STATUS REPORT Project: GloStra (Financial …business.nasdaq.com/media/GloStra Financial Market and Investor...STATUS REPORT Project: GloStra (Financial market and investor studies)

STATUS REPORT Project: GloStra (Financial market and investor studies)

Current progress of the project NasdaqOMX Foundation made, in early 2009, a decision to fund GloStra project (by Helsinki School of Economics HSE and Helsinki University of Technology TKK), for a period ranging from spring 2009 to summer 2010. The original research plan included the following specific studies:

Study 1: survey/experiment on individual stock investors planned for spring-summer 2009 Study 2: survey on business angels planned for spring-summer 2009 Study 3: survey on entrepreneurs/firm managers planned for fall 2009

The current progress of the project is such that by January 2010, the GloStra research team has completed the following studies:

Study 1: survey/experiment on individual stock investors completed in summer 2009 Study 2: survey on business angels completed in summer 2009

The development of the survey instrument for study 3 was completed to a large extent by December 2009, but the survey has not yet been submitted to the respondents. This will be done during the spring of 2010. The funds granted by the foundation have been used for financing the part-time research work by Professors Jaakko Aspara and Henrikki Tikkanen (HSE), as well as the work by a research assistant Miikka Tölö (HSE). The person months involved have exceeded 3 months for the professors and 1 month for the research assistant. Working papers and publications from the project Study 1 Study 1 involved conducting an experiment with (Finnish) individual investors who are actively engaged in investing in the stock market. The number of investor-participants in the study was approximately 200, and they were recruited to the study at “stock exchange evening events” of the Finnish Foundation for Share Promotion. The main aim of the study was to examine whether and how individual investors’ evaluations of a company’s products and brands influence their interest to invest in the company’s stock. The companies included in the experiment scenario were privately-held (from the portfolios of 3i and Eqviteq); and both domestic (Finnish) and international companies were included in the study. Therefore, the results of the study can help both domestic and international companies to “market themselves” to investors, in stock issues or IPO situations, for example. To publish the results of Study 1, members of the GloStra research team have co-authored the following articles, which are currently in the review process of international academic journals.

1. Aspara, Jaakko, Tikkanen, Henrikki & Puttonen, Vesa (2009), “The spill-over of product evaluations to stock investment decisions: An experiment with Finnish individual investors”. In review process of Review of Finance.

2. Aspara, Jaakko & Chakravarti, Amitav (2010), “Product-related investor advertising vs. brand goodwill: Effects on individual investors’ interest to invest in companies”. To be submitted to Journal of Marketing.

3. Aspara, Jaakko (2009), “The influence of product design evaluations on investment interest: An experiment with Finnish individual investors”. In review process of International Journal of Design.

Moreover, part of the results of Study 1 were published in December 2009 in Professor Jaakko Aspara’s second doctoral dissertation. (Note that “Study 1” of GloStra project is called “Study 2” in the dissertation):

4. Aspara, Jaakko (2009), "Where Product Design Meets Investor Behavior: How do individual investors' evaluations of companies' product design influence their investment decisions?". Doctoral dissertation, University of Art and Design Helsinki, Helsinki, Finland. Available at : https://www.taik.fi/kirjakauppa/product_info.php?products_id=155

Study 2 The data of Study 2 has been analyzed to a large extent, but no articles have yet been written to publish the results. However, much of the results were reported in a seminar arranged by the venture capital firm Veraventure in the summer of 2009. The presentation slides about the results are attached:

5. Aspara, Jaakko (2009), "Yksityissijoittajatutkimus” [”A study of business angels”, in English], Study results presented at Veraventure meeting, June 26.

Study 3 As mentioned above, the survey data involved in Study 3 has not been gathered yet, but will be gathered in the spring of 2010. Results of the survey are expected to be published starting from the latter part of 2010. Media attention The aforementioned studies and publications have received attention from domestic and international popular and business media. Specifically, the following media coverage has been obtained:

The Finnish business journal Kauppalehti (June 30, 2009) published a front-page news story about business angels, which widely cited the results of Study 2 (item 5 above)

The international Investor Relations magazine published an interview with Professor Aspara, concerning the results of Study 1 and the related dissertation (item 4 above).

The Swedish web journal of Unga Aktiesparare published a web article of Professor Aspara’s theoretical/conceptual article related to Study 1.

The Finnish magazine Arvopaperi (December 18 issue) published a short news story about Study 1 and the related dissertation (item 4 above).

The Finnish magazine Talouselämä (December 11 issue) published a short news story about Study 1 and the related dissertation (item 4 above).

The Finnish business journals Kauppalehti and Tekniikka&Talous published short articles about Study 1 and the dissertation (item 4 above) on their websites.

Moreover, Professor Aspara has been involved – owing to the results of Study 2 – in advising the Finnish Ministry of Employment and the Economy about taxation issues related to business angels.

Continuation of the project The project will continue as planned in Spring 2010, with emphasis on completing the data-gathering of Study 3. Further articles concerning the results of the studies will be simultaneously written, with estimated publication times in late 2010 and 2011. On behalf of the GloStra research team, In Helsinki, January 28, 2010 Jaakko Aspara Professor (acting), Aalto University School of Economics (formerly Helsinki School of Economics)

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The Spill-Over of Product Evaluations to Stock Investment Decisions:

An Experiment with Finnish Individual Investors

Jaakko Aspara

Henrikki Tikkanen

Vesa Puttonen

Abstract

Earlier behavioral finance research has found that individual investors’ familiarity with companies’ products may spill over to affect their decisions to invest in the companies’ stocks. However, what has not been confirmed is whether also subjective product evaluations spill over to affect investment decisions. To examine this question, the authors utilize a randomized experiment, conducted with Finnish individual investors. The experiment reveals that an individual investor’s subjective evaluation of a company’s products has positive effect on his interest to invest in the company’s stock; that this effect is independent of familiarity; and that the effect may be especially reinforced for non-domestic companies.

JEL Classification: D11, G10

Keywords: investor psychology, individual investor, affect, attitude, product evaluation,

brand

NOTE. This article has been submitted to Review of Finance.

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1. Introduction

In their seminal article regarding how perceptions about companies’ products may “spill

over” to affect investors’ investment decisions, Frieder and Subrahmanyam (2005) find that

individual investors’ preference to invest in companies’ stocks is positively influenced by

their familiarity with companies’ product brands. In contrast, what Frieder and

Subrahmanyam’s evidence disconfirms, is the hypothesis that individual investors’

evaluations of companies’ product brands would have influence on their interest to invest in

company stocks. In this article, we expressly take the latter effect into reconsideration, by

theorizing and finding evidence that under certain conditions, individual investors’

evaluations of companies’ products do have positive influence on their interest to invest in the

companies’ stocks.

Our examination differs from that of Frieder and Subrahmanyam (2005) in two important

respects – which will also partly explain our somewhat differing, novel findings. The first

aspect is methodological. In contrast to the study of Frieder and Subrahmanyam, which

examines aggregate proxy data for individual investor interest (i.e., the proportion of

individual vs. institutional investors in the ownership compositions of companies)1, our study

1 As a proxy for individuals’ investment interest, Frieder and Subrahmanyam (2005) took institutional investor

holdings in a sample of companies, as opposed to individual investor holdings. As a proxy for product brand

evaluations, they took a market-wide product brand quality index for a company, based on aggregated

consumer survey data. In this setting, they find no significant negative correlation between institutional

holdings and perceived product brand quality (which would imply positive correlation between individual

investor holdings and perceived product brand quality) and conclude that individual investors do not prefer to

invest in and own stocks of companies with high-quality brands. Note, however, one alternative explanation

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examines individual-level psychological data, as drawn from a randomized experiment with

investors. Notably, our experiment is constructed according to the principles of psychological

consumer research – since consumer theories and research techniques have been recently

regarded as useful for studying individual investor psychology (Clark-Murphy & Soutar,

2004, 2005; Fama & French, 2004; Statman, 2004). The access to and analysis of individual-

level psychological data (rather than just aggregate proxies) is especially relevant given our

study’s focus on product evaluations and investment interest – which are, essentially,

psychological phenomena.

Secondly, in theoretical terms, our study differs from Frieder and Subrahmanyam’s study

(2005) in that we examine the effects of product evaluations on individual investors’

investment interest for domestic vs. non-domestic companies, respectively. While Frieder and

Subrahmanyam’s examination did not pay attention to the domesticity vs. foreignness of the

companies, we examine both domestic and non-domestic companies. In effect, we are able to

theorize and find certain evidence of a pattern whereby the effect of product evaluations on

investment interest is reinforced for companies based in foreign, farther-away countries (as

opposed to domestic companies). Also in general, we provide a more detailed theoretical

explication than Frieder and Subrahmanyam of the psychological mechanisms how subjective

product evaluations about companies influence individual investors’ interest to invest in them.

The investor-subjects of our experiment were Finnish individual investors, who invest

actively in the stock market. We examined, especially, a setting whereby the investors

encountered a set of companies to consider as investment targets, differing in terms of the

of the finding is simply that money managers of institutional investors may also prefer to invest in companies

with high-quality brands – perhaps equally much as individual investors do.

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home country (a “within-subjects” experimental factor) – and whereby different subgroups of

investors simultaneously differed in terms of product evaluations (a “between-subjects”

experimental factor). Consequently, we analyze how the investors’ evaluations of the

presented companies’ products influenced their interest to invest in those companies’ stocks,

for domestic and non-domestic companies, respectively. At the same time, we control for the

effects of investors’ prior familiarities with the companies’ products and the degree of their

subjective information of the companies at the time of the investment consideration. These

controls are important considering that Frieder and Subrahmanyam’s study (2005) expressly

suggested that it is the familiarities with companies’ products – rather than evaluations of

them – that spill over to influence individuals’ investment decisions.

As to our results, our experiment provides strong support to the hypothesis that an individual

investor’s subjective evaluation of a company’s products has positive effect on his2 interest to

invest in the company’s stock. The found effect is particularly substantial for non-domestic

companies. Thus, while Frieder and Subrahmanyam (2005) were unable to find uniform

support for the product evaluation hypothesis from companies’ ownership compositions

(aggregate proportion owned by individuals vs. institutions), our psychological experiment is

able to confirm the hypothesis. Moreover, our results show that the effect of an individual

investor’s subjective evaluation of a company’s products on his interest to invest in the

company is partially, yet not fully mediated by (increased) optimism about the company’s

financial returns. This suggests that positive product evaluations influence investment interest

2 Throughout this article, we use the personal pronoun “he” (or “his”) when referring to individuals. We do this

purely for sake of simplicity, to avoid the complexity involved in repeating expressions like “he/she” and

“his/her”. The use of “he” does not in any way suggest that the arguments would merely apply to males, or

that the arguments would be contingent on the gender of the individual.

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both by generating self-induced optimism in the investor’s financial expectations (I like the

products of the company the company will succeed financially) and by generating

preference that goes over and beyond the financial expectations.

Along with yielding new insights to the effects of product or product brand evaluations on

individual investors, our results also extend the literature that claims that individual investors

view “good companies” to be good or preferable investment targets as well (e.g., De Bondt,

1998; Shefrin & Statman, 1995; Shefrin, 2001, 2002; van der Sar, 2004). While earlier

research has mostly focused on the influence that perceptions of companies’ general

“goodness” (i.e., corporate image or reputation) may have on investors’ interest to invest in

company stocks, the present research provides new evidence of the influence that investors’

evaluations of the goodness of companies’ products, in particular, have on their investment

interest. In broad terms, the revealed investment preferences are also indicative of the fact that

individual investors’ investment preferences may have affective determinants and/or

determinants that go beyond the objective financial return-risk profiles of stocks (Fisher &

Statman 1997; Statman 2004). Finally, by suggesting that the effect of product evaluations is

reinforced in the case of non-domestic companies, our examination provides new insights to

cross-border investing, and the role of product evaluations vis-à-vis home bias (cf. Campbell

& Kräussl, 2007; Coval & Moskowitz, 1999; French & Poterba, 1991; Kang & Stulz, 1997;

Karlsson & Nordén, 2007) therein. This implies that in the emerging international

marketplaces for stocks, companies’ product brand images and evaluations in the market may

become significant influencers of individual investor interest.

2. Theory and Hypotheses

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2.1 THE INFLUENCE OF SUBJECTIVE EVALUATIONS OF COMPANIES’ PRODUCTS

ON INDIVIDUAL INVESTMENT INTEREST

The present article is to model, first and foremost, the psychological mechanisms related to

how subjective product-related (brand) evaluations about companies influence individual

investors’ interest to invest in the stocks of those companies. Notably, with an individual’s

evaluation of a company’s products (“product evaluation”, in brief) we refer to an individual’s

overall, affective evaluation (MacGregor et al., 2000) of a company’s products. It is a

valenced impression of the quality of the products in terms of “goodness” vs. “badness” –

experienced as a feeling state (with or without consciousness) and demarcating the degree of

positive vs. negative overall quality image of the products (MacGregor et al., 2000; Slovic et

al., 2002, 2007). Thus, an interchangeable term for product evaluation would be “product

quality perception/ image”. Moreover, since an individual’s evaluation of a company’s

products is an affective phenomenon and manifests along bipolar dimensions of positive vs.

negative impressions, such as good–bad, pleasant–unpleasant, likeable–dislikeable, attractive–

unattractive (cf. MacGregor et al., 2000), another interchangeable term for product evaluation

would also be “attitude toward the products”3 (see Ajzen & Fishbein 1980; Ajzen 2001).

Furthermore, since we are dealing with an individual’s overall impressions of a company’s

products, rather than impression of the quality of any single product of the company, other

interchangeable terms for product evaluation are also “product brand evaluation”, “product

3 Indeed, an attitude towards a company’s product would in Ajzen and Fishbein’s (1980) terms be an index of

how much a person likes or dislikes the products; or a summary evaluation of the products on bipolar dimensions

of positive vs. negative impressions, such as good–bad, pleasant–unpleasant, likeable–dislikeable, attractive-

unattractive (Ajzen, 2001).

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brand quality image”, and “product brand attitude” – as assumed by Frieder and

Subrahmanyam (2005), as well.

In effect, there are basically three main ways in which product evaluations may influence

individual investors’ proclivity to invest in particular stocks. The three ways of influence are

explicated below. First, an investor’s positive evaluation of a company’s products – i.e., liking

them – may lead the investor to naïvely reason that since he likes the company’s products,

others will like them, too, and the company will therefore succeed financially (Aspara &

Tikkanen 2008). Inasmuch as such naïve, self-induced optimism about the company’s

financial returns occurs, the investor will logically have increased proclivity to invest in and

own the company’s stock. This is especially probable since psychological evidence suggests

that people often use simple heuristics when making decisions, especially in complex and

uncertain environments, such as in investment contexts (Gigerenzer et al., 1999; Tversky &

Kahneman, 1982). Indeed, preferring stocks of which one has positive evaluation – with the

presumption that product quality signifies superior financial return performance – can be an

instance of such a simple heuristic (Frieder & Subrahmanyam, 2005). In more specific terms,

the preference to invest in companies of whose products one has positive affective evaluation

manifests the use of “affect heuristic” 4 (Slovic et al., 2002, 2007) . Hence, the question is

essentially about a heuristic whereby individual investors view that companies whose

products they evaluate to be good are “representative” of good financial investments as well

(cf. Shefrin & Statman, 1995; Shefrin, 2001; Shefrin, 2002).

4 That is, using the mental shortcut presuming that objects (companies) of which one has most positive affective

evaluations (or for which one has most positive affect) are preferred alternatives.

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Another reason why enhanced evaluations of the company’s products may increase an

investor’s proclivity to invest in the company is that according to a common psychological

notion, an individual’s positive attitude towards (i.e. positive overall evaluation of) an object

– in this case a company – will manifest in the individual’s predisposition to behave in a

consistently favorable way with respect to that object (Fishbein & Ajzen, 1975; Zajonc,

1980). Indeed, due to psychological drive to maintain “attitude-behavior consistency”

(Abelson et al.,1968; Festinger, 1957), it can be expected that an individual who has positive

affective evaluation of a company’s products will not only e.g. talk favorably about the

company and its products (and perhaps buy or use them) but also express his positive

evaluation by favoring the company as an investment target5 (Aspara & Tikkanen 2008).

Notably, such product attitude-based favoring may be quite non-related to the investor’s

expectations about the financial returns of the company – and should therefore increase one’s

proclivity to invest in the company over and beyond its expected financial returns. This kind

of extra preference or willingness to invest in a company due to product evaluation was not

explicitly discussed by Frieder and Subrahmanyam (2005).

A third reason why enhanced evaluations of the company’s products may increase an

investor’s proclivity to invest in the company is the fact that positive affect implicated in

one’s positive evaluation of a company’s products may lead to some degree of outright

“desire to possess” the company by owning its stock – over and beyond any financial

interests, again. This suggestion derives from research that addresses the psychology related

5 In fact, should the individual not favor – in an investment decision – a company whose products he likes, he

might end up feeling cognitive/affective “dissonance”. By default, individuals tend to avoid ending up feeling

such dissonance (Festinger 1957; Zajonc 1980) – thus, favoring the company in the investment decision could

also be understood also as a (psychological) strategy of avoiding dissonance feelings.

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to people’s collections (such as stamp collections): people’s need and motivation to own and

surround themselves with objects for which they have special affect (Danet & Katriel, 1989;

Pearce, 1994). Specifically, collection researchers emphasize the close relationship between

one’s affection for an object, on one hand, and will to possess the object, on the other (Danet

& Katriel, 1989). Thus, a special positive affect for a company’s products may lead the

individual desiring to possess this object of affect – by way of investing in and owning the

stock of the company behind the products.

Thus, an individual investor’s subjective evaluations of a company’s products can influence

his investment interest in the company’s stock at least in the three main ways discussed

above. Notably, these product evaluations should have effect on investment interest rather

independently from the positive effect of individual’s familiarity with (i.e., degree of

information of) the company or its products. This is because the sources of and correlation

between familiarity and positive evaluations are far from singular6. In sum, we can, thus, pose

the following hypotheses:

Hypothesis H1: An individual investor’s subjective evaluation of a company’s products

has positive effect on his interest to invest in the company’s stock.

Hypothesis H2: The effect that an individual investor’s subjective evaluation of a

company’s products has on his investment interest is independent of the effect of her

familiarity with the company/its products.

Notably, we also proposed in the above discussion that positive product evaluations will

partly influence investment interest by generating self-induced optimism in the investor’s

6 For instance, an individual may be highly familiar with a company’s products (e.g., General Motors) without

having positive evaluation them.

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financial expectations (I like the products of the company the company will succeed

financially) – but partly also by generating preference that goes over and beyond the financial

expectations (attitude-based favoring; desire to possess). In effect, this means that increased

optimism about the company’s financial returns should partially but not fully mediate the

effect of product evaluations on investment interest. Our further hypothesis is, thus:

Hypothesis H3: The effect that an individual investor’s subjective evaluation of a

company’s products has on his interest to invest in the company will be partially but not

fully mediated by his optimism about the company’s financial returns.

