, industry
inﬂuencers, and observers.

1.6 Summary and Overview of Remaining Chapters

Chapter 1 provided an overview of this dissertation. Background information
regarding preannouncements was presented, as well as a review of gaps in extant
literature. The research objectives relevant to this dissertation were stated and their
contribution to preannouncement research was discussed. A brief overview concerning

methodological tools and the rationale for their selection was also provided. Chapter 2

presents a critical review of relevant literature and provides the theoretical foundation for

the development of hypotheses relevant to the stated dissertation objectives. This chapter
also summarizes previous research limitations, discusses gaps within the literature, and
presents the research hypotheses to be tested. Chapter 3 details the research design and
methodology used in this dissertation. This chapter links research objectives and the
testing of hypotheses to information needs and data sources. The survey instrument is
described and the data collection processes are reviewed.

Chapter 4 presents empirical results related to measurement reliabilities, construct
validity, and hypotheses testing. Lastly, Chapter 5 presents conclusions, evaluates the
contributions, and summarizes the overall research effort with respect to implications for
theory development and manager behavior. Future research directions are developed and

limitations to the study are also presented.

Chapter 2

CRITICAL REVIEW OF LITERATURE AND
HY POTHESES DEVELOPMENT

2.1 Overview of Market Signaling

A signal is any action by a ﬁrm that provides a direct or indirect indication of a
ﬁrm's intentions, goals, motives, or internal situation (Porter, 1980). Signals are activities
or attributes of a ﬁrm which, by accident or design, alter the beliefs or convey
information to other market actors (Spence, 1974). Market signals convey information
that affect market beliefs, as well as expectations about the signaling ﬁrm.

Market signals can take two forms. Signals can be a behavioral action of the ﬁrm
(e. g., organization changes, launch of a new product, increases in product advertising) or
a communication of an action that has already been taken (e.g., acquisition or divestiture)
or is intended to be taken (e. g., new product preannouncement). Thus, signals, both
intentional and unintentional, convey information, either by action or communication (the
lack of action or communication by the ﬁrm when one is anticipated may also be

considered a signal).

10

11

Market participants or signal recipients may infer additional beliefs or
expectations about the signaling ﬁrm based on the action or communication. For
example, if a ﬁrm purchases a large tract of land in a geographic region new to the ﬁrm,
competitors may infer that the signaling ﬁrm has plans to expand into the region.

Thus market signals by a ﬁrm:

0 Can be intentional or unintentional.

0 Convey information.

0 Can be an action or a communication.

0 Can concern past, current, or future actions by the signaling ﬁrm.

0 Can provide insights into the signaling ﬁrm's perceptions of future industry states.

0 Can be " send to" and "received by" one or more market participants.

0 Affect the signal recipients' beliefs and/or expectations regarding the ﬁrm.

0 Can cause the recipient to make additional attributions regarding the signaling
ﬁrm.

Previous research has primarily examined: 1) what motivates ﬁrms to
intentionally signal and 2) what factors inﬂuence the likelihood that a recipient will
respond to a ﬁrm's signal (e.g., competitors and investors). Extant literature provides that
a ﬁrm's decision to intentionally signal is largely based on its consideration of the
potential gains and costs accruing from the signaling event (Eliashberg and Robertson,
1988). That is, the ﬁrm infers how its signal will affect the beliefs, expectations, attitude,
and, ultimately the behavior of the signal recipient(s) and then evaluates if the potential
beneﬁts (e.g., reduction in buyer switching costs) outweigh the potential costs (e.g.,
competitive cueing). Simply put, a tradeoff analysis is conducted by the ﬁrm in its efforts
to decide whether to signal or not.

Previous investigation regarding a signal recipient's likelihood to respond has

been limited to competitive and investor responses. Factors proposed to motivate

response include the recipient ﬁrm's 1) abilities to effectively and accurately receive the

12

signal (Heil and Robertson, 1991; Heil and Walters, 1993), and 2) assessment of the
signal's effect on their "livelihood" (e.g., market share, proﬁtability, market position,
stock price).

The action-reaction perspective that guides much of signaling research has
motivated the extensive use of a game theoretic, competitive behavior paradigm by
signaling researchers in their efforts to study antecedents of ﬁrm signaling and the
likelihood and type of response by recipient(s) (Eliashberg and Robertson, 1988; Heil and
Robertson, 1991; Heil and Langvardt, 1994; Porter, 1980).

For the purpose of this dissertation, the research focus will be limited to a subset
of signals, ﬁrm preannouncements, which entail deliberate communications by the ﬁrm
regarding future intended actions, as opposed to behavioral actions, unintentional signals,
or communications regarding past actions. This approach is consistent with previous
research and allows for the consideration of preannouncement as a directed activity by
ﬁrm management intended to inﬂuence market participants based upon notions of the
future. The relevance of future actions will be ﬁrrther explicated within Section 2.2.

2.2 Review of Previous Preannouncement Conceptualizations
2.2.1 Deﬁnition

In their seminal article, Eliashberg and Robertson (1988) deﬁne preannouncement
as the formal and deliberate communication before a ﬁrm undertakes a particular
marketing action such as a price change, new advertising campaign, or product line
change. The act of preannouncement is a ﬁrm level, multifaceted process comprising
informal and formal components under the direction of management (Rabino and Moore

1989)

13

2.2.2 Content

Previous research has largely studied preannouncements concerning "typical"
future marketing actions by ﬁrms such as price changes and new product introductions
(see Table 1). Firms also preannounce "atypical" future marketing actions such as the
formation of strategic channel relationships (e.g., alliances) or changes to organizational
form (e.g., joint ventures). Firms, therefore, signal their intemal stances regarding a
broad variety of intended actions. However, previous research has largely examined
preannouncement activity from a restricted content focus.

Additionally, previous research has generally classiﬁed preannouncement content
by the future action itself (e. g., price change or new product introduction). Within the
context of new product preannouncements (NPPs), Lilly and Krishnan (1996) proposed
that NPPs can vary according to the amount of comparative information that is provided.
However, theirs is the only previous study to address content attributes other than the
planned action itself.

2.2.3 Timing

In addition to content, preannouncements can differ according to the timing or
degree to which the communication is issued in advance of the intended action. The
importance of timing is evident when one considers that preannouncements are issued in
advance of intended actions and results from a selection process by the preannouncing
ﬁrm.

Late preannouncements (i.e., those communicated temporally proximate to the
intended action) have been proposed to preclude retaliatory actions by a competitor due

to lack of adequate response time (Eliashberg and Robertson, 1988).

14

Table l — Previous Future Action Research

 

Eliashberg, Robertson, and Rymon (1993)
Price Changes Heil and Langvardt (1994)

Heil and Robinson (1991)

Moore (1992)

Porter (1980)

 

Chaney, Devinney, and Winer (1991)
Eddy and Saunders (1980)
Eliashberg and Robertson (1988)
Farrell and Saloner (1986)

Heil and Robertson (1991)

New Product Introductions Heil and Walters (1993)

Lane and Jacobsen (1995)

Lilly and Krishnan (1996)

Lilly and Walters (1997)

Porter (1980)

Rabino and Moore (1989)

Thomas, Eliashberg, and Rymon (1995)

 

 

 

 

15

Table 2 - Lilly and Walters (1997) Preannouncement Timing Propositions

 

 

 

 

 

 

 

 

 

Likelihood for Competitors' to Retaliate Positively Related to Late Timing

Cannibalization Risks to Current Positively Related to Late Timing
Products

Degree of Complementary Products Positively Related to Early Timing

Innovativeness Of New PFOdUCt Positively Related to Early Timing

Complexity of Product Positively Related to Early Timing

Buyer Switching Costs Positively Related to Early Timing

Length of Purchase Decision Positively Related to Early Timing

Buyer Loyalty Positively Related to Early Timing

Degree to Frozen Product Features positively Related to Early Timing

 

 

 

 

16

Early preannouncements (i.e., those communicated well in advance of intended action)
provide for the development of complementary products by ancillary support ﬁrms and
reductions in buyer switching costs (Farrell and Saloner, 1986; Lilly and Walters, 1997;
Rabino and Moore, 1989). Although timing is largely accepted as a varying attribute of
preannouncements, little previous research exists regarding this topic beyond that offered
by Lilly and Walters (1997) (see Table 2).

Regarding new product preannouncments (NPPs), these authors propose that
competitive factors, product factors, buyer-related factors, and ﬁrm features inﬂuence the
selection of preannouncement timing by signaling ﬁrms. Additionally, if the objective of
the preannouncement is to inform and receive feedback, thus implying a desire for
informational exchange, the NPP timing tends to be earlier rather than later.

Examination of Lilly and Walters' proposed antecedents of preannouncement
timing selection by a ﬁrm indicate that many may be highly related and thus concerns
regarding confounding effects are raised. For example, product innovativeness, product
complexity, and buyer loyalty may indeed covary with each other as well as with buyer
switching costs. Despite some possible shortcomings, Lilly and Walter (1997)
nonetheless provide an exploratory inventory of propositions related to an important
feature of preannouncements - their timing as its relates to the future intended action.
2.2.4 Target Audience

Preannouncements can vary according to the recipient or target audience of the
signal (e. g., competitors, buyers, and investors) (see Table 3). Previous research has also
proposed that preannouncements can be targeted at multiple constituents in keeping with

the strategic objectives of the ﬁrm and its decision to preannounce (Eliashberg and

17

Table 3 - Previous Target Audience Research

Competitors

 

Eliashberg and Robertson (1988)
Heil and Langvardt (1994)

Heil and Robertson (1991)

Heil and Walters (1993)

Lilly and Walters (1997)

Thomas, Eliashberg, Rymon (1995)

 

Buyers

Eliashberg and Robertson (1988)
Farrell and Saloner (1986)

Lilly and Krishnan (1996)

Lilly and Walters (1997)

Rabino and Moore (1989)

 

 

Investors

 

Chaney, Devinney, and Winer (1991
Eddy and Saunders (1980)
Lane and Jacobsen (1995)

 

 

18

Robertson, 1988; Lilly and Walters, 1997; Rabino and Moore, 1989). For example,
preannouncements can be targeted at consumers in advance of new product introductions
to reduce switching costs, assist consumer learning, or delay purchase of competing
products. Competitors can be targeted for preannouncement as a means to enforce
competitive norms of conduct, elicit cooperative response, or preempt their development
of a "like new product". Preannouncements can also be targeted at investors to
effectively and favorably position the ﬁrm and its products within the ﬁnancial
community and develop the ﬁrm's reputation for innovativeness, particularly

important in technology industries.

However, little research has been conducted regarding the effect of
preannouncements on other important constituent groups such as employees, channel
participants, and opinion inﬂuencers/leaders In their seminal study, Eliashberg and
Robertson (1988) asked 87 managers to identify their "targeted audience" for recent
preannouncements by their ﬁrms. The managers' most frequent response was that the
ﬁrm's salesforce was the primary target. Customers were the next most frequent
selection, followed by distributors. Lilly and Walters (1997) also indicate that employees
and channel members are often targeted for preannouncement activity as their research
proposes that possible "interdepartmental and channel confusion" may inﬂuence a ﬁrm's
decision not to preannounce a new product.

Lastly, previous research has not examined opinion leaders or inﬂuencers as
possible targets for preannouncement. Opinion leaders or inﬂuencers are persons or
organizations regarded by a group, or by other people, as having expertise and knowledge

on a particular subject (Eliashberg and Shugan 1997). The group or individual uses the

l9

opinion leader as a source of information and counsel regarding the subject, and their
beliefs, expectations, and ultimately their attitudes may be affected by the opinion
leader's comments and perspectives (e.g., Car and Driver Magazine's assessment of new
car models). Opinion leaders or inﬂuencers pervade many industries such as
entertainment, high technology, consumer durables, and ﬁnancial services (Eliashberg
and Shugan 1997).

As previously discussed, the targeted audience of a preannouncement can be one
or more of the constituents in the preannouncing ﬁrm's marketing environment. Previous
research has proposed that management can target preannouncements not only by
category of target audience but also by the number or range of audiences selected. That
is, multiple signal recipients can be selected such that the resultant target audience is
large and non-exclusive (e.g., Microsoft's Windows 95 pre-launch advertising). In
contrast, the targeted audience can also be small and more exclusive such as
preannouncements targeted at only select employees, key customers and industry analysts
(Lilly and Walters, 1997). Previous research, however, has largely not studied target
audience exclusivity within the context of ﬁrm preannouncement activity.

2.2.5 Channel of Communication

Preannouncements are deliberate communications about what a ﬁrm intends to do
(Eliashberg and Robertson, 1988). But how is that communication delivered to the
targeted audience(s)? Preannouncements can be delivered via press releases, media
interviews with company management, trade show speeches, conventional advertising,
and management meetings with employees, customers, suppliers, distributors and

investors. Thus, the means or channel by which the communication is delivered can

20

vary. Preannouncements can be delivered via channels within which ﬁrm management
has a high degree of control over the communication's distribution, content, and format
(e.g., conventional advertising). Lower levels of control would be present when the
communication is part of a media interview by ﬁrm executives (e.g., interviews on
CNBC).

2.2.6 Intensity

Previous competitive signaling research has recognized that ﬁrm signals indeed
can be repeated or are part of a series of related signals (Moore, 1992). Extant literature
(see Table 4) proposes that multiple signals have a greater inﬂuence on the signal
recipient (Moore, 1992), affect a ﬁrm's signaling reputation (Heil and Robertson, 1991),
provide for improved signal interpretation and response by the signal recipient (Heil and
Robertson, 1991), and affect the relative importance of the recipient's inferences drawn
from the signals (Heil and Langvardt, 1994).

However, previous preannouncement research has largely examined
preannouncements as discrete single events rather than a series of communications
(related or unrelated) issued by a ﬁrm. The lack of consideration of preannouncements as
multiple signaling events provides that the intensity of the preannouncement, related
characteristics such as frequency (number of preannouncements within a speciﬁc time
frame) and cycle time (temporal distance between preannouncements), as well as the
effect of multiple preannouncements on the targeted audience(s) remains underexamined.
2.2.7 Towards An Improved Preannouncement Conceptualization

Examination of the extant preannouncement research suggests the complexity and

variety of preannouncement attributes such as content (e.g., information and details

21

Table 4 - Effects of Multiple Competitive Signals on Signal Recipient

 

Multiple Signals inﬂuence more than a single signal
(Moore, 1992)

 

Firm Signaling Reputation is related positively to its fulﬁllment of past signals
(Heil and Robertson, 1991)

 

Correctness of signal interpretation and response by signal recipient is positively related to
the number and similarity of previous signals received from same sender
(Heil and Robertson, 1991)

 

 

Inferences drawn from recent multiple signals gain importance
relative to prior beliefs
(Heil and Langvardt, 1994)

 

provided), timing (e. g., how far in the ﬁlture is the preannouncement targeted?), target
audiences(s) (e.g., who is the targeted audience(s) and how exclusive?), channel of
communication (e. g., what degree of control does the ﬁrm have over preannouncement?)
and, lastly, intensity (e. g., number, frequency, spacing of preannouncements) have been
largely underinvestigated. An improved preannouncement conceptualization that
incorporates these attributes may allow researchers to consider 1) a broader ﬁeld of
preannouncement application, 2) the ﬁrm's propensity to issue multiple
preannouncements that vary in timing, content, targeted audience, exclusivity, channel of
distribution, and intensity, and 3) the tendency of ﬁrms to issue, over time, a number of
unrelated preannouncements or related ones that are part of a preannouncement campaign

(e. g., progressive unveiling of new product attributes).

