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EJM COMMENTARY
43,3/4
The marketing of innovations in
high-technology companies:
364
a network approach
Erik A. Borg
Sodertorn University College, Huddinge, Sweden

Abstract
Purpose – This article aims to consider the usefulness of network theory in examining the marketing
of high-technology products and services.
Design/methodology/approach – High-tech companies are analysed in light of a network
approach to marketing.
Findings – The research finds that building marketing relationships can improve the viability of
high-tech companies.
Originality/value – The article contributes to the development of theory that can enhance the
marketing of high-technology products and services.
Keywords Innovation, Marketing, Research and development, Knowledge economy
Paper type Viewpoint

European Journal of Marketing
Vol. 43 No. 3/4, 2009
pp. 364-370
q Emerald Group Publishing Limited
0309-0566
DOI 10.1108/03090560910935479
Introduction
An increasingly knowledge-oriented society is delivering products and services that
are more research and development intensive. Markets where technology is central
have become essential to the economic development of the whole economy (John et al.,
1999). At the same time investments in technology-intensive sectors are essential
driving forces of the economy. The use of new technology has been leading to
increased productivity since the beginning of the industrial revolution (Mokyr, 1990).
To compete in high-tech markets, producers must invest in R&D and innovations. A
high-tech company that cannot rely on internal resources to remain competitive can
look for new relationships and strategic partnerships to broaden its R&D base. A
network approach to markets (Hakansson and Snehota, 1989; Anderson et al., 1994;
Mattsson, 1997; Borg, 1991, 2001) can identify the value of networks in the
development of technology. Enterprises build networks to enhance their competence
and search for new knowledge. Relationships between research institutions and
companies are examples of networks that may enhance innovativeness by allowing
companies to benefit from outside research. Increased R&D co-operation and flow of
knowledge and information are essential to the competitiveness of research-intensive
industries.
There is a lack of consensus as to the marketing implications of high-tech products
and services. Innovations represent something entirely different, and different
The author wishes to thank Professor P.M. Rao of Long Island University in New York for his
thought-provoking comments on this research.
approaches to marketing are necessary for technology-intensive markets. At the same The marketing of
time, some of the basic principles of marketing can be applicable to innovations (John innovations
et al., 1999). The argument put forward here is that the marketing of
technology-intensive products can benefit from a network approach, which mends
some of the weaknesses of traditional marketing approaches. Networks can represent a
collection of users and/or producers co-operating around sets of complementary
know-how (Farrell and Saloner, 1985). 365
Rugman and D’Cruz (2000) propose a theory of business networks, which are
governance structures for organizing exchange through co-operative non-equity
relationships among firms and non-business institutions. A network comprises five
partners:
(1) the multinational flagship firm;
(2) key suppliers;
(3) key customers;
(4) selected competitors; and
(5) the non-business infrastructure, which includes educational and training
institutions, various levels of governments, and other organizations, such as
non-governmental organizations and trade associations.