2.2 THE MODERATING EFFECT OF COMPANY HOME COUNTRY

Another central aspect of our theoretization is, as implied in the Introduction, that the effect of

an investor’s product evaluations on his investment interest may differ depending on whether

the company is domestic vs. non-domestic. Specifically, our theory is that ceteris paribus, the

effect of product evaluations on investment interest is reinforced for companies that are non-

domestic and/or based farther away from the investor’s home country. This can be expected

especially on the following grounds. As an investor is likely to have less investment-/value-

relevant information about non-domestic companies than about domestic companies (e.g.,

Ackert & Church, 2009; Coval & Moskowitz, 1999; Huberman, 2001; Kang & Stulz, 1997),

the information that he does hold of the company within his product (brand) evaluation

obtains increased weight, in relative terms, for non-domestic companies. In other words, the

product (brand) evaluations will serve as a relatively more important “focal point for

information” (Frieder & Subrahmanyam 2005) about a foreign company than about a

domestic company – of which the investor will more extensively hold other, non-product-

related information in addition to the product evaluation (e.g., management and labor relations

discussed in local media; local customers, suppliers, and competitors; local demand

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conditions; etc.). Moreover, in the case of companies based in foreign countries, the investor

cannot and will not have the factors of patriotism (Morse & Shive, 2006; Statman, 2004) or

preference for the local (Ackert & Church, 2009; Huberman, 2001) as (partial) motivators of

his investments. Therefore, in the case of non-domestic companies, investors may also

substitute preference towards companies with good products for their “normal” preference

towards the patriotic or the local. This will further reinforce the effect of product evaluations

on investment interest for non-domestic companies.

To summarize the above discussion, we hypothesize the following moderating effect:

Hypothesis H4: The effect that subjective evaluation of the company’s products has on

investment interest will be reinforced for foreign, farther-away companies.

3. Method and Data

3.1. SUBJECTS

The investor subjects of the present experiment were individual stock investors from Finland.

Notably, Finnish investors contemporarily operate on a fairly similar logic as investors in

Western Europe and North America – and have recently been investigated in many much-

cited finance studies (Grinblatt & Keloharju 2000, 2001a;2001b, 2009; Rantapuska &

Knüpfer, 2008). Specifically, the subjects were recruited for the experiment at “stock

exchange evening” events of the Finnish Foundation for Share Promotion in the spring of

2009. This non-profit foundation arranges a series of such events twice a year; the events are

open to the public and targeted especially to people who are interested and (actively) engaged

in investing their savings in the stock market.

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Subjects were recruited to the experiment at four events. At each event, a stand was arranged

to the proximity of the auditorium door where the event was held. A poster informing about

the possibility to participate in the study was attached to the wall beside the stand. A set of

papers – including a cover letter, the study stimuli, and a return envelope – was given to

investors passing by. Almost all passers-by were willing to take the papers with them (until

the material ran out). The subjects were informed of a possibility to win book prizes (with a

value of approximately 50 euros) in a lottery, should they fill in and return the questionnaire.

In total, 446 copies of the study material were distributed over the four events. Usable

responses were received back from 141 investors, resulting in a response rate of 32 %, which

is a rather normal response rate for a study involving consumer research methods.

Due to the non-perfect response rate, there was a potential non-response bias and, especially,

the possibility that those investors who responded to the survey (appr. 32% of the contacted

investors) might have different tendencies with respect to the hypotheses than the non-

respondents. Thus, we used a common procedure to control for the bias in question:

distinguishing the respondents who answered late (i.e., closer to the deadline) from the early

respondents and analyzing the differences between these two groups. The early vs. late

respondent check showed no significant differences between earlier and later respondents.

This indicates that non-response/self-selection bias should not be a very serious concern.

A description of the investors in the final sample of subjects is provided in Table 1, in terms

of a set of personal background variables. The background variables include gender, age,

education, yearly income, total number of stocks owned, and stock following activity. We are

unfortunately unaware of any contemporary studies that would map the current characteristics

of average Finnish individual investors in the overall population. In any case, the distribution

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of investor characteristics in the sample seems to accord to an intuitive notion of individual

investors: the distribution is bent towards middle-aged (rather than very young or very old),

college/university educated, and medium/high-income people. Most of the investors have also

moderately diversified stock portfolios (with 6 or more stocks) and tend to follow their stocks

at least weekly.

----------------------

Insert Table 1 about here

----------------------

3.2 STUDY DESIGN

3.2.1 Overall Design

The study was designed to employ analysis of covariance (ANCOVA), common in

randomized psychological experiments that involve a single, continuous dependent variable

(presently: INVESTMENT INTEREST), a few categorical experimental factors (presently:

‘subjective product evaluations’, ‘company home country’, ‘company/product type’), and a

few continuous covariate variables (e.g., SUBJECTIVE INFORMATION OF THE COMPANY, PRIOR

FAMILIARITY WITH THE COMPANY’S PRODUCTS, OPTIMISM ABOUT THE COMPANY’S FINANCIAL

RETURNS).

For the first experimental factor, (1) investor-subjects were assigned randomly to two

conditions, eliciting different degrees of product evaluations. In the first condition/treatment,

subjects encountered a company presentation which markedly emphasized the subjective

value of the company’s products , i.e., personal relevance of the company’s products as well

as their use value (‘subjective product evaluations’= high). In the second condition, the

subjects encountered a company presentation which emphasized this content to a lesser extent

(‘subjective product evaluations’= low). The manipulation checks – i.e., whether subjects in

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the first condition indeed had higher product evaluations about the companies than subjects

in the latter condition – are reported below, at the beginning of the Results section.

The purpose of the second experimental factor (2), ‘company home country’, was to examine

whether the company’s home base country influenced investors’ interest to invest in the

company – and whether home country moderated the effect of product evaluations

(hypothesis H4). This factor was a within-subjects factor, meaning that each subject was

presented with one domestic company (Finnish), one non-domestic company from a near

country (Scandinavian) and one non-domestic company from a farther country

(Central/Western European). While the domestic companies were Finnish, the non-domestic-

near companies were from Sweden or Denmark, and the non-domestic-far companies were

from England, Germany, and France. Notably, the countries of the non-domestic-near

companies (Sweden, Denmark) fall, from the Finnish investors’ perspective, into one and

same category in terms of size and reputation – i.e., the “neighboring Nordic countries of

similar size (as Finland)”. The countries of the non-domestic-far companies (England,

Germany, France) also fall, among themselves, into one and same category in terms of size

and reputation from Finnish perspective – i.e., “the big Western European countries”. Thus,

investors’ mental distance to the countries can be assumed to be similar both within the non-

domestic-near condition and within the non-domestic-far condition. Likewise, the geographic

distances of the countries from Finland are also quite similar within the conditions –

approximately 300-500 kilometers (non-domestic-near: Sweden, Denmark) and 1,000-2,000

kilometers (non-domestic-far: England, Germany, France), respectively. In sum, differential

mental or physical distances (cf. Bodnaruk, 2009; Chan, Covrig, & Ng, 2005; Grinblatt &

Keloharju, 2001a; Portes & Rey, 2005) to the company home countries (within the

conditions) should not seriously confound the manipulations.

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The main purpose of the third factor (3), ‘company-product type’ was to enhance the external

validity and generalizability of the study over different kinds of companies, having different

kinds of products in the market. Hence, the subjects were randomly assigned to evaluate one

of three alternative types of companies, differing broadly by their product type. The three

types were:

business-to-business products: products sold mainly to other businesses (e.g. capital

equipment, medical products, high-tech components)

services: consumer and/or business services (e.g., weather information, security

services, currency exchange services)

personal goods: products that consumers use mainly in person (e.g., hygiene products,

contact lenses, shoes)

In sum, the study employed a 2 X 3 X 3 ANOVA design, with ‘subjective product

evaluations’ (high or low) and ‘company-product type’ (personal goods, services, or business-

to-business products) serving as a between-subject factors – and ‘company home country’

(domestic, non-domestic-near, or non-domestic-far) serving as a within-subject factor. In

addition, the continuous covariates – such as PRIOR FAMILIARITY WITH THE COMPANY’S

PRODUCTS and OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS – would be included to

the ANOVA in order to conduct ANCOVAs for testing hypotheses H2 and H3.

3.2.2 Procedure, Stimuli, and Manipulations

In the cover letter distributed with the study material, the subjects were told that the

questionnaire related to research that studied private individuals’ stock investments and,

especially, their interest to invest in various companies in connection with stock issues (such

as initial public offerings, IPOs). It was stressed that there would be no “right answers” to the

questions and that the person should respond to them according to his personal views and

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opinions. In the actual study material, a subject was first presented with background questions

about his personal demographics and characteristics as an investor. The background questions

were followed by the actual stimuli (company presentations), which were followed by

questions pertaining to the dependent variable (INVESTMENT INTEREST). Thereafter, questions

pertaining to the company-specific covariates were presented.

The objective information content (sentences) of the company presentations were the same in

the high and low conditions of ‘subjective product evaluations’. This was considered

important, so that differential amount of objective information conveyed by the presentations

would not confound the results. While the presentation text was the same for both high and

low conditions of the factor, the high condition was achieved, in effect, by (i) adding to the

company presentation a heading that highlighted in bold typeface the products of the company

and their potential personal relevance and use value (e.g., “Carl Zeiss – premium lenses for

the sake of faultless vision”) – i.e., content supposed to evoke positive product evaluations.

Moreover, (ii) one sentence in the presentation text was underlined and set in italics, namely a

sentence which was supposed to further evoke positive product evaluations (e.g., “In other

words: even in your own pocket, there might be a product whose functionality is ensured by

Zeiss’s technology.”). To see an example of what the stimuli looked like for subjects in the

high condition of ‘subjective product evaluations’ (for one of the non-domestic-far

companies), see Appendix 1.

In the low condition of the ‘subjective product evaluations’ factor, the company presentation

simply lacked both the heading as well as the highlighting of the sentence at the end of the

text (i.e., the underlining and italics). Consequently, even if the subjects in the low condition

had the same text to process (in literal terms) as in the high condition, they would not likely

17

pay so much attention to the subjective value associated with the company’s products – which

would result in less positive product evaluations evoked. To see an example of what the

stimuli looked like for subjects in the low condition of ‘subjective product evaluations’ (for

the same non-domestic-far company as above), see Appendix 2. The manipulation checks for

the high vs. low ‘subjective product evaluations’ are reported in the Results section.

The manipulation of ‘company-product type’ as well as the ‘company home country’ were

handled by selecting such companies from Finland, (rest of the) Scandinavia, and Western

Europe to be included in the study that would meet the specifications for the respective

conditions of the factors:

Company A0: ‘business-to-business products’ & ‘domestic’

Company B0: ‘business-to-business products’ & ‘non-domestic-near’

Company C0: ‘business-to-business products’ & ‘non-domestic-far’

Company A1: ‘services’ & ‘domestic’

Company B1: ‘services’ & ‘non-domestic-near’

Company C1: ‘services’ & ‘non-domestic-far’

Company A2: ‘personal goods’ & ‘domestic’

Company B2: ‘personal goods’ & ‘non-domestic-near’

Company C2: ‘personal goods’ & ‘non-domestic-far’

While the companies were real and medium to large in size, none of them was listed in any

stock exchange at the time the experiment – yet the scenario presented to the investors asked

them to ponder their interest to invest in the companies, should they all be(come) listed in the

same international exchange of NasdaqOMX in near future (see the scenario below).

18

A single subject was presented with and questioned about either companies A0, B0, and C0;

companies A1, B1, and C1; or companies A2, B2, and C2 – according to the between-within

design explained above. Subjects were randomly assigned to one of these groups, and the

order of the company presentations was varied randomly in the study materials within the

groups. In any case, all the companies – irrespective of the condition – were presented to the

subjects with presentations having similar structure and logic. The presentation texts for each

firm were of similar length (appr. 120 words) and followed a similar pattern across the

conditions (as in Appendixes 1 and 2).

3.3 Measures

The dependent variable INVESTMENT INTEREST was measured after presenting the subjects

with an investment scenario. The idea was to present the subject a scenario whereby the

subject should imagine having a certain amount of money at hand – an amount that he would

have supposedly decided to invest in certain stock(s). After presenting the scenario, the

subject would reflect his interest to invest the money in question in the stock of the focal

companies (domestic, non-domestic-near, and non-domestic-far). The amount of money at

stake was set to be significant, yet under 10 % of the value of the subject’s stock portfolio –

the final figure used in the scenario was 7%. In its entirety, the scenario read as follows (as

translated in English; the original was in Finnish, as were all the questions, too):

“Let’s assume that you have just sold a certain stock investment of yours (at profit). As a result, you

have an amount of R euros of ”discretionary” money, equivalent of 7 percent of the value of your

stock portfolio (for instance, 7 000 € of money if the value of your stock portfolio is 100 000 €). Now,

you have decided that you will invest that sum of money in certain stocks.

Please describe, in the table below, your interest to invest the aforementioned R euros in the stock

of [company X], [company Y], and [company Z], respectively, in case all of these firms were listed in

the same international stock exchange, NasdaqOMX.

NOTE. According to your bank/advisor, the ”transaction costs” (trading fees, account fees, etc.) as

well as the ease of making the investments would be the same, regardless of whether you invest in

19

[company X], [company Y], or [company Z] stock ( even if the home countries of the firms are

different).”

Note also that it was emphasized to the subjects that in terms of transaction costs (trading

fees, account fees etc.), investing in the non-domestic stock offered would not be more costly

or difficult than investing in the domestic stock (which is, ecologically, a fairly valid

assumption nowadays, considering contemporary technology and globalization of

marketplaces for stocks). With reference to the aforementioned amount of money, R euros (7

% of the total value of the respondent’s stock portfolio), the dependent variable INVESTMENT

INTEREST was eventually measured by asking the subject “How interested would you be to

invest R euros (or a significant part of it) in [company X]?”. The answers were recorded on a

7-point scale, anchored by: “0= not at all interested”... “6=extremely interested”.

The covariate SUBJECTIVE INFORMATION OF THE COMPANY – meant as a control variable – was

measured with a single-item scale. The subject was asked: “How much information do

consider to have about things that affect the attractiveness of the company as an investment

target?” Here, the responses were recorded on a 7-point scale anchored by 0 = “none” and 6 =

“very much”.

While the above covariate pertained to the investor’s subjective information of or familiarity

with the company at the time of the investment consideration, an alternative covariate

pertained to investors’ subjective information of the company prior to the experiment (and the

company presentations). This covariate, PRIOR FAMILIARITY WITH THE COMPANY’S PRODUCTS,

was measured by asking the subjects: “How familiar were you with this company’s products

(before receiving/answering this questionnaire)?” The responses were recorded on a 7-point

20

scale, anchored by: 0 = “I had never even heard about this company’s products” and 6 = “This

company’s products were very familiar to me”.

Finally, the covariate OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS was measured by

asking the investor: “If you were considering to invest in the firm at the moment, what would

be your “hunch” about the long-term financial performance/returns of the company?”. The

responses, here, were recorded on a 7-point scale, anchored by 0=”very poor return

prospects” and 6 =” very good return prospects”.

4. Results

4.1 MANIPULATION CHECKS

Manipulation checks of ‘company home country’ and ‘company-product type’ were

unnecessary, since the companies de facto had different home countries as well as represented

different product types – and this was clearly indicated in the company presentations.

Manipulation of the ‘subjective product evaluations’, in contrast, was necessary, since testing

the hypothesis H1 depended on our having, available for analysis, two investor groups that

would differ in terms of subjective evaluations of investment targets’ products. We

performed this manipulation check with an index measure of an investor’s subjective product

evaluation of a particular company’s products. Each subject was asked (with respect to the

three companies presented to him, respectively):

1. How good do you think or believe that the firm’s products/services are in terms of

functionality and usability? (0 = “very bad”… 6 = very good”)

2. How good do you think or believe that the firm’s products/services are in terms of design?

(0 = “very unattractive” …6 = very attractive”)

An index of subjective product evaluation of a company’s products was obtained for each

respondent (and each company presented to him) as a sum of his responses to these two

21

items7. Thereafter, we performed an ANOVA along the two investor groups to which the

companies had been presented with (1) high vs. (2) low emphasis on product-evaluative

content – and which were, thereby, supposed to differ in terms of ‘subjective product

evaluations’ (high vs. low). In the ANOVA of the subjective product evaluation index

measure, the main effect of ‘subjective product evaluations’ resulted highly significant (F(1,

119) = 7.59, p < .01). This indicates that the manipulation was successful, as those investors

assigned to the high condition of ‘subjective product evaluations’ reported significantly

higher product evaluations than those assigned to the low condition (MHighEval=6.90;

MLowEval=6.22; p<.01).

4.2. TESTS OF HYPOTHESES

4.2.1 Analysis of the Experimental Factors

A three-way, mixed ANOVA was performed, with ‘subjective product evaluations’ (high or

low) and ‘company/product type’ (business-to-business products, services, or personal goods)

as between-subjects factors, and ‘company home country’ as a within-subject factor (see

Table 2 for cell means).

----------------------

Insert Table 2 about here

----------------------

The analysis revealed, first of all, a significant effect by ‘subjective product evaluations’ on

INVESTMENT INTEREST (F(1, 126) = 4.82, p = .029). Specifically, investors’ interest to invest

in companies was significantly higher in the high condition of ‘subjective product

evaluations’ (MHiEval= 2.60) than in the low condition (MHiEval= 2.21; comparison significant

7 The Cronbach’s alpha for the two items was .85, indicating good reliability of the two-item reflective scale.

21

22

at p < .05). This finding essentially gives support to hypothesis H1. That is, individual

investors’ subjective evaluations of a company’s products have positive effect on their interest

to invest in the company’s stock.

When it comes to ‘company-product type’, the analysis revealed no significant main effect by

this factor on INVESTMENT INTEREST (F(2, 126) = 2.45, p = .09). This result means that

investors’ investment interest overall did not differ significantly by the product type of the

company offered for investment. Even more interestingly, the analysis revealed no significant

main effect by ‘company home country’, either (F(2, 252) = 2.04, p = .13). This finding is

interesting, considering earlier behavioral research that has found that (individual) investors

prefer to invest in domestic companies (e.g., Campbell & Kräussl, 2007; Coval & Moskowitz,

1999; French & Poterba, 1991; Kang & Stulz, 1997; Karlsson & Nordén, 2007). Notably, our

contrary finding may be due to the fact that in the experiment scenario, it was emphasized that

investing in the non-domestic companies would not be more costly or difficult (in terms of

transaction costs) than investing in domestic companies. Thus, insofar as investors face

domestic and non-domestic companies in which they can invest in an equally easy an

inexpensive way, they seem not to have strong bias or preference for domestic companies,

after all – not at least if the investors come from a small open economy, like Finland.

