0019-8501/98/$19.00PII S0019-8501(97)00059-X

Industrial Marketing Management

27

, 229–246 (1998)© 1998 Elsevier Science Inc. All rights reserved.655 Avenue of the Americas, New York, NY 10010

Managing Intraorganizational

Diffusion of Technological

Innovations

Namwoon Kim Rajendra K. Srivastava

Industrial market sales processes are often long and pro-tracted. These processes typically involve a “trial” stage whenseveral competing options may be tested. Then, a smaller set ofproducts may be bought in greater quantities for use. Hence,the central marketing problems in industrial (or business-to-business) markets for technological products are related to ob-

taining “adoption” (initial trial) and, subsequently, to effect-ing diffusion of the new product or technology within the buy-ing organization. In the context of technology-based product-markets characterized by compression of technology cycles, itis imperative that vendors of such products develop appropri-ate strategies to speed-up

both

trial adoptions and subsequentorganization-wide purchases. Unfortunately, most research ondiffusion of technological innovations in business organiza-tional settings is devoted to initial adoption. The importance ofpost-trial sales in business markets underscores the need forresearch on

intra

organizational diffusion of innovations. Tothis end the authors suggest a framework and research propo-

Address correspondence to Namwoon Kim, Department of Marketing, HongKong University of Science and Technology, Clear Water Bay, Kowloon, HongKong.

The authors thank Etienne Rolland-Piegue, Jos Van Bommel, Dae RyunChang, and Philip Parker for their helpful comments.

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sitions for intraorganizational diffusion of technological prod-ucts based on five sets of variables: characteristics of buyingorganizations, buying center dynamics, buying organization’senvironmental characteristics, product characteristics, and thecompetitive environment of selling organizations. More effec-tive management and control of these factors contribute to bet-ter key account management practices. Consequences of moreeffective intraorganizational diffusion create advantages forboth selling and buying organizations. These advantages, inturn, lead to more profitable long-run buyer-seller relationships.© 1998 Elsevier Science Inc.

INTRODUCTION

The growth in markets for technology-based productshas been accompanied by greater interest in industrial orbusiness-to-business markets and, as a consequence, or-ganizational buying behavior. Industrial market salesprocesses for nonstandardized products and services areoften long and protracted and typically involve multipleparties, including those who influence purchase decisions(e.g., purchasing and procurement agents) as well as ac-tual users. These processes typically involve a “trial” (orinitial adoption) stage where several competing optionsmay be tested. Subsequently, a smaller set of optionsmay be bought in greater quantities for use across the or-ganization. In the short cycle environments of technology-based product-markets, vendors must develop strategiesto speed-up

both

trial adoptions and subsequent diffusionof the new product or technology within the buying orga-nization.

Unfortunately, most research on diffusion of techno-logical innovations in business organizational settings isdevoted to initial adoption. Existing studies in organiza-tional buying contexts are often concerned with groupdynamics in a firm’s purchase decision [1–5] and withorganizational adoption of innovations (innovativeness)[6–9]. Studies focusing on group dynamics tend to ana-lyze the characteristics of buying centers [2, 5, 10] andtheir impact on the organizational purchase decision [4,

11]. Research in organizational adoption of innovationstends to deal with the impact of organizational structure[6, 12, 13], organizational psychographics [8], decision-making processes [14, 15], benefits sought by buying or-ganizations [16], and industry environments [17, 18] onorganizational innovativeness.

As a result, the major focus of previous research in in-novation diffusion within the context of organizationalbuying was on the role of interorganizational relation-ships and influences. For example, studies on adoption ofinnovations in industrial markets tend to treat a firm asthe unit of analysis. In this context, adoption of technol-ogy by firms puts pressure on competitive firms to adoptthe same technology to stay competitive. Hence, the fo-cus was on how to explain the purchase behavior of afirm as a buying unit [19] and how to analyze the relativeinnovativeness of companies using firm-specific vari-ables: strategic orientation, structure, market competi-tiveness, and demographics [20]. This focus has resultedin a strategic perspective for market penetration and growthbased on adoption or trial across firms, and therefore oninterorganizational diffusion of innovations. However, itseems that existing studies do not pay adequate attentionto diffusion of innovations

within

an organization—thatis,

intra

organizational diffusion, even though its impor-tance in business-to-business markets is highly recognized.

The importance of intraorganizational diffusion of in-novations is underscored by the fact that sales of mosttechnological products with business applications (e.g.,office products such as fax machines, personal computers,work-stations, software programs, industrial machines,etc.) to firms are based on additional purchases by thesame organization [21]. In fact, in business-to-businessor industrial markets, an initial adoption of a product ortechnology is often only a “trial” or a testing/comparisonexercise where the buying firm purchases an innovationin small quantities to avoid technological risks related tothe new supplier’s products and services [22]. Risks suchas uncertainty in quality, incompatibility with currentsystems, and vendor-related switching costs result in loy-alty to a limited number of suppliers [23–25]. From thesuppliers’ point of view, real success in industrial mar-kets is achieved when subsequent purchases are made bytheir customer organizations, based in part on successfultrials as well as other factors that may facilitate the prod-uct diffusion within organizations.

Therefore, it is imperative that selling organizationsunderstand intraorganizational diffusion of innovations ifthey wish to develop and leverage favorable relationships

NAMWOON KIM is Assistant Professor of Marketing at the School of Business and Management, Hong Kong University of Science and Technology.

RAJENDRA K . SRIVASTAVA is Jack R. Crosby Regents Chair in Business Administration and Senior Associate Dean at the

Graduate School of Business, University of Texas at Austin.