 

22

The following deﬁnition is provided as a means to re-examine the

preannouncement phenomena from a broadened application and target audience
perspective:
Preannouncement is a formal communication by a firm that provides a direct or
indirect indication of its intended future actions. The preannouncement
communication can be directed at one or many constituent parties within the firm’s
general market environment including buyers, suppliers, distributors, employees,
investors, industry experts and observers, and government regulatory agencies -- in
all cases, both current and prospective.

Preannouncements can be categorized as possessing ﬁve key attributes (see Table
5). First is preannouncement timing. Preannouncements regarding a planned future
action or management commentary regarding future industry trends and conditions can
be targeted at time frames years or days in the ﬁrture. Thus preannouncements can be
considered as positioned along a timing continuum. An early preannouncement (i.e.,
larger advanced time frame) provides lead-time for buyers to reduce switching costs (e.g.,
capital requirements and learning curves) and for channels of supply and distribution to
be adequately established. It can hinder competitor activity in the market by providing
future alternatives for buyers to consider. Perhaps, most overlooked in previous research,
early preannouncement allows the ﬁrm to position itself as an industry leader, innovator,
and a force that will impact future industry standards (Rabino et al., 1995).

The second preannouncement attribute is speciﬁcity. At the low end of the

speciﬁcity continuum, ﬁrm preannouncements provide somewhat vague evidence of

management’s intended future actions (e. g., future expected use of magnesium casting in

   

.........
-----

23

Table 5 - Key Attributes of Preannouncement

 

 

 

 

 

 

 

 

 

Intel’sprojected home PC
How far in advance of Varies from usage in the car 2005
Timing targeted time frame the years(early) to days (ear y); [B s .
ﬁrm is preannouncing (late) rn advance announcement of price cut
in the next ﬁscal quarter
(late).
Varies from vague Whirl .oolfs expected
Degree of message and generahze eSow conso ldatlon of various
Speciﬁcity content speciﬁcrty and to hlghly detail an roduct lines Within the next
detail specrﬁc (high) ew ears (low);
content For unveils their 1999
Lincoln Continental at
Geneva Auto Show (high).
Scott McNeally (CEO of
Degree of control the Varies from low Sun Micros stems rs
Channel ﬁrm has over the controlb the ﬁrm mtervrewe on C BC
message content, format, (indirect to high indirect);
and distribution control direct) erlca Online begins a
pre-launch advertrsrng
campaign for their new 3.5
software (high).
Varies from exclusive Bill Gates addresses VIPs at
Target Number and variety of (narrow) to non— his Technology Conference
Audience audiences targeted by the exclusrve (wrde) (narrow); Comp Ads for
message audience targets. that forthcoming C (wide)
Varies from many Ford Motor Company's
. . . . preannouncements Lincoln Navigator
. Within a time period, the tem orall proximate prelaunch advertising
Intensrty number and spacing of (big ) to ew or even campaign (high);
related one preannouncement Chrysler Corporation
preannouncements wrth greater temporal reannouncement of
spacmg between ice-Chaiman Robert's
communications Lutz's end of year
(low) retirement (low)

 

 

24

small displacement engines by Ford’s executive engineering staﬁ). Preannouncements
can also possess high speciﬁcity where comprehensive details are provided regarding a
speciﬁc future marketing action (e. g., release date, features, and pricing for a new car
model).

The third attribute of preannouncements concerns the means or channel of the
message communication. One end of this continuum is anchored by indirect
communication channels which are characterized by the company’s lower degree of
control over message distribution, content and format (e.g., media interviews by company
executives). F inns preannouncing via direct channels would possess a higher degree of
control over the communication of the message and would often make use of traditional
marketing communications tools such as advertising to deliver the message (e.g.,
Windows 95 pre-launch advertising campaign).

The fourth attribute of preannouncements is the targeted audience. Previous
research has indicated that preannouncements can be directed at one or more of the
constituents of the ﬁrm’s market environment including employees, investors, buyers,
and competitors (Eliashberg and Robertson, 1988; Heil and Langvardt, 1994; Heil and
Robertson, 1991; Chaney et al., 1991; Wind and Mahajan, 1987; Lilly and Walters,
1997). Preannouncements that possess some exclusivity of audience focus would be
narrow band preannouncements. An example of such a preannouncement would be
management conferences with key investor community analysts. A ﬁrm
preannouncement that is declared in a manner to ensure wide and non-exclusive
distribution (e.g., new product pre-launch advertising) would be a wide band

preannouncement.

25

Lastly, previous research has conceptualized ﬁrm preannouncements as discrete
single events. However, ﬁrms oﬁen, over time, issue a number of preannouncements
regarding a future intended action. A set of related preannouncements comprise a
preannouncement campaign. Within the set, each individual preannouncement can vary
in timing, speciﬁcity, channel of communication, and target audience. For example, ﬁrms
often migrate, over time, from conditions of low preannouncement speciﬁcity (e.g., broad
description of product attributes, credibility linkages, “laundry lists” of possible actions)
towards more speciﬁc messages (e.g., detailed listing of product features, distribution
channels, prototype display).

The preannouncement campaign itself could vary from conditions of low intensity
(i.e., low frequency and greater temporal spacing between individual preannouncements)
to high intensity (i.e., high frequency and smaller temporal spacing). Firms seeking to
inﬂuence a critical mass of opinion leaders within a short time ﬁame may engage in a
highly intense preannouncement campaign.

2.3 Antecedents of Preannouncement Propensity
2.3.1 Overview

One major research objective of previous preannouncement research has been the
ability to explain and predict preannouncing versus non-preannouncing behavior by
ﬁrms. A ﬁrrn's use of preannouncements (preannouncement propensity) is largely based
on its assessment of the beneﬁts of preannouncing versus the costs or risks inherent in the
activity (Eliashberg and Robertson, 1988). Previous research has been wholly restricted

to the examination of antecedents of new product preannouncements and the effects of

26

two broad categories, product development/adoption and competitor related variables
(see Table 6).

Additionally, previous studies have been largely conceptual in nature (Heil and
Langvardt, 1994; Heil and Robertson, 1991) and the empirical studies that have been
done focus on analyzing managerial interviews (Lilly and Walters, 1997; Rabino and
Moore, 1989) and smaller, convenience samples of 100 or less (Eliashberg and
Robertson, 1988).

2.3.2 Product Development and Adoption Antecedents

Rabino and Moore (1989) propose that a ﬁrm is more likely to make use of
preannouncements if the future product is higher in price, more complex or signiﬁcant to
the buyer. The authors note that the "sheer dollar value of a mainframe computer, up to
$5 million, might require an extended preannouncement process in keeping with the need
to provide an adequate planning window for the prospective customer”.
Preannouncements allow buyers the opportunity to manage the pace of product adoption,
reduce switching costs (e.g., obsolescence of incumbent capital base) or spreading them
over a longer investment time horizon (Eliashberg and Robertson, 1988).

Switching costs can also arise from consumer learning requirements (e. g., high
information search). However, Eliashberg and Robertson (1988) found no empirical
support for a positive relationship between consumer learning requirements and
preannouncement propensity. Their study describes consumer learning as the buyer's
requirements to expend major learning resources in advance of product adoption due to
the product's complexity or discontinuity with past products. Lilly and Walters (1997)

provide some needed insight regarding the null result when they propose that the

27

Table 6 - Previously Proposed Antecedents of Preannouncement Propensity

 

 
   

 

NPDAntmaents .. . ,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price of New Product (+) Moore & Rabino Not Limited Mgmt
1989) applicable Interviews

Complexity of New Moore & Rabino Not Limited Mgmt

Product (+) (1989) applicable Interviews

Signiﬁcance of New Moore & Rabino Not Limited Mgmt

Product (+) (1989) applicable Interviews

Consumer Switching Costs (+) Eliashberg & Yes Survey of 87 Managers
Robertson (1988) Probit Analysis

Consumer Learning Eliashberg & No Survey of 87 Managers

Requirements (+) Robertson (1988) Probit Analysis

Likelihood of Customer Lilly & Walters Not Interviews with 50

Confusion (-) Q997) applicable Managers

Firm Desire to Hype Product Lilly & Walters Not Interviews with 50

and Build Interest (+) (1997) applicable Managers

Keep Special Customers Lilly & Walters Not Interviews with 50

"In The Know" (+) (1997) applicable Managers

Firm Desire to Enhance Image Eliashberg & Yes Survey of 87 Managers

(+) Robertson (1988) Probit Analysis

Risk that Product Gets “Old” Eliashberg & Yes Survey of 87 Managers

Prior to Launch (-) Robertson (1988) Probit Analysis

Risk of Missing Launch Lilly & Walters Not Interviews with 50

Date (-) (1997) applicable Managers

Perceived Ability of Firm to Eliashberg & Yes Survey of 87 Managers

Deliver New Product (-) Robertson (1988) Probit Analysis

Need to Stimulate Demand (+) Eliashberg & Yes Survey of 87 Managers
Robertson (1988) Probit Analysis

Need to Stimulate Demand (+) Eliashberg & Yes Survey of 87 Managers
Robertson (1988) Probit Analysis

Need to Test Design or Product Lilly & Walters Not Interviews with 50

Forecast (+) (1997) applicable Managers

Number of Divisions Involved Moore & Rabino Not Limited Mgmt

in Product Launch (+) (1989) applicable Interviews

Likelihood of Departmental Lilly & Walters Not Interviews with 50

CODfUSIOD (-) (1997) applicable Managers

Importance of Distribution Eliashberg & Yes Survey of 87 Managers

Advantage to Preannouncing Robertson (1988) Probit Analysis

Firm (+)

Core Product (-) Lilly & Walters Not Interviews with 50
(1997) applicable Managers

Cannibalization Risks to Eliashberg & Yes Survey of 87 Managers

Incumbent Products (Q Robertson (1988) Probit Analysis

Encourage Purchase Delay (+) Lilly & Walters Not Interviews with 50
(1997) applicable Managers

 

 

28

 

 

  
        

 

 

 

 

 

 

 

 

 

 

 

 

Table 6 (can't)

Competitive-Antecedents .: a v . . . ._ .p- ~ .--. . -- - .» . , -_ -. ,
Likelihood of Competitive Lilly & Walters Not Interviews with 50
Learning (—) (1997) applicable Managers
Likelihood of Competitive Eliashberg & No Survey of 87 Managers
Retaliation (-) Robertson (1988) Probit Analysis
Competitive Hostility (-) Eliashberg & Yes Survey of 87 Managers

Robertson (1988) Probit Analysis
Antitrust Concerns (-) Eliashberg & Yes Survey of 87 Managers
Robertson (1988) Probit Analjsis
Market Dominance of Eliashberg & Yes Survey of 87 Managers
Preannouncing Firm (-) Robertson (1988) Probit Analysis
Firm Size (-) Eliashberg & Yes Survey of 87 Managers
Robertson (1988) Probit Analysis

 

 

likelihood of consumer conﬁision (more likely with complex and technologically
discontinuous products) negatively affects preannouncement propensity.

However, this notion of consumer learning requirements remains appealing and
may be better investigated from the perspective of buyer involvement effects on purchase
behavior. Gatignon and Robertson (1985) proposed that awareness and knowledge
precede purchase trial in high involvement goods (e.g., technology-based products).
Indeed, Eliashberg and Robertson discuss involvement's relevance to new product
adoption but seemingly fail to properly operationalize and thus test the construct's effect
on the frrm's use of preannouncements.

Additionally, ﬁrm desire to "hype" the product and build interest has also been
proposed as positively related to preannouncement propensity (Lilly and Walters 1997).
The relationship is theoretically based on Wind and Mahajan's (1987) construct of

"marketing hype", the ﬁrm's creation of a supportive and receptive environment for new

29

and innovative products. Such an environment enables product adoption. Lilly and
Walters (1997) point out that the desire to build interest and keep special customers “in
the know” is common across a wide range of settings. Similarly, the ﬁrm's desire to
create or enhance a favorable public image, often based on product development plans,
has been proposed to motivate preannouncement propensity (Eliashberg and Robertson,
1988). Conversely, the risk of not fulﬁlling expectations (e. g., product “old” when it
launches, missing launch dates, inability to deliver) disinclines ﬁrms to preannouncement
because of concerns regarding reputational damage (Eliashberg and Robertson, 1988;
Lilly and Walters, 1997)

Building positive expectations about future products may not be targeted at only
buyers. Other external and internal stakeholders (e.g., investors, channel
members, opinion leaders/inﬂuencers, and employees) may be similarly affected by
preannouncements (Eliashberg and Robertson, 1988). Each of these constituents has a
signiﬁcant and interrelated effect on new product adoption; thus the size or range of the
prospective targeted audience may be related to a ﬁrm's preannouncement propensity.

Previous research has proposed a positive relationship between ﬁrm desire to
stimulate demand and preannouncement propensity (Eliashberg and Robertson, 1988).
Stimulation of demand needs refers to the inﬂuence of "demand-side economies of scale"
that are prevalent in industries where product adoption is inﬂuenced by the presence of
network extemalities (i.e., product's value to the buyer is a function of the number of
users) and speciﬁcation standardization. Within such industries, the building of
awareness, interest, and positive expectations (Lilly and Walters, 1997) about the new

product within a broad base of constituents (e.g., buyers, channel members, investors,

3O

opinion leaders/inﬂuencers, and ancillary support ﬁrms) would seem to carry special
importance.

One aspect of preannouncements is that they are directed at future intended
actions and are ﬁequently about products that are not yet available. However, in some
industries, product purchase made in advance of product availability is the norm. For
example, previous research has examined the cruise industry where consumers make their
purchase well in advanced of the consumption or delivery of the product; therefore,
cruise lines communicate their schedules, destinations, and ships months before the
departure dates (Lilly and Walters, 1997). In short, the degree to which buyers purchase
or plan the purchase (i.e., purchase cycle time) in advance of product delivery or
consumption is proposed to motivate preannouncements.

Time related purchase behavior effects are also relevant to installed base products
(e.g., capital equipment, computer software). Indeed, installed bases are implicitly
reduced by preannouncements as they encourage purchase delay (Farrell and Saloner,
1986; Lilly and Walters, 1997). Therefore, incumbent ﬁrms would attempt to protect
their own installed base and prevent customers' defections by providing advanced
information regarding their own ﬁiture products (Lilly and Walters, 1997).

Turning to product development activities, previous research has proposed that
the need to test future product designs and forecasts is positively related to
preannouncement propensity (Lilly and Walters, 1997). The desire of the ﬁrm to pretest a
design with buyers and other channel members (e.g., suppliers and distributors) requires
that the ﬁrm must reveal information about the ﬁlture product to those constituents. For

example, it is common for automotive manufacturers to include suppliers and dealers in

31

the design phase of future products well in advance of product introduction.
Additionally, consumer package goods are frequently test marketed, thus disclosing an
advanced prototype to distributors and consumers, to determine response to product
design and validate future product sales forecasts.