While the main effect of ‘company home country’ was non-significant, hypothesis H4

expected that ‘company home country’ would have an interaction effect with ‘subjective

product evaluations’ on INVESTMENT INTEREST. Specifically, the hypothesis expected that the

effect by subjective product evaluations on investment interest would be reinforced for

foreign, farther-away companies. Concerning this moderating effect, the analysis revealed an

interaction effect, which was approaching significance (F(2, 252) = 1.8, p= .15). Specifically,

23

as Figure 1 illustrates, the effect of subjective product evaluations on investment interest was

greatest for non-domestic-far companies, next greatest for non-domestic-near companies, and

weakest for domestic companies, which is in support of hypothesis H4. Note, however, that

these differences are not definitive due to the overall interaction only achieving p=.15

significance. Thus, hypotheses H4 can be considered to obtain only tentative, marginal

support.

Finally , with regard to the two-way interaction of ‘subjective brand evaluations’ and

‘company-product type’, this effect was found to be clearly non-significant (F(2, 126) = 0.09,

p > .9). This shows in the approximately similar slopes of the plots in Figure 2. Also the

three-way interaction of the three experimental factors resulted non-significant (F(4, 252) =

0.44, p > .7).

----------------------

Insert Figure 1 about here

----------------------

----------------------

Insert Figure 2 about here

----------------------

In sum, the above findings concerning the interaction effects suggest that the influence of

subjective evaluations of a company’s products on individual investors’ interest to invest in

the company are fairly independent of the company’s product type – but the company’s home

country being foreign will somewhat reinforce the influence.

4.2.2 Analysis with Covariates

24

While the above analyses revealed the (main) effect by investors’ subjective evaluations of

companies’ products on their interest to invest in the companies’ stocks (hypothesis H1),

hypothesis H2 calls us to verify that the effect is not due to investors’ familiarities with (or

subjective information of) the companies’ products (i.e., instead of product evaluations). To

verify this, we added the covariate SUBJECTIVE INFORMATION OF THE COMPANY to the 2 X 3 X

3ANOVA analyzed above8. The resulting ANCOVA revealed that the effect of ‘subjective

product evaluations’ in the ANOVA (F(1, 128) = 4.85, p <.05) was not substantially

attenuated and remained significant (F(1, 124) = 3.93, p <.05), when the covariate

SUBJECTIVE INFORMATION OF THE COMPANY was included. Thus, even if the covariate

SUBJECTIVE INFORMATION OF THE COMPANY itself achieved significance (F(1, 251) = 67.68, p

<.001), the effect that investors’ subjective product evaluations had on their investment

interest was not attenuated by investors’ subjective information of the company. That is, the

effect that an investor’s subjective evaluation of a company’s products has on his investment

interest is independent of the effect of his familiarity with the company at the time of the

investment consideration. Moreover, we also included an additional covariate pertaining to

investors’ PRIOR FAMILIARITY WITH THE COMPANY’S PRODUCTS to the ANCOVA, but this

covariate did not, either, substantially attenuate the effect of ‘subjective product evaluations’

on INVESTMENT INTEREST (F(1, 124) = 4.36, p <.05) (even if this covariate also achieved

significance (F(1, 250) = 4.23, p <.05)). In sum, these findings provide strong support to

hypotheses H1 and H2: An individual investor’s subjective evaluation of a company’s

8 Note that according to a common procedure, we did not include the three-way interaction effects of ‘company-

product type’, ‘company home country’, and ‘subjective product evaluations’ to this further analysis, since

this interaction effect had resulted non-significant in the three-way ANOVA reported above. The two-way

interactions, in contrast, were included, as some of them were approaching significance in the earlier

ANOVA.

24

25

products has positive effect on his interest to invest in the company’s stock, and this effect is

independent of the effect of his current and prior familiarity with the company/its products.

On the other hand, the interaction effect of ‘subjective product evaluations’ and ‘company

home country’ remained equally substantial and significant in the ANCOVA (F(2, 250) =

1.91, p = .15) as in the earlier ANOVA ((F(2, 252) = 1.8, p= .15) – providing, again, marginal

support to hypothesis H4. Especially, this finding suggests that the marginal reinforcing effect

of company’s foreignness on the influence that subjective product evaluations have on

investment interest does not depend on investors’ differential subjective information of or

familiarities with domestic vs. non-domestic companies. Note also that the interaction of

‘subjective product evaluations’ and ‘company-product type’ remains non-significant (F(2,

124) = 0.42, p > .5), as earlier.

As a further analysis, we sought further support to hypothesis H1 by including the subjective

product evaluation measure (i.e., the one utilized in the manipulation check) as a covariate to

the ANCOVA. Notably, inasmuch as the effect of the experimental factor ‘subjective product

evaluations’ on INVESTMENT INTEREST is, indeed, due to individual investors’ subjective

evaluations of the company’s products, the main effect of the experimental factor should be

attenuated when the individual-level measure of subjective product evaluations (SUBJECTIVE

EVALUATION OF THE COMPANY’S PRODUCTS) is included in the ANCOVA as a continuous

covariate. This is exactly what the analysis reveals: With the inclusion of SUBJECTIVE

EVALUATION OF THE COMPANY’S PRODUCTS as a covariate, the main effect of ‘subjective

product evaluations’ on INVESTMENT INTEREST becomes non-significant (from F(1, 124)

=4.36, p =.038 down to F(1, 118) =3.61, p >.05), while the covariate itself achieves high

significance (F(1, 232) = 23.34, p <.0001). Since this significance occurs in the presence of

26

SUBJECTIVE INFORMATION OF THE COMPANY and PRIOR FAMILIARITY WITH THE COMPANY’S

PRODUCTS as covariates, we can conclude that the analysis yields further support to not only

hypotheses H1 but also to hypothesis H2. What is worth noting also, is that the effect of PRIOR

FAMILIARITY WITH THE COMPANY’S PRODUCTS (F(1, 236) = 3.01, p =.08) becomes

substantially smaller in size than the effect of SUBJECTIVE EVALUATION OF THE COMPANY’S

PRODUCTS (F(1, 232) = 23.34, p <.0001). This indicates that the influence that an investor’s

positive evaluation of a company’s products – at the time of investment consideration – has

on his interest to invest in the company is greater than the influence of his (prior) familiarity

with the company’s products.

Finally, hypothesis H3 predicted that the positive effect that subjective evaluation of the

company’s products has on investment interest will be partially (but not fully) mediated by

the optimism in investors’ financial expectations about the company. That is, the effect of the

above covariate pertaining to subjective product evaluations on INVESTMENT INTEREST should

be somewhat attenuated by the inclusion of the further covariate OPTIMISM ABOUT THE

COMPANY’S FINANCIAL RETURNS. This is also what we find: The effect of the covariate

SUBJECTIVE EVALUATION OF THE COMPANY’S PRODUCTS is attenuated, yet remains marginally

significant (from F(1, 232) = 23.34, p <.0001 down to F(1, 231) = 3.36, p =.068), once the

covariate OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS is included. The covariate

OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS itself achieves high significance (F(1,

231) =67.42, p <.0001). Thus, the effect that subjective evaluation of the company’s products

has on investment interest is partially, yet not fully mediated by the investor’s optimism about

the company’s financial returns. This finding supports hypothesis H3, and suggests that

positive product evaluations influence investment interest both by generating self-induced

optimism in the investor’s financial expectations (I like the company’s products the

27

company will succeed financially) and by generating preference that goes over and beyond

the financial expectations (attitude-based favoring; desire to possess).

4.2.3 Analysis with Investor Characteristic Covariates

In addition to the above analyses with the main covariates, we also performed ANCOVAs

including, as covariates, certain variables pertaining to investor-specific characteristics. Of

demographic variables included (gender, age, education, gross income, net worth), none

achieved significance as a covariate, and neither did interaction terms of the demographic

variables and the main covariate SUBJECTIVE EVALUATION OF THE COMPANY’S PRODUCTS.

This indicates that individual investors’ interest to invest in the companies does not depend

significantly on their demographics – and that the extent to which subjective product

evaluations influence investment interest does not depend on the demographics, either.

When it comes to variables pertaining to the subjects’ characteristics as investors, most

variables (value of the stock portfolio, stock investing experience, stock trading activity, stock

following activity, experience on stock issues, experience on foreign stocks) did not achieve

significance, either. An exception was a variable pertaining to the number of stocks in the

investor’s portfolio (~diversification). The ANCOVA revealed that diversification had a

significant positive effect on investors’ interest to invest in the presented companies in general

(F(1, 116) = 4.73, p =.032), and a negative moderating effect on the influence of SUBJECTIVE

EVALUATION OF THE COMPANY’S PRODUCTS on investment interest (F(1, 228) = 7.45, p

=.007). The former finding is intuitively logical, considering that higher diversification may

make an investor relatively more willing to add further stocks to the portfolio. The latter

finding, in turn, might be explained by the fact that individual investors who have already

highly diversified stock portfolios may have less mental resources to evaluate the products of

28

potential investment targets – rendering the influence of product evaluations on their interest

to invest in particular companies less substantial. Highly diversified investors might also be

more “objective” by letting their subjective evaluations of the companies’ products drive their

investment decisions relatively less than modestly diversified investors do (while assessing

the companies in a more versatile way: e.g., the company’s management quality and market

position). Note, however, that in any case, the covariate SUBJECTIVE EVALUATION OF THE

COMPANY’S PRODUCTS remained highly significant (F(1, 228) = 9.01, p =.003), even with the

inclusion of the diversification covariate. This indicates that the influence of subjective

product evaluations on investment interest is substantial overall.

5. Discussion

5.1 CONTRIBUTIONS TO RESEARCH

The main findings of the present investor psychology experiment are:

i. an individual investor’s subjective evaluation of a company’s products has positive effect

on his interest to invest in the company’s stock (in support of hypothesis H1);

ii. the effect that subjective evaluation of the company’s products has on investment interest

is partially (but not fully) mediated by the optimism in investors’ financial expectations

about the company (in support of hypothesis H3); and

iii. the effect that an individual investor’s subjective evaluation of a company’s products has

on his investment interest is independent of the effect of his familiarity with the

company/its products (in support of hypothesis H2).

Moreover, marginal support was found for the following pattern concerning domestic vs.

foreign companies as investment targets:

29

iv. The effect that subjective evaluation of the company’s products has on investment interest

is somewhat reinforced for foreign, farther-away companies (in marginal support of

hypothesis H4).

In sum, our findings partly complement and partly counter the results of Frieder and

Subrahmanyam (2005) on how product perceptions may “spill over” to individual’s

investment decisions. Essentially, Frieder and Subrahmanyam’s data disconfirmed the

hypothesis that individual investors’ evaluations of companies’ product brands would have

effect on their interest to invest in companies’ stocks, while only confirming the hypothesis

that individual investors’ familiarities with companies’ product brands have effect on their

investment interest. In contrast, our findings provide evidence of effects by both of the factors

– and even suggest that the effect of investor’s subjective evaluation of a company’s products

on investment interest is greater than the effect of his prior familiarity with the company’s

products. Notably, our partly contradicting results might be partially attributed to the fact that

our data pertained directly to individual-level psychological constructs, whereas Frieder and

Subrahmanyam (2005) used aggregate proxy data – which might have less accurately

measured, than our data, the essentially psychological constructs of subjective product

evaluations and investment interest. Moreover, the contrasting results might also be partly

explained by the fact that Frieder and Subrahmanyam did not pay attention to the companies’

home countries vis-à-vis the investors, whereas we examined both domestic and non-domestic

companies. Indeed, we found tentative support for a pattern whereby the effect of product

evaluations on investment interest is especially reinforced for companies based in foreign,

farther-away countries (as opposed to domestic companies).

30

Beyond complementing and contrasting to the work of Frieder and Subrahmanyam (2005),

our results – especially finding (i) listed above – adds to the behavioral finance literature that

claims that individual investors tend to perceive that “good companies” are good or preferable

investment targets as well (De Bondt, 1998; Shefrin & Statman, 1995; Shefrin, 2001, 2002;

van der Sar, 2004). The contribution of the present results to this literature lies in its novel

evidence of the fact that individual investors tend to perceive that companies that have “good

products”, particularly, are good investment targets (i.e., not only that companies that have

generally good reputation are good investment targets).

Even more specifically, with the second finding (ii) listed above, our results support the

notion that positive product evaluations influence investment interest both by generating self-

induced optimism in the investor’s financial expectations (I like the company’s products

the company will succeed financially) and by generating preference that goes over and

beyond the financial expectations (i.e., attitude-based favoring; desire to possess). In so doing,

the results also add to the emerging streams of research on the sources of investors’ optimism

about particular stocks’ financial returns (e.g., Kilka & Weber 2000), on one hand, and on the

sources of investment preferences that go over and beyond financial expectations (Fisher &

Statman, 1997; Statman, 2004), on the other. With respect to the former, earlier research has

suggested that investors may exhibit optimism towards domestic companies’ stocks (e.g.,

Kilka & Weber 2000; Morse & Shive), whereas the present results suggest that what also

elicits optimism about a company’s financial returns is the investor’s positive evaluation of a

company’s products. With respect to the latter, in turn, earlier literature has proposed that

investors may exhibit extra willingness to invest in socially responsible, “green”, ethical, or

“fair” companies (due to positive attitude towards green/fairness issues; e.g., Beal, Goyen, &

Phillips, 2005; Getzner & Grabner-Kräuter 2004; Statman 2004), familiar, domestic, or

31

nearby companies (due to comfort obtained from the familiar; e.g., Ackert & Church 2009;

Huberman 2001), domestic companies (due to patriotism; e.g., Huberman 2001; Statman

2004), and even prestigious companies (due to yearn for status; e.g., Statman 2004). In

addition to these sources of extra willingness to invest in particular companies’ stocks (over

and beyond their financial returns), the present results suggest that an individual investor’s

subjective evaluation of a company’s products (or, product quality/brand) may also elicit extra

willingness to invest in its stock, beyond its expected financial returns.

Finally, concerning cross-border investing, our results give (iv) marginal support to the

hypothesis that the effect that subjective evaluation of a company’s products has on

investment interest is somewhat reinforced for foreign, farther-away companies (as opposed

to domestic companies). Surprisingly, we also found that that among companies presented to

the investors, investors’ interest to invest did not significantly depend on a company’s home

country. This finding – as combined with the fact that the effect of product evaluations is

potentially reinforced in the case of foreign, farther-away companies – implies that

companies’ product brand image (especially in terms of product quality evaluations) will be

an important determinant of individual investor attraction across international borders.

5.2 LIMITATIONS AND AVENUES FOR FURTHER RESEARCH

One limitation of the present research is due to the nature of the psychological experiment:

While our dependent variable of investment interest is likely to reflect an individual’s interest

and proclivity to invest in the stock, it does not necessarily fully predict real investments or

investment decisions. Indeed, more than actual investment, the present dependent variable

reflects investment intention. Another limitation relates to the external validity of the results.

As the experiment was conducted with a sample of Finnish, active individual investors, the

32

results are not automatically generalizable to other individual investors in different times or

places. For instance, the results might somewhat differ for investors with other national

backgrounds or for more passive investors (who do not attend events like the one where the

subjects of the present study were recruited). Yet another limitation relates to potential non-

response/selection bias and the possibility that those investors who responded to the

experiment might have different tendencies with respect to the hypotheses than the non-

respondents. However, as mentioned earlier, the fact that no significant differences were

found between early and late respondents gives us confidence that non-response bias should

not be a very serious concern.

In further research, thus, it would be valuable to first replicate the present study, by

addressing a more varied set of companies (in terms of product types and home countries).

The experiment should also be replicated with investors from different countries. Moreover,

whereas the present study examined individuals’ willingness to invest in stocks, decisions to

sell should also be explored in further research, since the dynamics of the sell decision might

be different to those of the buy decision (e.g., Kahneman & Tversky, 1979; Shefrin &

Statman, 1985). Finally, it would be interesting to study whether and to what extent the results

of this study apply not only to individual investors but, perhaps, also to institutional investors

and/or investment market intermediaries and professionals, such as investment analysts. One

might think that professionals would not be influenced at all by the somewhat “soft”,

attitudinal product evaluation factors proposed in this research. Nevertheless, some

preliminary existing studies show that professional investment analysts, for instance, often

make investment evaluations and decisions based on affective or attitudinal factors, as well

(e.g., Ganzach, 2001). Thus, there is a potentially fruitful setting for studying how the product

33

evaluation-related psychological and behavioral mechanisms proposed in this study

potentially influence the investments of professional and institutional investors, too.

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38

Table 1. Description of the subjects of the Study: Personal characteristics of the investor-

respondents

overall sample

Gender female male

25.8% 74.2%

Age below 25 25–35 36–45 46–55 56–65 over 65

1.5%

10.6% 4.6%

18.2% 37.9% 27.3%

Education (highest) middle school high school vocational school college/bachelor university/master licenciate/doctor

4.6%

10.6% 9.1%

22.7% 42.4% 10.6%

Yearly income 1–50 000€ 50 000–100 000€ 100 001–150 000€ 150 001–250 000€ 250 001–500 000€ 500 001–1000 000€

48.5% 39.4% 7.6% 1.5% 3.0% 0.0%

Net worth 0–100 000€ 100 001–500 000€ 500 001–1 000 000€ 1 000 001–5 000 000€

25.8% 45.5% 16.7% 12.1%

Total no. of stocks owned 0 1–2 stocks 3–5 stocks 6–10 stocks 11–20 stocks 21–30 stocks over 30 stocks

6.1% 3.0%

18.2% 27.3% 28.8% 12.1% 4.6%

Stock following activity daily weekly monthly once in three months once in six months once a year once in two years

13.9% 38.5% 26.2% 7.7% 6.2% 4.6% 3.1%

39

Table 2. Means (and standard deviations) for interest to invest in the company

Company-product type / Company home country

Subjective product evaluations = Low

Subjective product evaluations = High

Business-to-business products: Domestic company A0 Non-domestic-near company B0 Non-domestic-far company C0

2.41 (1.77) 1.94 (1.60) 2.53 (2.03)

2.72 (1.83) 2.50 (1.79) 3.00 (1.77)

Services: Domestic company A1 Non-domestic-near company B1 Non-domestic-far company C1

2.92 (1.59) 3.18 (1.70) 1.14 (1.21)

2.54 (1.71) 3.46 (1.56) 2.08 (1.44)

Personal goods: Domestic company A2 Non-domestic-near company B2 Non-domestic-far company C2

1.66 (1.65) 2.35 (1.80) 1.79 (1.82)

1.74 (1.54) 2.48 (1.62) 2.86 (1.63)

Note. The ratings indicate mean interest to invest in the focal company (0=”not at all interested”… 6=extremely interested). The numbers in parentheses are standard deviations.

40

Figure 1. The effect of subjective product evaluations on investment interest (least squares means) – by target company’s home country

41

Figure 2. The effect of subjective product evaluations on investment interest (least squares means) – by target company’s product type.

