Does customer participation moderate the effects of innovation on cost-based financial performance? An examination of different forms of customer participation

Although the importance of customer participation in innovation is recognized in theoretical and managerial fields, few studies have shed light on the interaction effects of different forms of customer participation on the relationship between a firm’s innovation orientation and cost-based financial performance. This study empirically examined the moderating effect of customer participation as information providers (CPI), co-developers (CPC), and innovators (CPN), on the relationship between a firm’s innovation orientation and cost-based financial performance. We focus on two types of innovation orientation: exploitative and exploratory innovation. Finally, we used data from 272 manufacturing industry respondents of the Korean Innovation Survey. The results show a non-linear U-shaped relationship between exploitative innovation and financial performance. Further, CPI (CPN) positively (negatively) moderates this relationship. This study provides important theoretical and managerial implications for adopting and managing customer participation in a firm’s innovation orientation.