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with current and potential industrial or business custom-ers [26]. Whereas no research on intraorganizational dif-fusion has emerged from the marketing literature, a fewstudies concerning organizational implementation of newproducts have been reported from the information tech-nology (IT) perspective [27–29]. But, such research isstill in its early stages.

The purpose of this article is to develop a framework,constructs, and corresponding research propositions forintraorganizational diffusion of technological products inindustrial/business markets, focusing on strategy devel-opment from the marketing perspective. This purpose setsthe agenda for the rest of this study. We

first examineand clarify the concept of intraorganizational diffusionby examining related constructs from existing literature.Second, we propose a framework linking the constructsand develop corresponding research propositions basedon five sets of variables: characteristics of buying organi-zations, buying center dynamics, buying organizations’environmental characteristics, product characteristics,and the competitive environment of selling organizations.More effective management and control of these variablesshould contribute to better key account managementpractices. Finally, we discuss managerial implicationsand consequences of more effective intraorganizationaldiffusion (e.g., lower transaction costs, reduced risk, andenhanced loyalty) for both buying and selling organiza-tions and suggest directions for the future research.

INTRAORGANIZATIONAL DIFFUSION: THE CONCEPT AND RELATED CONSTRUCTS

Because intraorganizational diffusion has never beenformally defined, a first step in verifying the conceptwould be to examine its operational definition. Concep-tually, intraorganizational diffusion is closely related to“innovation implementation,” which has been studied inthe innovation process literature [6, 7, 12]. Intra-organi-zational diffusion was also dealt with directly or indi-rectly in various concepts such as “eventual diffusion of

innovations” [30], “innovation’s becoming ingrainedwithin organizational behaviors” [27], and “successfulimplementation of innovations” [31]. All these conceptsfocus on the qualitative degree of innovation acceptanceby organizations. They imply a process of understanding,using, and mastering the adopted technology. Even thoughthese concepts of innovation acceptance can provide partof a theoretical background, few managerial implicationsfor the selling and buying organizations are explored inthis literature.

An Operational Definition ofIntraorganizational Diffusion

Because the interest of sellers centers on securing con-sistent repurchase orders through customer satisfactionand a favorable buyer-seller relationship, a quantitativeconcept, “the rate of intraorganizational diffusion” (i.e.,how quickly organizational units/members adopt innova-tions), has strategic implications for selling organizations.By capturing the dynamics and causes of the rate of in-traorganizational diffusion, selling firms can predict fu-ture orders and focus on buying firms that have higherpotential for product purchase. During this process, sup-pliers can improve on the long-run buyer-seller relation-ship by continuously adjusting their strategic planning tofeedback from buying organizations. In the context of in-terdepartmental diffusion of microcomputers, Bretschneiderand Wittmer [29] operationalize the level of intraorgani-zational diffusion as the number of microcomputers peremployee. However, this operationalization does notnecessarily correspond to “how many employees actuallyuse the microcomputers” because some employees haveno access to or use for microcomputers (i.e., they are notpotential users) and some microcomputers may lie dor-mant. Based on this argument, we define the level of in-traorganizational diffusion as the percentage of the em-ployees who use or have ever used the product to thetotal number of employees of an organization.

1

1

This definition is similar to the width of adoption [9], the number of peopleusing the product within the adoption unit.

Importance of the product diffusion

within

buying organizations is emphasized.

232

Constructs Related toIntraorganizational Diffusion

Several studies dealing with “implementation of inno-vations” from an organization theory perspective [6, 12]have focused on the relationship between stages of inno-vations and organizational structure. Marshall and Vre-denburg [31] analyzed the impact of organizational struc-ture, management support, and product compatibility onsuccessful implementation of telemarketing innovation.Related research efforts in the information technology(IT) area analyzed efficiency in implementation of an or-ganization’s information system [30, 32] and exploredthe innovation-organization interactions in software de-velopment [27]. Bretschneider and Wittmer [29] dealtwith IT adoption behavior across different sectors andexamined the impact of technology characteristics andresource capacity on the IT adoption rates within organi-zations. These studies, however, focused on the efficientimplementation of innovations from the buying organiza-tion’s perspective with a few explanatory variables. Theydid not examine relationships between buying and sellingorganizations, dynamics within organizations, nor theimpact of competitive environments on the innovationimplementation. No strategic suggestions for selling or-ganizations were reported and, as a result, marketing im-plications were very limited.

Randles [33] used a logistic internal influence diffu-sion model, also called the technological substitutionmodel [34, 35], to fit and forecast diffusion of computerterminals within organizations. Brancheau and Wetherbe[28] analyzed the diffusion of spreadsheet software withinorganizations using social interaction variables such ascommunication channels and mass media impact. Basedon these variables, Brancheau and Wetherbe comparedearly and late adopters within organizations. Randles’sand Brancheau and Wetherbe’s studies directly appliedthe innovation diffusion theory developed for the con-sumer market to the intraorganizational diffusion context.They assume an organization to be the whole society andregard the organization members (employees of a firm)as the potential population to adopt innovations. Becausevariables and the decision-making process, both of whichinfluence intraorganizational diffusion, are quite differ-ent from those that affect the innovation diffusion in con-sumer markets, Randles’s and Brancheau and Weth-erbe’s analogy is difficult to justify. This is becauseadoption of innovations within a buying organization de-pends on continuous interactions among the buying orga-nization, the selling organization and their market envi-

ronments. The dynamics among these entities providesthe motivation to develop a broader framework to guideresearch on intraorganizational diffusion.