42

Appendix 1. Example of stimuli presented to the experiment subjects in the high condition

of ‘subjective product evaluations’

Carl Zeiss – premium lenses for the sake of faultless vision

Carl Zeiss is a Germany-based company that develops,

manufactures, and sells optics and lens products to various

industries, as well as licenses its trademark to selected

companies. The products, such as eyeglass lenses, contact

lenses, and camera lenses, are manufactured with premium materials and

techniques. The high quality and faultlessness of the end products is important in

their daily use, whether the question is about spectacles or the lens of a cell phone

camera. In other words: even in your own pocket, there might be a product whose

functionality is ensured by Zeiss’s technology.

Zeiss’s international business has grown fairly quickly in the past years,

and its future prospects as a company are promising.

Appendix 2. Example of stimuli presented to the experiment subjects in the low condition of

‘subjective product evaluations’



manufactures, and sells optics and lens products to various

industries, as well as licenses its trademark to selected

companies. The products, such as eyeglass lenses, contact

lenses, and camera lenses, are manufactured with premium materials and







-

1

Product-Featuring Investor Ads vs. Brand Goodwill: Effects on Individual Investors’ Interest to Invest in Companies

Jaakko ASPARA

Assistant Professor Aalto University School of Economics (formerly Helsinki School of Economics)

P.O. Box 21230, FI-00076 Aalto/Helsinki, FINLAND Tel. +358 50 546 8891

Email. [email protected]

Amitav CHAKRAVARTI Associate Professor

New York University, Stern School of Business 44 West 4th Street

New York, NY 10012 Email. [email protected]

Note. This article is being submitted to Journal of Marketing.

2

Product-Featuring Investor Ads vs. Brand Goodwill: Effects on Individual Investors’ Interest to Invest in Companies

ABSTRACT

The advertising of companies’ stocks to individual investors is an issue of growing interest to industry practitioners, as well as to marketing and finance scholars. Investor-oriented advertisements that feature a company’s products are especially interesting from marketing perspective, as parallels can be drawn between such ads and the “detailing” efforts that have long been practiced in the pharmaceutical industry. Given the burgeoning phenomenon of such investor-oriented marketing activity, at least two research questions merit investigation. First, do investor-oriented ads that feature a company’s products have a systematic influence on individual investors’ decisions to invest in the company’s stock? Second, if such ads do have an effect, then do they exert their influence over and above preexisting product market factors, like brand recognition? The present article addresses these questions by examining how investor-oriented, product-featuring advertising interacts with preexisting brand recognition and image, to determine investors’ stock investment decisions. Using real stock market investors as a representative sample, an experiment reveals that investor-oriented advertisement featuring a company’s products has a significant positive effect on investors’ decisions to invest in the company, independent of preexisting brand goodwill in the market. KEYWORDS: Individual investors, stock market, brand goodwill, investor marketing, investor advertisements, product evaluations

3

Marketing scholars have recently started to become interested in investor marketing, that is, how

companies can market themselves towards the stock market – with advertising and other efforts

aimed directly at influencing investors (e.g., Ebel and Hofer 2003; Kotler, Kartajaya, and Young

2004; Luo 2008). In fact, in the recent special issue of JM dealing with the links between

marketing and finance, the editors (Hanssens, Rust, and Srivastava 2009, p. 117) note that “the

study of [understanding and directly influencing] investors represents a major research

opportunity in marketing” (even though the articles in the special issue itself do not explicitly

examine this topic1). Similarly, finance scholars’ interest in the idea of promoting companies or

their stocks to investors has been growing as well (e.g., Cook, Kieschnick, and Van Ness 2006;

Fehle, Tsyplakov, and Zdorovtsov 2005; Grullon, Kanatas, and Weston 2004).

Several factors have combined to trigger this interest in investor marketing, especially when it

comes to individual investors2. Such interest is partly fueled by the fact that recent years have

witnessed considerably increased participation of consumers in the stock market, as individual

investors (e.g., Guiso, Haliassos, and Jappelli 2003; Jacoby et al. 2001; Lee et al. 2008; Raghubir

and Das 2010; Wärneryd 2001)3. Observing this development, many companies have conducted

ad campaigns directed to potential investors within the general public, in Initial Public Offering

(IPO) situations for example (e.g., GlobeNewswire 2009; Marcus 2005; McAuley 2006; see also

www.investormarketing.com)4. Notably, these campaigns have often not only informed investors

about the marketed companies’ characteristics in general but also provided information about –

or, featured – the details of the companies’ products and brands in particular (e.g.,

GlobeNewswire 2009). Against this backdrop, academics and practitioners alike seem to be

realizing that mass marketing methods may be as influential in directly influencing individual

investors as they normally are in influencing actual consumers of a company’s products (Fehle,

4

Tsyplakov, and Zdorovtsov 2005; Frieder and Subrahmanyam 2005; Schoenbachler, Gordon,

and Aurand 2004; Vogelheim, Schoenbachler, and Gordon 2001). Accordingly, some studies

have indicated, via aggregate, macro-level data, that companies engaging in investor marketing

towards individual investors may indeed benefit in comparison to those who eschew such

promotional efforts (Cook, Kieschnick, and Van Ness 2006).

Given this burgeoning phenomenon of individual investor-oriented ads and marketing

activity, it is important to take a systematic look at the factors that might influence the

investment decisions of individual investors who are exposed to such ads. In the present article,

we focus especially on individual investor-oriented advertising that features the company’s

products – a marketing tactic analogous to the “detailing” efforts that are established practice in

the pharmaceutical sector (whereby physicians, rather than actual consumers, are provided

persuasive information about a pharmaceutical company’s products). This focus naturally begs

the following question: What are the various ways of influence by which product knowledge and

product images exert influence on a stock market investor? Arguably, the main sources of

influence, affecting investors’ investment decisions, can be twofold. First, a priori brand

perceptions created in the product markets about the company’s products may influence

investors’ investment decisions in the stock market (cf. Frieder and Subrahmanyam 2005). In

other words, preexisting product market factors, like brand recognition and brand likeability,

might influence how investors pick their stocks. Second, and even less examined of the two

sources, is the influence that the investor-oriented, product-featuring ads per se might have on

investors’ stock market decisions.

Taking into account these twin sources of influence, at least three research questions merit

systematic investigation. First, do preexisting product market factors, like brand recognition and

5

likeability, systematically influence investment decisions? Second, do such investor-oriented ads

that feature the company’s products systematically affect how investors invest in the stock

market? Third, if the investor-directed ads do have a significant effect, then do they exert their

influence over and above preexisting product market factors, like brand recognition and

likeability? However, despite attracting interest and speculations in the popular press, these

questions have largely gone unexamined. The present article addresses this research gap by

looking at how investor-directed advertising interacts with preexisting consumer/product market

factors like brand image and recognition, to determine investors’ stock investment decisions.

Using active stock market investors as a representative sample, the research reveals that investor-

oriented advertisement that features a company’s products has a significant positive effect on

investors’ decision to invest in a company, independent of preexisting product market-level

factors, like brand likeability and brand recognition, that might be associated with the company.

The rest of the paper is organized as follows. First, we begin with a review of past research on

investor marketing in regards to product market-related ads and brand images, and delineate the

contributions of our research from the extant work. Next, we present our theoretical framework

and build our research hypotheses. We then present a study that we conducted on a sample of

active stock market investors to test these hypotheses. Finally, we end with a discussion of the

implications of our findings and avenues for future research in investor-directed marketing.

Past Research on Investor Marketing

That fact that investors in a stock market may be susceptible to ongoing marketing efforts in the

consumer product markets, should not be altogether surprising. Indeed, product markets and

6

stock markets are inevitably interrelated: companies are often present in both markets, and

perceptions of a company as an investment target, have been suggested to vary with the

perceptions of the company in the product market (Lovett and MacDonald 2005; Schoenbachler,

Gordon, and Aurand 2004). This “spill-over” of perceptions from the product market to the stock

market has attracted considerable interest among finance scholars who study investor behavior,

as well (Frieder and Subrahmanyam 2005). However, our efforts differ from this extant research

in investor marketing both in terms of the conceptual variables we examine, as well as the

methodological tools we use.

In terms of the conceptual variables examined, the extant research has mostly concentrated on

the effect that consumer-oriented advertising in the product market, has on investors’ investment

interest in the target company – to the extent that investors also happen to perceive that

advertising (Fehle, Tsyplakov, and Zdorovtsov 2005; Frieder and Subrahmanyam 2005; Grullon,

Kanatas, and Weston 2004; McAlister, Srinivasan, and Kim 2007). The main finding of this

work has been that individual investors’ greater familiarity with a company (being a by-product

of the company’s consumer-oriented advertising, when perceived by investors) increases

investors’ investment interest in the company. This is seen to be due to individual investors’

preference for stocks for which they perceive to have higher-quality information (Frieder and

Subrahmanyam 2005; McAlister, Srinivasan, and Kim 2007).

We extend this work in several different ways. First of all, in contrast to the aforementioned

work that has focused on the effects of consumer-oriented advertising, we focus on the effects

that might occur as a result of investor-oriented advertising, i.e., advertising which is expressly

aimed at investors. To the best of our knowledge, the effects of investor-oriented advertising, and

in particular, the issue of how the effects of consumer/product market brands interact with

7

investor-oriented advertising to determine investor decisions, has not been examined before.

Especially, we look into how high (vs. low) “product-evaluative” emphasis of product-featuring,

investor-oriented advertising interacts with factors related to consumer-market brand goodwill,

involving brand recognition and likeability. Notably, our focusing on investor ads that

(differentially) feature the company’s products – rather than ads featuring other kinds of

contents, such as detailed financial information – is justified by two specific, further reasons.

First, focusing on product-featuring ads allows us to explicitly examine the links between pre-

existing product market brand images, on one hand, and the product evaluations as influenced by

the investor-oriented advertising, on the other – as well as the total effects of these factors on

investment decisions. Second, focusing on ad content that expressly pertains to the company’s

products rather than the company’s financial information is also justified because the specifics of

the product-featuring content in an investor ad are to a large extent at the discretion of the

marketer, whereas presentation of financial information and outlooks in investor-ads is highly

regulated by authorities.

Secondly, past research on how consumer-market advertising might affect investors, has

largely been restricted to looking at recognition/familiarity of the company in question. While

there has been some speculation that investors’ evaluations of (and not merely familiarity with)

companies’ products and brands may spill over to influence their investment decisions (Frieder

and Subrahmanyam 2005; Schoenbachler, Gordon, and Aurand 2004), such effects have neither

been theoretically modeled nor empirically verified. Thus, we expand on this by not only looking

at information-related factors like brand familiarity/recognition, but by also looking at attitudinal

/evaluative factors like subjective product evaluations and brand likeability. In this respect,

another aspect of our research that is worth noting, is that in our investor-oriented ads, we do not

8

focus on the presence vs. absence of advertisements that differ in terms of information content.

Rather we focus on advertisements that present the company with high (vs. less) emphasis on

product image characteristics (i.e., “product-evaluative” content), holding constant the objective

information content. This enables us to focus on – and verify – those effects of investor

advertisements that are due to the evaluation-enhancement effects, rather than informational or

familiarity-enhancement effects.

Our research is also set apart from earlier research in its study approach and methodology. We

examine data that pertains directly to investor psychology – as gathered from a randomized

(consumer-psychological) experiment – instead of making indirect inferences about investment

psychology on the basis of aggregate stock market data such as companies’ stock price reactions

or developments (cf. Cook, Kieschnick, and Van Ness 2006; Madden, Fehle, and Fournier 2006),

stock trading volumes (cf. Fehle, Tsyplakov, and Zdorovtsov 2005; Grullon, Kanatas, and

Weston 2004), or companies’ ownership compositions (cf. Frieder and Subrahmanyam 2005;

Grullon, Kanatas, and Weston 2004). Moreover, when it comes to advertising, we focus on

qualitative advertisement stimuli that are targeted exclusively to investors – not product market

advertisements targeted to consumers (cf. Fehle, Tsyplakov, and Zdorovtsov 2005) or inferences

made from the size of consumer advertisement budgets (cf. Luo 2008; McAlister, Srinivasan,

and Kim 2007). Finally, when it comes to product and brand evaluations, our study is not

restricted to market-level indexes of companies’ general brand strength (cf. Frieder and

Subrahmanyam 2005; Madden, Fehle, and Fournier 2006) but takes into account the investors’

subjective perceptions and evaluations of the companies’ products.

Theoretical Framework and Hypotheses

9

As noted earlier, we focus on two, broad sources of influence on investors. In our hypotheses, we

focus first on the source of influence that is related to the content of the investor-directed ads

themselves – and especially their product evaluation-enhancement effects, rather than

familiarity-enhancement effects (the latter have been established in earlier research). The second

source of influence on which we focus is the branding that companies have engaged in, in the

consumer markets (prior to the investor ads). In the sections that follow, we examine each source

of influence and present our key hypotheses.

Effects of Investor-Oriented, Product-Featuring Ads

Insofar as a product-featuring, investor-oriented advertisement by a company is able to enhance

an investor’s subjective evaluation of the company’s products, it can be expected to increase the

investor’s interest in investing in the company for three reasons. First, a heightened affective

evaluation of a company’s products – liking them – may lead the investor to naïvely reason that

since he likes the company’s products, others will like them, too, and the company will therefore

succeed financially (Aspara and Tikkanen 2008). Due to such naïve, self-induced financial

optimism, the investor will exhibit increased interest to invest in and own the company’s stock.

This is especially probable since psychological evidence suggests that people often use simple

heuristics when making decisions, especially in complex and uncertain environments, such as in

investment contexts (e.g., Gigerenzer, Todd, and ABC Research Group, 1999; Tversky and

Kahneman 1982). Indeed, preferring stocks with high-quality products – with the presumption

that perceived product quality signifies superior financial return performance – can be an

instance of such a simple (affect) heuristic (Frieder and Subrahmanyam 2005; see also

10

MacGregor et al. 2000). Consistent with this notion, Fehle et al. (2005) attributed the increase in

net buying activity among small investors after Super Bowl commercials not only to information

that investors obtain about the advertising companies from the commercials but also to the

positive mood into which the commercials may put the investors, considering the companies’

products. Moreover, a consistent finding, in marketing research, has been that reported changes

in companies’ product quality are associated with changes in their stock valuations (Aaker and

Jacobson 1994; Mizik and Jacobson 2004; Tellis and Johnson 2007), presumably because

“investors view the quality signal as providing useful information about the future-term

prospects of the firm” (Srinivasan and Hanssens 2009, p. 306).

Another reason why enhanced subjective evaluations of the company’s products may increase

an investor’s interest to invest in the company is that, according to a common psychological

notion, an individual’s positive attitude towards an object (i.e., positively affective overall

evaluation of it) will manifest in the individual’s predisposition to behave in a consistently

favorable way with respect to the object (Fishbein and Ajzen 1975; Zajonc 1980). Indeed, due to

the basic psychological drive to maintain “attitude-behavior consistency” (Abelson et al. 1968;

Festinger 1957), it can be expected that an individual who exhibits a positive affective evaluation

of a company’s products will not only e.g. talk favorably about the company and its products

(and perhaps buy or use them) but also express his positive evaluation by favoring the company

in investment decision-making5 (Aspara and Tikkanen 2008). Notably, such product attitude-

based favoring is quite non-related to the investor’s expectations about the financial returns of

the company – and should therefore increase one’s interest to invest in the company over and

beyond its expected financial returns.

11

A third reason why enhanced evaluations of the company’s products may increase an

investor’s interest to invest in the company is the fact that positive affect implicated in one’s

positive evaluation of a company’s products may lead to some degree of outright “desire to

possess” the company by owning its stock – again over and beyond any financial interests. This

suggestion derives from research that addresses the psychology related to people’s collections

(such as stamp collections). Collection researchers point to people’s need and motivation to own

and surround themselves with objects for which they have special affect (Danet and Katriel

1989; Pearce 1994). Also, collection researchers explicitly emphasize the close relationship

between one’s affection for an object, on one hand, and will to possess the object, on the other

(Danet and Katriel 1989). Thus, personal affect for a company’s products may lead the

individual to desire to possess the object of affect – by way of investing in and owning the

company’s stock (Aspara 2009).

Reflecting the above discussion, we will in our study test whether advertising will have

influence on investment interest through subjective product evaluations – by presenting investors

with advertisements which differ in terms of the degree to which they emphasize product-

evaluative content, holding constant the objective information content. Holding the information

content similar means that any found effects by the differing advertisements should be due to

(i.e., mediated by) the advertisement’s product evaluation-enhancement effects, rather than to

any familiarity-enhancement effects (as the latter have been established in earlier research).

Thus, summarizing the above discussion, we present as our first hypotheses the following:

Hypothesis H1: High emphasis on product-evaluative content in an investor advertisement about a

company will have a positive effect on investors’ investment interest.

12

Hypothesis H2: The effect that high emphasis on product-evaluative content in an investor

advertisement has on investment interest will be mediated by the investor’s subjective evaluation of

the company’s products at the time investing.

Moreover, we proposed in the above discussion that advertisement-elicited, enhanced product

evaluations may specifically influence investment interest by generating self-induced optimism

in the investor’s financial expectations (I like the products the company will succeed

financially) – yet also by generating preference that goes over and beyond the financial

expectations (attitude-based favoring; desire to possess). This means that increased optimism in

financial expectations should partially but not fully mediate the effect of product evaluations on

investment interest. Thus, formally, we hypothesize:

Hypothesis H3: The effect that subjective evaluation of the company’s products has on investment

interest will be partially (but not fully) mediated by investors’ optimism about the expected financial

returns of the company.

Effects of Prior Brand Goodwill in the Product Market

Irrespective of the effects of investor-oriented ads discussed above, the company’s earlier

marketing efforts in the consumer/product market can lead (or have led) to recognition of the

company’s brands among the investor community – and that (prior) brand goodwill in the

product market can have its own effects on investors’ investment interest. The first type of effect

by brand goodwill relates to information and has been somewhat widely suggested and verified

in earlier research (Fehle, Tsyplakov, and Zdorovtsov 2005; Frieder and Subrahmanyam 2005;

Grullon, Kanatas, and Weston 2004; Huberman 2001). That is, individual investors seem to

prefer to invest in companies with higher brand recognition. Consistent with this notion, Frieder

13

and Subrahmanyam (2005), for instance, found that individual investors tend to concentrate their

investments disproportionately in companies that have high brand recognition or familiarity.

Nevertheless, as a second type of effect, we suggest that brand goodwill in the form of brand

image or likeability in the market, is also likely to affect investors’ investment interest in the

company (in addition to brand recognition).

Overall, it would indeed be unreasonable to expect that investors would, when engaging in the

investment consideration, totally ignore or be able (or even willing) to “partial out” a priori

perceptions of the company’s consumer or product market brand (see e.g., Aaker and Jacobson

1994; Keller 1993). Accordingly, let us consider three basic cases of these brand goodwill

perceptions. At one extreme, the company’s brand is generally not recognized in the product

market. Consequently, investors are not likely to have (valid) views of or attitudes towards the

image or likeability of the brand, either. This case can be considered to be, in a way, a baseline

case. For example, many business-to-business companies that are invisible to the general public

are likely to represent this baseline case. Notably, this is a case whereby the general non-

recognizability of the company’s brand might decrease investors’ interest in investing in the

company (cf. Frieder and Subrahmanyam 2005). On the other hand, the issue of brand image

factors like brand likeability is a moot one, here.