The desire of the ﬁrm to test design and product forecasts points to the ﬁrm's need
for feedback ﬁ'om consumers, employees, and channel members in advance of product
launch. This need for feedback perhaps indicates that the degree to which new product
development activities are characterized as integrated (i.e., many groups involved in
product launch activities) and interactive (i.e., substantial advanced testing/feedback of
product with buyer, employee and channel groups) may indeed inﬂuence a ﬁrm's
preannouncement propensity. This notion is further supported by Moore and Rabino's
(1989) proposition regarding the positive effect of "number of divisions involved in
product launch" on ﬁrm preannouncement. However, Lilly and Walters (1997) propose
that the likelihood of interdepartmental conﬁision is negatively related to the
preannouncement propensity.

Previous research has also argued that the need for new product distribution
advantage is positively related to preannouncement propensity (Eliashberg and
Robertson, 1988). This effect results from the preannouncing ﬁrm's desire to help
distributors clean up their inventories, build advance support for the new product within
their distribution channel, and gain better distributor cooperation. The success of some
new products (e.g., entertainment and fashion goods) is strongly affected by a ﬁrm's
distribution prowess. In instances such as these, the diffusion of the new product is

substantially linked to the ability to distribute the new product. That is, the rapidness of

32

diffusion is positively related to the rapidness of product distribution. Further
investigation of the relationship between preannouncement propensity and the need for
rapid deployment of the new product, possibly due to imitation risks (e.g., copying of
new product by competitors) and social imitation rewards (e. g., fashion goods diffusion)
may provide some additional insights into conditions that foster preannouncement.

Finally, regarding product development and adoption antecedents, perceived risks
to current products, via cannibalization, discourages ﬁrms from preannouncing future
products within their core product line (Eliashberg and Robertson, 1988; Lilly and
Walters, 1997).

2.3.3 Competitive Antecedents

As previously discussed, the extant literature regarding preannouncements has
largely been based on competitive behavior. That is, an undesirable result of
preannouncement could be a damaging competitor response or a competitive learning
opportunity (see Table 6). However, previous research results indicate that competitive
hostility negatively effects preannouncement propensity, while likelihood of competitive
retaliation does not (Eliashberg and Robertson, 1988). Why these seemingly conﬂicting
results?

Eliashberg and Robertson (1988) conceptualize competitive retaliation as the
response of a single competitor, while the construct of competitive hostility describes the
"collective" competitive response from a group of industry participants. Intensely
competitive industries are characterized by harsh business climates and precarious
industry conditions (Covin and Slevin, 1989). Also, such industries generally lack

exploitable business opportunities and thus ﬁrms face signiﬁcant difﬁculties in advancing

33

self-determined strategies (Miller and F reisen, 1982). Within such a "zero sum"
environment, the participating ﬁrms may provide the basis for a network of highly
involved interaction: the moves of one ﬁrm are indeed met with multiple responses from
a range of competitors. Thus it seems that the preannouncing ﬁrm is more concerned with
a "collection" of competitive responses rather than simply one response from a single
ﬁrm.

The effect of an anticipated competitive response would be greater based on the
potential number of competitors responding, the strengths of their responses, and the
number of fronts attacked (e.g., multiple market segments, multiple geographic segments,
multiple product lines). The risks inherent in preannouncing would seem to increase
based upon the breadth, aggressiveness, and size of competitive responses.

Previous research has largely regarded antitrust concerns (see Table 6) as a
subclass of competitive antecedents that negatively inﬂuence preannouncement
propensity (Eliashberg and Robertson, 1988, Heil and Langvardt, 1994; Heil and
Robertson, 1991). Additionally, propositions related to ﬁrm size and market dominance
result from antitrust concerns (Eliashberg and Robertson, 1988).

2.3.4 Need for An Improved Theoretical Framework

Previously proposed antecedents of preannouncement have largely been based on
the ﬁrm’s contingent beliefs regarding the preannouncements’ effects, favorable or
unfavorable, on target audience(s). However, it is important to note that previous
research, wholly restricted to new product preannouncements, largely examines
antecedent effects at the variable rather than the construct level. This result is not

surprising considering that primarily an inductive research approach has been used.

34

However, the absence of constructs means that a systematic and interrelated view
of antecedent effects on preannouncement phenomena is largely lacking. Because this
fragmented literature has not been tied together at a conceptual level, a cogent and
overarching understanding of preannouncement antecedents has not been developed.

Additionally, the predominance of a game theoretic perspective indicates that
previous researchers largely ignored ﬁrm-level constructs and the use of
preannouncements by ﬁrms to achieve a speciﬁc goal (e.g., new product success); thus,
the effects of organizational, strategic, and marketing antecedents on preannouncement
propensity have been largely underexamined.

Within the context of the dissertation, a conceptual framework will be developed
(see Figure 1) that addresses the gaps identiﬁed above. The framework will be limited to
a categories of antecedent constructs that foster the ﬁrm's use of preannouncements to
achieve new product success. The model and accompanying hypotheses are presented in
the following Section 2.3.5.

2.3.5 A Model of Preannouncement Antecedents

Although previous research has largely been restricted to new products,
preannouncements may also include communications regarding channel relationships
(e.g., Intel and Mattel to co-develop smart toys), and discussion of future product
development plans among the ﬁrm's internal staff (e.g., marketing, engineering,
production, and ﬁnance), as well as, other channel members (e.g., distributors and
suppliers). The model's focal dependent variable, a ﬁrm’s propensity to preannounce, is

deﬁned as the tendency of a ﬁrm to communicates, via public statements (e. g., press

35

Executive

 

Market
Orientation

H9 (+)

 
     
     
   
  
 
    

   

 
    
 

Buyer

Equity
Involvement

H4(+) Building

328“)

H3(+)
Distributor NPD
Integration

  
 

 

Rapid
Deployment
Requirement

Figure 1 - A New Product Success Model of Preannouncement Antecedents

Competitive

H5b(+)

H1(+)

H11(+

 

H10(+)

 
   
 

A F irm’s
Propensity to
Preannounce

   

   
 

Supplier NPD
Integration

H6(+L

 

36

releases, management interviews, executive industry speeches, employee meetings,
conferences), its future intended actions to a broad base of constituents (e.g., investors,
employees, suppliers, distributors, buyers, ancillary support ﬁrms, industry inﬂuencers
and observers).

The ﬁrst series of hypotheses (HI to H4) investigates the effect of buyer
involvement, the degree to which a buyer's need for knowledge is a precursor to trial and
purchase, on the constructs: 1) a ﬁrm’s propensity to preannounce, 2) competitive equity
building, 3) distributor NPD integration, and 4) rapid deployment requirements. The
model incorporates a second exogenous construct, executive market orientation, as a
means to examine the cognate inﬂuence of top management team behavior, an
organizational construct, on a ﬁrm’s propensity to preannounce as well as competitive
equity building (HlO,Hl 1).

The model also examines the effects of four other constructs. First is rapid
deployment requirements (HSa & b, H6). The two constructs, distribution and supplier
NPD integration (H7a & b, H8a & b, H9), examine the relationship between a ﬁrm's need
for pre—launch training, planning, and integration of external organizations (i.e.,
distributors and suppliers) and its propensity to preannounce and competitive equity
building. Lastly, the effect of competitive equity building (HlZ) is examined as a means
to evaluate if factors related to consumer preference formation inﬂuence a ﬁrm’s
propensity to preannounce. An elaboration of the theoretical rationale for these

relationships follows.

37

Buyer Involvement
Buyer involvement refers to conditions where the buyer's need for knowledge is a

precursor to product trial and purchase. The need for knowledge results from (Gatignon

and Robertson, 1985):

0 Consumer learning requirements that refer to a consumer's need to acquire
information or skills to make use of the product, understand its function, or realize its
beneﬁts. Consumer learning requirements would be expected to be higher for high
technology goods and discontinuous product innovations.

0 Innovation or switching costs that concern the incremental expenses, beyond the
product, that result from its adoption. Such expenses can include obsolescence of an
installed capital base and the required adoption of ancillary products such as in the
case of product systems (e.g., computer software)

Preannouncements, at their simplest, offer ﬁrms a way to communicate
information about their future products and product plans. Preannouncements therefore
respond to the involved buyer's need for information regarding product features, function,
and beneﬁts, as well as reduce switching costs. (Eliashberg and Robertson, 1988).

However, the content of preannouncements extends beyond product features and
availability and may include information about other adopters (e.g., Johnson Controls
announces ﬁlture vehicle development programs with Ford Motor Company), as well as
comments and recognition by opinion leaders or industry experts (e.g., Microsoft
announces Gartner Group's positive review of Windows 98 beta version). These
examples point to the use of preannouncements as a way to communicate favorable-
endorsements of a ﬁrm's new product development activities and reduce uncertainty. The
effects of such endorsement-based preannouncements suggest that product credibility and
acceptance can also be enhanced.

Preannouncements also offer the ﬁrm with a means to communicate product

attributes, beneﬁts, and endorsements to a wide range of target audiences and the ability

38

to customize messages to ﬁt each target's needs. Thus, preannouncements can be tailored
and issued to address the unique concerns of multiple functional constituents (e.g.,
ﬁnance, engineering, and production), as well as, dispersed geographic buyer segments
common to many multinationals.

Additionally, the growing use of the Internet as a "database" of product
information (formally communicated by the companies via their own websites and
informally provided by online chat rooms, listserves, and message boards) points to its
growing position as a new, technology based, word of mouth that is particularly relevant
to involved buyers. Preannouncements are a communciation tool that capitalizes on this
developing technology. Thus,

H1: Buyer involvement is related positively to
a ﬁrm’s propensity to preannounce.

Buyer involvement also places demands on a ﬁrm's product development
activities. The involved buyer's need for extensive information regarding product
attributes, functionality, beneﬁts, and compatibility with other products and technologies
suggests that product development participants, both internal and external to the ﬁrm,
play key roles in product adoption.

Distributor and supplier NPD integration is the tendency of a ﬁrm to involve its
suppliers and distributors in NPD activities prior to product launch. Higher levels of
buyer involvement may necessitate considerable training and planning by distributors and
suppliers in advance of product introduction to ensure satisfactory response to buyer
queries and concerns about the product. Ancillary support organizations (e.g., computer
peripherals) are similarly affected as they integrate the product plans of lead developers

into their own product strategies. Thus,

39

H2a: Buyer involvement is related positively to
distributor NPD integration.

H2b: Buyer involvement is related positively to
supplier NPD integration.

As previously discussed, higher levels of buyer involvement can enlarge the
ﬁrm's and its distributors' roles as educators and facilitators of product adoption.
Additionally, the ﬁrm and its distributors are affected by the involved buyer's emphasis
on product availability. The social relevancy aspect of involvement suggests that such
buyers are prone to imitation adoption effects (Mahajan et al., 1990); that is, the broader
the social acceptance of the product is conveyed by word of mouth or visual endorsement
(e.g., fashion and entertainment goods), the greater is the product adoption rate. Under
such conditions, ﬁrms would seek to distribute the product broadly and expeditiously
across the market. Failure to service demand due to supply or distribution constraints
would reduce the effects of normative adoption drivers and decrease product adoption
rates. In short, the buyer adoption model is a demand based model (Mahajan et al., 1990).
Thus,

H3: Buyer involvement is related positively to
rapid deployment requirements.

Involved buyers place a high degree of emphasis on uncertainty reduction and
thus they engage in extensive pre-adoption information search and planning, as well as
consideration of social referents. Absence of industry standards would further exacerbate
the concerns of involved buyers due to a lack of product referents, low salience or
confusion regarding product attributes, and high ambiguity and unpredictability of
purchase implications. Under such conditions, products are often evaluated by the buyer

based on the seller's reputation (Rumelt, 1987; Spence, 1974; Weigelt and Camerer,

40

1988). To further reduce uncertainty for involved buyers, ﬁrms would attempt to
establish a favorable industry reputation and position its product as the prototypical
market standard (Carpenter and Nakamoto, 1989, 1990). In attempting to establish its
product as the market prototype or standard, ﬁrms may engage in management activities
beyond those previously considered as part of traditional brand equity building.

Firms seeking prototypical status would engage in communication activities
deﬁned as competitive equity building, which is different from brand equity building in at
least six ways (see Table 7). First, the target audience associated with competitive equity
building is broader and more varied than that typically discussed in brand equity
literature. The latter seeks to inﬂuence the individual consumer while competitive equity
building targets the minds of suppliers, distributors, ancillary support ﬁrms (e.g., software
developers in the computer industry), industry experts, the media (both general business
and trade related), and the investment community in addition to the consumer.

Second, competitive equity building attempts to inﬂuence the development of the
perceptual market structure, while brand equity building focuses on the creation of
positive mental associations between the frrm’s brand and already established perceptual
market structures. Third, the target inﬂuence event relevant to brand equity building
focuses on predisposing action; alternately, competitive equity building is directed
towards achieving prototypical product class status within the minds of the broader
targeted market audience. Fourth, brand equity focuses on near term time frames
associated with purchase, while competitive equity building has no such time frame

limitation.

41

Table 7 - Comparison of Competitive and Brand Equity Building

Broad net of industry
participants (e. g., buyers,
suppliers, distributors,
investors, and other industry
observers)

‘5 “‘4 'CV '
. -\ t s...
\em-i. nQM-M ‘Nn New.“

Primarily Buyers

 

Attempts to inﬂuence
development

Attempts to develop
associations between brand
and perceptual structure

 

Achieve product class
standard

Predispose purchase

 

No limitations

Near term

 

Highly cognitive and
complex

Relatively simple brand
associations

 

Includes industry forums,
industry conferences,
executive interviews in
trade and general business
iublications

 

 

Traditional advertising

 

 

42

The ﬁfth proposed difference between competitive and brand equity concerns the
message content of the ﬁrm’s marketing communications. In building competitive equity
targeted at a broad base of constituents, ﬁrms would articulate and campaign a product
vision that includes their internal model of future product development, industry trends,
and market practices. Firms engaged in competitive equity building are attempting to
resolve uncertainty in their favor, inﬂuence development of industry standards, and
ultimately establish a favorable industry reputation. They may ﬁirther reinforce these
efforts by communicating their commitment to achieving and maintaining leadership
status within the product class. In contrast, traditional advertising and promotion largely
focus on the communication of simple brand associations and relatively small levels of
product information.

The sixth and ﬁnal difference between competitive and brand equity building is
related to choice of channels for distribution of the marketing communication.
Traditional advertising is limited in its capability to effectively communicate the concepts
and commitment associated with competitive equity building. The focus of traditional
marketing communication methods is on the single buyer as the decision maker, and
advertising and promotion have practical limitations regarding their ability to transmit
complex cognitive content. Thus, ﬁrms attempting to build competitive equity will
acquire more appropriate venues for their communication activities by actively seeking a
signiﬁcant public proﬁle via extensive participation in industry conferences and forums,
as well as welcoming coverage by the media.

Competitive equity building can be considered the means by which ﬁrms attempt

to reduce uncertainty in their favor, inﬂuence industry , and achieve prototypical product

43

status. The involved buyer, due to its emphasis on uncertainty reduction, would be
favorable inﬂuenced by competitive equity building. Thus,

H4: Buyer involvement is related positively to
competitive equity building.

Rapid Deployment Requirements
Rapid deployment requirements is deﬁned as the ﬁrm's need to distribute new

products broadly and expeditiously throughout their market. Under higher levels of rapid
deployment requirements, the need for the ﬁrm's suppliers and distributors to coordinate
and plan the new product launch and rollout would be heightened. Issues such as
production capacity, sub-component availability and inventory requirements, market
segment introduction dates, stocking requirements, and service levels would be jointly
considered. Path dependent tasks (i.e., completion of task is a requirement for many other
project tasks and is not substitutable) and critical constraints would be extensively
scrutinized. Tightly integrated efforts across multiple organizational boundaries would
also be evident. Thus,

H5a: Rapid deployment requirements are related positively to
distributor NPD integration.