CAUSES AND CONSEQUENCES OF INTRAORGANIZATIONAL DIFFUSION: A PROPOSITIONAL INVENTORY

We explore five constructs that are conceptualized toinfluence intraorganizational diffusion of technologicalproducts: (1) characteristics of buying organizations, (2)buying center dynamics, (3) environmental characteris-tics of buying organizations, (4) product characteristics,and (5) competitive environment of selling organizations.These are presented in Figure 1, which illustrates the ba-sic framework, including the consequences of intraorga-nizational diffusion of technological products. In thissection, each set of variables and their interrelationshipwith other constructs and relevant research propositionsare discussed.

Characteristics of the Buying Organization

Characteristics of buying organizations have been fre-quently studied to explain the interorganizational buyingbehavior in the existing literature [1, 6, 7]. Based on priorefforts to classify organizational characteristics affectingbuying decisions [2, 6, 7, 18, 36], we focus on three dimen-sions affecting intraorganizational diffusion and dynam-ics: organizational structure, organizational attitudes, andorganizational climate. The directional relationship of eachof these three dimensions on intraorganizational diffu-sion is represented in Figure 2.

O

RGANIZATIONAL

STRUCTURE

. Organizational struc-ture has been widely discussed in management and orga-nization theory literatures in relation to organizationalinnovativeness/performance [7, 12, 37–40]. However,the relationship between the organizational structure andinnovativeness has been inconclusive because of context-specific properties of innovations [27] and different orga-nization-innovation dynamics at various stages of innova-tion adoption processes [7, 41]. We focus on the potentialimpact of two organizational structure variables: central-ization and formalization, because these variables are re-lated to the success of implementation of innovations [6].

Centralization is defined as “the degree to which powerand control in a system are concentrated in the hands ofrelatively few individuals” [7, p. 359] and formalization“the degree to which an organization emphasizes follow-ing rules and procedures in the role performance of its

233

members” [6, p. 138, 7, p. 360]. Low levels of centraliza-tion and formalization facilitate initiation (i.e., increaseawareness levels) of innovation and high levels of thosevariables expedite implementation (i.e., successful us-age) of innovations [6, 42]. These conclusions from prior

research are reasonable because less emphasis on hierar-chy and more participation in decision-making (low cen-tralization) enhance information accessibility in the initi-ation stage of innovation diffusion. On the other hand,strict channels of authority (high centralization) can re-

FIGURE 1. Framework of Intraorganizational Diffusion of Technological Products.

FIGURE 2. Impact of Characteristics of Buying Organization on Intraorganizational Diffusion.

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duce potential ambiguity and conflict in innovation im-plementation [6, p. 146, 43]. Similarly, low formalizationis good for initiation of innovations because flexible andopen systems are more susceptible to new information.High formalization is desirable at the implementationstage, because it reduces both role ambiguity and con-flict. In this study, we use the “intraorganizational diffusionrate” (discussed in the previous section) as the dependentvariable to focus on the relationship with organizationalstructure variables.

Based on the theory of innovation stages, the numberof users of a product within an organization will increasewhen encouraged by higher authorities. For example, inorganizations where power is centralized, a planning de-cision to adopt a certain computational standard (e.g., thePower PC) to simplify maintenance and to standardizesoftware will lead to a higher level of diffusion of thatproduct within the company. Similarly, when well-definedrules and procedures urge organization members to use acertain product for their task fulfillment, the number ofusers of the product will increase. Hence,

P1a:

The higher the centralization of the buying organiza-tion, the higher the rate of intraorganizational diffu-sion of technological products.

P1b:

The higher the formalization of the buying organiza-tion, the higher the rate of intraorganizational diffu-sion of technological products.

O

RGANIZATIONAL

ATTITUDES

. Organizational attitudesare general policies or strategies of an organization to-ward its environments. In this study, we focus on five or-ganizational attitude variables to examine diffusion withinorganizations: technology sensitivity, price sensitivity, re-sistance to change, attitude toward risk, and openness toexternal information.

Rogers [7] and Kim and Srivastava [44] demonstrateempirically that technological sensitivity is positively re-lated to consumer’s innovativeness in the context of mul-tigeneration technological product markets. We extendthis logic and argue that technologically sensitive organi-zations are more likely to encourage their members/unitsto get familiar with new technologies and to use them.This organizational policy will increase the rate of in-traorganizational diffusion of the new technologies. Sowe propose:

P2:

The more technologically sensitive the organization,the higher the rate of intraorganizational diffusion oftechnological products.

Rogers [7] and Kim and Srivastava [44] also note thatmore price-sensitive buyers are less innovative than lessprice-sensitive buyers. But, it can be argued that higherprice sensitivity of an organization can have a positiveimpact on intraorganizational diffusion. We contend thatwhereas price-sensitive organizations are late in purchas-ing an innovation (that is, they are less innovative), theyare more likely to get as much “value per invested dollar”as possible from the innovation (1) by standardizing toincrease clout with vendors and to reduce maintenanceand support costs, and (2) by encouraging full use of theinnovation by organization members, which, in turn, willexpedite intraorganizational diffusion.

P3:

The more price-sensitive the organization, the higherthe rate of intraorganizational diffusion of technologi-cal products.

Previous studies on the resistance to technological changenoted that the higher the resistance to change, the lowerthe organizational innovativeness [8, 45]. We argue thatthe resistance to change also retards intraorganizationaldiffusion. This is because organizations reluctant to ac-cept technological changes are also less likely to encour-age organization members to use new technologies. Fur-ther, members of organizations that are reluctant to changetend to have high individual switching costs because theyare less experienced in dealing with change. Thus,

P4:

The higher the organizational resistance to change, thelower the rate of intraorganizational diffusion of tech-nological products.