At the other extreme, consider a company that is, owing to its product market brand, both well

recognized and well regarded by investors as well. This is often the case with, for example,

popular consumer product companies, the brands of which are both well-recognized and well

liked when it comes to average attitudes/evaluations towards the brand in the market (cf. Aaker

and Jacobson 1994; Srinivasan et al. 2009). Intuitively, it could be assumed that companies with

such strong brand goodwill – high recognizability and high product likeability – would enjoy

14

relatively high investment interest among individual investors, compared to the baseline case.

However, this increased investment interest may manifest itself through several specific process

mechanisms, partly complementary and partly alternative, which need to be accounted for. First,

(1a) since individual investors have the preference to invest in companies with familiar brands

due to more information they have about such companies (Frieder and Subrahmanyam 2005),

they should exhibit, on average, higher interest to invest in companies whose brands have high

recognizability and high likeability than in the baseline companies with non-recognizable brands.

At the same time, (1b) inasmuch as the investors have, on average, positive subjective

evaluations of the company’s products – by the definition of high market-level brand likeability

– their average investment interest is likely to be further increased due to the self-induced

optimism in financial expectations (I like the products the company will succeed financially)

as well as attitude-based favoring and desire to possess. These reasons are the same as those

discussed in the context of the product evaluation effects of investor-ads. In effect, should these

mechanisms (1a and 1b) be present, their effects should actually be captured – or attenuated – by

the investors’ subjective familiarity with the company (1a) and their subjective product

evaluations related to the brand (1b), at the time of the investment consideration.

Alternatively, (2) regardless of an individual investor’s personal, subjective evaluation of the

products of the company with high brand likeability, the investor’s “hunch” about the overall

market’s general liking of the product brand may have effect on his investment interest – through

directly affecting his view of the financial prospects of the company. This is consistent with

Aaker and Jacobson’s (1994) suggestion that investors may pay attention to impressions of

companies’ market-level brand image as a basis of their investment decisions (somewhat

regardless of their own subjective evaluations of the products). Notably, this way of influence (2)

15

– wherein an individual investor may exhibit increased interest to invest in the company whose

brand has high likeability at the market level, regardless of his own personal evaluation of the

company’s products – is also one which should not be captured by individuals’ subjective

product evaluations. That is, insofar as the effect of high brand likeability and recognizability

(vs. non-recognizability) at the market level on investment interest is due to an investor’s hunch

and inference that such market-level brand goodwill will directly lead to good financial prospects

for the company, the effect should not be attenuated once the subjective, personal evaluations are

taken into account. Yet, what should mediate the effect even here is the individual’s optimism

about the financial returns of the company – the hunch that since the product brand is liked in the

market in general, the company will succeed financially.

Summarizing the above discussion, we present the following hypothesis H4, contrasting

companies whose brands have high recognizability and high likeability with the baseline

companies whose brands have low recognizability. The alternative reasons (1 vs. 2 discussed

above) for the effect of brand goodwill are reflected in propositions H5.1 and H5.2, respectively:

Hypothesis H4: Investors will exhibit higher average investment interest towards companies whose

brands have high recognizability and high likeability at the market level than towards companies

whose brands have low recognizability.

Hypothesis H5.1: The influence of market-level brand goodwill on investment interest will be

attenuated by the investors’ subjective information of the company and subjective evaluations of the

companies’ products at the time investing.

Hypothesis H5.2: The influence of market-level brand goodwill on investment interest will not be

attenuated by the investors’ subjective information of the company or subjective evaluations of the

companies’ products at the time investing (but will still be attenuated by optimism in financial

expectations about the company).

16

Between the two extreme cases (i.e., between a company with low brand recognizability and a

company with high brand recognizability and high brand likeability) there is a third basic case.

Namely, consider a company that has a brand which is quite recognized in the product market,

but which is – rather than being very highly regarded in terms of likeability – perceived to be

mediocre at most. In this case, would we expect the investors’ interest to invest in the company,

on average, be higher or lower than in the two extreme cases? Comparing a company whose

brand has high recognizability and mediocre brand likeability to a company whose brand has

high recognizability and high brand likeability, the result is fairly logical: Investors are likely to

exhibit, on average, higher interest in investing in the latter than in the former. This is because

although the familiarity component is approximately the same for both companies (due to similar

recognizability), the investment interest in the latter is increased due to its higher brand

likeability (due to reasons 1 and/or 2 dealt with above). Thus:

Hypothesis H6: Investors will exhibit higher average investment interest towards companies whose

brands have high recognizability and high likeability at the market level than towards companies

whose brands have high recognizability and mediocre likeability.

With regards to a company with high recognizability and mediocre brand likeability vis-à-vis a

company with low recognizability, the predictions are less clear. On the one hand, the former is

likely to attract more investment interest due to its higher familiarity. This would be consistent

with Frieder and Subrahmanyam’s (2005) empirical results, suggesting that eventually individual

investors prefer companies with higher recognizability. Yet, on the other hand, investors’ interest

in investing in the company with mediocre brand likeability is likely to be decreased due to

likeability-related reasons (inverse to those dealt with above). In other words, the mediocre

17

likeability company may get “penalized”, in comparison to the low recognizability company.

The question of which of these two effects prevail, is an empirical one, one that we will let our

data reveal. Accordingly, we present the following hypotheses:

Hypothesis H7.1: Investors will exhibit higher average investment interest towards companies whose

brands have high recognizability and mediocre likeability at the market level than towards companies


Hypothesis H7.2: Investors will exhibit lower average investment interest towards companies whose

brands have high recognizability and mediocre likeability at the market level than towards companies


Finally, when it comes to the interaction between investor advertisements and a company’s

existing brand goodwill in the market, there are also three possibilities. First, it may be that

investor advertising (with emphasis on product-evaluative content) will have greater positive

effect on investment interest for companies with low brand recognizability and for companies

with high brand recognizability and mediocre brand likeability, than for companies with high

brand recognizability and high brand likeability. This would be the case insofar as an investor

advertisement with product-evaluative appeal has greatest marginal effect for companies whose

existing product brand familiarity or likeability is underdeveloped or low. Second, however, the

contrary or alternative influence might also occur: the positive effect of the investor

advertisement might be greatest for companies whose existing product brand familiarity and/or

likeability is already high. This will be the case if the product-evaluative content of the

advertisement resonated especially well among investors when the target of advertisement is

readily familiar and liked – consistent with the idea that advertising that concords with people’s

existing brand-related mental schemata may have heightened effect or efficiency (cf. Hoeffler

18

and Keller 2003; Kent and Allen 1994; Smith and Park 1992). Third, in the simultaneous

presence of these two possible contrary influences, the emphasis on product-evaluative content

in investor advertisement may also have approximately equal, total enhancing effect on

investors’ investment interest – independent of the company’s existing brand goodwill in the

market. Thus, our alternative hypotheses concerning the interaction are:

Hypothesis H8.1: The influence that an investor advertisement’s emphasis on product-evaluative

content has on investment interest is greater for companies whose brands have low recognizability or

high recognizability but mediocre likeability – than for companies whose brands have high

recognizability and high likeability.


content has on investment interest is greater for companies whose brands have high recognizability

and high likeability – than for companies whose brands have low recognizability or high

recognizability but mediocre likeability.


content has on investment interest is equally great, regardless of the company’s existing brand

goodwill in the market.

Method

Participants

The investor participants for the study were recruited at “stock exchange evening” events of the

Finnish Foundation for Share Promotion. This non-profit foundation arranges a series of such

events twice a year, and they are open to the public and targeted to people who are actively

engaged in investing their wealth in the stock market. Notably, the Finnish stock market and

investors operate on a fairly Anglo-American logic, with emphasis on shareholder value creation.

19

Thus, Finnish investors have recently been investigated in many much-cited finance studies

concerning individual investor behavior (e.g., Grinblatt and Keloharju 2000, 2001, 2009 ).

Participants were recruited to the study at four events in early 2009. At each event, a stand

was arranged to the proximity of the auditorium door where the event was held. A poster

informing about the study was attached to the wall beside the stand. A set of papers – including a

cover letter, the study stimuli, and a return envelope – was given to investors passing by. Almost

all passers-by were willing to take the papers with them (until the material ran out). The

participants were informed of a possibility to win prizes (with a value of approximately 50

Euros) in a lottery, should they fill in and return the questionnaire by mail. In total, 400 copies of

the study material were distributed over the four events. Usable responses were received back

from 142 investors, resulting in a rather unconventionally high response rate of approximately

36%.

Due to the non-perfect response rate, there was potential for some non-response bias. Thus,

we used a common procedure to control for non-response bias in surveys: we compared the

respondents who answered late (i.e., closer to the deadline) to the early respondents and analyzed

the differences between these two groups. The early vs. late respondent check showed no

significant differences between earlier and later respondents. This indicates that non-response

bias is not a serious concern with the sample of participants we contacted.

Descriptive statistics pertaining to our final sample of investor-participants are provided in

Table 1. The background variables include gender, age, education, yearly income, and total

number of stocks owned. Due to the fact that no census studies have been conducted that would

map the characteristics of the entire population of Finnish active investors, we are unable to

definitively compare the characteristics of the participants in the present study to the typical

20

investor in the whole population. However, one of the authors has conducted an earlier study,

whereby a random sample was drawn of the individual investors of a set of companies in the

Finnish stock market. Thus, we are able to examine the present study’s sample vis-à-vis the

comparison sample, with chi-square tests for independence. The tests indicate that no significant

differences exist between the samples, on any of the background variables (see Table 1). This

suggests that the present sample comes from the same population as the comparison sample –

and is, thereby, representative of the population of Finnish active individual stock investors with

a high likelihood. Moreover, assessment of the investor characteristics in our sample(s) seems to

accord to an intuitive notion of individual investors: There are more male than female investors,

and the distribution of the investors is bent towards middle-aged (rather than very young or very

old) and college/university educated people, with and medium/high incomes (median income

being around 50,000€). Most of the investors also have moderately diversified stock portfolios

(with 6 or more stocks).

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INSERT TABLE 1 ABOUT HERE

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Design

The study employed a 2 (Investor-Ad Emphasis) x 3 (Prior Brand Goodwill) x 2 (Company’s

Home Country) factorial experiment design. The Investor Ad Emphasis factor was manipulated

between subjects by exposing participants to investor-ads that were either high or low on

product-evaluative content. For high product-evaluative content, participants encountered a

company advertisement which markedly emphasized the personal value of the company’s

products , that is, personal relevance of the company’s products as well as their use value. The

21

low product-evaluative ad emphasized this content to a lesser extent. The Prior Brand Goodwill

factor was also manipulated between subjects, by exposing participants to companies that had

one of three possible levels of brand goodwill: low recognizability, high recognizability but

mediocre likeability, or high recognizability and high likeability. None of the companies was

currently listed in stock exchanges at the time of study, i.e., they were privately-held. Finally, as

a within-subject factor, the Company Home Country factor was manipulated by exposing each

participant to two different types of companies: domestic (Finnish) or international. Note that the

international companies were from England, Germany, and France. These countries fall, from the

Finnish investors’ perspective, into the same category in terms of size, reputation (i.e., “the big

Western European countries”), and distances from Finland.

Procedure. In the cover letter distributed with the study material, the participants were told

that the questionnaire related to research that studied private individuals’ stock investments and,

especially, their interest to invest in various companies in connection with stock issues (such as

initial public offerings, IPOs). It was underlined that there would be no “right answers” to the

questions and that the person should respond to them according to her personal, current views

and opinions. In the actual study material, a subject was first presented with background

questions about his personal demographics and characteristics as an investor. The background

questions were followed by the stimuli (company presentation/ad), which was followed by

questions pertaining to the dependent variable (INTEREST TO INVEST). The presentation order of

the companies (domestic vs. non-domestic) was varied randomly across participants. Finally,

questions pertaining to the company-specific covariates were presented.

Stimuli and manipulations. The information content (sentences) of the company

presentations/ads were the same in the two conditions of Investor-Ad Emphasis (high vs. low

22

level of product-evaluative content) – so that differential amount of objective information

conveyed by the ads would not confound the results. The high level of product-evaluative

content was achieved by (i) adding to the company presentation a heading that highlighted in

bold typeface the products of the company and their potential personal relevance and use value

(e.g., “Carl Zeiss – premium lenses for the sake of faultless vision”), and (ii) by underlining

and italicizing a corresponding sentence in the presentation (e.g., “In other words: even in your

own pocket, there might be a product whose performance is ensured by Zeiss’s technology”). To

see what the stimuli looked like for participants in this condition of Investor-Ad Emphasis, see

the left column of Table A1 in Appendix A. For the low level of product-evaluative content, the

ad simply lacked both the heading as well as the underlining and italicization of the sentence.

Consequently, even if the participants in the low condition had the same text to process (in literal

terms), they would be unlikely to pay much attention to the personal relevance and subjective

value associated with the company’s products. To see what the stimuli looked like for

participants in the condition of low level of product evaluative-content, see the right column of

Table A1 in Appendix A. The manipulation of Prior Brand Goodwill (as well as Company’s

Home Country) were done by selecting companies differing in terms of their brand goodwill for

the participants to react to, as described earlier. Manipulation checks for the brand goodwill of

the companies are presented in the Results section.

Measures

Dependent variable. The dependent variable INTEREST TO INVEST was measured after presenting

the participants with an investment scenario. The idea was to present the subject a scenario

whereby he should imagine having a certain amount of money at hand – an amount that he

23

would have supposedly decided to invest in certain stock(s). After presenting the scenario, the

subject would reflect his interest in investing the money in question in the stock of the focal

companies (domestic and non-domestic). The amount of money at stake was set to be significant,

yet under 10 % of the value of the subject’s stock portfolio – the final figure used in the scenario

was 7%. In its entirety, the scenario read as follows (as translated in English; the original was in

Finnish, as were all the questions, too):

“Let’s assume that you have just sold a certain stock investment of yours (at profit). As a result, you have an amount

of R euros of ”discretionary” money, equivalent of 7 percent of the value of your stock portfolio (for instance, 7 000 €

of money if the value of your stock portfolio is 100 000 €). Now, you have decided that you will invest that sum of

money in appropriate stocks.

Please describe, in the table below, your interest to invest the aforementioned R euros in the stock of [company A and

company B], respectively, in case these companies would become listed in the same international stock exchange,

NasdaqOMX.

NOTE. According to your bank/advisor, the ”transaction costs” (trading fees, account fees, etc.) as well as the ease of

making the investments would be the same, regardless of whether you invest in [company A or company B] ( even if

the home countries of the firms are different).”

Note also that it was emphasized to the participants that in terms of transaction costs (trading

fees, account fees etc.), investing in the non-domestic stock offered would not be more costly or

difficult than investing in the domestic stock. With reference to the aforementioned amount of

money, R euros (7 % of the total value of the respondent’s stock portfolio), the dependent

variable INTEREST TO INVEST was, eventually, measured by asking the subject “How interested

would you be to invest R euros (or a significant part of it) in [company X]?”. The question was

asked for both companies (domestic and non-domestic), respectively. The answers were recorded

on a 7-point scale, anchored by: “0= not at all interested”... “6=extremely interested”.

Covariates. The covariate SUBJECTIVE EVALUATION OF COMPANY’S PRODUCTS was measured,

in the present study, with a two-item reflective scale, both items measured on 7-point continuum.

The two items were (with their respective anchors):

24

1. How good do you think or believe that the firm’s products/services are in terms of

functionality? (0 = “very bad”… 6 = very good”)

2. How good do you think or believe that the firm’s products/services are in terms of design? (0

= “very unattractive” …6 = very attractive”)

The reliability of this two-item scale was also good, as it achieved a Cronbach Alpha of .85. The

final variable value was obtained as a sum index of the subject’s responses to the two items.

The covariate SUBJECTIVE INFORMATION OF THE COMPANY – meant as a control variable – was

measured with a single-item scale, “How much information do consider to have about things that

affect the attractiveness of the company as an investment target?” The responses were recorded

on a 7-point scale anchored by 0 = “none” and 6 = “very much.”

Finally, the covariate OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS was measured

with a two-item reflective scale. First participants were asked: “If you were considering to invest

in the firm at the moment, what would be your ‘hunch‘ about the attractiveness of the firm’s

business in terms of long-term investment returns?” (7-point scale, anchored at 0=”highly

unattractive” and 6 =”highly attractive”). The second question was: “If you were considering

investing in the firm at the moment, what would be your ’hunch‘ about the long-term

performance/earnings of the company?”. The responses were recorded on a 7-point scale,

anchored by 0=”very poor earnings prospects” and 6 =” very good earnings prospects.” The

reliability of this two-item scale was good, as it achieved a Cronbach Alpha of .84.

Results

Manipulation Checks

For the factor Investor-Ad Emphasis, no manipulation check was necessary in the present study.

Namely, the manipulation of this factor was de facto effective, since the intrinsic features

25

(heading, underlining, and italics) of the message form unquestionably varied across the two

conditions, which makes manipulation checks unnecessary (see O'Keefe 2003). Manipulation

check of Company’s Home Country was also unnecessary, since the companies de facto had

different home countries, and this was made clear in the company ads. Manipulation check of the

Prior Brand Goodwill was done as follows. To verify the recognizability of the companies,

respondents were asked: “Mark/check, first, if you recognized the example companies before this

questionnaire”

1. “Did you recognize [company A] by name? Check yes or no.”

2. “Did you recognize [company B] by name? Check yes or no.”

Table 2 present tests of recognizability and shows that the manipulation of the Prior Brand

Goodwill was successful. Specifically, the ‘low recognizability’ companies were recognized by

about 10 % of the respondents, while the ‘high recognizability’ companies were recognized by

approximately 80-90% of the respondents. Moreover, normal approximation to binomial test for

the proportions indicates that the former proportions were significantly below a norm of 33%

(one-third) and the latter proportions significantly above a norm of 67% (two-thirds).6

----------------------


----------------------

To verify the product likeability component of Prior Brand Goodwill, the respondents were

asked: “Considering the company’s products/services, what is your view of the company’s brand

or trademark?”, with responses requested on a 7-point scale, anchored by “0 = not at all likeable

brand” and “6 = highly likeable brand.” The results are presented in Table 3. Since the

measurement scale for product likeability had a clear neutral mid-point (3 on a scale of 0-6), we

26

performed t tests, whereby the mean values were compared to the neutral, scale mid-point value.

The manipulations appear to have been successful, since the mean values of the ‘high brand

likeability’ companies were significantly above the scale neutral value of 3 at p=.05 level, while

the mean values of the ‘mediocre brand likeability’ companies were not. Note that product

likeability measure of the ‘low recognizability’ companies is irrelevant here, since investors can

be considered not to have a valid (average) likeability image of a company that is unrecognized.

