The Influence of Product Design on Switching Decisions for Capital-intensive Technologies: The Case of MRI Purchasing in Research Facilities
Al-Kwifi, Osama, Sam
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This research investigates the role of product design on technology switching in the context of a capital-intensive product. I focus on switching rather than on new sales because switching is the primary means of changing market share in nearly mature markets. Further, the dominant logic — is that, because of switching costs and the related consequences, incumbents have a strong advantage when upgrading or replacing equipment. However, the literature on lead users suggests that those users at the cutting-edge are willing to meet the costs of changing technology because they have the capabilities needed to leverage significant advantages from the new technology. The extant literature on switching focuses primarily on consumers in highly competitive markets. There is little understanding of the antecedents of switching in business markets, especially in markets for capital-intensive technology-based products. This research investigates the influence of product design on switching behavior for capital-intensive high technology products, where buyers are faced with numerous implications and significant costs at each step of the process. The switching behavior for capital-intensive products has not been studied previously; because of this deficiency, we do not know the consequences for theory, that is, how different theoretical assumptions will contribute to the final decision to switch, or for managerial practice, that is, the kind of strategies managers should follow to retain existing buyers under such conditions. Previous literature did not explore explicitly the concept of product design as an influence on switching, because satisfaction and switching cost were widely used as determinants of switching decisions in competitive markets. This gap in knowledge is due to the difficulty in identifying a method that would allow one to differentiate among the products’ performance and how the difference would impact consumers’ objectives. It is also difficult for researchers to define the characteristics of high technology products that make certain products more attractive on the market than others, without substantial assistance from experts in particular products. These conditions create a barrier to investigating switching behavior for high technology products. This research is positioned in the overlapping area between product design and switching behavior. The linkage between these two bodies of literature has never been explored. The research answers two important questions: (1) what are the antecedents of technology switching in a context where there are considerable costs?, and (2) does product design encourage technology switching behavior? Dynamic capabilities theory is used to explain this research, because the decision to switch an old technology for a new one in rapidly changing technology markets is about renewing resources and capabilities to maintain competitive advantages. This research is conducted in the context of the Magnetic Resonance Imaging (MRI) industry as a case study. Considerable switching has occurred in this industry over the last decade, resulting in this industry offering a good opportunity to investigate the reasons why. The market is divided into different segments based on the region and the health care system. I selected the university hospitals segment, MRI research centers, to conduct this research study, because it is feasible to track the technology switching process for this segment over time and because this segment’s market is nearly mature. Data were collected from multiple sources including personal interviews, online surveys, annual conference database, product technical reports, and patent data. In this study, the independent variable is product design and other variables related to switching costs and marketing strategies. The dependent variable is switching behavior, which has two values: (1) “switched,” defined as purchasing a new technology from a different supplier, and (2) “not switched,” defined as repurchasing from the same supplier. After collecting surveys from decision makers who purchased MRI technology, I use logistic regression analysis to test the hypothesis that the product design has a direct impact on the switching decision of capital-intensive products. Research findings have shown that buyers are willing to switch to a different technology in spite of high associated costs, particularly when they are faced with a product that restricts their capabilities. Product design represents the most influential factor underpinning switching, because it provides more capabilities that motivate switching. Notwithstanding the fact that moving to a new supplier imposes significant challenges, including technology and relationship incompatibility, findings confirm that this distinction in product capabilities has induced some MRI buyers to move to a new supplier in order to maintain a competitive market position. The findings also confirm that support during the transition process can be achieved through marketing strategies. The findings of this research clarify our understanding of the switching behavior of capital-intensive products where successful product design is expected to play a significant role. This behavior is expected to be different from the behavior identified in previous research, because the previous research was conducted using mainly competitive markets with frequently purchased products. For lead users faced with products that restrict their capabilities, switching is an expected option despite high switching costs. Those early switchers, having capitalized on the real value of the new product, serve to encourage other users to pursue the same behavior later. The outcomes from this MRI study — as one example of a high technology device — could be applied to the different industries that share the same characteristics in terms of high rates of technological change and high switching costs, for example, military devices, aircrafts, and advanced medical and industrial devices.