Research on risk-taking attitudes of individual consum-ers [9, 46] and organizations [20, 47] suggests that risk-taking attitudes of the buying unit are positively relatedto innovativeness. Extending this logic to intraorganiza-tional diffusion, we posit that risk-taking propensity willexpedite intraorganizational diffusion. This is becauserisk-taking organizations will be better in managing risksassociated with the compatibility of the innovation withthe organization and in facilitating the use of newlyadopted innovations. Hence,

P5:

The more risk-taking the organization, the higher therate of intraorganizational diffusion of technologicalproducts.

Several researchers have asserted that organizationalopenness to external information is positively related tothe organizational innovativeness [7, p. 356, 48–50]. Itcan be expected that organizations open to external input

235

Are organizations enthusiastic about using

as well as adopting new technologies?

develop information sources not only for availability ofnew technologies but also for their effective usage. Thus,we expect that members of organizations that are moreopen to external information are enthusiastic about “us-ing” as well as adopting new technologies. Therefore, weposit:

P6:

The more open to external information the organiza-tion, the higher the rate ofintraorganizational diffusionof technological products.

O

RGANIZATIONAL

CLIMATE

. Barclay [36] defined or-ganizational climate as the friendliness or team spiritamong the organization members. Marcoulides and Heck[40] defined it as the workers’ perception about a varietyof conditions concerning the work environment. Fromthe organizational effectiveness point of view, Porter,Lawler, and Hackman [51, p. 456] conceptualized orga-nization climate as the organization’s

modus operandi

—particularly the quality and style of the interpersonal rela-tions among the organization members. In this article, weuse the term “organizational climate” to include variablesthat represent the manner in which organizational opera-tions, communications, and management practices areimplemented within the organization. Whereas organiza-tional attitudes are concerned with the interaction of theorganization with its environments, organizational cli-mate deals with the interaction among its members. Forthe purpose of examining the impact of the organiza-tional climate on intraorganizational diffusion, we exam-ine four aspects of these interactions: task interdepen-dence, communication openness, top management support,and interdepartmental conflict.

Based on Thompson [52], task interdependence amongthe organization members is the give-and-take relation-ship: one member’s output is another member’s input forperforming the task. For our study, we will follow themore detailed definition of task interdependence by Wal-ton and Dutton [53]: it is the extent to which two unitsdepend on each other for assistance, information, compli-ance, or other coordinative acts in the performance of their

respective tasks. High task interdependence increases in-traorganizational diffusion of new technologies used inone of the task-dependent departments. This is becausemembers of task-dependent departments are more likelyto use the same technology to enhance compatibility inrelated tasks. This sharing will increase the rate of in-traorganizational diffusion of technologies. We thereforeexpect that:

P7:

The greater the task interdependence among depart-ments, the higher the rate of intraorganizational diffu-sion of technological products.

Communication openness among departments, or in-terdepartmental connectedness [54, 55], reflects the af-fective orientation of the organization members [8]. Ac-cording to Aiken and Hage [56] and Ross [57], internalcommunications among organization members facilitateidea dispersion and create a favorable environment fornew ideas. Because open and frequent communicationwill increase information sharing among the organizationmembers, it will expedite intraorganizational diffusion.Hence,

P8:

The greater the communication openness among de-partments, the higher the rate of intraorganizational dif-fusion of technological products.

Two forms of the management style, top-down versusbottom-up, have been widely discussed in the context oforganizational learning [51]. Referring to Argyris [58]and Porter, Lawler, and Hackman [51] we note that a top-down management style is more instrumental than a bot-tom-up style to achieve effective injection of new learninginto the organization. This is because a manager favoringa new technology can more easily push his/her subordi-nates to use the technology than the other way around. Ithas also been argued that top-down push is more appro-priate when training personnel for new skills [59] and inimplementing corporate strategies [60]. Because intraor-ganizational diffusion is closely related to organizationallearning and implementation of new technologies, we ex-

236

pect that the top-management support (push) for newtechnologies will expedite intraorganizational diffusion.We therefore posit:

P9:

The greater the top-management support for new tech-nologies, the higher the rate of intraorganizational dif-fusion of technological products.

Most studies argue that the major source of interde-partmental conflict is interdepartmental decision-makingwhen organizational resources are limited [53, 61, p. 642,62]. More recently, Jaworski and Kohli [55] have in-cluded psychological tensions and informal personal in-teractions as sources of interdepartmental conflict. Becauseinterdepartmental conflict discourages communicationamong the departments [63], we contend that interdepart-mental conflict will reduce the information sharingamong the organization members and negatively affectintraorganizational diffusion of new products. Hence,

P10:

The greater the interdepartmental conflict, the lowerthe rate of intraorganizational diffusion of technologi-cal products.

There are important implications of the above proposi-tions (P1 to P10) to vendors of technological products forselecting and targeting client firms as well as for manag-ing the sales process within the buying organization. Or-ganizational variables that are not controllable (e.g., struc-ture and climate) are more useful for segmentation andsegment selection. For example, early in a product’s lifecycle, it may be more effective to focus intraorganizationalsales efforts to more formal, centralized organizationswhere top management support is more forthcoming. In

particular, key accounts that have higher levels of task in-terdependence and communication openness and lowerlevels of interdepartmental conflict may be better candi-dates for effecting higher penetration levels across workers.