We also performed an ANOVA of brand likeability, with Prior Brand Goodwill and

Company’s Home Country – by including the groups ‘high recognizability, mediocre likeability’

and ‘high recognizability, high likeability’ (and excluding the ‘low recognizability’ group due to

the aforementioned reason). In support of the notion that the manipulation was successful, the

main effect Prior Brand Goodwill resulted significant (F(1, 92) = 11.90, p < .001), with

comparisons of mean brand likeability values (Table 3) significant. Note that the main effect of

Company’s Home Country was also significant (F(1, 89) = 7.68, p <.01). The domestic

companies had slightly higher mean brand likeability (3.70) than the non-domestic (3.07; p<.05).

However, this is likely not to confound our results, since our later analyses show that Company’s

Home Country does not have any significant effect on investment interest nor any moderating

effects. Moreover, the product brand being, on average, more likeable with domestic companies

is a case which is highly realistic considering real-life markets.

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----------------------

Tests of Hypotheses

27

The main effects of investor ads and brand goodwill. A three-way ANOVA was performed, with

Investor-Ad Emphasis, Prior Brand Goodwill, and Company’s Home Country as the factors (see

Table 4 for cell means).

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----------------------

The analysis revealed a significant main effect of Investor-Ad Emphasis (F(1, 125) = 3.95, p =

.049), with participants who encountered an ad with high product-evaluative content exhibiting

higher INTEREST TO INVEST in the company (MhiEmph = 2.74) than those who encountered an ad

with low product-evaluative content (MlowEmph= 2.31; p < .05). This is in support of hypothesis

H1, which predicted that high emphasis on product-evaluative content in an investor

advertisement about a company will have a positive effect on investors’ investment interest.

The analysis also revealed a significant main effect of Prior Brand Goodwill (F(2, 125) =

6.40, p = .0023). When it comes to the different conditions of this factor, investors exhibited,

first of all, higher average investment interest in companies whose brands had high

recognizability and high likeability at the market level than towards companies whose brands

had high recognizability but mediocre likeability (MHiRecHiLike = 2.90; MHiRecMedLike = 2.01; p <

.001). This is in support of hypotheses H6. Investment interest in companies whose brands had

high recognizability and high likeability was also higher than that in companies whose brands

had low recognizability, yet this difference did not reach statistical significance (MHiRecHiLike =

2.90; MLowRec = 2.67; p =.19). This means that hypothesis H4 does not receive uniform support,

which is interesting: Companies with strong(est) existing brand goodwill in the product market,

in terms of recognizability and likeability, do not seem to enjoy uniformly greater investment

28

interest than companies with low or no recognizability (in case both are advertised to investors).

Furthermore – and what is equally interesting – is the finding that investment interest in

companies whose brands had high recognizability but mediocre likeability is the lowest of all,

even significantly lower than investment interest in companies whose brands had low

recognizability (MHiRecMedLike = 2.01; MLowRec = 2.67; p < .01). This finding supports hypothesis

H7.2, and suggests that mediocre or low brand likeability decreases investors’ interest to invest

in the company more than high brand recognition increases it. Correspondingly, the alternative

hypothesis H7.1 is rejected.

When it comes to Company’s Home Country, we find no significant effect by this factor on

INVESTMENT INTEREST (F(1, 125) = 2.85, p = .094). This finding is also interesting, considering

earlier behavioral finding research that has found that (individual) investors prefer to invest in

domestic companies (see reviews by e.g., Campbell and Kräussl 2007; Karlsson and Nordén

2007; Morse and Shive 2006; Sercu and Vanpee). Our contrary finding may be partly due to the

fact that in the experiment scenario, it was emphasized that investing in the non-domestic

companies would not be more costly or difficult (in terms of transaction costs) than investing in

domestic companies. Finally, the analysis reveals that none of the two-way interaction effects

among Prior Brand Goodwill, Investor-Ad Emphasis, and Company Home Country is

significant7 – nor is the three-way interaction effect (F(2, 125) = 0.78, p > .4). This suggests that

the (main) effects reported above are fairly independent of each other, as is also visible in Figure

1. Notably, the positive effect of Investor-Ad Emphasis is rather uniform and similar across the

conditions. This is in support of hypothesis H8.3, and leads to rejection of the alternative

hypotheses H8.1 and H8.2 (which suggested interaction effects by brand goodwill).

----------------------

29

INSERT FIGURE 1 ABOUT HERE

----------------------

Mediational analyses. Hypothesis H2 further predicted that the effect that high emphasis on

product-evaluative content in an investor ad has on investment interest will be mediated by the

investor’s (ad-)enhanced subjective evaluation of the company’s products. Moreover, hypothesis

H5.1 predicted that the influence of product market brand goodwill could also be attenuated by

the investors’ subjective evaluations of the companies’ products at the time investing.

Accordingly, we controlled for the mediating influence of subjective product evaluations by

including the corresponding variable as a covariate to the earlier 2 X 3 X 2 ANOVA, i.e.,

analyzing a corresponding mixed ANCOVA.

The earlier analyses revealed significant experimental effects by Investor-Ad Emphasis and

Prior Brand Goodwill on investment interest. These findings meet the first the step of a

meditational analysis (see Campbell and Keller 2003; O'Keefe 2003), while another step is to

analyze whether the experimental factors have main effect on the assumed mediating variable:

subjective product evaluations at the time of investing. For this step, a similar 2 X 3 X 2

ANOVA was performed as above, but SUBJECTIVE EVALUATION OF THE COMPANY’S PRODUCTS

as the dependent variable. This analysis revealed, as expected, significant main effects by

Investor-Ad Emphasis (F(1, 122) = 6.16, p = .014) and Prior Brand Goodwill (F(2, 122) = 22.20,

p < .0001). The direction of the effects was as expected, as well: Participants who encountered

an investor ad with high product-evaluative content exhibited significantly higher subjective

product evaluations (MhiEmph = 7.46) than those who encountered ads with low product-

evaluative content (MlowEmph= 6.66; p < .05). With respect to Prior Brand Goodwill, in turn, the

average product evaluations were highest for companies with high recognizability and high

30

likeability ( MHiRecHiLike = 8.48; MHiRecMedLike = 6.92; MLowRec = 5.78; comparisons significant at

p < .01 level) – which indicates, logically, that companies with highly liked brands obtain higher

average product evaluations than others.

The third step that remains in the meditational analysis is to include SUBJECTIVE EVALUATION

OF THE COMPANY’S PRODUCTS as a covariate in the standard ANOVA model for investment

interest. In the resulting ANCOVAs, the effect of Investor-Ad Emphasis was indeed found to be

attenuated, as expected with hypothesis H2. The previously reported effect of this factor was

substantially reduced and became non-significant, as the covariate SUBJECTIVE EVALUATION OF

THE COMPANY’S PRODUCTS was included (from F(1, 125) = 3.95, p = .049 down to F(1, 120) =

0.98, p > .3). The covariate itself was revealed as highly significant F(1, 117) = 49.62, p <

.0001). These findings support hypothesis H2. In contrast, the effect of Prior Brand Goodwill

was not attenuated when SUBJECTIVE EVALUATION OF THE COMPANY’S PRODUCTS and SUBJECTIVE

INFORMATION OF THE COMPANY were included in the ANCOVA (from F(2, 125) = 6.40, p =

.0023 up to F(2, 119) = 9.40, p = .0002). This means that hypothesis H5.2 received support,

while the alternative hypothesis H5.1 did not.

Notably, hypothesis H5.2 also predicted that the effect of Prior Brand Goodwill would be

attenuated when the covariate OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS were to be

included. Moreover, hypothesis H3 predicted that optimism would also further mediate the effect

of subjective evaluation of the company’s products on investment interest. To examine these

predictions, a 2 X 3 X 2 ANOVA was first performed with OPTIMISM ABOUT THE COMPANY’S

FINANCIAL RETURNS as the dependent variable. This analysis revealed, as expected, a significant

main effect by Prior Brand Goodwill (F(2, 123) = 4.42, p = .014) as well as by Investor-Ad

Emphasis (F(12, 123) = 5.47, p = .021). The direction of the effects was as expected, as well:

31

optimism was highest for companies whose brands had high recognizability and high likeability

and lowest for companies whose brands had high recognizability but mediocre likeability (

MHiRecHiLike = 6.39; MLowRec = 5.62; MHiRecMedLike = 5.37); and participants in the high condition

of Investor-Ad Emphasis had higher optimism (MhiEmph = 6.14) than those in the low condition

(MlowEmph= 5.44; p < .05),

In the final step, OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS was included as an

additional covariate in the above ANCOVA for INVESTMENT INTEREST. In the resulting model,

the effect of Investor-Ad Emphasis was attenuated (from F(2, 119) = 9.40, p = .0002 down to

F(2, 119) =6.12, p = .003), as expected in hypothesis H5.2, while OPTIMISM ABOUT THE

COMPANY’S FINANCIAL RETURNS itself achieved high significance (F(1, 119) =55.83, p < .0001).

In addition, the effect of SUBJECTIVE EVALUATION OF THE COMPANY’S PRODUCTS was somewhat

attenuated and reduced to marginal significance (from F(1, 117) = 49.62, p < .0001 down to F(1,

115) = 2.18, p = .14). All in all, these last findings support but hypothesis H5.2 as well as also

hypothesis H3. Note also that as the covariate SUBJECTIVE INFORMATION OF THE COMPANY did

not achieve significance in the last ANCOVA (from F(1, 115) = 1.16, p > .15), the found effects

are indeed due to evaluative effects rather than mere familiarity effects (cf. Frieder and

Subrahmanyam 2005).

In sum, Figure 2 summarizes the hypothesized effects for which the study provides evidence.

----------------------

INSERT FIGURE 2 ABOUT HERE

----------------------

Discussion

Contributions to Research

32

There has been increasing interest among both marketing and finance scholars in the influence

that product evaluations and brand images created in the product market – including advertising

– may have on individual investors’ investment decisions in the stock market. However, the

extant research has mostly concentrated on the effects that a company’s brands and consumer-

oriented advertising have on individual investors’ investments by way of increasing their

information (recognition or familiarity) of the company (Fehle, Tsyplakov, and Zdorovtsov

2005; Frieder and Subrahmanyam 2005; Grullon, Kanatas, and Weston 2004; McAlister,

Srinivasan, and Kim 2007). In contrast, the present research makes a contribution by modeling

theoretically and finding evidence of the effects that product market brands and investor-oriented

advertising have on individual investors’ investment interest – by way of influencing investors

evaluations of the company’s products and their optimism about the company’s financial returns.

With respect to the relative role of brand recognition vs. evaluations, our findings are actually

somewhat surprising. We found that investors’ interest to invest in companies whose brands have

low recognition was, on average, at the same level as their interest to invest in companies whose

brands have high recognition and high likeability – and at a higher level than their interest to

invest in companies whose brands have high brand recognition and mediocre brand likeability.

These results imply that earlier research may have overemphasized the role of brand recognition

in investment decisions when finding that individual investors concentrate to invest in

companies with high brand recognition (Frieder and Subrahmanyam 2005). Indeed, according to

our results, low a priori brand recognition does not lead to low investment interest. Moreover,

according to our results, mediocre or low brand likeability decreases investors’ interest to invest

in the company more than high recognition increases it. Nevertheless, understanding our distinct

results requires acknowledgement of the fact that even if some of the companies that we

33

presented to the investors had non-recognizable brands, we in any case presented the companies

to them – meaning that without that presentation, the investors might never (have) become aware

of those companies as investment opportunities. Thus, among the entire company world,

individual investors may still have heightened likelihood to invest in companies with brands of

high recognition since they are readily aware of the existence of those companies (even without

any investor advertisements) – and this may partly explain why individual investors seem to

concentrate to invest in companies with higher brand recognition (Frieder and Subrahmanyam

2005). But again, our results importantly do suggest that in case the individual investor does

come to learn about a company through investor advertisement, for example, the lack of

recognizability of its brand prior to the ad does not matter much to investment interest.

Concerning investor advertising further, our finding was that emphasis on product-evaluative

content in an investment ad for a company has uniform positive effect on individual investors’

interest to invest in the company, independent of prior brand goodwill – and that this effect is

due to (mediated by) the effect that the emphasis on product-evaluative content in the ad has on

investor’s subjective evaluation of the company’s products. While earlier investor advertising

research has again concentrated on the effect of advertising on investment interest due to its

making investors more informed about the company (Fehle, Tsyplakov, and Zdorovtsov 2005;

Grullon, Kanatas, and Weston 2004; McAlister, Srinivasan, and Kim 2007), our finding extends

this literature by suggesting that advertising can indeed influence investment interest by way of

enhancing investors’ product evaluations as well. Moreover, our findings extend this literature by

explicating in detail the mechanism by which the enhanced product evaluations exert influence

on investment interest. We found that the effect that subjective evaluation of the company’s

products has on investment interest will be partially (but not fully) mediated by investors’

34

optimism about the expected financial returns of the company. This means that our results also

add, as explicated below, to the emerging behavioral finance research streams on (i) the sources

of investors’ optimism about particular stocks’ financial returns (e.g., Kilka and Weber 2000), on

one hand, and on (ii) the sources of investment preferences that go over and beyond financial

expectations (e.g., Fisher and Statman 1997; Statman 2004), on the other.

With respect to the former (i), earlier research has suggested that investors may exhibit

optimism towards domestic companies’ stocks (e.g., Kilka and Weber 2000; Morse and Shive

2006), whereas the present results suggest that what also elicits optimism about a company’s

financial returns is the investors’ positive evaluations of a company’s products and brand

likeability in the market. With respect to the latter (ii), in turn, earlier literature has proposed that

investors may exhibit extra willingness to invest in socially responsible, “green”, ethical, or

“fair” companies (due to positive attitude towards green/fairness issues) (Beal, Goyen, and

Phillips 2005; Getzner and Grabner-Kräuter 2004; Statman 2004); familiar, domestic, or nearby

companies (due to comfort obtained from the familiar) (Ackert and Church 2009; Huberman

2001); domestic companies (due to patriotism) (Huberman 2001; Statman 2004); and even

prestigious companies (due to yearn for status) (Statman 2004). In addition to these sources of

extra willingness to invest in particular companies’ stocks (over and beyond their financial

returns), the present results suggest that an individual investor’s subjective evaluation of a

company’s products (or, product quality) will also elicit extra willingness to invest in its stock,

beyond its expected financial returns.

Finally, we found that the effect of brand goodwill was only partially mediated by the

investor’s subjective evaluations of the company’s products and subjective familiarity with the

company. This suggests that not only do investors’ subjective or personal opinion and

35

information about the company’s brand influence their investment interest – but investors also

attend to the market-level brand goodwill of the brand, partly independent of their subjective

evaluations of (or familiarity with) it. Thus, investors seem to have a hunch of the company’s

brand goodwill in the market and in case the brand goodwill is strong (likeable brand), their

investment interest is enhanced somewhat independent of their personal evaluation of the brand’s

products. This is consistent with the notion that investors attend to indicators of market-level

perceptions of the company’s brand quality and based on those indicators, draw inferences about

the financial prospects of the company (Aaker and Jacobson 1994; Mizik and Jacobson 2004) –

and are not merely influenced by their subjective and affective evaluations of the brand.

Managerial implications

In brief, the main managerial implication of the results of the present study is simple: It is

beneficial for a firm to emphasize its products and their quality aspects when presenting or

advertising the firm to individual investors. According to the results, this will likely increase the

investors’ interest to invest in the company both by reinforcing their expectations about the

company’s financial returns and by creating extra willingness or preference to invest in the

company, over and beyond expected financial returns. Notably, it is also reassuring to managers

that the effect of presenting the company to investors by emphasizing the quality of its products

is quite independent of the firm’s existing brand goodwill in the market. This means that both

firms with non-recognizable brands and firms with highly recognizable brands – as well as both

firms with well-liked brands and not-so-liked brands – should benefit from the advertising. Thus,

even if the company’s brand was unrecognizable, it should benefit from emphasizing its product

design and quality in communication towards individual investors – e.g., when attempting to

36

raise capital, prepare for an IPO, or widen the company’s shareholder base in general.

Furthermore, the results also imply that product advertising designers and managers should be

involved in designing a company’s communications towards individual investors as well: to have

the communications optimally convey product quality images to potential investors and not only

potential customers (see also Tellis and Johnson, 2007). In this context, companies may also

want to consider strategies to persuade some segments of consumers to become both its product-

buyers and its stockowners (see Schoenbachler, Gordon, and Aurand 2004).

Concerning the firm’s brand goodwill in the market further, the results emphasize something

important especially to companies whose product brands are perceived as mediocre in the

markets. The results suggest that such companies risk facing low investment interest from

investors – intuitively lower than companies with well-liked brands but also lower than

companies with non-recognizable brands. This finding also generally suggests that companies

can increase investors’ investment interest through creating positive product images in the

market – by e.g., improved product design and quality and advertising that reinforces quality

image and likeability. Notably, the product brand quality perceptions influence investment

interest, according to the results, not only indirectly (due to potentially increased sales and profits

in future) but also by directly creating preference or interest in investors towards the company.

Limitations and Further Research

One limitation of the present research is due to the nature of the psychological experiment:

While our dependent variable of investment interest is likely to reflect an individual’s interest

and proclivity to invest in the company, it does not necessarily fully predict real investments or

investment decisions. Indeed, more than actual investment, the present dependent variable

37

reflects investment intention. Another limitation relates to the external validity of the results. As

the experiment was conducted with a sample of Finnish, active individual investors, the results

are not automatically generalizable to other individual investors in different times or places. For

instance, the results might somewhat differ for investors with other national backgrounds or for

more passive investors who do not have any experience of or engagement in stock investing. Yet

another limitation relates to potential non-response/selection bias and the possibility that those

investors who responded to the experiment might have slightly different tendencies with respect

to the hypotheses than the non-respondents. However, as mentioned earlier, the fact that no

significant differences were found between early and late respondents gives us confidence that

non-response bias should not be a very serious concern.

In further research, thus, it would be valuable to first replicate the present study, by

addressing a more varied set of companies (in terms of product types and home countries). The

experiment could also be replicated with investors from different countries. Moreover, whereas

the present study examined individuals’ willingness to invest in stocks, decisions to sell should

also be explored in further research, since the dynamics of the sell decision might be different to

those of the buy decision (Johnson, Tellis, and MacInnis 2005; Kahneman and Tversky 1979;

Shefrin and Statman 1985). Finally, it would be interesting to study whether the results of this

study apply not only to individual investors but, perhaps, also to institutional investors and/or

investment market intermediaries and professionals, such as investment analysts. One might

think that professionals would not be influenced at all by the somewhat “soft”, attitudinal

product evaluation factors proposed in this research. Nevertheless, some preliminary existing

studies show that professional investment analysts, for instance, often make investment

evaluations and decisions based on affective or attitudinal factors, as well (Ganzach 2001).

