Product Innovativeness Strategy With Crowdsourcing

This study focuses on the manufacturer’s strategy of product innovation when a set of potential consumers are involved in product innovation through crowdsourcing. Two models are built for developing incremental and radical products to capture the manufacturer’s optimal strategy in a supply chain which includes one supplier, one manufacturer, and some potential consumers. In addition, the effort compensation mechanism has been designed to improve the profits of the manufacturer and supplier, and consumer surplus. Finally, the innovativeness strategy is explored based on the manufacturer providing compensation for crowdsourcing consumers. The results show the following: 1) if the degree of preference dispersion is low, the percentage of crowdsourcing consumers is large, or the degree of knowledge spillover is high, the manufacturer prefers radical innovation. It also implies the negative relationship between the manufacturer’s profit and innovation level. Otherwise, the manufacturer prefers incremental innovation, which implies the positive correlation between the manufacturer’s profit and innovation level; 2) under the optimal product innovativeness strategy, supplier’s profit and consumer surplus also are improved; and 3) under certain conditions, offering compensation for crowdsourcing consumers is Pareto improvement strategy for the manufacturer, the supplier, and crowdsourcing consumers.