H5b: Rapid deployment requirements are related positively to
supplier NPD integration.

Under rapid deployment conditions, preannouncements can be used by the ﬁrm to
discuss and update future product plans with suppliers and distributors.
Preannouncements can provide information relevant to the development of production
schedules, inventory requirements, warehousing, and logistics support. Rapid deployment
also involves (1) the distribution of information about the product to buyers such as

which retail (in the case of consumer goods) or sales regions (in the case of industrial

44

goods) will carry the product, (2) when it will be available, (3) plans for additional
product versions or related peripherals, and even (4) purchase ﬁnance options.
Preannouncements provide a low cost and timely means, often through the Internet or
company websites, to prepare and inﬂuence the inforrnation base available to buyers
further engendering rapid deployment capabilities. Thus,

H6: Rapid deployment requirements are related
positively to a ﬁrm’s propensity to preannounce.

Distributor and Supplier NPD Integration

Previous research has proposed that communication among internal new product
project team members, as well as outsiders (e.g., suppliers and distributors) allows for the
improved integration of efforts across a broad scope of market participants (Brown and
Eisenhardt 1995). The greater the integration, the more successful the development
process.

Primarily, two types of product development related communication have been
investigated. First, ambassadorial communications, which consists of lobbying activities
to inﬂuence various groups (e.g., suppliers, distributors, investment community) to
support the new product project and overall impression management (Ancona and
Caldwell, 1990). The second type, task related communication, deals with the
coordination of technical or design issues among cross functional team members or
departments, as well as, channel members (Dougherty, 1990, 1992). Both the levels of
ambassadorial, as well as, task related communications are positively affected by the
cross ﬁlnctional nature of the team (i.e., how many functional groups involved in product
launch both internal and external to the ﬁrm), the size and geographic dispersion of the

team, the complexity of the new product, and its departure from incumbent technologies,

45

manufacturing processes, and targeted buyer segments (Ancona and Caldwell, 1990,
1992). Previous research indicates that communication by a wide range of groups in
advance of new product introductions inﬂuences team integration and results in higher
performing development processes (e.g., speed to market) (Keller, 1986, Brown and
Eisenhardt, 1995).

Preannouncements provide ﬁrms with means to communicate to the various
individuals and organizations involved and 1) provide information that is necessary for
them to perform their respective product development tasks, 2) create a feeling of
connectedness that will motivate commitment to the project, 3) enhance opportunities for
ﬁrrther information exchange and feedback, and 4) develop a favorable overall
impression regarding the ﬁrm's ﬁrture new product plans. Preannouncements are
relatively inexpensive to produce and provide for timely updates and response to queries
throughout the new product development process. They can be targeted towards all
interested parties (e.g., a general press release regarding introduction dates) or
exclusively communicated (e.g., meeting with key investment community analysts).
Thus:

H7a: Distributor NPD integration is related
positively to a firm’s propensity to preannounce.

H7b: Supplier NPD integration is related
positively to a firm’s propensity to preannounce.

Distributor NPD Integration is deﬁned as degree to which the ﬁrm seeks the
involvement of distributors in the new product development activities. The need to

involve distributors often results from the need for sales forecasting and inventory

46

planning. The satisfaction of product demand by distributors implies that supply chain
participates will coordinate in a “demand-pull” fashion. Thus:

H8: Distributor NPD integration is related
positively to supplier NPD integration.

Executive Market Orientation .
Executive marketing orientation describes top management's involvement and

interest in marketing activities. Higher levels of executive market orientation provides
that executive management would: 1) emphasize marketing's role (in the activity rather
than departmental sense) in the development of ﬁrm strategies, business solutions, and
organizational structures, 2) participate directly in marketing related boundary spanning
activities (e.g., meeting with key customers, missionary new customer development), and
3) assume a high proﬁle and accessible position within the ﬁrm and the industry.
Previous research has proposed that a ﬁrm's top management does directly
inﬂuences organizational response to market issues (Kohli and Jaworski, 1990). For
example, management may personally meet with current and prospective customers;
champion rapid response, customer focused new product and service oriented programs.
Firms with greater levels of executive market orientation would be characterized by
frequent and compelling executive communications (as opposed to management edict)
with employees and other industry participants regarding the emphasis the ﬁrm places on
execution of the marketing concept, which includes not only customers needs, but also
the importance of the market forces that could inﬂuence future needs, and the means by
which the ﬁrm could effectively and proﬁtably respond (Kohli and Jaworski, 1990).
Firms with higher levels of executive market orientation (e.g., executive

involvement at trade shows and participation in distributor and supplier conferences)

47

would emphasize the need for a proactive, future oriented, and visible marketing stance.
The endorsement and promotion by top management would engender the achievement of
a favorable industry reputation and its associated advantages. Thus,

H9: Executive market orientation is related
positively to competitive equity building.

Higher levels of executive market orientation suggest that top management would
seek out roles as boundary spanners for the organization. Adopting this position suggests
that team members act as the nexus of a strategic communication network to a variety of
organizations, both internal and extemal to the ﬁrm. Top management would participate
in the communication of information regarding the ﬁrm's performance and priorities.
Additionally, the communications could focus on management's perceptions of future
industry states (e. g., technology trends and market growth), as well as ﬁlture strategies
and planned actions (e.g., new product development plans and market entry plans).

Preannouncements are frequently made by or subject to the approval of top
management. In press release form, they are subject to public disclosure requirements and
thus need the scrutiny and approval of legal and executive management. Higher levels of
executive marketing orientation imply that top management would be active in and
supportive of directed communication within the ﬁrm and with external groups (e.g.,
buyers, channel members, investors, industry expert and observers). Thus:

H10: Executive marketing orientation is related
positively to a firm’s propensity to preannounce.

Competitive Equity Building
Competitive equity building is the process by which ﬁrms attempt to resolve

uncertainty in their favor, inﬂuence development of industry standards, and ultimately

establish a favorable industry reputation. Firms attempting to build competitive equity

48

would seek the awareness by other industry participants (e.g., buyers, suppliers, channel
members, industry experts and observers) of not only ﬁrm products but also
management’s opinions regarding industry trends and market conditions.

Such ﬁrms would seek a “high proﬁle” position and desire the “industry
spotlight” as means to communicate and campaign their internal strategic vision and thus
build competitive equity. Management would value public recognition of their insights
and opinions regarding the industry and seek to be endorsed via their involvement in
communication related events and venues. As such, ﬁrms engaged in competitive equity
building would provide frequent public statements regarding their ﬁrm’s future planned
actions and perspectives on industry trends and practices. Thus,

H11: Competitive equity building is related
positively to a firm’s propensity to preannounce

2.4 Preannouncement Outcomes
2.4.1 Overview

The examination of preannouncement outcomes is concerned with the study of
consequences related to a ﬁrm's issuance of preannouncements. Previous
preannouncement research has been wholly restricted to behavioral responses by
competitors and investors (e.g., matching a price cut, purchasing stock) and focuses on
what factors motivate the likelihood of responses by the two audiences.
2.4.2 Likelihood of Competitive Response Motivators

Motivators of a competitor's likelihood to respond to a preannouncement (see
Table 8) include the attributes of the preannouncement, preannouncing ﬁrm, competitor,
as well as industry factors. A preannouncement that is unambiguous and can be

interpreted quickly, easily and with minimum error is a clear preannouncement (Heil and

49

Robertson, 1991). Clear preannouncements ensure that the competitor will expend less
resources assessing the meaning of the preannouncement, limit its consideration set of
possible responses, and therefore a response decision can be made more quickly. Thus
time, effort, and uncertainty all seem to play a role in determining the likelihood of a
competitor's response.

The consistency of a preannouncement with previous communications is used by
the competitor to check the credibility of the signal (Heil and Robertson, 1991). If it is
deviant from previous preannouncements, the competitor will be less likely to believe it
or may need to expend greater effort interpreting its meaning, thus reducing the
likelihood of response. Additionally, preannouncements are viewed as increasing hostile
if they threaten the livelihood of the competitor or if they deviate from industry norms
regarding the ratio of competitor-cost versus preannouncer-gains (Heil and Robertson,
1991; Heil and Walters, 1993; Thomas, Eliashberg, and Rymon, 1995). Previous research
in game theory predominately suggests that competitive actions and the signiﬁcance of
their consequences positively affects competitive response (Heil and Walters, 1993; Heil
and Robertson, 1991).

The effect of each preannouncement attribute is strengthened when the competitor
has a baseline from which to assess the preannouncement (Heil and Robertson, 1991).
That is, multiple past preannouncements allow the competitor to more easily and

accurately evaluate the communication's clarity, consistency, and hostility.

   

50

Table 8 - Previously Proposed Antecedents of
Competitor Outcomes

 

  

 

 

 

 

 

 

 

   

 

He1l

Yes Robertson, Eliashberg, Survey of 346
and Rymon (l995) Key Informants
Discrimminant Analysis
Preannouncement
Hostility (+) Yes Heil and Walters (1993) Survey of 106
Marketing Managers
Regression
Not Heil and Robertson
a licable (199 1) Conceptual
Preannouncement Not Heil and Robertson Conceptual
Clarity (+) applicable (1991)
Preannouncement Not Heil and Robertson Conceptual
Consistency (+) applicable (1991)
# of Related Simulation of a 2
Preannouncement Yes Moore (1992) player bidding situation
+ usin 35 . . vers

 
 

  

 

   

 

Exit Costs (+) “

 

Preannouncrng Not and Robertson
F irrn's applicable ( 199 1) Conceptual
Reputationgﬂ
Preannouncing Not Heil and Robertson Conceptual
Finn's applicable (1991)
Commitment (+) Survey of 106
No Heil and Walters marketing managers
(1993) R - es 'on

-. c“ «v. eke-max w:-
Hell and Walters (1993)

 

    

\ -:-.\'\:«.\ Ext
Survey of 106

 

 

 

 

 

 

marketing managers
Rggession
Market Share (+) No Heil and Walters (1993) Survey of 106 marketing
managers
Regression
Reception Not Heil and Robertson Conceptual
Expertise(+)) a licable (1991)

 

 

 

 

51

Table 8 (Con't)

     

 

 

 

 

 

 

 

 

Market Growth Hell and Walters (1993) Survey of 106

Rate(-) marketing managers
Regression

Market Not Heil and Robertson Conceptual

Heterogenity(-) applicable (1991)

Industry Life Not Heil and Robertson Conceptual

Cycle(+) applicable (1991)

Fixed Costs and Not Heil and Robertson Conceptual

Economies of applicable (1991)

Scale(+)

 

Turning to preannouncer attributes, the reputation of the preannouncing ﬁrm
positively inﬂuences competitor response via two mechanisms. First, a ﬁrm's reputation
as a preannouncer is assessed by the competitor; that is, has the ﬁrm previously
demonstrated its propensity to fulﬁll its preannouncements (Heil and Robertson, 1991).
Second, the general reputation of a ﬁrm declines if its preannounced future actions go
unfulﬁlled. Thus, ﬁrms that have more favorable reputations will be reluctant to take
risks by blufﬁng or preannouncing future actions that have a greater probability of going
unfulﬁlled (Heil and Robertson, 1991).

Preannouncer commitment refers to the competitor's perceptions concerning the
likelihood that the preannounced future planned action will be fulﬁlled or is credible. The
likelihood would increase if the preannouncer has the demonstrated means to take the

future action (e.g., capital availability and production capabilities), the future action is

52

perceived as important to the preannouncer (e.g., core products), and the preannouncer
has few strategic alternatives other than the future action (Heil and Robertson, 1991). As
previously discussed, a favorable ﬁrm reputation should also increase the likelihood of
planned action fulﬁllment.

The competitor's perception of commitment is also dependent on the channel used
for the communication of the preannouncement. More public channels (especially mass
media such as TV advertising) suggest that an increased number of audiences are
involved and the competitor's commitment attributions regarding the preannouncement
will increase (Heil and Robertson, 1991).

Regarding competitor motivators, previous research has suggested that exit costs
are positively related to the likelihood of a competitive response (Heil and Walter, 1993);
that is, the greater the exit costs, the number of alternative responses available to the
competitor is lower, thus the threat of the preannouncement to the competitor's livelihood
is greater.

The competitor's market share has been proposed as positively inﬂuencing the
likelihood of its response (Heil and Walters, 1993). However, empirical testing provides
no support for the proposition. The null result can, perhaps, be best explained if we
consider that a competitor with a large market share may be less threatened by the
preannouncement.

Reception expertise refers to the competitor's ability to receive the
preannouncement cost effectively and correctly interpret its meaning (Heil and

Robertson, 1991). Similarity of resources and strategies, as well as market dependence

53

have all been suggested as positively impacting reception expertise and thus the
likelihood of response (Heil and Robertson, 1991).

Lastly, the industry factors of market heterogeneity and growth, industry life
cycle, ﬁxed costs and economies of scale all inﬂuence the likelihood of competitor
response (Heil and Robertson, 1991). Greater market heterogeneity and growth provide
the competitor with possible revenue alternatives not affected by the future planned
action; the preannouncement would be perceived as less hostile and response likelihood
is reduced. Similarly, preannouncements late in the industry life cycle would be
perceived as more hostile as one ﬁrm's gain results from another ﬁrm's loss. Higher
industry ﬁxed costs and economies of scale, similarily to exit costs, motivate a
competitor's likelihood to respond to preannouncements.

2.4.3 Likelihood of Investor Response Motivators

Turning to the likelihood of investor response to preannouncements (see Table 9),
the extant literature demonstrates that ﬁrm, industry, and preannouncement attributes are
the principal motivators of response likelihood. Note that the present literature review
addressing investor-related determinants was restricted to those studies where the
preannouncement content pertained to information other than stock splits and dividends.
This restriction was selected to exclude previous economics and ﬁnance research that
examined capital market related preannouncements as a means to assess the "market
mechanics" related to ﬁrm valuation. This perspective is highly limited in its study of
preannouncements in that it largely focuses on the development of methodological tools

(e.g., event study) rather than the theoretical rationale for the preannouncement-response

54

Table 9 - Previously Proposed Antecedents of
Investor Outcomes

      
 
    
  
    
 

Event Study
1101 preannouncements by
231 ﬁrms

  
  
  

 
   
 

 
   
 

Firm Innovation

Reputation (+)

Chaney, Devinney, and
Winer ( 1991)

 

Event Study
1101 preannouncements by
231 ﬁrms

 
     
    
     

 
  
  

 
 

Firm Size (-) Chaney, Devinney, and

Winer (1991)

   
   

 
   
  
    

  
  
  
  

Industry
Innovation Rate
+

Chaney, Devinney, and
Winer (1991)

Event Study
1101 preannouncements by
231 ﬁrms

  
   

 
   
    
  

Stronger Brand
extensions had
greater effect that

 
  

Lane and Jacobsen (1995) Event Study
89 preannouncements by

 

  
  

weaker brand 59 ﬁrms
extensions
Unexpected Not Aaker and Jacobsen Conceptual

Information(+) applicable (1987)

 

 

 

 

 

55

relationship. This limitation to preannouncement content provides that, with the
exception of the Aakers and Jacobsen (1987) investigation, all the studies examined
relate to investor response to new product preannouncement. Additionally, unexpected
information (Aaker and Jacobsen,]987) -- that is information that was deviant from
investor expectations -- and NPPs related to a ﬁrm's strength (e.g., extension of strong
brand names) (Lane and Jacobsen, 1995) are positively related to the likelihood of
investor response.