38

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Footnotes

[1] Rather that marketing efforts aimed directly at investors, the articles in the special issue

concentrated on the effects that “traditional” marketing efforts within product markets have on

stock market measures (and, hence, indirectly on investors).

[2] Individual investors are sometimes called “retail investors” or “private investors”.

Institutional investors such as pension and mutual funds – as well as investment intermediaries

such as security/investment analysts – are outside the primary scope of the present article.

[3] For instance in the USA, Canada, the UK, and Australia, the stock market participation

has rapidly risen, in the 1980s and 1990s, from about ten or twenty per cent to even half of the

population. In the USA, the share of families owning stock directly or indirectly (through e.g.,

mutual funds or various retirement vehicles) went up from 19 % in 1983 to 49 % in 1998

(Aizcorbe, Kennickell, and Moore 2003; ICI and SCA 2002), in Canada from 13 % in 1983 to 49

% in 1998 (Toronto Stock Exchange 2004), and in the UK from 9 % in 1978 to 34 % in 2000

(Muñoz 2006). In Australia, the share of individuals with direct shareholdings increased from 10

% in 1991 to 44 % in 2004 (Australian Stock Exchange 2005).

[4] Interchangeably with “investor advertising”, these campaigns are sometimes referred to as

“financial PR” or “investor relations” campaigns.

45

[5] In fact, should the individual not favor – in an investment decision – the company of the

products of which he has a positive evaluation, he might end up feeling cognitive/affective

“dissonance”. By default, individuals tend to avoid ending up feeling such dissonance (Festinger

1957; Zajonc 1980) – thus, favoring the company in the investment decision could also be

understood also as a (psychological) strategy of avoiding dissonance feelings.

[6] As an additional manipulation check for recognizability, we also analyzed a continuous

variable of investors’ familiarity with the companies’ products. For this variable, the investors

were asked: “How familiar were you with this company’s products (before receiving/answering

this questionnaire)?” The responses were recorded on a 7-point scale, anchored by: 0 = “I had

never even heard about this company’s products” and 6 = “This company’s products were very

familiar to me”. An ANOVA was performed on this variable, with Prior Brand Goodwill and

Company’s Home Country as independent variables. Consistent with the other recognizability

manipulation check, the main effect of Prior Brand Goodwill on familiarity with the company’s

products was significant (F(2, 129) = 98.51, p < .001). The ‘low recognizability’ companies

(MA1=0.53; MB1=0.29) had significantly lower average familiarity in the market than the ‘high

recognizability’ companies (MA2=3.35; MA3=4.29; MB2=3.56; MB3=3.24). The main effect of

Company’s Home Country was non-significant (F(2, 129) = 2.92, p >.05). All in all, this second

test gives clear additional support to the notion that the manipulation of Prior Brand Goodwill

was successful, when it comes to the recognizability of the companies’ brands.

[7] Prior Brand Goodwill X Company’s Home Country: (F(2, 125) = 0.41, p > .5); Prior

Brand Goodwill X Investor-Ad Emphasis: (F(2, 125) = 0.12, p > .5); Investor-Ad Emphasis X

Company’s Home Country: (F(1, 125) = 0.44, p > .5).

46

Table 1. Description of the participants of the study: Personal characteristics of the investor-

respondents

Present study sample

Comparison sample

Chi square

p value

Gender female male

32.0% 68.0%

23.7% 76.3%

3.57 .06

Age below 25 25–45 46–65 over 65

4.0% 17.3% 55.7% 22.7%

3.0% 22.3% (26-40) 44.5% (41-60) 30.3% (61 or more)

2.67 .10

Education (highest) middle/high school vocational school college/bachelor university

11.3% 9.6% 31.1% 48.0%

15.2% 11.6% 22.9% 50.3%

1.39 .24

Yearly income 1–50 000€ 50 000–100 000€ 100 001–150 000€ 150 001–250 000€ 250 001–500 000€ 500 001–1000 000€

55.9% 32.8% 7.9% 1.7% 1.1% 0.6%

62.2% (less than 50 000€) 37.8% (50 000€ or more)

1.66 .20

Total no. of stocks owned 0 1–2 stocks 3–5 stocks 6–10 stocks over 10 stocks

6.3% 6.8% 15.9% 24.4% 46.6%

23.4% (0-5 stocks) 76.6% (6 or more stocks)

1.67 .20

Notes. The comparison sample variables had more limited scales (i.e., fewer categories in the scales). When the variable scales/categories differed across the samples (especially: Yearly income, Total no. of stocks owned), the variable categories of the present sample were collapsed to match the categories of the comparison sample, for the calculation of the chi-square test statistics.

47

Table 2. Manipulation check results: Brand recognizability of companies with different

presumed brand goodwill

Brand Goodwill

low recognizability high recognizability, mediocre likeability

high recognizability, high likeability

“Did you recognize [company A] by name?”

Domestic company A1: 10.5%*a

Domestic company A2: 78.9 % *b

Domestic company A3: 95.2 % *b

Non-domestic company B1: 7.9 % *a

Non-domestic company B2: 92.3 %*b

Non-domestic company B3: 86.7 %*b

Notes. The figures indicate the proportion of investors who had prior recognition of the company’s brand. *a The proportion is significantly lower than the norm of 33%, at p=.05 level. *b The proportion is significantly higher than the norm of 66% at p=.05 level.

48

Table 3. Manipulation check results: Brand likeability of companies with different

manipulated/presumed brand goodwill

Brand Goodwill

low recognizability

high recognizability, mediocre likeability

high recognizability, high likeability

Considering the firm’s products/services, what is your view of the brand or trademark?”

Domestic company A1: not relevant

Domestic company A2: 3.33 N/S

Domestic company A3: 4.07*

Non-domestic company B1: not relevant

Non-domestic company B2: 2.65 N/S

Non-domestic company B3: 3.49*

Notes. The figures indicate the mean values of investors’ responses to the question (scale: 0 = “not at all likeable brand”… 6 = “highly likeable brand”). N/S Not significantly different from the scale neutral value 3, at p=.05 level. * Significantly higher than the scale neutral value 3, at p=.05 level.

49

Table 4. Means (and standard deviations) for interest to invest in the company in Study 2

Prior Brand Goodwill Investor-Ad Emphasis = Low

product-evaluative content

Investor-Ad Emphasis = High

product-evaluative content Low recognizability: Domestic company A1 Non-domestic company B1

2.41 (1.77) 2.53 (2.03)

2.73 (1.83) 3.00 (1.77)

High recognizability – mediocre product likeability: Domestic company A2 Non-domestic company B2

1.66 (1.65) 1.79 (1.82)

1.74 (1.54) 2.87 (1.63)

High recognizability – high product likeability Domestic company A3 Non-domestic company B3

2.53 (1.61) 2.95 (1.93)

3.00 (1.76) 3.14 (1.71)

Notes. The ratings indicate interest to invest in the focal company (0=”not at all interested”… 6=extremely interested). The numbers in parentheses are standard deviations.

50

Figure 1. Results: Investment interest

51

Note. The dashed line indicates that the effect of Prior Brand Goodwill on investment interest was partially but not fully attenuated/mediated by investors’ optimism about the company’s financial returns. Figure 2. Effects on investment interest as found in the experiment

52

APPENDIX

Table A1. Examples of stimuli presented to the experiment subjects, according to the conditions of the main factors: Non-domestic

companies

Investor-Ad Emphasis

high level of product-evaluative content low level of product-evaluative content

Prior Brand Goodwill

Low recogniza-bility

Novexel – cures for difficult infections.

Novexel is a France-based company that

develops, manufactures, and sells cures and

medicines for pharmaceutical industry, hospitals,

and drug users. The kind of products and cures that Novexel produces are

important in treating difficult infections, when normal antibiotics are not effective. In

other words: If an acquaintance of yours some time ends up to a hospital for a

difficult infection disease, it might be that she will be treated with a medical product

developed by Novexel.

Novexel’s international business has grown fairly quickly in the past years,













53

Investor-Ad Emphasis

high level of product-evaluative content low level of product-evaluative content

Prior Brand Goodwill

High recognizability, mediocre likeability

Specsavers – puts your sight into order.

Specsavers is an England-based

company that develops, manufactures, and sells

eyeglass frames to consumers. The company

specializes on serving buyers that seek for

eyeglasses that are less inexpensive than normal. It has retail outlets in a few

countries around Europe, also Finland. In other word: you may also have yourself

have encountered Specsavers’s ads or stores when you have been buying

glasses for yourself or for a family member.

Specsavers’s international business has grown fairly quickly in the past

years, and its future prospects as a company are promising.


Specsavers is an England-based company

that develops, manufactures, and sells eyeglass

frames to consumers. The company specializes on

serving buyers that seek for eyeglasses that are

less inexpensive than normal. It has retail outlets in a few countries around

Europe, also Finland. In other word: you may also have yourself have

encountered Specsavers’s ads or stores when you have been buying glasses for

yourself or for a family member.



High recognizabiliy, high likeability



manufactures, and sells optics and lens products to consumers

and various industries, as well as licenses its trademark to

selected companies. The products, such as eyeglass lenses,

contact lenses, and camera lenses, are manufactured with premium materials and



















The influence of product design evaluations on investment interest: An experiment with Finnish individual investors

Jaakko Aspara

Helsinki School of Economics

Design management research has increasingly advocated strategic, business perspectives to product design. However, what has been little studied so far is how and to what extent investors, who act in the stock market, are influenced by their subjective evaluations of companies’ product design. To examine this question we report an experiment with Finnish individual investors. The experiment provides evidence of two product design -related variables that increase investors’ interest to invest in companies. First, the higher the investor’s overall evaluation of a company’s product design, the higher is her interest to invest in the company. Second, the greater the personal relevance that an investor associates with a company’s product domain, the higher is her interest to invest in the company.

Keywords – design management, investors, design strategy, evaluation, perception, product design Relevance to design practice – The results of the study show that product design will not only create strategic distinction for the company in the product markets, but also in the stock market. In so doing, the present findings have implications for design management practice when it comes to attracting investments (e.g., designing communications towards investors who are appealed by the company’s product design) as well as creating new kinds of product design based business models (that take into account, already at the outset, certain investors’ potential fondness of the company’s current or future product design).

NOTE. This article has been submitted to International Journal of Design.

Introduction

Both academicians and practitioners in design management have been increasingly interested in the strategic role of product design with respect to company management and business (e.g., Borja de Mozota & Clipson, 1990; Borja de Mozota, 2002; Buchanan, 2008; Hertenstein & Platt, 1997; Heskett, 2001). However, one important, strategic business aspect has been rather completely ignored in extant literature. That is, the reactions and behavior of investors in respect to a company’s product design. In this article, we address investors’ reactions to companies’ product design, by reporting the results of an experimental study conducted among Finnish individual investors. Specifically, the study was set up to address the research question: How do individual investors’ subjective evaluations of a company’s product design influence their investment decisions towards the company’s stock? Our results provide new, interesting insights to the broader socio-economic impacts and contexts of product design.

Design and investors

References to investors in earlier design management literature Where rarely occurring in design management literature, references to investors have mostly appeared amidst lists of multiple stakeholder classes (customers, employees, investors, general public, etc.). Such lists have appeared in connection with the general claim that design-generated distinction or differentiation in products (or other artifacts) can make a company more attractive to all stakeholders – and therefore, assumingly, to investors as well (e.g., Bruce and Bessant, 2002: p. 87; Schmitt, Simonson, and Marcus, 1995).

Beyond such general claims, slightly more specific and insightful perspectives to the relation between investors and a company’s product design have been presented by Andrew Hargadon and Brigitte Borja de Mozota. Hargadon’s work has concentrated on illustrating – often through elaborate case studies such as that of Edison’s electric light innovation (Hargadon and Douglas 2001) – how successful design depends on how design “addresses the needs of multiple actors” (Hargadon, 2005). Among these actors, Hargadon often mentions investors – among others such as users, suppliers, distributors, content-providers, regulators, and the general public.

Borja de Mozota (2003: p. 113), in turn, notes that in future, design will have an important role in companies’ financial (owner) relationships, among other relationships – and remarks that design process is an identity process that defines the company for itself, its customers, and its investors (p. 17). Elsewhere, Borja de Mozota (2006) further prescribes that design managers should attempt to outline strategic vision -based, yet measurable links all the way from customers’/market’s perceptions of the company’s design to financial value creation. One of the ultimate questions for companies, Borja de Mozota suggests, is “how should design appear to our shareholders?” (2006: pp. 47, 48).

Nevertheless, even Hargadon’s and Borja de Mozota’s arguments remain, after all, somewhat superficial when it comes to investors. It is prescribed that company managers, venture creators, or designers “have to address the needs” of multiple actors – including investors – with product designs (Hargadon, 2005); “define the company identity” for investors through design (Borja de Mozota, 2003); and ask “how should design appear to our shareholders?” (Borja de Mozota, 2006). Yet, beyond these kinds of broad, rather philosophical lines, no closer examinations seem to have emerged into the perceptual and evaluative mechanisms of how a company’s product design actually attracts investors. Curiously enough, even studies (Rich, 2004) which have found (preliminary) evidence of the fact that companies with highly-regarded product design fare better in terms of stock market valuation have been totally ignorant of the mechanisms why or how good

product design would attract investors at the individual and subjective level1.

Hypotheses development Thus, the question remains: How do investors’ subjective perceptions and evaluations of a company’s product design influence their willingness to invest in the company’s stock?

First of all, it can be argued that investors will be attracted by the increased sales and better margins, enhanced brand value, greater market share, and better return on investment (ROI) that companies manifesting “good design” will assumingly have (Borja de Mozota 2006). That is, investors would tend to presume that companies whose product design they perceive to be good are also good investment targets.

More specifically, there are basically two ways in which such product design evaluations may influence individual investors’ proclivity to invest in particular stocks. First, an investor’s positive evaluation of a company’s product designs – liking them – may lead the investor to presume that others will like them, too, and the company will therefore succeed financially (Aspara and Tikkanen, 2008). Such self-induced optimism about the company’s financial returns, based on one’s evaluation of the company’s product design, is consequently likely to increase one’s interest to invest in the company’s stock. This is especially probable since psychological evidence suggests that people often use simple heuristics when making decisions, especially in complex and uncertain environments, such as in investment contexts (Gigerenzer, Todd, and ABC Research Group, 1999; Tversky and Kahneman, 1982). Indeed, preferring companies with products of good design – with the presumption that product design quality signifies superior financial return performance – can be an instance of such a simple heuristic (see Frieder & Subrahmanyam, 2005). In other words (see Shefrin & Statman, 1995), companies whose product design is perceived to be good would also be seen as “representative” of companies of good investment opportunities.

The second reason why enhanced evaluations of the company’s product design may increase an investor’s interest to invest in the company is that according to a common psychological notion, an individual’s positive attitude towards (i.e. positive overall evaluation of) an object – in this case a company's product design – will manifest in the individual’s predisposition to behave in a consistently favorable way with respect to the object (Fishbein and Ajzen, 1975; Zajonc, 1980). Indeed, due to psychological drive to maintain “attitude-behavior consistency” (Abelson et al., 1968; Festinger, 1957), it can be expected that an individual who has positive affective evaluation of a company’s product design will not only e.g. talk favorably about the company and its products (and perhaps buy or use them) but also express her positive evaluation by favoring the company in investment decision-making2 (Aspara and Tikkanen, 2008). Notably, such product attitude-based favoring can be somewhat independent of the investor’s expectations about the financial returns of the company – and should therefore increase one’s interest to invest in the company even over and beyond its expected financial returns.

Summarizing the above discussion, our first hypothesis is:

Hypothesis H1: An individual investor’s subjective, overall evaluation of the (goodness of the) company’s product design has a positive effect on her interest to invest in the company’s stock.

1 In a number of studies commissioned by the Design Council (summarized in Rich, 2004), a set of stock exchange -

listed companies were divided into groups on the basis of the number of design awards that the companies won. The studies generally suggest that the group of companies that won high number of design awards continually outperformed other stocks (i.e., the general stock market index). Specifically, the “good-design” companies outperformed the other stocks by 10–200 percentage units within different subperiods (booms, busts) during the overall period of 1993–2003.

2 In fact, should the individual not favor – in an investment decision – the company of the products of which she has positive evaluation, she might end up feeling cognitive/affective “dissonance”. By default, individuals tend to avoid ending up feeling such dissonance (Festinger, 1957; Zajonc, 1980) – thus, favoring the company in the investment decision could also be understood also as a (psychological) strategy of avoiding dissonance feelings.

Notably, we also proposed in the above discussion that positive product design evaluations may influence investment interest partly by generating self-induced optimism in the investor’s financial expectations (I like the product design the company will succeed financially) – yet partly also by generating preference that goes over and beyond the financial expectations (attitude-based favoring). In effect, this means that (increased) optimism about the company’s financial returns should partially but not fully mediate the effect of product design evaluations on investment interest. Our further hypothesis is, thus:

Hypothesis H2: The effect of subjective evaluation of the company’s product design on investment interest will be partially (but not fully) mediated by the investor’s optimism about the company’s financial returns.

Furthermore, it may be that an investor’s investment interest will not only be influenced by her overall evaluation of the company’s product design – but it may also be influenced by how personally relevant the investor finds the company’s product domain to be. With the personal relevance of the company’s product domain we refer to the degree to which the investor finds a domain – e.g., activity, area of interest, idea, or ideal – that the company’s products support or represent to be personally relevant. For instance, if an investor finds ‘motoring’ and ‘road traveling’ to be personally relevant domains (activities), she is likely to have increased interest to invest in auto and/or tire companies (whose products assumingly support/represent ‘motoring’ and ‘road traveling’). Or, if an investor considers ‘healthcare’ to be a highly relevant domain (idea) personally, she is likely to have increased interest to invest in companies that design and produce healthcare products (or products of healthy design). Note that this personal relevance is indeed distinct from the overall evaluation of the company’s products (as in H1). Namely, one may find e.g., ‘road traveling’ as a personally relevant product domain, yet like only some auto companies’ product design (while disliking others). Also, one may have a special liking for one auto company’s product design, yet not consider ‘road traveling’ in general as a very relevant domain personally. In any case, since personal relevance of an object is likely to lead to preferential behaviors with respect to the object (Aspara et al., 2008), we hypothesize:

Hypothesis H3: The personal relevance that an individual investor attaches to a company’s product domain has positive effect on her interest to invest in the company’s stock.

Notably, also this influence may be partly mediated by optimism about the financial returns. Thus:

Hypothesis H4: The effect of the personal relevance of a company’s product domain on the investor’s interest to invest in the company’s stock will be partially (but not fully) mediated by the investor’s optimism about the company’s financial returns.

Finally, if the above propositions indeed hold – i.e., if a company whose product design is perceived to be good and/or personally relevant is perceived to be an attractive investment target as well –, we should also find that investors’ interest to invest in a company will be enhanced insofar as the company’s product design is emphasized to the investors when the company is presented or advertised to them as an investment target. This leads to our final hypothesis – a corollary to the hypotheses above:

Hypothesis H5: Product design emphasis in a company’s investment advertisement has a positive effect on investors’ interest to invest in the company’s stock.