Organizational variables that are “influenceable” (e.g.,attitudes) are appropriate for managing the sales processwithin client firms. For example, openness to external in-formation (and hence the potential for increasing the rateof intraorganizational diffusion) can be enhanced via ed-ucation and training. Resistance to change can also beovercome by both education and training (that reduceperceived risk) and by increasing sensitivity to fear ofcompetition. (One of the most frequently cited reasonsfor technology adoption when economic justification isquestionable is “to keep up with competition.”) Techno-logical sensitivity can be raised via information and ad-vertising (e.g., the “hype” associated with “Intel Inside”and “Designed for Windows 95” marketing campaigns).

Buying Center Dynamics

Because purchase decision-makers and product usersare often not the same group, the importance of under-standing the impact of the purchase decision-making pro-cess on intraorganizational diffusion cannot be overem-phasized. To explore the effects of “who are (and howmuch are they) involved in the purchase process” and“how the purchase decision is made” on intraorganiza-tional diffusion, we focus on the characteristics of thebuying center dynamics. The impact of buying center dy-namics on intraorganizational diffusion is presented inFigure 3.

FIGURE 3. Impact of Buying CenterDynamics on IntraorganizationalDiffusion.

237

The buying center, defined as “those individuals whointeract for the specific purpose of accomplishing thebuying task” [2, p. 35], has been the focal concept in re-search on the organizational buying behavior as it is theactual purchasing decision unit for the organization (for arecent review of research on buying centers, see [65]).Because the composition of buying centers changes overtime according to specific purchase needs [64, 65] andthe firm size [15], buying center dynamics—structure,decision process, and functions—have been emphasizedand widely studied as the consequence of other variablessuch as environmental uncertainty.

2

However, with rareexceptions, the influences of buying center dynamics onstrategic variables have been more or less ignored. Web-ster and Wind [2] mentioned the effects of centralizedversus decentralized structure of the buying center onuser satisfaction of the organization. Robertson and Wind[8] used one variable of buying center dynamics—con-flict among the buying center members—as the factor af-fecting the organizational innovativeness.

Although we posited in the previous section that theentire organization’s high centralization expedites in-traorganizational diffusion, we expect that a high degreeof decision centrality in the buying center will have nega-tive impact on intraorganizational diffusion. The reasonis as follows. In a highly centralized buying center, theactual purchase decision is made by a very limited num-ber of participants, for example, top executives and/orpurchasing agents [66]. As a result, many other partici-pants in the buying center may not agree with the pur-chase decision but may have to follow it [62]. So afterthe product is purchased, the majority of participants whodid not like the purchase decision do not have enoughmotivation either to use the product themselves or to en-courage other members to use it. This will negatively af-fect intraorganizational diffusion of the purchased prod-uct.

3

Thus,

P11:

The higher the decision centrality of the buying cen-ter, the lower the rate of intraorganizational diffusionof technological products.

Whereas decision centrality is the degree to which pur-chase decision authority is exercised by a few personnel

of the buying center, participation in the buying center isdefined as the organization members’ actual involvementin the organizational buying task [4] or the total amountof communication offered to other members in the buy-ing center during the course of the purchase decision[67]. Prior research has supported the perspective thathigher environmental or task uncertainty induces highlevels of participation [64]. Further, it has been noted thatparticipation contributes to successful innovation by in-ducing more communication [68] and that greater partic-ipation in the buying center will give the participants thefeelings of contribution and involvement in the purchaseprocess [69]. We expect that these feelings encourageparticipants to use the product and to share product infor-mation with others and therefore to expedite intraorgani-zational diffusion. Formally,

P12:

The greater the participation in the buying center, thehigher the rate of intraorganizational diffusion oftechnological products.

Whereas centrality and participation represent the cli-mate of the buying center, extensivity (size) of the buyingcenter is the total number of individuals involved in thebuying center [2, 5]. We expect that the more extensivethe buying center, the greater the proportion of productusers involved in the purchase decision and, therefore,the faster the dissemination of information on the producttechnology. Hence, we propose:

P13:

The more extensive the buying center, the higher therate of intraorganizational diffusion of technologicalproducts.

Propositions related to buying center dynamics alsohave important marketing implications. For example,sales efforts targeted at high decision centrality organiza-tions are likely to run into barriers unless adequate effortsare made to educate users (as opposed to key decision-makers). Similarly, intraorganizational diffusion ratescan be increased by encouraging and facilitating userparticipation in purchase processes. Additionally, mecha-nisms such as user groups, workshops, and publicationscan help in this dimension.

Environmental Characteristics of the Buying Organization

Because environmental factors such as technologicaluncertainty and competitive intensity in the buying orga-nizations’ industry affect participation in buying centersand management support, they influence intraorganiza-

2

The variables that are supposed to affect the buying center dynamics areenvironmental uncertainty [64, 78], task uncertainty [4, 85], product types[11], dominance among the participants [86, 87], and contingency effect ofparticipation and purchase tasks [15, 88].

3

Webster and Wind [2, p. 65] also contended that decentralized purchasingresponsibility is more likely to be responsive to actural users’ needs.

238

tional diffusion indirectly. We draw on three environ-mental factors: market turbulence, technological turbu-lence, and competitive intensity, and examine their indirectimpact on intraorganizational diffusion via buying centerdynamics and organizational climate. The scheme isgiven in Figure 4.

M

ARKET

TURBULENCE

. Market turbulence,

4

definedas the rate of change in the composition of customers andtheir preferences [55], is expected to influence intraorgani-zational diffusion through buying center dynamics. Spek-man and Stern [64] and McCabe [4] argue that firms aremore likely to facilitate gathering and processing informa-tion under more uncertain environments. As a result, thebuying center becomes more participative.