The investor related determinants seem to have underlying characteristics similar
to those related to competitive response. NPPs for innovation based ﬁrms and industries,
and unexpected information (e.g., EPS changes) would have "signiﬁcant consequences
related to the investor's livelihood" motivate the likelihood of response.

2.4.4 Towards An Improved Theoretical Framework

Within the context of the dissertation, a conceptual framework will be developed
that examines the relationships among preannouncement propensity and categories of
attitudinal outcomes related to new product success. Previous research regarding
preannouncement outcomes has been wholly restricted to the examination of competitor
and investor behavioral responses. However, the examination of attitudinal outcomes,
such as those related to buyers, channel members, employees, industry observers and
inﬂuencers, is particularly relevant given that proposed motivators of preannouncements
include such factors as the desire to build support and interest for a product, reduce
market uncertainty, and enhance ﬁrm image. The framework and accompanying

hypotheses are presented in the following Section 2.4.6.

56

2.4.5 A Model of Preannouncement Outcomes

Although previous research has included new product preannouncements, other
preannouncements, relevant to new product success -- such as management commentary
regarding future industry states (e.g., Bill Gates' forecasting future e-commerce revenue),
communications regarding channel relationships (e.g., Intel and Mattel to co-develop
smart toys), and discussion of future product development plans among the ﬁrm's internal
staff (e.g., marketing, engineering, production, and ﬁnance), as well as, other channel
members (e.g., distributors and suppliers) -- will be included in this study.

Within the context of the proposed model (see Figure 2), the relationship between
a ﬁrrn's preannouncement propensity and four outcome constructs will be investigated.
The outcome constructs are: (l) competitive equity, which describes the ﬁrm's position as
an inﬂuencer of industry standards and its products' ranks as product class prototypes, (2)
industry receptiveness, which is the degree to which constituent groups (e.g., buyers,
employees, channel members, industry inﬂuencers and observers) are inclined to show
interest in and value the ﬁrm's future product plans and marketing vision, (3) ability to
marshal resources, which describes the frrm's ability to engender tangible resource
support necessary for the development and introduction of ﬁrture products, and (4) new
product success, which is a perceptual construct describing the favorable attitudes held by
managers regarding their ﬁrm's ability to execute new product activities and inﬂuence

industry trends.

57

     
   
   
     

 

  

Competitive Ability to
Equity Marshal
H1809 Resources
H16(+)
A Firm’s
Propensity to 3170’) H14“) H15“)

Preannounce

H12(+)

y H13(+) V
Industry New Product
Receptivenecs Success

Figure 2 - A New Product Success Model of Preannouncement Outcomes

 

 

 

   

58

Industry Receptiveness Related Outcomes

Industry receptiveness is deﬁned as the favorable bias of buyers, distributors,
suppliers, investors, industry observers and inﬂuencers towards a ﬁrm's future product
plans and market outlook. Higher levels of industry receptiveness are characterized by
market constituents (e.g., buyers, distributors, suppliers, investors, and industry observers
and inﬂuencers): 1) demonstrating strong interest in the ﬁrm's ﬁrture product plans and
perceptions of future industry states, and (2) judging them as relevant, credible, and
valuable.

Preannouncement propensity was previously deﬁned as the degree to which a
ﬁrm communicates, via public statements (e.g., press releases, management interviews,
executive industry speeches, employee meetings, conferences), its ﬁlture intended actions
to a broad base of constituents (e.g., investors, employees, suppliers, distributors, buyers,
ancillary support ﬁrms, industry inﬂuencers and observers).

Preannouncement propensity is positively related to industry receptiveness by
ensuring that information provided to market constituents by the ﬁrm can be "packaged
and delivered" to best suit the needs and inﬂuence the opinions of various target
audiences. Higher levels of preannouncement propensity suggests that the ﬁrm can
develop specialized, focused, and highly cognitive communications, in a timely manner,
that speciﬁcally target the individual "livelihood" concerns of a range of audiences. For
example, different preannouncements, targeted at different buyer segments, can
emphasize individually relevant issues such as the innovativeness of ﬁrture products, their

costs saving opportunities, or the compatibility of ancillary products, while

59

preannouncements targeting investors may highlight industry and market segment growth
rates, as well as anticipated revenue gains resulting from future product plans.

Under conditions of higher preannouncement propensity the ﬁrm would convey
endorsements of the frrm's future product plans and market outlook and thus respond to
the targeted audiences needs for social acceptance or preference for normative based
business attitudes and product adoption. Additionally, preannouncement propensity
indicates that public messages, delivered or sanctioned by top management, are available
thus providing credible insights into the mind's of the ﬁrm's leading strategists. Thus,

H12: A firm’s propensity to preannouncement
propensity is positively related to industry receptiveness.

A receptive industry environment inﬂuences directly and indirectly, through the
ﬁrm's ability to marshal resources, a ﬁrm's new product success. Under conditions of
high industry receptiveness, market constituents are predisposed to value and believe ﬁrm
information regarding future product plans and market vision. This compelling condition
directly inﬂuences new product success by engendering a favorable managerial attitude
regarding their ﬁrm's ability to execute new product activities and inﬂuence industry
trends. Firm management does not view its new product activities as an uphill battle
against negative industry opinions.

Indirectly, a receptive industry environment means that ﬁrms would face a market
predisposed to value the frrm's new product activities; thus ﬁrms would be better able to
marshal the necessary resources, such as buyer interest, endorsement from industry
inﬂuencers, channel support, and capital market investment, to effectively and efﬁciently

execute future product plans. Thus,

60

H13: Industry receptiveness is related positively
to new product success.

H14: Industry receptiveness is related positively
to new product success

H15: A firm’s ability to marshal resources is
positively related to new product success.

Competitive Equity Related Outcomes
A ﬁrm’s propensity to preannounce is proposed to be related positively to

competitive equity. Firms with higher levels of preannouncement propensity will
frequently communicate, via various channels (e.g., press release, media interview,
management meetings with distributors), a wide range of information regarding the
future: their plans, perceptions of industry trends, and internal marketing vision. The
information delivered would be credible, highly cognitive, and possess a prescient
quality. Thus, market constituents will be highly cognizant of many details regarding the
ﬁrm, its direction, and its prescription for future success within the industry.
Preannouncements portend the industry's ﬁlture in the ﬁrm's own image and provide the
opportunity to resolve market uncertainty in the ﬁrrn's favor, inﬂuence the development
of industry standards and the positoning of ﬁrm products as prototypes. Thus,

H16: A ﬁrm’s propensity to preannounce is
related positively to competitive equity.

Competitive equity positively inﬂuences new product success via its relationships
with industry receptiveness and the ﬁrm's ability to marshal resources. A ﬁrm with higher
levels of competitive equity will be better able to inﬂuence industry standards and its
products would be ranked as prototypical standards. Such ﬁrms would be regarded as

industry standard-bearers and hold prominent and respected positions in the industry.

61

Their status suggests that industry channel participants would value business
relationships with these ﬁrms and compete to be part of future product plans. Buyers,
industry inﬂuencers, and observers would seek out the ﬁrm's opinions of ﬁrture industry
trends and demonstrate high levels of interest in their product plans. Investors would
view the ﬁrms as possessing a higher level of sustainable competitive advantage,
accruing through their inﬂuential position and the status of their products, and may value
the ﬁrm at market premiums. Higher levels of competitive equity imply that the ﬁrm is
considered as an industry leader, widely solicited about its perspectives and future
product plans, and pursued as an organization to do business with. Thus,

H17: Competitive equity is positively related to
industry receptiveness.

H18: Competitive equity is positively related to
the firm's ability to marshal resources.

Chapter 3 i

RESEARCH METHOD

 

3.1 Unit of Analysis "‘
A key informant approach was used to collect data for this study. Three
considerations motivated this decision. First, given the strategic nature of the model
constructs, the informants selected were high level managers (e. g., CEO and President).
By deﬁnition, an informant's role is to report on organizational processes, events, or
outcomes that are aggregate in nature, and thus informants should be sampled according
to expertise (McKendall and Wagner, 1997). Accordingly, the informants are heavily
involved in the strategy formation process of their ﬁrm and are thoroughly cognizant of
industry issues and important study considerations. Second, the use of senior level
management as key informants is particularly critical when examining the boundary-
spanning activities that are central to the research hypotheses (Penning, 1979). Third,
given the sensitive information requested, a single key informant assured of anonymity
perceives less risk and is likely to be candid (Kohli, 1989). Regarding self-report bias,
previous research has largely concluded that the areas of organizational culture and

structure are relatively free of covariate inﬂation effects (Crampton and Wagner, 1994).

62

63

3.2 Sampling Frame and Sampling Method

The sampling ﬁame was comprised of high level executives of US. based ﬁrms
in the surgical, medical instruments and apparatus (SIC 3841), games and toys (SIC
3944), sporting and athletic goods (SIC 3949), personal hygiene (e.g., shaving
preparations, mouthwashes, shampoos, (SIC 2844), computer software (SIC codes 73 72),
computer peripheral (SIC codes 3572, 3575, 3577), and OEM automotive component
(SIC codes 3714) industries. Firms in these industry groups are categorized as
manufacturers of their respective products and would engage in the development and
marketing of new products. The research focus is on medium to large companies, and any
ﬁrms with less than 200 employees were excluded. Smaller ﬁrms were also avoided
because they tend to have strong family inﬂuences that may skew study results (Kirpalani
and MacIntosh, 1980).

The appropriate sample size for use in testing structural equation models ranges
from 50 to 500. Samples smaller than 50 are not recommended as improper solutions
(e.g., nonconvergence of the iterative procedure, or negative error variance estimates) can
occur; samples over 500 may result in sampling ﬂuctuations being detected as differences
between the observed and expected covariance matrices thus resulting in a Type I error
regarding the )8 statistic (Chin, 1998).

A 2000 subject frame was randomly drawn from a national mailing list of executives
holding the position of CEO or President of their respective ﬁrms within the selected
industries. The following actions were be taken to promote response and minimize

response bias:

64

The survey packet included a personalized cover letter that introduced the study,
identiﬁed it as a study conducted under the guidance and authority of an academic,
rather than a commercial organization, highlighted its potential value to the executive
and the importance of their participation. Participants were told that their responses
would be both anonymous and conﬁdential. Additionally, they were offered a copy of
the survey results and the research conclusions.

The survey and cover letter was pretested with a group of 10 executives with similar
responsibilities as the sample population to ensure that the survey questions were
clear and convenient to answer, and that the relevance of survey participation was
evident.

A follow-up card was sent ten days after the initial mailing to remind the executive of
the request of their participation. It highlighted the relevance of the study and again
offered the results. It also included the name and telephone number of a contact
person if a replacement survey was needed.

3.3 Constructs and Their Measurements

3.3.1 Antecedent and Preannouncement Propensity Constructs

Buyer Involvement. In Chapter 2, buyer involvement was deﬁned as the degree to which

the buyers' need for knowledge is a precursor to product trial and purchase. The construct

was measured using 7-point Likert scales adapted from Eliashberg and Robertson (1989)

and Gatignon and Robertson (1985), anchored by strongly disgree and strongly agree,

and contained the following three items:

The purchase of your ﬁrm's new products/services requires advance planning on the
part of your customer.

Buyers spend time and effort, prior to purchase, to acquire information related to the
products/services features, functions, or beneﬁts (e.g., acquiring details regarding a
new car's engine speciﬁcations, warranty claims, and available options).

Buyers of your ﬁrm’s products have a need to obtain information about the product
prior to purchase.

Executive Market Orientation. In Chapter 2, executive market orientation was deﬁned

as the degree to which top management team members emphasize marketing's role in the

development of ﬁrm strategies, business solutions, and organizational structures,

65

participate directly in marketing related boundary spanning activities (e.g., meetings with
key customers, missionary new customer development), and assume a high proﬁle and
accessible position within the ﬁrm and the industry. Previous measures of executive
market orientation could not be found in the literature, thus measures were developed
speciﬁcally for this study based on Kohli and Jaworski's (1990) examination of senior
management factors inﬂuencing a ﬁrm's market orientation. Executive market orientation
was measured using 7- point Likert scales, anchored by strongly disagree and strongly
agree, and contained the following ﬁve items:

0 Within your ﬁrm, top management emphasizes a market driven approach regarding
business strategies and tactics.

0 Within your ﬁrm, top management provides visible support for new product and
customer focused initiatives.

0 Within your ﬁrm, top management is personally involved with the maintenance and
development of key customer and/or distributor relationships.

0 Within your ﬁrm, top management often plays a "missionary" role targeted at

positively inﬂuencing the opinions of customers, suppliers, distributors, trade and
general business press.

0 Within your ﬁrm, top management is highly focused on market issues external to the
ﬁrm (e.g., emerging industry trends, gathering support from external constituents
such as the trade and general business press).

Supplier NPD Integration. As deﬁned in Chapter 2, supplier NPD integration is the

degree to which supplier involvement in NPD activities is sought by the ﬁrm. The

construct was measured using 7-point Likert scales, adapted from Hise et al.(1990) and

Gupta & Wilemon (1990), anchored by strongly disgree and strongly agree and contained

the following three items:

66

o NPD teams include suppliers.

0 The ﬁrm seeks the involvement, opinions, and support of its suppliers during new
product development.

0 NPD activities include external suppliers.

Distributor NPD Integration. As deﬁned in Chapter 2, distributor NPD integration is the
degree to which distributor involvement in NPD activities is sought by the ﬁrm. The
construct was measured using 7-point Likert scales, adapted from Hise et al.(1990) and
Gupta & Wilemon (1990), anchored by strongly disgree and strongly agree and contained
the following three items:

0 NPD teams include distributors.

o The ﬁrm seeks the involvement, opinions, and support of its distributors during new
product development.

0 NPD activities include external distributors.

Competitive Equity Building. In Chapter 2, competitive equity building was deﬁned as
the process by which ﬁrms attempt to resolve uncertainty in their favor, inﬂuence
development of industry standards, and ultimately establish a favorable industry
reputation. Previous measures of competitive equity building could not be found in the
literature, thus measures were developed speciﬁcally for this study after extensive review
of the ﬁrst mover and reputation literature (e.g., Lieberman and Montgomery, 1988;
Weigelt and Camerer, 1988). Competitive equity building was measured using

7- point Likert scales, anchored by strongly disagree and strongly agree, with the
following ﬁve items:

0 Your ﬁrm seeks to have a leadership reputation within your industry.

0 . Your ﬁrm seeks a public proﬁle via its participation in industry activities and forums.

67

0 Your ﬁrm welcomes coverage by journalists in trade magazines and the general
business press.

0 Your ﬁrm seeks to be have its products or services considered as "standards" of the
industry (e.g., Windows 98 in computer software, Dodge Caravan in the minivan
automotive market).

0 Your ﬁrm seeks to have its products considered leaders in their market segment.

Rapid Deployment Requirements. In Chapter 2, rapid deployment requirements were

deﬁned as the ﬁrm's needs to distribute new products broadly and expeditiously

throughout their market. Previous measures of rapid deployment requirements could not
be found in the literature, thus measures were developed speciﬁcally for this study. Rapid
deployment requirements was measured using 7- point Likert scales, anchored by
strongly disagree and strongly agree, and contained the following three items:

0 For your ﬁrm, ensuring that the product is available to the buyer - when they wish to

purchase - is a signiﬁcant concern; buyers will generally not wait and, instead, will
purchase an alternate product.

