Arab American University

Ph.D. Strategic Management Program

Article Summary # 3

Insights and New Directions from Demand-Side Approaches to Technology

Innovation, Entrepreneurship, and Strategic Management Research

Course Name: Business Strategy

Supervised by: Dr. Hussam Al- Shammari

Student Name: Sand Salhout

ssalhout@staff.alquds.edu

Fall 2021/ 2022

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 1) References:
The authors are: Richard L. Priem, Sali Li, and Jon C. Carr
The main Author is Richard L. Priem Emeritus Professor, Neeley School of Business, Texas
Christian University. This article has been cited 416 times and Published in the Journal of
Management

2. Methodology:

The authors used the systematic literature review, they have analyzed publication in the web of
science. They searched for recent demand-side literature in technology innovation,
entrepreneurship, and strategic management through online library database sources, by examining
citations to existing demand-side work using Web of Science, and by manually examining the “in-
press” listings of scholarly journals. To capture the most recent demand-side work, they also
emailed those scholars whom they found had previously engaged in demand-side research and
asked for their latest in-press articles and working papers.

3. Purpose of the study:

The study aimed to review and integrate an emerging and relatively little-known literature
representing a rapidly growing and potentially highly consequential new direction for researchers
in technology innovation, entrepreneurship, and strategic management.

The authors review the progress of three rapidly growing macro-management works of literature
in technology innovation, entrepreneurship, and strategic management that have in common the
use of a “demand-side” research perspective. Demand-side research looks downstream from the
focal firm, toward product markets and consumers, to explain and predict those managerial
decisions that increase value creation within a value system.

This study emphasized on the demand-side perspectives which represent a burgeoning research
area in the fields of technology innovation, entrepreneurship and strategic management, yet are
only at an early stage in the field of international business. Demand-side research looks outside
the focal organization toward consumers and product markets to explain managers' strategic
decisions, decisions that increase value created within a value system by emphasizing: consumer
benefits experienced; thematic similarity (i.e., products and services that are used in performance
of the same activity.
Typical characteristics of demand-side, macro-level management research include clearly
distinguishing value creation from value capture, emphasizing product markets as key sources of
value-creation strategies for firms, viewing consumer preferences as dynamic and sometimes
latent, and recognizing that managers’ differing decisions in response to consumer heterogeneity
contribute to firm heterogeneity and, ultimately, value creation.
The authors review recent demand-side findings showing that strategies based on consumer
heterogeneity can result in competitive advantage even if the firm holds only obsolete or mundane
resources, these advantages can be sustainable without resource- or ability-based barriers to
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imitation, successful innovations can be consumer-driven rather than resource or technology-
driven, and consumer knowledge can play a key role in entrepreneurial idea discovery. The
authors suggest directions for future demand-side research based on their review.

4. Discussion

Some scholars advocate resource-focused approaches to management research that “look inside”
in attempting to value firms’ or nascent ventures’ heterogeneous resources or dynamic capabilities
These approaches have contributed to knowledge in areas such as technology innovation,
entrepreneurship, and strategic management, with some scholars even assigning the resource-
based view (RBV) a “preeminent position” in the strategic management field. Recently, however,
some management scholars researching innovation, entrepreneurship, and strategy have begun
focusing on the demand side of the value equation rather than on the resource side.

By demand-side research, the authors mean work that looks downstream from the focal firm,
toward product markets and consumers, rather than upstream, toward factor markets and
producers, to explain and predict those managerial decisions that increase value creation within a
value system. Demand-side research typically remains at the firm level for example, by evaluating
how heterogeneity among a firm’s immediate customers can affect the viability of various strategic
responses to radical technology. This research also shows how consumers’ preference functions
can be useful in guiding strategies, such as diversification or backward or forward integration, for
multiple firms up and down the value system.

Demand-side management research is different from a typical marketing research in the following
way. Although marketing research might examine, for example, how differing retail assortments
may attract different types of consumers demand-side management research focuses on how major
strategic moves, such as interindustry diversification, could provide an ongoing value creation
advantage

Typical characteristics of demand-side research include:

a) Distinguishing between value creation, which is determined by consumers’ willingness to pay,
and value capture, which is determined by market structure and resource ownership.

(b) Recognizing that consumers’ heterogeneity of demand contributes to a firm's decisions.

c) Viewing consumer preferences as dynamically changing and sometimes latent.

d) Emphasizing product markets as key sources of value-creation strategies.

In short, the demand-side work to date indicates that the possession of “superior” resources is not
always as important as previously supposed and may in many contexts be unnecessary for
sustainable advantage.

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This paper argues for a new emphasis in macro- organizational research: an emphasis on the
dominant coalition of the organization, in particular its top managers. Organizational outcomes-
both strategies and effectiveness are viewed as reflections of the values and cognitive bases of
powerful actors in the organization. It is expected that, to some extent, such linkages can be
detected in empirical.

The Demand Side and Technology Innovation

Technology innovation scholars have long debated whether innovation is driven by technology
breakthroughs or by market demand that is, technology push versus demand-pull. Through a series
of studies in industries where customers tend to have more heterogeneous needs such as integrated
circuits, custom foods, and security software, studies showed the firms that offer their consumers
the chance to modify products or invent new solutions provide greater customer satisfaction.

The authors emphasized the difference between The “market pull” approach and the “technology
push”, “market pull” approach attempts to provide products the market demands. The “technology
push” approach attempts to interest the market in new products based on new solutions.