Networks in marketing
In the marketing of research-intensive products and services, the relationships that
evolve within marketing may be crucial to a company. Network methods in marketing
can be seen as diagnostic tools with which to investigate interactive systems, where
technology is an essential part of the network (Iacobucci, 1998). Enterprises may share
important information with their customers, and develop new products and services in
close co-operation with clients. A network approach to marketing may embrace
essential elements for success in R&D and marketing research-intensive production.
The ability to convert knowledge and information into marketable products and
services may rely on the type and quality of market relationships that a company can
establish. Strategic groups can be established around inter-firm networks in
international high-tech industries (Duysters and Hagedoorn, 1995). With increased
globalization, market relationships are becoming more geographically spread out, and
R&D-intensive networks commonly include participants in many different regions of
the world. Effectively managing and developing research-intensive networks can be a
key variable for sustaining the market presence of a company that relies on R&D for its
continual progress.
Networks can lead to positive spillover when participants work on innovative
solutions to challenges they have in common. In dynamic market-related networks,
common standards and compatibility can evolve between partners and customers. The
creation of innovation and new know-how are examples of positive spillover from
network relationships. Barriers between disciplines can be reduced and the integration
of technologies is common in technology-intensive markets, and know-how bases can
spread widely across firms, industries, and users. Networks assist the technology
integration process and are useful in the early phases of an R&D project (Iansiti and
West, 1997). Networks may form around a centrally positioned lead user of technology.
A lead user of technology can be responsible for most of the commercialization of a
EJM new technology (Von Hippel, 1986). The dynamics of the network and the market
43,3/4 relationships built, not least with consumers of innovations, can be essential in
determining the ability of a company to conduct R&D in ways that lead to marketable
products and services.
A network approach can involve several aspects of marketing. Central to marketing
in this respect is segmentation, targeting a market, and positioning R&D-intensive
366 products and services (Easingwood and Koustelos, 2000). Some of this approach is
relevant to the discussion of the marketing of high tech presented below. Segmentation,
targeting, and positioning are concepts readily adopted in academic texts on strategic
marketing (Jain, 2000; Cravens and Piercy, 2003; Anderson and Vincze, 2004). These
concepts can be adapted to a network approach to marketing and be well suited for
describing and analysing the marketing challenges of high-tech companies.

Segmentation
Market segmentation represents a distinctive move away from mass marketing. Mass
marketing is today outdated in many respects; indeed, it was only applicable when
demand was homogeneous, every customer had the same basic need, and competition
was scarce. The varied needs now emerging among diverse customers can no longer be
satisfied in the same basic way. A network approach to marketing implies that
relationships are built between buyers and sellers, and that companies can learn more
about the needs of the customer.
Segmentation is the process of dividing markets into smaller groups or clusters of
customers with similar characteristics. Establishing networks makes it possible to
reach all members of a segment with similar relationship activities. Marketers can form
networks around market segments. Customers in a segment respond similarly to the
same product or service features, promotional activities, distribution methods, and
pricing strategies. Groups of customers may be located in the same geographic area or
share similar buying habits, media preferences, product uses, etc. (Anderson and
Vincze, 2004).
The strength of a network approach to marketing is that a relationship is built with
the customer, allowing information to flow between the buyer and the seller. This
means that the company conducting the marketing can adjust its marketing activities
to fit the needs of individual or groups of customers after an interactive segmentation
process. In a network approach, markets can potentially be segmented down to
individual customers. Having segmented the market, a number of management tools
are available to approach customers in different segments. Essential to the
segmentation process is to relate to and know more about customers, including
knowing about applicable psychographic and geo-demographic variables (Novak and
MacEvoy, 1990).

Targeting
Targeted marketing can increase the precision of marketing. A distinct network of
market relationships can represent a target for marketing activities. Databases are
making it possible to selectively target a market, letting marketers narrow down their
markets more precisely. Mass customization and micro marketing are offering new
opportunities facilitated by establishing closer relationships with customers. The key
is to know your customers’ wants and needs and to customize products, services, and
messages to suit each customer (Peppers and Rogers, 1993). Targeting also means The marketing of
choosing the companies with which you want to do business. Choosing customers can innovations
be seen as an essential strategic decision (Webster, 1994). Working in networks can
make it easier to gain access to information about potential partners and customers
that companies can choose to do business with.
Elaborate marketing networks can assist a company in its targeting efforts.
Through networks of relationships, companies can gain information about whom to 367
target and how they should be targeted. Networks can channel information about how
technology is being adopted by each customer. Companies can also assist in the
technology adoption process. Early adopters of new technology may be closely
connected to the company, and can be involved at an early stage in the R&D process.
The customers that adopt innovations early on may also influence the development of
new products and services.