0 For your ﬁrm, product distribution issues (e. g., retail shelf space, delivery
responsiveness and the number of distributors) are signiﬁcant new product
introduction concerns.

0 The planning of new product distribution is a critical business activity for your ﬁrm.

A Firm ’s Propensity to Preannounce. In Chapter 2, a ﬁrm’s propensity to preannounce

was deﬁned as the ﬁrm’s tendency of to communicates, via public statements (e.g., press

releases, management interviews, executive industry speeches, employee meetings,
conferences), its ﬁrture intended actions to a broad base of constituents (e.g., investors,

distributors, and suppliers). The survey provided the following deﬁnition and examples

of preannouncements to the respondents:

 

68

Preannouncement is a formal and public communication by a firm that provides an
indication of its future plans. The preannouncement communication can be directed
at one or many constituent parties within the firm’s general market environment
including buyers, suppliers, distributors, employees, investors, industry experts and
observers, and government regulatory agencies - in all cases, both current and
prospective.

Examples of preannouncements include:

0 Northwest airlines announcing, in March, its special summertime air fares;

0 Bill Gates, CEO of Microsoft, discussing his perspectives of future e-commerce
revenue with the general business press;

0 Alex Trotman, CEO of Ford Motor, predicting that double digit growth for
sport-utility will continue during a conference with regional dealership owners;

0 Mattel and Intel issuing a press release regarding their plans to co-develop

"smart" toys;

0 Firm executives hold a debrieﬁng conference with key suppliers and distributors
regarding future product plans.

A ﬁrm’s propensity to preannounce was measured using 7-point Likert scales,
anchored by strongly disagree and strongly agree, and contained the using the following
ﬁve items:

If the situation arises, your ﬁrm will formally communicate information regarding:

0 Its ﬁrture plans for the development and launch of new products and services;

0 Its ﬁrture plans for the development of new distribution partners;

0 Its future plans for the development of joint development or marketing programs;

0 Its ﬁrture plans to enter into a joint venture, merger, or acquisition;

0 Its plans to enter new market or geographic segments;

3.3.2 Outcome Constructs

Competitive Equity. In Chapter 2, competitive equity was deﬁned as the degree to which
1) a ﬁrm is positioned as an inﬂuencer of industry standards and, 2) its products' rank as

product class standards. Previous measures of competitive equity could not be found in

the literature, thus measures were developed speciﬁcally for this study after extensive

 

69

review of the ﬁrst mover and reputation literature (e.g., Lieberman and Montgomery,

1988; Weigelt and Camerer, 1988). Competitive equity building was measured using a

7- point Likert scale, anchored by strongly disagree and strongly agree, and contained the

following ﬁve items:

0 Your ﬁrm has a signiﬁcant leadership reputation within your industry.

0 Your ﬁrm's products, services, technologies, and strategic initiatives are used as
benchmarks or set standards for your industry (e. g., Mercedes Benz in the luxury car

industry, FedEx in the overnight delivery industry).

0 Your ﬁrm's products or services are copied or imitated by other ﬁrms within your
industry.

0 Your ﬁrm is inﬂuential in shaping the direction of your industry.

0 Your ﬁrm’s products are market leaders within your industry.

Industry Receptiveness. In Chapter 2, industry receptiveness was deﬁned as the
favorable bias of various market constituents (e.g., buyers, distributors, suppliers,
investors, industry observers and inﬂuencers) towards a ﬁrm's ﬁrture product plans and
market outlook. Higher levels of industry receptiveness are characterized by market
participants: 1) demonstrating strong interest in the ﬁrm's ﬁrture product plans and
perceptions of ﬁlture industry states, and (2) judging them as relevant, credible, and
valuable. The construct was measured using 7-point Likert scales, anchored by strongly
disagree and strongly agree, and contained the following four items adapted ﬁ'om

Mahajan and Wind (1987) and Ancona and Caldwell (1990):

0 Within your industry, there exists a receptive and supportive environment for ﬁrm's
new products/ services.

0 Within your industry, there is a signiﬁcant level of curiosity and interest regarding
your ﬁrm's new product plans.

0 Within your industry, your ﬁrm's new products are anxiously anticipated.

 

70

0 Within your industry, your ﬁrm's new product plans and commentary regarding
future industry states are considered as relevant and valuable.

Firm 's Ability To Marshal Resources. In Chapter 2, the ﬁrm's ability to marshal
resources was deﬁned as its ability to engender tangible resource support necessary for
the development and introduction of new products. The construct was be measured using
7-point Likert scales, anchored by strongly disagree and strongly agree, and contained the

following three items from Ancona and Caldwell (1990,1992) and Dougherty (1990):

0 Your ﬁrm's new product development activities are adequately ﬁrnded and properly
staffed.

0 Your ﬁrm's new product budgets include the necessary expenditures on critical items
to ensure a successful product launch (e. g., prototype development, capital

equipment, market testing, salesforce/distributor training, advertising).

0 Your ﬁrm's new product development plans and budgets are viewed as an
organizational priority.

New Product Success. In Chapter 2, the new product success construct was deﬁned as a
perceptual construct that describes managerial attitudes regarding their ﬁrm's ability to
successfully execute new product activities and inﬂuence industry trends. The product
development literature largely focuses on the success of individual new product projects
measured in ﬁnancial (e.g., proﬁtability and revenue), market (e.g., market share, market
leadership), and process (e.g., lead-time, productivity, quality) performance terms
(Brown and Eisenhardt, 1995). However, the intention of the new product success
construct is to capture managerial attitudes regarding the ﬁrm's competence to
successfully develop ﬁrture new products and inﬂuence industry trends, rather than
simply evaluating the performance of past individual new product projects activities.
Intuitively, the construct attempts to assess how managers perceive the ﬁrm's position as

a capable new products ﬁrm.

71

Previous measures of new product success could not be found in the literature,
thus measures were developed speciﬁcally for this study after extensive review of the
new product development, ﬁrst mover, and reputation literatures. New product success
was measured using 7-point Likert scale, anchored by strongly disagree and strongly
agree, and contained the following ﬁve items:

0 Your ﬁrm's new product development capabilities are adept at meeting or exceeding
the expectations of ﬁrm management (e.g., time to market, product quality,

commercial performance).

0 Your ﬁrm's new product development capabilities are viewed by management as a
ﬁrm strength.

0 Your ﬁrm's new product development capabilities are leading contributors to your
ﬁrm's overall success and performance;

0 Your ﬁrm's new product development capabilities set the ﬁrm apart (in a favorable
sense) from others in your industry.

0 Management is generally well satisﬁed with your ﬁrm's new product development
capabilities.

3.4 Measurement Testing Approach
Due to the limited degree of prior testing of the operational constructs used in the
two models, a series of steps was taken to purify the construct measurements and

improve reliability and validity as follows:

0 Construct items were subjected to conﬁrmatory factor analysis, using EQS 5.0 (PC-
version), to test for convergent and discriminant validity;

o Reliabilities (internal consistency) were tested using Cronbach's alpha.
3.5 Structural Model Testing Approach

After determining that the viability and validity of the proposed measurement
model, the structural models of preannouncement propensity antecedents and outcomes,

presented in Figure l and 2, were tested using EQS 5.0 (PC-version). Each proposed

72

model’s overall goodness of ﬁt to the observed data was assessed using the x2 statistic
and CFI measure. Each individual hypothesis was tested by examining the standardized
parameter estimates and t-values, computed on unstandardized parameters, for each

structural path.

 

Chapter 4

RESEARCH RESULTS

4.1 Antecedent Model Results
4.1.1 Response Rate

Of the 2000 surveys initially mailed, a total of 261 were returned because of
“moved/not forwardable”, “forwarding order expired”, or “person no longer at
company”. This reduced the actual sample ﬂame to 1739 companies; of these, 290
executives (a response rate of 16.7 %) responded to the survey. It is important to note
that such a response rate is reasonable given that the targeted respondent is a high level
executive (e.g., President and CEO) under signiﬁcant time constraints and that the
strategic focus of the survey could result in responses considered sensitive and
conﬁdential. Both these factors would produce a downward bias to the response rate.
4.1.2 Results of Measurement Model Testing

EQS 5.0 (Byrne 1994) was used to perform a conﬁrmatory factor analysis of the
antecedent model constructs to assess their validity (see Table 10). The overall ﬁt of the

25 - item, 7 - construct, CFA analysis was acceptable. Measures of overall ﬁt included

73

74

CF I = .968, no standardized residuals over the absolute value of 2, and a chi-squared of
381.894, 250 (If.

As evidence of convergent validity, each of the 25 items loaded on their
prespeciﬁed hypothesized constructs, all standardized factor loadings exceeded .5 and all
tests of unstandardized coefﬁcients were signiﬁcant. (t-values between 9.651 to 13.375;
see Table 10, third column, for standardized parameters) (Chin, 1998; Fomell and
Larcker, 1981). To establish discriminant validity, a multivariate LaGrange Multiplier
(LM) test indicated no signiﬁcant cross loadings for measurement items with non-
hypothesized constructs. Thus the measurement model was supported.

Additionally, the reliabilities of the seven constructs were assessed using
Cronbach’s alpha. The result for each construct is presented in Table 10. As shown, all
scales achieved Cronbach’s Alpha greater than .70 and therefore were deemed acceptably
convergent (Nunnally, I97 8).

4.1.3 Results of Structural Model Testing

After determining that the proposed measurement model obtained convergent and
discrimminant validity based on the data, the structural model presented in Figure 1 was
next tested. This two step method also provides a test of nomological validity (Anderson
and Gerbing, 1988).

The model was tested using the covariance matrix of the 7 latent constructs (PHI)
(Anderson and Gerbing, 1982) and maximum likelihood estimation. Examination of
overall ﬁt statistics (see Table 11) indicates acceptable ﬁt of the model to the data (CFI =

.964, and chi-squared of 403.440, 254 df).

 

Table 10 - Antecedent Model Construct Measures and Reliabilities based on CFA

75

 

 

Construct Measures Std or
Loading
Buyer Involvement .7 5
BIN 1 Product purchase requires advance planning by buyer .858
BINZ Buyers spends time/ effort to acquire information .730
BIN3 Buyers Imve a need to obtain information .626
Executive Market .81
Orientation
EMOl Top management is personally involved in maintenance .829
and development of key external relationships
EMOZ Top management acts as ﬁrm “missionaries” .914
EMO3 Top management personally emphasizes market issues .654
Supplier NPD .86
Integration NPD teams include suppliers .787
SNIl Firm seeks suppliers’ involvement, opinions, and support .919
SN12
SNI3 NPD activities include external suppliers .898
Distributor NPD .91
Integration
DNIl NPD teams include distributors .781
DNIZ F inn seeks distributors’ involvement, opinions, and .928
support
DNI3 NPD activities include external distributors .929
Competitive Equity .90
Building
CEBl Firm seeks to have a leadership reputation .793
CEBZ Firm seeks a public proﬁle via participation in .636
industry activities and forums
CEB3 Firm welcomes media coverage .614
CEB4 F inn seeks to have its products the industry standards .909
CEBS Firm seeks to have its products considered leaders .950
in their market segment
Rapid Deployment .78
Requirements
RDR3 Product availability is a signiﬁcant ﬁrm concern .710
RDR4 Distribution issues are signiﬁcant NP concerns .872
RDR5 The planning of the distribution of NPs is a critical .795
business activity
Finn’s Propensity to .79
Preannounce
PTPI Preannounce future plans to develop and launch new .749
products/services
PTP2 Preannounce future plans to develop new distribution .648
partners
P'I'P3 Preannounce ﬁlture plans for the development of joint .696
product development programs
PTP4 Preannounce future plans to enter into a joint venture, .776
merger or acquisition
P'I‘PS Preannounce ﬁrture plans to enter into a new geographic .806

_segment

Goodness of Fit Results: Chi-square of 381.894, df 250; CFI=.968.

 

76

Table 11 - Tests of Hypothesized Antecedent Relationships

 

 

 

‘nHl: Buyer Involvement rs posrtrvely related to
a Firm’s Propensity to Preannounce

 

..........

.....

..........
-

 

 

0.365

H1 not supported

 

H2a: Buyer Involvement is positively related
to Distributor NPD Integration

-1.065

H2a not supported

 

H2b: Buyer Involvement is positively related
to Supplier NPD Integration

4.198“

H2b supported

 

H3: Buyer Involvement is positively related
to Rapid Deployment Requirements

-2.726*

H3 contradicted

 

H4: Buyer Involvement is positively
Related to Competitive Equity Building

2346*

H4 supported

 

H5a: Rapid Deployment Requirements
is positively related to Distributor
NPD Integration

4.101*

H5a supported

 

H5b: Rapid Deployment Requirements is
positively related Supplier NPD Integration

.096

l.433""""l

H5b sppported

 

H6: Rapid Deployment Requirements is
positively related to a Finn’s Propensity
to Preannounce

-.015

~0.173

H6 not supported

 

H7a: Distributor NPD Integration is positively
Related to Finn’s Propensity to Preannounce

.088

1.200

H8a not supported

 

H7b: Supplier NPD Integration is positively
Related to Firm’s Propensity to Preannounce

.082

1.110

H8b not supported

 

H8: Distributor NPD Integration is positively
Related to Supplier NPD Integration

.299

4632*

H9 supported

 

H9: Executive Market Orientation is
Positively related to Competitive Equity
Building

.138

2.285“

H10 supported

 

H10: Executive Market Orientation is
positively
Related to a Finn’s Propensity to Preannounce

.023

0.334

H11 not supported

 

 

H11: Competitive Equity Building is positively
related to a Firm’s Propensity to Preannounce

 

.210

 

2.634“

 

 

H12 supported

 

*signiﬁcant at p<.01, Msigniﬁcant at p < .05, ***significant at p<.10
Goodness of Fit Results: Chi-square of 403.440, df 254;CFI=.964.

n'ﬂt

 

77

    

Executive
Market
Orientation

 

 
 

"\ H10(+)

”\
,” \ Hl(+) \
I \\ \

  
 
 
 
   

 
      
 

Competitive
Equity A Firm’s
Building Propensity to

     

Preannounce

 
 
  

H2a(+)\ H2b(+) / ’H7a(+) / H7b(+)

     

Distributor NPD
Integration

 

l HM
Rapid H5b(+) H60)

Deployment
Requirement

Figure 3 —Model of Antecedents
Incorporating Research Findings

Note: dashed arrow (---->) indicates hypothesis was not supported by findings
solid arrow (—p) indicates hypothesis was supported by ﬁndings

78

Table 11 shows the standardized parameters and t-values for the model. Figure 3
presents an updated model incorporating the ﬁndings. Regarding direct antecedent effects
on a ﬁrm’s propensity to preannounce, only competitive equity building (HI 1) had a
positive effect on a ﬁrm’s propensity to preannounce. The results do not support the
proposed positive relationships between buyer involvement (Hl), rapid deployment
requirements (H6), distributor NPD integration (H7a), supplier NPD integration (H7b), or
executive market orientation (10) and a ﬁrm’s propensity to preannounce.