Demand-pull innovation and the technology life cycle

Demand-pull research also has provided fresh insights that complement traditional, technology-
push research into the technology life cycle. These studies show the importance of
considering demand-side market heterogeneity, in conjunction with technological capability, when
examining technology evolution.

Consumer demand and value creation:

Demand-side innovation research also has examining the relationship between consumer demand
and value creation through innovation. Researchers have found that consumer users
are major drivers of innovation, especially in consumer goods sectors, and that firms
intentionally get consumers involved in their innovation processes firms to analyze and understand
demand factors, instead of ignoring them; given marketplace heterogeneity, a consumer focus is
key for firms to successfully innovate or to successfully retreat from a competitor’s disruptive
innovation.

The Demand Side and Entrepreneurship

The phrase “opportunity-rich, but cash poor” is commonly associated with entrepreneurs.
The authors defined opportunity signaling as the general process whereby overt or latent consumer
or market demands indicate to entrepreneurs’ prospects for opportunity creation or discovery. In
reviewing the literature, they found that the entrepreneurial process can be influenced by (a) signals
received through customer–entrepreneur relationships or (b) demand signals from changing
customer preferences, each of which can indicate a potential opportunity for entrepreneurial action.

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They have also added the term user entrepreneurship, although opportunity signaling generally
captures how demand-side pressures can lead to entrepreneurial opportunities, research in user
entrepreneurship demonstrates how the demands of a user or user community can lead to
innovations that are ultimately commercialized by the users themselves
Thus, close relationships with customers can shape the actions of entrepreneurial firms as they
attempt to meet the external demands for products or services

The Demand Side in Strategic Management

Researchers have since examined strategic issues such as value co-creation, technological
discontinuities, industry evolution, consumer and firm heterogeneity, diversification, opportunity
finding, and systems for judging value, all from the demand-side perspective. Studies showed
that interindustry diversifications with otherwise-mundane assets can create consumer
value; counter to prevailing thought, “superior” assets are not necessary for value creation.
Moreover, they determined that common ownership is required. Together, these studies indicate
that attention to value creation must precede attention to value capture and that value creation for
consumers stands on equal footing with value capture regarding its importance to firm success.
Therefore, the studies have shown that strategic effectiveness can be determined by market factors
as well as organizational design features

Distinguishing between Demand-Side Research and Marketing Research

Marketing studies focused on managing customer relationships. Therefore, such studies could
provide useful ideas for demand-side management scholars wishing to link willingness to pay to
the value creation potential of various firm-level resource bundles at either the business or
corporate level. Such demand-side, management studies are called for (a) when consideration of
consumer heterogeneity can contribute to the discovery of corporate-level or business-level
strategies that produce differential advantage and (b) when the decisions made are important to the
firm survival, involve substantial resource deployments, and would be difficult to reverse that
when they are strategic decisions.
Most marketing studies do not address issues that are unambiguously strategic at the enterprise
level, according to the criteria just mentioned

Differences in Demand-Side Research and the RBV

RBV scholars typically assume that resources are heterogeneous but also assume that the market
is homogenous. Demand-side research, on the other hand, is concerned with the economists’
entrepreneurial profits instead of rents from resources. The focal point is the marketplace, and the
firm is considered as an organization created to satisfy diverse market demands. The basic
assumption of demand-side researchers is market heterogeneity.

This market heterogeneity assumption has several implications. First, it means that different
consumer groups can have different demand characteristics. Second, it means that a single
consumer can exhibit different demand characteristics over time. And third, a consumer’s demands
and preferences may sometimes be latent. When market heterogeneity is taken into consideration,

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firms can gain competitive advantages by creating value for their customers, determined by the
level of utility delivered

Demand-Side Research and Dynamic Capabilities

The authors have defined dynamic capabilities as “capabilities through which firms manage
resources to satisfy changing market conditions. Or as “the firm’s potential to systematically
solve problems, formed by its propensity to sense opportunities and threats, to make timely and
market-oriented decisions, and to change its resource base.”
Both of these definitions encompass the management of internal resources and the external
Marketplace.

5. Conclusion

It can be concluded that demand-side research is critical to understanding firm activity, it can help
remind us of the role consumers play in alerting marketers to merchandising opportunities, in
providing designers insights into desired product attributes, and in general, in allowing researchers
to identify how firms achieve, exceed, or fail to attain certain performance targets. Integration of
demand-side studies into macro-management research is vital to our understanding of the firm.
Indeed, I believe that demand-side research’s contribution rests in viewing it not as a “new
direction” but rather as part of a multifaceted approach to management research.

Demand-side research can be also valuable for expanding the strategic actions available to
multinational organizations and international social enterprises by integrating geographical
expansion and business diversification in ways that can create the most value for heterogeneous
end users both across and within national boundaries. This adds conceptual complexity to the
international business field by raising international consumer issues to the strategic level – with,
for example, investments in mergers and acquisitions and strategic alliances – rather than the more
typical single-business or functional marketing levels. This added complexity has the potential to
extend international business theories in new ways
6. Personal Evaluation:

1. Despite its importance, demand-side focus research must include in the analyses the costs
of serving that demand. Therefore, researchers cannot focus their attentions on consumer
markets to the exclusion of other areas of the firm’s value chain.
2. I also think that the best Business portfolio is that the ones that create a strategic fit between
the external and internal environment.
3. The authors did not mention any limitations of their research although the authors cited
many sources (152 in total) it is not a systematic literature review (no criteria given why
they chose an article as relevant).
4. The authors did not conduct any field research or back up their
findings/recommendations by their own data.
5. The paper does not provide specific managerial implications. A practitioner will find it
hard to extract any hands-on advice.