5

Combiningthis assertion with P12 in the previous section, we suggest:

P14a:

The greater the market turbulence, the greater the par-ticipation in the buying center, the higher the rate of in-traorganizational diffusion of technological products.

In addition, because rapidly changing market condi-tions stimulate prompt organizational reactions, marketturbulence motivates top management to attract manage-ment attention and to be more supportive of new technol-ogies if they are important strategic investments. Basedon this logic and P9 from the previous section, we posit:

P14b:

The greater the market turbulence, the greater thetop management support for new technologies, thehigher the rate of intraorganizational diffusion oftechnological products.

Whereas we expect lower levels of intraorganizationaldiffusion when dealing with high levels of buying centerdecision centralities (P11), organizations are more likelyto resort to more independent buying centers in order toadapt to more turbulent and dynamic markets. Hence, the

indirect effect of market turbulence (via its likely impacton decision centrality of buying centers) is to enhance in-traorganizational diffusion. Therefore,

P14c:

The greater the market turbulence, the lower the buy-ing center decision centrality, the higher the rate of in-traorganizational diffusion of technological products.

T

ECHNOLOGICAL

TURBULENCE

. In an environmentwhere the rate of technological change is high, membersof organizations have more incentive to participate in thebuying center. This is because organizations require di-verse information in the buying process in order to adaptto high technological heterogeneity.

6

Also, within a highrate of technological change, top management is ex-pected to be more supportive of new technology in orderto keep pace with competition. Hence, putting these ar-guments together with P12 and P9, we posit:

P15a:

The greater the technological turbulence, the greaterthe participation in the buying center, the higher therate of intraorganizational diffusion of technologicalproducts.

P15b:

The greater the technological turbulence, the greater thetop management support for new technologies, thehigher the rate of intraorganizational diffusion oftechnological products.

C

OMPETITIVE

INTENSITY

. As noted by Gatignon andRobertson [18], price competition retards the adoption oftechnological innovations. According to them, price com-petition encourages a lower cost standard in the produc-tion process, making it hard for the company to buy newtechnologies that require major resource allocations. Inthis context, we suggest a focus on the firm’s competitiveadvantage in order to understand the impact of competi-tion on the innovation adoption and intraorganizationaldiffusion process. That is, if the firm’s competitive ad-vantage depends on new technologies that differentiateits products and services from its competitors’ [70, 71],

It is easier to foster top management support

under a turbulent market condition.

4

This is also called demand uncertainty by Robertson and Gatignon [17].

5

The impact of environmental uncertainty on the certrality of the buyingcenter is inconclusive. Spekman and Stern [64], following conventionalcontingency theory, contended that low uncertainty induces high centrality,whereas McCabe [4] empirically showed that high uncertainty calls for highcentrality of the buying center.

6

Technolgical heterogeneity is defined as the degree of dissimilaritybetween available technologies in a particular market [24].

239

then top management will be supportive and this will ex-pedite intraorganizational diffusion of the innovations(P9). Even in price-competitive markets, technologyserves to reduce operating costs [72, p. 232]. Hence cost-reducing technologies can be expected to be supportedby top-management. Therefore,

P16:

The greater the competitive intensity, the greater thetop management support for new technologies, thehigher the rate of intraorganizational diffusion of tech-nological products.

Factors leading to environmental uncertainty (marketand technological turbulence, competitive intensity) in gen-eral create conditions for change from the status quo. Theirindirect effect through moderators such as managementsupport for new technologies (to the extent they provide acompetitive advantage in the anticipated environment) is tofoster intraorganizational diffusion. Therefore, vendors arelikely to benefit by focusing their technological products tothose markets where they can truly make a difference in thecompetitive arena. For example, it is easier to foster topmanagement support for information technology in the tur-bulent healthcare market than in the legal services segment.

Product Characteristics

Based on research on the relationship between innova-tion characteristics and the adoption of innovations [6, 7],we examine the influence of product (innovation) charac-

teristics on intraorganizational diffusion. The schema isrepresented in Figure 5.

Based on extensive reviews on the innovation charac-teristics by Rogers [7] and Zaltman, Duncan, and Holbek[6], we posit that three dimensions of innovation—com-patibility, complexity, and observability—have an im-pact on intraorganizational diffusion. Compatibility, de-fined as the degree to which an innovation is perceived asconsistent with existing values, past experiences, andneeds of potential adopters [7], is probably the most im-portant innovation characteristic affecting intraorganiza-tional diffusion.

7

Compatibility is expected to have a pos-itive impact on intraorganizational diffusion, because itreflects the “goodness-of-fit” between a new technologyand the needs of its potential users. Observability, the de-gree to which the results of an innovation are visible toothers, is expected to increase the opportunity for organi-zation members to learn and appreciate a newly adoptedtechnology. This expedites intraorganizational diffusion.On the other hand, technological complexity is supposed tohave a negative impact on intraorganizational diffusion, be-cause it may discourage the potential users (especially nov-ice-level users) from trying a new technology. Formally,

7

Compatibility is also defined as low consumer switching cost [25, 89],because the consumer switching cost occurs when the consumer’s existingequipment or physical assets are not compatible with the new products orsystem [24].

FIGURE 4. Impact of Environmental Characteristics of Buying Organization on Intraorganizational Diffusion.

240

P17a:

The greater the compatibility of a technologicalproduct, the higher its rate of intraorganizational dif-fusion.

P17b:

The greater the observability of a technological prod-uct, the higher its rate of intraorganizational diffusion.

P17c:

The more complex a technological product, the lowerits rate of intraorganizational diffusion.