However, the results indicate that buyer involvement, as proposed, is positively
related to supplier NPD integration (HZb), competitive equity building (H4), and, in
constrast to the original hypothesis, is negatively related to rapid deployment
requirements (H3). The results do not support buyer involvement’s proposed positive
relationship to distributor NPD integration (HZa).

Rapid deployment requirements was found to be positively related to both
distributor (HSa) and supplier (HSb) NPD integration; however, in the case of the latter
hypothesis the relationship was marginally signiﬁcant (p<. 10). Additionally, distributor
NPD integration was found to be positively related to supplier NPD integration (HS).

Lastly, the results support the proposed positive relationship between executive
market orientation and competitive equity building (H9).

4.2 Outcome Model Results
4.2.1 Response Rate

The outcome model was tested using the same sample as that used in the testing

of the antecedent model. Therefore, the discussion of the response rate provided in

Section 4.1.1.will not be repeated.

79

4.2.2 Results of Measurement Model Testing

A conﬁrmatory factor analysis of the outcome model constructs was performed to
assess their validity (see Table 12). The overall ﬁt of the 22 - item, 5 - construct, CFA
analysis was acceptable. Measures of overall ﬁt included CFI = .959, no standardized
residuals over the absolute value of 2, and a chi-squared of 357.925, 187 df.

As evidence of convergent validity, each of the 22 items loaded on their
prespeciﬁed hypothesized constructs, all standardized factor loadings exceeded .5 and all
tests of unstandardized coefﬁcients were signiﬁcant (t-values between 10.300 to 18.599;
see Table 12, third column, for standardized parameters) (Chin 1998; F ornell and Larcker
1981). To establish discriminant validity, a multivariate LaGrange Multiplier (LM) test
indicated no signiﬁcant cross loadings for measurement items with non-hypothesized
constructs. Thus the measurement model was supported.

Additionally, the reliabilities of the ﬁve constructs was assessed using Cronbach’s
alpha. The result for each construct is presented in Table 12. As shown, all scales
achieved Cronbach’s Alpha greater than .70 and therefore were deemed acceptablely
convergent (Nunnally 1978).

4.2.3 Results of Structural Model Testing

After determining that the proposed measurement model obtained convergent and
discrimminant validity based on the data, the structural model presented in Figure 2 was
next tested. This two step method also provides a test of nomological validity (Anderson
and Gerbing, 1988). The model was tested using the covariance matrix of the 5 latent

constructs (PHI) (Anderson and Gerbing 1982) and maximum likelihood estimation.

80

Examination of the overall ﬁt statistics (see Table 13) indicates acceptable ﬁt of the
model to the data (CFI = .959, and chi-squared of 353.874,]88 dt).

Table 13 shows the standardized parameters and t-values for the model. Figure 4
presents an updated model incorporating the ﬁndings. The ﬁndings support the proposed
positive relationship between a ﬁrm’s propensity to preannounce and industry
receptiveness (HIZ); however, the hypothesized positive relationship between a ﬁrm’s
propensity to preannounce and competitive equity was not supported (1116). Additionally,
the results support the proposed positive relationships between competitive equity and
both the ability to marshal resources (I-118) as well as industry receptiveness (1117).
Regarding the inﬂuence of industry receptiveness, the ﬁndings support its proposed
positive relationships with ability to marshal resources (HM) and new product success
(Hl3). Lastly, the proposed positive relationship between ability to marshal resources and

new product success (HIS) is also supported.

81

Table 12 - Outcome Model Construct Measures and Reliabilities based on CFA

 

Construct

Measures

Std

 

(1
Loading *
F irm’s Propensity .80
to Preannounce
PTPl Preannounce future plans to develop and launch
new products/services “782
PTP2 Preannounce ﬁrture plans to develop new .660
distribution partners
PTP3 Preannounce future plans for the development of .683
joint product development programs
PTP4 Preannounce future plans to enter into a joint .773
venture, merger or acquisition
PTPS Preannounce future plans to enter into a new .787
geographic segment
Competitive Equity .94
CEQ 1 Firm has a signiﬁcant leadership position in industry .845
CEQ2 Products act as industry “benchmarks” .905
CEQ3 Products are oﬁen imitated or copied . .810
CEQ4 Firm is inﬂuential in shaping direction of industry .859
CE Q 5 Products are market leaders wrthrn your industry .845
Industry .86
Receptiveness A receptive and supportive environment exists for 691
IR“ your ﬁrm’s new products '
There is curiosity/ interest regarding ﬁrm’s NP plans 848
IRT2 New Products are anxiously anticipated .853
IRT3 New product plans and statements about future '794
IRT4 industry states are considered relevant and valuable ‘
Ability to Marshal .79
Resources
AMRl NPD eﬂ'orts are adequately ﬁrnded and staffed .677
AMR2 NPD budgets include necessary expenditures .754
to ensure a successful product launch
AMR3 NPD activities are an organizational priority .815
New Product .89
Success New product meet/exceed management’s expectations .861
NPSl New product development is a ﬁrm strength .917
NPSZ
NP83 New product capabilities are viewed by management .804
as a leading contributor to the ﬁrm’s overall success
NPS4 New product capabilities set the ﬁrm apart (in a .847
favorable sense) from others in the industry
NPSS Your ﬁrm’s management is generally well satisﬁed .807

(constant improvement is always sought but ﬁrm
generally performs well) with your ﬁrm’s new
product development capabilities

 

Goodness of Fit Results: Chi-square of 357.925, df 187; CFI=.949

82

Table 13 - Tests of Hypothesized Outcome Relationships

Resources

10

to
13 *
to
Marshal . 1.734“ H19
* signiﬁcant at p<.0l, "significant at p < .05, *"significant at p<.10
Goodness of Fit Results: Chi-square of 353.874, df 188; CFI=.952.

 

83

     

 

   
     

  

Competitive Ability to
E ui Marshal
q ty H1814“) Resources
If
I
I,
I, H16(+)
I
I
A Firm’s
Propensity to Hl7(+) H14("’) H15“)

Preannounce

H12(+)

v H13(+) V
Industry New Product
Receptiveness Success

 

 

 

   

Figure 4 —Model of Outcomes
Incorporating Research Findings

Note: dashed arrow (--—->) indicates hypothesis was not supported by findings
solid arrow (—p) indicates hypothesis was supported by findings

Chapter 5

DISCUSSION OF CONTRIBUTIONS, FUTURE DIRECTIONS
AND LIMITATIONS

5.1 Discussion of Contributions and Future Research Directions
5.1.1 Reconceptualization of Preannouncement

Prior to this dissertation, preannouncement research largely focused on
preannouncements of a speciﬁc type (e. g., new products and pricing). The dissertation
proposes an initial foundation for examining preannouncements as strategic marketing
communication tools by highlighting the ﬁrm’s use of preannouncements across a wide
range of future actions, termed a ﬁrm’s propensity to preannounce. This
reconceptualization proposes that preannouncements may possess a scope and scale of
content and target audience extending beyond the buyer and competitor domains that
have been the primary focus of previous research. Additionally, within Chapter 2, a
conceptual model of attributes was proposed as a starting point for an improved
characterization of preannouncements and, utimately, towards the development of a

normative preannouncement framework.

84

85

The ultimate purpose of any strategic communication is to inform or to inﬂuence
the target audience in some way and preannouncement’s timeliness and believability are
major factors in achieving this goal. Emerging information technologies, such as the
Internet, provide channel members, investors, employees, industry inﬂuencers, as well as
buyers and competitors, low-cost access to preannouncements thus establishing a
formidable informational forum through which ﬁrms can communicate their future
actions to a broad base of industry constituents in an efﬁcient, credible, timely, and
inﬂuential manner.

Given their ﬂexibility, preannouncements may be the contemporary means by
which ﬁrms communicate and inﬂuence a broad array of industry constituents within a
rapidly developing information - based business environment.

5.1.2 Antecedent Model

The dissertation investigates direct and indirect antecedent effects arising
from three main categories of information — based drivers related to new product success
(See Table 14). The ﬁrst, buyer uncertainty reduction, examines the inﬂuence of buyer
involvement, the buyer’s need for information prior to product purchase, on a ﬁrm’s
propensity to preannounce. The ﬁndings indicate that effect of buyer involvement on a
ﬁrm’s propensity to preannounce is indirect through its positive relationship with
competitive equity building. Involved buyers place a high degree of emphasis on
uncertainty reduction and engage in extensive pre-adoption information search. As
discussed in Chapter 2, going beyond the traditional activities associated with brand

equity, the competitive equity building ﬁrm seeks to establish itself and its products as

86

Table 14 - Three Main Information- Based Drivers

    

 

 

Buyer Involvement Competitive Equity Rapid Deployment
Building Requirements
Executive Market Distributor NPD
Orientation Integration
Supplier NPD
Integration

 

 

 

 

 

industry leaders by inﬂuencing the development of the perceptual market structure in its
own image.

The positive relationship between buyer involvement and competitive equity
building suggests that ﬁrms respond to involved buyers via two mechanisms: 1) by
providing, in a traditional manner, information the buyer cognitively processes as part of
the purchase decision making process (e. g., sport utility vehicle’s hauling capacity from
automobile manufacturers) and 2) by proactively inﬂuencing the involved buyer ’5
information needs (e. g., Ford establishing the Expedition as the industry standard for
sport utility vehicles). In building competitive equity, the ﬁrm, in addition to providing
pre-purchase information, attempts to inﬂuence the involved buyer’s consideration set of
attributes, their salience, and ordering towards its own product ’3 image. Thus, instead of
solely satisfying the involved buyer’s need for pre-purchase information, the competitive
equity building ﬁrm responds by attempting to inﬂuence the process by which involved
buyers develop their preferences, reduce uncertainty, and ultimately make purchase

decisions - a signiﬁcant and highly inimitable competitive advantage.

87

Within the context of the antecedent model, the results indicate that the sole factor
motivating a ﬁrm’s propensity to preannounce is competitive equity building. In the
preceding paragraphs, the importance of competitive equity building as source of
competitive advantage, within the context of the buyer behavior, was punctuated.
However, competitive equity building goes beyond the domain of buyers and
incorporates the ﬁrm’s attempt to establish itself as the industry leader in the minds of
multiple industry constituents (e. g., channel members, investors, industry inﬂuencers and
the media) (see Table 14). Firms with greater levels of competitive equity are often the
bellwethers of their industry (e. g., Cisco in computer hardware and peripherals, Coca-
Cola in beverages), holding positions of signiﬁcant competitive advantage, and
considered the “preferred ﬁrms to do business with”.

Thus the ﬁnding that statements of ﬁrture actions, primarily issued and controlled
by executive management, are largely affected by management’s emphasis on the
strategic positioning of their ﬁrm as the industry leader is particularly intriguing. Extant
literature has emphasized reputation’s role, as an intangible resource, in business strategy
(Bharadwaj et al. 1993; Hall 1993). In a national study of CEOs, executives rated
company reputation above employee know-how, culture, and organizational networks
with respect to the contribution it makes to business success (Hall 1993).

As with the building of brand equity, competitive equity is a resource that must be
nurtured and proactively managed to achieve the status of a strategic asset.
Preannouncements, as believable and timely communications ﬁ'om the executive suite,
provide the ﬁrm’s leading strategists with the means to foretell the ﬁrm’s ﬁrture actions

and weave a positive spin around them. Similar to advertising’s major role in building

 

'g’3 5‘.- "-.'.'A

88

brand equity, preannouncements may be a key force in achieving competitive equity thus
providing signiﬁcant research and managerial implications.

The proposed antecedent model also examines the direct and indirect effects of
executive market orientation on a ﬁrm’s propensity to preannounce. In Chapter 2,
executive market orientation was deﬁned deﬁned as the degree to which top management
team members personally emphasize marketing's role in the development of ﬁrm ._
strategies, business solutions, and organizational structures and personally participate in
marketing related boundary spanning activities (e. g., meetings with key customers,

missionary new customer development). The construct attempts to tap the ﬁrm’s pursuit

 

of industry leader status at the individual and highly personal level of the executive tr"
management team (see Table 14).

The ﬁndings do not support a positive direct relationship between executive
market orientation and a ﬁrm’s propensity to preannounce. However, the results indicate
an indirect effect exists; that is, executive market orientation is positively related to
competitive equity building and through it to a ﬁrm’s propensity to preannounce. In
previous research, the examination of the roles of CEO’s and other top executives in the
marketing of the ﬁrm and its products has largely focused on top management team
eﬁ‘ects ﬁom an organizational perspective such as a ﬁrm’s adoption of a market
orientation (Kohli and Jaworski 1993) and commitment to new products (Ancona and
Caldwell 1990, 1992, Hise, Parasuraman, McNeal 1990, Keller 1986). This perspective
primarily investigates the role of top management team members as institutional entities

inﬂuencing ﬁrm behavior via their decisions and selection of ﬁrm strategies.

89

However, industry anecdotal evidence indicates that top management (e.g., Bill
Gates of Microsoﬁ, Sam Walton of Wal-Mart, Andy Groves of Intel, Ted Turner of Time
Warner, Jeff Bezos of Amazon.com) often serve as marketing “missionaries” to a broad
base of industry constituents (e. g., buyers, channel participants, investors, and industry
inﬂuencers and experts). Executives, such as those listed, and their top management team
emphasize their “personal” role as boundary spanners and actively attempt to win support
for their ﬁrm converting “nay sayers” and seeking industry endorsement for their ﬁrm
and its products as industry leaders.

The ﬁndings indicate that the personal involvement of the ﬁrm’s top
management, their often zealous dedication of individual resources to marketing
activities, positively affects competitive equity building. From a research perspective, the
result suggests that, in addition to their role as strategists, top executives may impact ﬁrm
behavior and, ultimately, its success as individuals by how they spend their time and what
activities they engage in (e.g., meeting with customers and distributors). In short, top
management may act as highly visible and involved “advocates” personally inﬂuencing
buyer and channel relationships, the ﬁrm’s execution of the marketing concept, and,
ultimately, the achievement of industry leader status.

Ways of selling are transforming and a recent article in USA Today (Belton 1999)
states that “there has been an explosion of so-called ‘executive selling’. Increasingly a
chairman or chief executive will make a personal visit to prospective CEOs to discuss
doing business - along side the traditional salesman.” Thus, the consideration of the

“marketing persona”, personal networks, and even the charisma of top management may

9O

become increasingly managerially relevant and inﬂuence the ﬁrm’s selection and
retention of its executives.

Lastly, the proposed antecedent model also examines the direct and indirect
effects of rapid deployment requirements, distributor, as well as supplier NPD activities
on a ﬁrm’s propensity to preannounce. As a set, these constructs examine factors, related
to the ﬁrm’s attempt to leverage supply chain resources in support of NPD activities, that
may affect a ﬁrm’s propensity to preannounce (see Table 14). The ﬁndings do not
support the proposed positive relationships between each of the three constmcts and a

ﬁrm’s propensity to preannounce. Thus the degree to which the ﬁrm seeks to integrate its

 

distributors and suppliers into the new product development process and its emphasis on

l.r .

distribution as a critical new product success factor, seemingly, does not affect its
propensity to preannounce.

The null result is unexpected given that previous research has proposed a
communication-based paradigm of new product development that emphasizes
ambassadorial communication, aimed at gaining support for the new product
development, as well as task related communications targeted at improving the execution
of the new product development process (Brown, and Eisenhardt, 1995). A possible
explanation is that these motivating factors, which may be characterized as tactically
oriented, do not inﬂuence a ﬁrm’s use of strategic communications and therefore the
ﬁrm’s propensity to preannounce remains unaffected. Communications aimed at supply
chain participants may indeed be limited to more routinized forms that stress operational

objectives (e. g, discussion of prototype development timing charts, engineering revisions,

91

and spare parts inventory planning) and are delivered by operating, as opposed to,
executive management.