Positioning
Marketing positioning of high tech has been regarded as implying differences in how
companies sell technology. Companies can take different positions vis-à-vis the
consumer: companies can sell or license know-how directly, sell proofs of concept, or
sell systems, depending on the degree of ready-to-use know-how involved in the
marketing of a given technology. Companies can achieve a high vertical position by
licensing products or a low vertical position by selling whole systems (John et al., 1999).
Positioning has been identified with the position a company occupies in the value
chain. Internal activities are thereby related to activities within the overall set of
activities undertaken by all relevant firms (Porter, 2004).
In a network approach to high-tech positioning, companies are indivisible from their
relationships with their customers. Market positions are, after all, achieved in the eyes
of the customer. A better position in the market is achieved through an enhanced
relationship with customers. Positioning, as a concept in marketing, has contributed to
the interpretation of how products and services are perceived by customers, and how
companies and brands are perceived in relation to each other. Positioning is not what
you do to a product, but what a product does to the mind of the prospect (Trout and
Ries, 1995).
Different customers have different needs and will interpret the advantages of an
innovation differently. The positioning of a product or service should be developed
with reference to the needs of the customer. After all, it is often the customer who best
knows his or her needs. Networks that allow customers to share information about
their future needs and requirements can be vital to getting a favourable position in the
market. In the positioning effort, companies can emphasize different aspects of new
technology. The willingness to take risks involved in adopting new technology can be
one factor that needs to be addressed in relation to the customer. The risk of new
technology is generally lower when adopting technology later on, when the technology
is already proven. On the other hand, companies may need to adopt superior
technology and thereby be inclined to accept more risks when adopting a technology
early on. Adjusting to these customer needs may involve establishing closer ties with
the customer and allowing information to flow freely between the developer and
adopter of new technology.
EJM A network approach to the positioning of a company can also include corporate
43,3/4 venturing. By reaching out to emerging technology companies and making investments
in them, companies can increase their innovation capabilities when R&D resources are
tight. A network that involves smaller high-tech companies and provides distribution
facilities can provide the investor with an innovative team without having to fund the
entire technology development. The company can position itself as the initiator and
368 co-ordinator of a larger network of innovative firms and provide several alternate
solutions to satisfy the needs of customers involving different high-tech companies.
Providing venture capital can be an essential network-building activity that enhances
the relationship with end users of technology. A company can thereby position itself as a
central contributor to future solutions to technological challenges.

Concluding remarks
Many of the assets that companies control are not embedded in the brand of a product,
but rather in customer –supplier relationships and in systems and patterns. Achieving
a competitive position in a market depends on several factors, and high R&D
investments, concentration on knowledge-intensive high-value-added products, and
productivity gains have all been upheld as important factors in this respect
(Cunningham, 1986). Competitiveness can be linked to companies’ abilities to develop
and manage a vast range of network relationships. Essential to corporate
competitiveness is intangible assets and not necessarily the specific brand under
which a company’s product or service is marketed. Doyle (2001) maintains that in
many industries, the drivers of value are non-brand intangible assets, such as skills
and motivation, systems and patents, and customer – supplier relationships.
Companies possess certain technologies that are essential to achieving a position in
the market. These can be separated into three different areas (Turnbull et al., 1996).
First, there is the production technology, which comprises the ability to design
products or services. Second, there is the process technology, which consists of the
ability to manufacture these products and services. Third, there are the marketing
technologies: these consist of the various capabilities needed to be able to analyse the
requirements of others; they involve relationship competence and the ability to
influence and deliver to other companies in a network. A network can be viewed as a
pattern of capabilities and technologies. The network enables the transfer of
intangibles and capabilities from those that have specific capabilities to those seeking
them. In high-tech networks, companies need to control a portfolio of capabilities and a
set of relationships that supplies and receives essential resources.

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EJM About the author
Erik A. Borg has worked at the Universities of Stockholm and Lund, at Gothenburg School of
43,3/4 Economics, and has been visiting Associate Professor at Long Island University in New York. He
is currently an Associate Professor/Senior Lecturer at Sodertorn University College. His research
concerns the interaction between markets and organizations. This work is relevant to both to
marketing and management, and partly consists of analysing markets comprising networks and
market relationships. Erik Borg has published research in several refereed journals and is the
370 author of research-related books on international business, globalization, and marketing
management in a post-industrial economy. Emerging markets in Eastern Europe are another of
his research areas. Erik A. Borg can be contacted at: erik.borg@sh.se

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