The clear implications of product characteristics forenhancing intraorganizational diffusion of technologicalinnovations is to increase compatibility, reduce complex-ity, and to enhance observability. A variety of mechanismsis available to enable these aspects. For example, use ofIT that was incompatible with the decision-makers’ priorwork habits and decision-making styles led one majorwest coast bank to reengineer its entire IT operation sothat it would mimic executive work habits. By givingaway software (sampling maximizes observability), pub-lishers are able to maximize distribution and trials. Withinan organization, site licenses (with pricing based on thenumber of users or the size of the organization) with per-mission to duplicate and distribute can clearly facilitatediffusion. Product complexity can be targeted via both ed-ucation and sales support as well as user networks to facil-itate interaction and learning within client organizations.

Competitive Environments ofSelling Organizations

Like buying organizations, selling organizations alsorequire adaptive strategies in their competitive environ-ments [21]. On the importance of adaptive strategy, Mc-Kee, Varadarajan, and Pride [73] noted that in uncertainenvironments, good business performance is strongly re-lated to a firm’s adaptive capability. Sellers who securemore buyers and establish a more favorable and enduringbuyer-seller relationship than their competitors are likelyto perform better. Existing studies also identify factors

that can differentiate a company from its competitors:price [74], technology (product), and vendor support

8

[75, 76]. However, very limited research is available onthe relationship between the seller’s environment andadoption of innovations [17, 18].

In the context of technological product markets, cus-tomer support (e.g., training, installation/design, mainte-nance) plays an important role in facilitating organiza-tional use of an innovation [77], whereas price andtechnological superiority are important factors for orga-nizational adoption (purchase) of the innovation. If a sell-ing company’s market is highly competitive, it has agreater incentive to be more customer oriented (for thecomprehensive review on the customer focus and marketorientation see [54]) by providing the buyers with bettervendor support relative to competitors. Because bettervendor support increases product knowledge and encour-ages the use of the product among the buying organiza-tion’s members (Figure 5), we suggest:

P18:

The greater competitive intensity in the market faced bythe selling organization, the better the vendor supportfor the buying organization, the higher the rate ofintraorganizational diffusion of technological products.

In competitive product markets, vendor support is of-ten viewed as the “cost of doing business.” However, itneeds to be viewed more positively because it can lead tothe development of long-term buyer-seller relationshipsthat can result in faster trials and referrals for newer gen-erations of the technology as well as for related newproducts, in addition to more widespread use of the cur-rent generation of a technology.

8

Vendor support is the set of services given by a vendor (seller) to a buyer.It is also called customer service. It may happen before as well as after theproduct sales.

The selling organization should control the compatibility, observability, and

complexity of its products.

241

CONCLUSIONS AND MANAGERIAL IMPLICATIONS: CONSEQUENCES OF INTRAORGANIZATIONAL DIFFUSION

In this article, we have proposed a framework for in-traorganizational diffusion of technological products. Theframework integrates five constructs affecting intraorga-nizational diffusion: (1) characteristics of buying organi-zations, (2) buying center dynamics, (3) environmentalcharacteristics of buying organizations, (4) product char-acteristics, and (5) competitive environment of the sell-ing organization. In this concluding section, we explorethe consequences of intraorganizational diffusion in termsof advantages to selling and buying organizations anddiscuss management of intraorganizational diffusionfrom the seller’s perspective.

Consequences of Intraorganizational Diffusion

The consequences of intraorganizational diffusion canbe linked directly to advantages to both selling and buy-ing organizations. These advantages, in turn, will estab-lish profitable long-run buyer-seller relationships. Figure6 represents the relationship among the variables.

A

DVANTAGES

TO

THE

SELLING

ORGANIZATION. Highrates of intraorganizational diffusion provide selling or-ganizations with several economic/strategic advantages:(1) high risk, cost, and effort in establishing new suppli-

ers for buying organizations, (2) higher switching costsfor buyers, and (3) high repeat purchase rate. First, high-level intraorganizational diffusion reflects a buying orga-nization’s involvement with the product and vendor sup-port. This enhances supplier reputation [78] and sourceloyalty from customer organizations [3, 79] and thereforerepeat purchase rates.

Moreover, through the process of intraorganizationaldiffusion, buying organization members and technologysystems get familiar with the product and learn how touse it more effectively [21, 25, 70]. This experience/familiarity, along with sunk investments and the highrisk and effort in dealing with new suppliers [2, p. 98, 23,24] leads to higher switching costs [21, 25, 70]. Thesefactors will be the rewards to the seller who commands ahigh intraorganizational diffusion rate in his customerorganizations.

ADVANTAGES TO THE BUYING ORGANIZATION. Higherlevels of intraorganizational diffusion of innovationscontribute to more successful implementation of innova-tions [6, p. 59]. This in turn may have positive effects ona buying firm’s economic performance [73] and on orga-nizational efficiency (see [80] for a review of these fac-tors). It is difficult to establish the relationship betweenintraorganizational diffusion and a firm’s economic per-formance because many other factors such as productivityand management skill also affect the firm’s effectiveness.We therefore focus on some specific distinct advantages

FIGURE 5. Impact of Product Characteristics and Selling Organization’s Competitive Environment on Intraorga-nizational Diffusion.

242

accruing to the buying organizations from higher levelsof intraorganizational diffusion.