Additionally, perhaps ﬁrms are simply overlooking a powerﬁrl forum of
communication by not targeting channel members with their preannouncements. Given
the evolution of industry competition ﬁ'om ﬁrm versus ﬁrm to supply chain versus supply
chain, the use of preannouncements, as informative and inﬂuential communications
seems particularly relevant. Preannouncements, as strategic communciation tools, can
inform channel members about future actions that go beyond routine information sharing,

allowing the ﬁrm to respond to queries regarding the ﬁrm’s future actions and reducing

 

V:—

uncertainty surrounding the channel relationship. Preannouncements may play a vital role
in developing effective relations-within the channel and inﬂuencing channel performance
than ﬁrms have yet discovered.

However, the results do provide some interesting insights regarding the
relationships amongst buyer involvement, rapid deployment requirements, distributor, as
well as supplier NPD integration activities. First, the ﬁndings support the proposed
positive relationship between rapid deployment requirements and both distributor and
supplier NPD activities. Thus, in situations were NPD success is highly affected by
distribution prowess, the ﬁrm seeks not only to integrate distributors into the NPD
development process but its suppliers as well. The concept of a supply “chain”
incorporating both upstream and downstream activities is highlighted. The positive
ﬁnding regarding distributor NPD integration’s inﬂuence on supplier NPD integration

provides further support for the concept of a “supply chain driven” process as opposed

92

the ﬁrm’s use of discrete and uncoordinated NPD management practices aimed at
distributors and suppliers.

Additionally, the ﬁndings provide support for the proposed positive relationship
between buyer involvement and supplier NPD integration but not its hypothesized
positive inﬂuence on distributor NPD activities. Possible explanations for the result
suggest other factors could be confounding the results. Greater buyer involvement may
result in ﬁrm’s “internalizing” or providing “parallel support” for many of the
information-based activities usually assigned to distributors (e.g., product information
and customer support), For example, computer software, hardware, and peripherals are
distributed through various retail ﬁrms and, although these channel members provide
customer support during the pre-purchase period, the manufacturers (e. g., Microsoft,
Compaq, and Hewlett-Packard) signiﬁcantly augment the distributors activities through
their own internal customer support organizations and websites. Additionally, such ﬁrms
also distribute a signiﬁcant portion of their product through direct channels thus further
motivating the existence of an internal customer support organization. Therefore, the
degree to which the ﬁrm internalizes or parallels distributor activities within the sample
could be confounding the results as distributors would play a smaller and less signiﬁcant
role in responding to involved buyers.

The existence of a possible confound also provides some insight regarding the
ﬁnding that, in contrast to the proposed relationship, buyer involvement is negatively
related to rapid deployment requirements. That is, distribution prowess is de—emphasized
under conditions where buyer involvement is greater. The involved buyers need for

information and their extensive investment in pre-purchase information search may also

 

93

foster this result via two additional mechanisms: 1) the pre-purchase information search
pattern characteristic of involved buyers allows for a longer sell cycle and may result in
product delivery being less important to the purchase decision; under such conditions,
ﬁrms may not invest in and develop their distribution capabilities and 2) the involved
buyer’s pre—purchase investments in information search could mitigate buyer switching
when a product stockout occurs — the involved buyer will wait for their desired product
selection to be available and thus distribution acumen will not critically impact the
purchase decision.

In summary, the ﬁndings indicate that a ﬁrm’s propensity to preannounce is
directly motivated by an outward strategic focus aimed at achieving a positive reputation
at the aggregate level of the industry, via competitive equity building, rather in response
to individual elements within the context of the ﬁrm and its market (e.g., buyer
involvement, rapid deployment requirement). In short, the ﬁrm’s use of
preannouncements as strategic communications is mainly driven by the pursuit of a
strategic goal — a high proﬁle and strong position as an industry leader.

5.1.3 Outcome Model

The dissertation develops a conceptual framework that examines direct and
indirect outcomes of a ﬁrm’s propensity to preannounce. As discussed in Chapter 2,
previous research has largely focused on preannouncement outcomes related to
competitor and investor response. The proposed framework extends extant literature by
investigating: 1) outcomes related to a ﬁrm’s propensity to preannounce, across a wide
range of ﬁrture actions, as compared to preannouncements of a speciﬁc type (e. g., new

product preannouncements, dividend preannouncements), 2) outcomes that tap into the

94

favorable attitudinal biases of multiple target audiences (e. g., buyers, channel members,
industry observers and experts, and 3) the direct and indirect effects of a ﬁrm’s
propensity to preannounce on its new product success, a perceptual construct that
describes managerial attitudes regarding their ﬁrm's ability to successﬁrlly execute new
product activities.

Concerning direct effects, the ﬁndings do not support the proposed positive
relationship between a ﬁrm’s propensity to preannounce and competitive equity. One
possible explanation is that competitive equity, deﬁned as the ﬁrm’s position as an
inﬂuencer of industry standards and its products as product class standards, is a function
of a ﬁrm’s actual performance (e. g., product quality, ﬁnancial performance, market
share) and thus less subject to manipulation by the ﬁrm’s use of preannouncements.

However, the ﬁndings do support the proposed positive effect of a ﬁrm’s
propensity to preannounce on industry receptiveness. That is, the greater the ﬁrm’s
propensity to preannounce, the greater the favorable bias of various market constituents
(e. g., buyers, distributors, suppliers, investors, industry observers and inﬂuencers)
towards a ﬁrm's future plans and products. Thus the ﬁrm’s communicative efforts, via
preannouncements, result in increased awareness and interest, in a favorable sense, on the
part of multiple constituents.

The ability to achieve favorable industry awareness and interest for itself and its
products is increasingly difﬁcult for ﬁrms in an era where buyers are bombarded with
more and more marketing messages, investors must process growing amounts of
information ﬁ'om institutional and industry sources (e.g., Value Line, Gartner Group,

Forrester Research), and channel members can globally scan to select their partners.

 

95

Preannouncements provide ﬁrms with the means to “package and deliver” information in
a form that targets the audience(s) individual needs and interests. For example, multiple
new product preannouncements may be issued by a ﬁrm such that those aimed at buyers
discuss product design, while investors are targeted with preannouncements detailing
how the new product will affect ﬁrture revenue and EPS growth. Simply put, a
preannouncement is customized cognitive, timely, and credible; these characteristics
enhance its relevance and, consequently, its efficacy as an inﬂuencing agent, and its
ability to rise above the “noise” of an industry. Not simply limited to recall and
recognition, awareness and interest in the ﬁrm and its future actions are favorable
affected at a strategic level.

The use of preannouncements might be particularly pertinent in emerging
industries (e.g., Internet) where share of mind is often a precursor to market share and
ﬁrms “compete in the ﬁrture”. The successful entry into new market or geographic
segments might also be favorably affected by the ﬁrm’s use of preannouncement. In
advance of such a move, the ﬁrm could issue preannouncements stating their plans and
detailing why the ﬁxture actions would be interesting and beneﬁcial to the targeted
audience(s). Preannouncements also allow the ﬁrm to attenuate rumors surrounding a
ﬁrture action that might create a negative bias and could, consequently, undermine its
success.

In summary, the use of preannouncements to create and maintain a favorable
industry bias towards a ﬁrm’s future plans and products, as supported by the results, may
be particularly critical in situations where: l) ﬁrture actions are new for the company and

could possibly be construed as risky (e. g., America Online’s ﬂat-rate pricing strategy), 2)

 

 

96

future actions affect multiple constituent groups (e.g., Daimler-Chrysler merger), and 3)
the industry is highly dynamic or emerging thus future actions are stressed (e.g.,
computer software, Internet). However, this is beyond the scope of the dissertation and
thus further research regarding these issues is required.

Additionally, the ﬁndings indicate that, as proposed, competitive equity positively
affects a ﬁrm’s ability to marshal resources in support of new product development both
directly, as well as indirectly through its positive relationship with industry receptiveness.
Firm with high levels of competitive equity, such as Cisco or Coca-Cola, hold positions
as industry bellwethers or standard-bearers. This position positively inﬂuences the ﬁrm’s
ability to marshal resources via two proposed mechanisms. First, new product
development programs are characterized by substantial downside risks because most new
products are not successful. However, ﬁrms with greater competitive equity may be more
“attractive” as business partner to investors, channel participants, or other ﬁrms (e. g.,
joint venture partners). That is, the ﬁrm’s success and industry position suggests the
risk/reward scenario associated with a new product program would be highly biased
towards a successﬁrl outcome and that doing business with such a ﬁrm may even elevate
a business partner’s industry status and provide a powerful qualiﬁcation (e. g., Lear
Corporation’s status as a preferred supplier to Ford Motor Company, Hambricht and
Quist underwriting Amazon.com’s latest bond offering). Second, ﬁrms with greater
levels of competitive equity would generally be ﬁnancially prosperous; thus, the capital
requirements to adequately fund and staff new product development programs would not
be compromised due to cash ﬂow shortfalls, large debt obligations, or cost reduction

priorities. In short, ﬁrms with high levels of competitive equity either have the capital

 

97

available internally to adequately support new product programs or, due to their
attractiveness, may face a receptive industry audience (e. g, investors, channel members)
from which to successfully solicit, externally, the necessary resources, both ﬁnancial and
managerial. Thus, similar to brand equity within the consumer domain, competitive
equity may provide the ﬁrm with a signiﬁcant and inimitable competitive advantage
within the province of business to business relationships. However, the two proposed
mechanisms require substantial further investigation.

As previously discussed and supported by the results, the receptiveness of an
industry towards a ﬁrm’s future plans and products favorably positions the ﬁrm in terms
of its ability to solicit the resources necessary to successﬁrlly execute new product
development activities. Given the positive relationship between a ﬁrm’s propensity to
preannounce and industry receptiveness, this ﬁnding is particularly relevant. Thus ﬁrms
with greater levels of preannouncement propensity will indirectly foster their ability to
marshal resources in support of new products. This ﬁnding suggests that the ﬁrm’s use of
preannouncements may have a highly tangible beneﬁt: by preannouncing, the ﬁrm may
be able to increase its ability to solicit and, perhaps, ultimately, fund its new product
development activities.

The managerial implication of this result is indeed signiﬁcant. In short, by
“strategically foretelling” its ﬁrture plans and products and thus gaining favorable
attitudinal industry support for the programs, the ﬁrm may be able to increase their ability
to ﬁrnd such ventures. This ﬁnding suggests that ﬁrms short on internal resources would
be wise to “promote” their ﬁrture plans externally as a means to garner the necessary

industry support for their execution. Anecdotal evidence suggests that some ﬁrms are

 

98

indeed taking this path, particularly in the Internet sector, where. cash ﬂows are negative
but ﬁrms are tapping external capital markets and joint venture partners to fund their
expansion by “hyping” the potential growth of their emerging market and the subsequent
revenue and proﬁts their new products will eventually achieve. Additional research is
required to further investigate the relationships amongst preannouncement, industry
receptiveness, a ﬁrm’s resource solicitation activities, and a ﬁrm’s ability to marshal
resources. Additionally, the ﬁrm’s ability to effectively “foretell”, via preannouncements,
its future plans and products is punctuated. Therefore, ﬁrrther examination of the design
efﬁcacy of preannouncements and preannouncement campaigns is highlighted.

Turning to direct antecedents of new product success, the results indicate that
both the ﬁrm’s ability to marshal resources and industry receptiveness positively affect
new product success. Regarding a ﬁrm’s ability to marshal resources, previous research
has indicated that new product development proﬁciency, which includes measures of
proﬁciency in screening, market and technical assessment, market research, product
development, test-marketing, and market launch, has a signiﬁcant and positive
relationship with new product success (Cooper 1979, Cooper and Kleinschmidt 1987,
Song and Parry 1996). Brown and Eisenhardt (1995) term this new product success
paradigm the “rational plan approach” - “simply put, a product that is well-planned,
implemented and appropriately supported will be a success” (p.348). The ﬁndings lend
further support to this resource-based theory of new product success. Indeed, within the
context of our model, the ﬁrm’s ability to marshal resources is the main driver of new

product success (see Figure 5).

 

99

As previously discussed, industry receptiveness affects new product success
through its indirect affect on a ﬁrm’s ability to marshal resources; however, the results

indicate that it has a direct effect as well.

  
  
  
   
 
 
  

  
  

A Firm’s
Propensity to
Preannounce

Competitive
Equity

     

New Product
Success

  
   
     

Ability to
Marshal
Resources

 
    
 

Industry
Receptiveness

Figure 5 - Total Effects on New Product Success

Previous research proposes that communication fosters new product success by
generating support and commitment to the new product within the context of the new
product development teams (Brown and Eisenhardt 1995). However, the result indicates
that receptiveness, at the industry level and beyond the domain of the team, also fosters
new product success. Thus communication- based effects may operate at two levels: 1)
operationally, at the project -— team level, such that communication fosters internal
support and task management effectiveness and 2) strategically, at the program-industry
level, where a favorable bias for the ﬁrm’s new product plans is engendered at across a
wide range of external constituents (e.g., investors, channel members, industry

inﬂuencers).

 

100

Studies on new products indicate extremely low success rates and little
improvement despite extensive research efforts focusing on new product development
and advances in marketing research methods (Urban and Hauser 1993, Wind and
Mahajan 1997). Wind and Mahajan (1987) suggested that “marketing hype”, a ﬁrm’s
attempt to foster support for new products in advance of their introduction by creating a
receptive and supportive industry environment, might indeed be a key construct
inﬂuencing new product success. This ﬁnding lends support to their notion and suggests
that ﬁrms who strategically inﬂuence the industry environment in support of their ﬁxture
plans and products will obtain higher levels of new product success. The ﬁnding, again,
points to the contribution of preannouncements as a means to foster industry
receptiveness and, ultimately, cultivate new product success.

In retrospect, perhaps, the key ﬁnding related to the outcome model is that a
ﬁrm’s propensity to preannounce indirectly affects its new product success through its
positive relationship with industry receptiveness. That is, through its use of
preannouncements, the ﬁrm can engender a supportive and receptive industry
environment and thus indirectly affect its ability to gain the resources necessary to
execute its future product plans - a focal antecedent of new product success, as well as
create “favorable anticipation” for the its new products, perhaps opening the “window of
opportunity for the its new products” a bit wider and a bit longer and further improve its
new product success potential.

5.2 Limitations
Some possible limitations to the dissertation should be noted. First, as discussed,

the degree to which a ﬁrm intemalizes or augments distribution activities may be

 

101

confounding the results of the antecedent model. Second, several new constructs were
developed for use in this study (e.g., competitive equity, competitive equity building,
executive market orientation, and industry receptiveness) and, while testing supported the
validity of the constructs, more research is needed to provide conclusive and
generalizable evidence regarding the factors. Third, the dissertation’s response rate of
16.7 %, though acceptable, should be recognized as a possible limitation and suggests I,
future studies are needed to replicate the ﬁndings. Lastly, both models’ included
constructs that were examined using perceptual measures and thus subject to the bias of

the ﬁrm executives who acted as respondents to the survey. Again, suggesting the need

 

for further studies to improve the generalizability of the results "'

102

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