Insights and New Directions from Demand-Side Approaches to Technology Innovation, Entrepreneurship, and Strategic Management Research

Abstract

The authors review the progress of three rapidly growing macro management literatures—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. 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 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. These seemingly counterintuitive findings from demand-side research indicate the promise of future demand-side work for generating new knowledge useful to scholars and managers. The authors suggest directions for future demand-side research based on their review. What’s more, the research they review represents a start—but only a start—toward integrated theories that could attend to both the demand side and the producer side of the value creation equation.