The clear advantages to buying organizations are costadvantages [21] and possible price reductions. By facili-tating intraorganizational diffusion, the buying organiza-tion may demonstrate commitment to the supplier. Thiscommitment can be leveraged to negotiate, for example,comprehensive support services and better prices, as wellas vendor loyalty from the supplier [21]. As discussedearlier, when intraorganizational diffusion of a product ishigh, the buying organization’s motivation for findingother suppliers will be low. This lower motivation forswitching vendors will reduce the buyer’s cost in findingand establishing new sources for reorders. Also, buyingorganizations with higher levels of intraorganizationaldiffusion exhibit high levels of commitment to the sup-pliers. This can result in enhanced negotiating power andmay reduce purchasing costs (delivery cost, credit sales,etc.) and prices.

Finally, it is expected that the higher levels of intraor-ganizational diffusion lead to more profitable and long-run buyer-seller relationships. The concept of the long-run buyer-seller relationship has been examined underinterrelated constructs such as true loyalty9 [81], struc-

tural and social bonds between buyers and sellers10 [74,82], and long-term orientation between two parties [83].To maintain or even improve the long-run buyer-sellerrelationship, Wilson and Mummalaneni [21] contendedthat both parties should make “investments” that can sat-isfy their partners’ goals. In the context of advantages tobuyers and sellers, one party’s securing and contributingto the other’s advantages will strengthen the profitabilityof long-run buyer-seller relationships. For example, reli-able customer support from the selling organization andthe strong loyalty to the supplier from the buying organi-zation will benefit both parties in the long-run.

Managing Intraorganizational Diffusion: The Seller’s Perspective

Most existing studies focus on innovation manage-ment from the buying organization’s point of view [7, 6,31]. They tend to pay inadequate attention to the mana-gerial implications for the seller’s side. In this article, weexplore management of intraorganizational diffusion fromthe seller’s perspective.

Managers of selling organizations can draw strategicimplications from our research. By reviewing the ante-

9 According to Wilson and Mummalaneni [21], “loyalty” is composed ofrepeat purchase behavior and the psychological bond of attachment betweenthe buyers and sellers.

10 Based on Turnbull and Wilson’s definition [74], the structural bond is therelationship that involves investments and costs from both the buying andselling parties such that it will be difficult to end, whereas the social bond iseasy to break because it involves only personal relations.

FIGURE 6. Consequences of Intraorganizational DIffusion.

243

cedents (five constructs) and consequences of intraorga-nizational diffusion, managers can identify the strategicvariables to control and the environmental factors towhich they must adapt. Strategically, selling organiza-tions benefit by stimulating intraorganizational diffusionin buying organizations by managing the product (inno-vation) attributes and by providing high-quality customersupport services. First, selling firms should ensure thatproducts sold to customers will be compatible with theexisting values, habits, and task environments of mem-bers of the buying organization and with existing techno-logical systems. To achieve this goal, selling firmsshould always be keen on feedback from customer com-panies regarding product compatibility. Second, sellershave to expose the product to as many members in thebuying organizations as possible (for example, on-sitedemonstrations or free, limited-time site-licenses to en-courage trials) and demonstrate the relative advantagesof the product over the competing alternatives.

Third, the selling firm can also benefit by minimizingproduct complexity to enhance buyer motivation to accessand try innovations. For example, the personal computersoftware industry tries to make software as user-friendlyas possible and provides various levels of functional op-tions so that novice users will not be scared by the com-plexity of the software and can easily learn to use at leastbasic functions. Fourth, extensive and reliable vendorsupport is instrumental in encouraging intraorganiza-tional diffusion of technological products. According toSrivastava [77] and McQuiston and Walters [84], qualityof vendor support services ranked highest among thebuyers’ evaluation on important attributes of suppliers.Selling firms can enhance vendor support by providinguser-training programs and formal/informal supplier-userinformation sharing. By having frequent and close con-tacts with actual user groups in the buying company, sell-ers can capture the real customer’s voice. Finally, coop-eration between sales and manufacturing/engineeringdepartments will be required to respond effectively to

customer feedback on product performance and customersupport services.

Summary Comments

Research on intraorganizational diffusion and repeator additional purchases is likely to complement knowl-edge from prior research on adoption (trial) of innovationsacross buying organizations. Because multiple parties areinvolved in the purchase and use of nonstandardized prod-ucts and services within organizations (for example, pur-chasing/procurement agents and actual users), severalquestions arise: who are the real customers in buying or-ganizations, the purchasing department or actual usergroups? How can we best serve different, multiple cus-tomer groups? How should marketing efforts be differentat various phases (e.g., obtaining product trial versus fa-cilitating multiple adoptions) of the sales processes?How can we speed-up the diffusion process within theorganization? What are the factors that determine repeatpurchases and customer loyalty from the buying organi-zation? What should we do to establish the favorablelong-run buyer-seller relationship? Development of suchknowledge will be useful in targeting major customersand in allocating marketing resources. By developing aclearer understanding of the relationship among the fac-tors that influence intraorganizational diffusion such asorganizational structure, attitudes and environment, ven-dors can forecast and target potential high purchase andkey customer organizations. Although we have developeda set of useful propositions and examined their manage-rial implications here, we have only scratched the surface.

It is imperative that selling organizations understandintraorganizational diffusion of innovations if theywish to develop and leverage favorable relationships withcurrent and potential industrial or business customers[26]. The proposed conceptual framework and the atten-dant propositions capture how intraorganizational diffu-sion is affected by the organizational structure, climate,

How can we increase the rate of intraorganizational diffusion?

244

and competitive environments. The proposed frameworkcan be utilized, for example, to suggest how intraorgani-zational diffusion can be managed (e.g., speeded up) viastrategic marketing activities (e.g., customer educationand training). Finally, we discussed why higher levels ofintraorganizational diffusion are beneficial to the long-run buyer-seller perspective. Further empirical researchto test and confirm these propositions is encouraged.

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