Experiment

Method

Subjects To examine our hypotheses, an experiment was set up with Finnish individual investors. Notably, the Finnish stock market and investors operate on a fairly Anglo-American logic, with emphasis on shareholder value. Accordingly, Finnish individual investors have recently been investigated in many much-cited investor studies (Grinblatt and Keloharju, 2000, 2001a, 2001b, 2009; Keloharju, Nyborg, and Rydqvist, 2005).

The subjects were recruited for the study at “stock exchange evening” events of the Finnish Foundation for Share Promotion. This non-profit foundation arranges a series of such events twice a year, and they are open to the public and targeted especially to people who are interested and (actively) engaged in investing their savings in the stock market. Specifically, subjects were recruited to the study at four events. The subjects were informed of a possibility to win book prizes (with a value of approximately 50 euros) in a lottery, should they fill in and return the questionnaire with the prepaid envelope attached. In total, 446 copies of the study material were distributed over the four events. Usable responses were received back from 141 investors, resulting in a response rate of 32 %, rather normal for consumer research.

Due to the non-perfect response rate, there was a potential non-response bias and, especially, the possibility that those investors who responded to the survey (appr. 32% of the contacted investors) might have different tendencies with respect to the hypotheses than the non-respondents. Thus, we used a common procedure to control for the bias in question: distinguishing the respondents who answered late (i.e., closer to the deadline) from the early respondents and analyzing the differences between these two groups. However, the early vs. late respondent check showed no significant differences between earlier and later respondents. This indicates that non-response/self-selection bias should not be a very serious concern.

Study design The study employed analysis of covariance (ANCOVA), common in randomized psychological experiments that involve a single, continuous dependent variable (here: INTEREST TO INVEST), a few categorical experimental factors (presently: ‘product design emphasis in company investment ad’ and ‘company/product type’), and a few continuous covariate variables (e.g., OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN).

For the first factor, (1) investor-subjects were assigned randomly to conditions according to how companies (investment targets) were presented to them in an investment advertisement (ad). This would enable especially the examination of hypothesis H5. In the first condition/treatment, subjects encountered a company presentation/advertisement which markedly emphasized the potential personal relevance of the company’s products as well as their use value (‘product design emphasis in company investment ad’ = high). In the second condition, the subjects encountered a company presentation which emphasized the products of the company and their potential personal relevance and value to a lesser extent (‘product design emphasis in company investment ad’ = low).

The main purpose of the second factor (2) was to enhance the external validity and generalizability of the study over different kinds of companies. Hence, the subjects were randomly assigned to evaluate one of four alternative types of companies, distinct in terms of the type of products produced by the companies. The companies’ product types were:

a) everyday consumer products (‘everyday’) o ordinary products designed for consumer’s daily use: eyeglasses

b) high-tech business/consumer products (‘high-tech’) o high-technology products designed for and used by both consumers and businesses:

lenses and other optical products c) medical products (‘medical’)

o medical products designed for and used by both businesses and consumers: pharmaceutical treatment products

d) business/consumer services (‘service’) o service products designed for and used by both businesses and consumers: currency

exchange services

We chose all the companies to be non-domestic i.e., non-Finnish. The reason for this was to put the research in the interesting context of cross-border investing. Specifically, the companies were selected from the main Central/Western European countries (England, Germany, France), since these countries fall, from Finnish perspective, to the same category in terms of size and reputation (i.e., “the big and developed European countries”). Also the distances of these countries from Finland are quite similar, approximately 1 000 – 2 000 kilometers. Thus, differential distances to the company home bases should not be a serious confounding effect, either (cf. Grinblatt & Keloharju 2001a).

In sum, the study employed a 2 X 4 design, with ‘product design emphasis in company investment ad’ (high or low) and ‘company/product type’ (everyday; high-tech; medical; or service) serving as between-subjects factors. Moreover, for the examination of hypotheses H1-H4, the covariate variables that were included into the ANCOVA were OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN, PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN, and, finally, OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS.

Procedure In the cover letter distributed with the study material, the subjects were told that the questionnaire related to research that studied private individuals’ stock investments and, especially, their interest to invest in various companies in connection with stock issues (such as initial public offerings, IPOs). In the actual study material, a subject was first presented with two pages of background questions about her personal demographics and characteristics as an investor. The background questions were followed by the stimuli (company presentation/ad), which was followed by questions pertaining to the dependent variable (INTEREST TO INVEST). Thereafter, questions pertaining to the company-specific covariates were presented.

Stimuli and manipulations Notably, the information content (sentences) of the company presentations/ads were the same in the high and low conditions of ‘product design emphasis in company investment ad’ – so that differential amount of information conveyed by the ads would not confound the results. In this setting, the high condition for ‘product design emphasis in company investment ad’ was achieved, in effect, by (i) adding to the company presentation a heading that highlighted in bold typeface the products of the company and their potential personal relevance and use value (e.g., “Carl Zeiss – premium lenses for the sake of faultless vision”). Moreover, (ii) one sentence in the presentation was underlined and set in italics, namely a sentence which further highlighted how the subject might personally connect with the company’s products (e.g., “In other words: even in your own pocket, there might be a product whose functionality is ensured by Zeiss’s technology”). To see what the stimuli looked like for subjects in high condition of ‘product design emphasis in company

investment ad’, see the left column of the table in Appendix A.

In the low condition of ‘product design emphasis in company investment ad’, the company ad lacked both the heading as well as the highlighting of the sentence at the end of the text (i.e., the underlining and italics). Consequently, even if the subjects in the low condition had the same text to process (in literal terms), they would not likely pay so much attention to potential product-related relevance and affect associated to the company. To see what the stimuli looked like for subjects in low condition of ‘product design emphasis in company investment ad’, see the right column of the table in Appendix A.

The manipulation of the ‘company/product type’ factor involved, simply, presenting to a subject the ad of one of the four alternative companies, featuring the company name, logo, and presentation text (see Appendix). Notably, the presentation texts for each firm were of similar length (appr. 120 words) and followed a similar pattern across the conditions.

Measures The dependent variable INTEREST TO INVEST was measured, in the present study, after presenting the subjects an investment scenario. The idea was to present the subject a scenario whereby she should imagine having a certain amount of money at hand – an amount that she would have supposedly decided to invest in certain stock(s). After presenting the scenario, the subject would reflect her interest to invest the money in question in the stock of the focal company. The amount of money at stake was set to be significant, yet under 10 % of the value of the subject’s stock portfolio – the final figure used in the scenario was 7%. In its entirety, the scenario read as follows (as translated in English; the original was in Finnish):

“Let’s now assume that you have just sold a certain stock investment of yours (at profit). As a result, you have an amount of R euros of ”discretionary” money, equivalent of 7 percent of the value of your stock portfolio (for instance, 7 000 € of money if the value of your stock portfolio is 100 000 €). Now, you have already decided that you will invest that sum of money in appropriate stocks. Please describe, in the table below, your interest to invest the aforementioned R euros in the stock of [company X], [company Y], and [company Z], respectively, in case all of these firms were listed in the same international stock exchange, NasdaqOMX. NOTE. According to your bank/advisor, the ”transaction costs” (trading fees, account fees, etc.) as well as the ease of making the investments would be the same, regardless of whether you invest in [company X], [company Y], or [company Z] stock ( even if the home countries of the firms are different).”

Note that the scenario, as well as the questions, pertained to not only the focal company (Central European) of the study but also to two other companies (Finnish and Swedish). However, for reasons of simplicity, the analysis in the present study focuses only on one of the companies (the Central/Western European one) – this is to avoid modeling the country effects in investing, which are beyond the scope of the present article.

With reference to the aforementioned amount of money, R euros (7 % of the total value of the respondent’s stock portfolio), the dependent variable INTEREST TO INVEST was measured by asking the subject “How interested would you be to invest R euros (or a significant part of it) in [company X]?”. The answers were recorded on a 7-point scale, anchored by: “0= not at all interested”... “6=extremely interested”.

The measurement items for the covariates overall evaluation of the company’s product design, personal relevance of the company’s product domain, and optimism about the company’s financial returns are detailed in the below Table 1.

Table 1. Measurement items of the covariates Covariate Scale type Reliability

OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN

Three-item, reflective scale

1. How good do you think that the firm’s products/services are in terms of functionality or usability?

“0 = very bad” …

“6 = very good” 2. How good do you think that the firm’s products/services are in terms of design?

“0 = very unattractive” …

“6 = very attractive” 3. Considering the firm’s products, what is your opinion about the firm’s product trademark?

“0 = I don’t like the product trademark at all” …

“6 = I like the product trademark very much”

Cronbach’s alpha=.85

PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN

Two-item, reflective scale

1. “Do you feel that the firm’s product domain is personally important to you?” a

“0 = the product domain is significantly less important to me than to an average person in the street” …

“6 = the product domain is significantly more important to me than to an average person in the street”

2. ” Is the firm’s product domain ‘close to your heart’?”

“0 = not at all close to my heart” …

“6 = highly close to my heart”

Cronbach’s alpha=.80

OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS

Single-item scale

1. “If you were considering to invest in the firm at the moment, what would be your “hunch” about the attractiveness of the firm’s business in terms of long-term investment returns?”

0=”highly unattractive” …

6 =”highly attractive”.

N/A (due to single item)

a Before these questions, the product domains of the companies were indicated to be: “eye vision” in the case of the ‘everyday’ product company (the products of which were eyeglass frames); “healthcare” in the case of the ‘medical’ product company (the products of which were pharmaceutical treatment products); “international trade and mobility” in the case of the ‘service’ company (the products of which were currency exchange services); and “optics” in the case of the ‘high-tech’ product company (the products of which were lenses and optical products).

Results No manipulation checks were necessary in the present study. Manipulation of the ‘company/product type’ was de facto effective, since the firms were different and of rather varying type. Also the manipulation of ‘product design emphasis in company investment ad’ was de facto effective, since the intrinsic features (heading, underlining&italics) of the message form unquestionably varied

across the two conditions, which makes manipulation checks unnecessary (O'Keefe 2003).

The effect of product design emphasis in company’s investment ad (Hypothesis H5). Hypothesis H5 predicted that high ‘product design emphasis in company investment ad’ would have positive effect on an individual’s INTEREST TO INVEST in the company. This hypothesis was first examined in a 2 X 4 analysis of variance (ANOVA), where the other factor was ‘company/product type’: everyday; high-tech; medical, or service (see Table 2 for cell means). Table 2. Means (and standard deviations) for interest to invest in the company Company/product type Low product design emphasis in

company investment ad High product design emphasis in company investment ad

Everyday 1.79 (1.82) 2.87 (1.63) High-tech 2.95 (1.93) 3.14 (1.71) Medical 2.53 (2.03) 3.00 (1.77) Service 1.14 (1.21) 2.08 (1.44) Note. The ratings indicate the observed, mean interest to invest in the focal company (0=”not at all interested”… 6=extremely interested). The numbers in parentheses are standard deviations.

The analysis revealed a significant main effect of ‘product design emphasis in company investment ad’ (F(1, 164) = 6.28, p = .013), with subjects in the high condition having substantially higher INTEREST TO INVEST in the company (MhiPDemph = 2.77) than those in the low condition (MlowPDemph= 2.10; p = .013). Figure 1 presents the least-squares means for the two groups respectively (with the different conditions of ‘company/product type’ collapsed). The results indicate strong support for hypothesis H5: Product design emphasis in a company’s investment advertisement had positive effect on investor’s general willingness to invest in the company’s stock.

Figure 1. (Least-squares) Mean interest to invest in the company

When it comes to ‘company/product type’, the analysis revealed a significant main effect, as well (F(3, 164) = 5.05, p = .002). Pairwise comparisons showed that especially when the company’s product type was service, subjects had lower INTEREST TO INVEST in the company (Mservice = 1.61) than in the rest of the conditions (Mhigh-tech = 3.05; Mmedical = 2.76 Meveryday = 2.33; p < .05 for comparisons Mservice vs. Mhigh-tech and Mservice vs. Mmedical). While this finding is interesting per se, it does not have implications concerning our hypotheses.

On the other hand, with regard to the interaction of the experimental factors, the analysis found no significant two-way interaction between ‘product design emphasis in company investment ad’ and ‘company/product type’ (F(3, 164) = .62, p >.5). In other words, the effect of product design emphasis in a company’s investment ad on investors’ interest to invest in the company’s stock did not differ significantly by company/product type. This finding gives us confidence in the generalizability of the found effects.

Analyses with the main covariates (Hypotheses H1, H3) When the variables OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN were included into the above analysis as covariates, hypotheses H1 and H3 could be tested. In the resulting ANCOVA, both OVERALL AFFECT FOR THE COMPANY’S PRODUCT DESIGN (F(1, 150) = 14.99; p = .0002) and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN (F(1, 150) = 7.55; p = .007) were revealed to be highly significant covariates for INTEREST TO INVEST. This suggests that the individual investors’ subjective OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN explain investors’ INTEREST TO INVEST in particular companies to a substantial extent. In other words, both an investor’s overall evaluation of the company’s product design and the personal relevance that an investor attaches (at individual level) to a company’s product domain have positive effects on her interest to invest in the company. Moreover, the effects are independent, since both the covariates achieved significance3. As a further illustration of these effects, we present the observed means (and standard deviations) for INTEREST TO INVEST at different levels of the covariates in Figure 2. There is a clearly upward trend in investment interest with increasing level of OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN (upper panel) and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN (lower panel). All in all, the findings give further support especially to hypotheses H1 and H3.

Furthermore, as the covariates were included in the ANCOVA, the previously reported effect of ‘company/product type’ on INTEREST TO INVEST (F(3, 164) = 5.05, p = .002) became non-significant (F(3, 150) = 1.49; p = .22). Interestingly, this suggests that the type of the company or its products does not, per se, explain investors’ interest to invest in particular companies insofar as we account for investors’ differential (average) OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN per company. In other words, to the extent that investors’ overall investment interest differs by company or company’s product type, this seems to be due to differences in investors’ average evaluations for those companies’ product design and/or the personal relevance that investors, on average, attach to those companies’ product domains.

When it comes to the other experimental factor – ‘product design emphasis in company investment ad’ – the previously reported effect for INTEREST TO INVEST (F(1, 164) = 6.28, p = .013) was substantially attenuated due to the covariates (F(1, 150) = 4.20, p = .042). This further confirms our presupposition that the positive influence of emphasizing the company’s product design to investors in an investment ad on investment interest is mostly due to enhanced product design evaluations.

Note, finally, that we also controlled for investors’ prior familiarity with the companies on their

3 Multicollinearity should not be a concern here, since the correlation between the two covariates was under .5.

investment interest4, but this covariate did not achieve significance in the ANCOVA (F(1, 150) = .23, p = .63). This confirms the notion that neither the effect of ‘product design emphasis in the company’s investment ad’ nor the positive effects of OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN or PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN on INTEREST TO INVEST can be explained by mere differences in investors’ familiarities with the companies (cf. Frieder & Subrahmanyam 2005). Note. The height of the “bars” are equal to double the standard deviation of observations.

Figure 2. Means and standard deviations for interest to invest, along independent variables/covariates

4 This covariate was measured with a single-item scale. The subject was asked: “How familiar were you with this company (before receiving/answering this questionnaire)?” The responses were recorded on a 7-point scale, anchored by: “0 = not at all familiar” … “6 = I was very familiar with the company”.

Personal relevance of the company’s product domain

Overall evaluation of the company’s product design

Interest to invest in the company


Analysis of optimism as an additional covariate (Hypotheses H2, H4) To examine hypotheses H2 and H4, we needed one more analysis, so as to test whether optimism about the company’s financial returns would partially mediate the effects of OVERALL EVALUATION OF THE COMPANY’S PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN on the dependent variable INTEREST TO INVEST. This was tested by including OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS as an additional covariate to the ANCOVA.

As expected, OPTIMISM ABOUT THE COMPANY’S FINANCIAL RETURNS resulted to be a significant covariate in the ANCOVA (F(1, 155) =26.80, p < .0001). Moreover, with the inclusion of this covariate, the effect of OVERALL EVALUATION OF THE COMPANY’S PRODUCT was substantially reduced, yet remained significant (from F(1, 156) =20.20, p < .001 down to F(1, 155) =6.17, p = .014). Likewise, the effect of PERSONAL RELEVANCE OF THE COMPANY’S PRODUCT DOMAIN was reduced, yet remained significant (from F(1, 156) =10.19, p = .002 to F(1, 155) =3.93, p = .049), when optimism was included. In sum, these additional analyses suggest that optimism about a company’s financial returns partially (but not fully) mediates the effects of overall evaluation of the company’s product design and of the personal relevance of the company’s product domain on investors’ interest to invest in the company. Thus, these findings support hypotheses H2 and H4.

Discussion and conclusion

Contributions to research While design management literature has made some references to investors’ perceptions of companies’ product design (Borja de Mozota, 2003, 2006; Hargadon, 2005), it has lacked closer psychological and behavioral examinations of the mechanisms how a company’s product design actually attracts investors. The present dissertation contributes to the understanding of these mechanisms by explicating the theory as well as providing empirical evidence of how individual investors’ subjective evaluations of companies’ product design influence their willingness to invest in companies’ stocks.

The present research identifies two important, product design -related factors that influence investors’ investment behavior and decisions concerning companies stocks. The first factor is (a) the investor’s overall evaluation of company’s product design. This factor reflects the degree to which the investor perceives the company’s products to be pleasant, attractive, good, and likeable overall. The second factor, in turn, is (b) the personal relevance or importance that an investor attaches to “domains” represented by a company's products. The domains can be heterogeneous activities or areas of interests (e.g., motoring/car-driving, sport, optics) – but also more abstract themes or ideas (e.g., healthcare, eye vision, mobility, social responsibility).

At the general level, the identification and evidence of these factors adds an important dimension to design management literature’s notion about the marketplace distinction that can be achieved through designed artifacts. In earlier design management research, the goodness and effectiveness of a company’s product design have mostly been assumed to influence people’s willingness to use and buy those products, and this way create strategic distinction, differentiation, and competitive advantage for the company (e.g., Borja de Mozota, 2002; Hertenstein and Platt, 1997; Kotler and Rath, 1984; Olson, Cooper, and Slater, 1998; Phatak and Chandron, 1989). The important dimension added by the present research is that the aforementioned product design -related factors also influence people’s or individual investors’ willingness to invest in the company. In other words, the present research identifies and finds evidence of additional ways through which products and product design may create important strategic, marketplace distinction for the company – i.e., in the stock market.

Moreover, the present results imply two specific ways in which a company’s product design can “address investors’ needs” – something that earlier design management research has only marginally touched on (Hargadon, 2005). Indeed, the study implies two broad types of investor needs which a company’s product design may address: (A) financial needs and (B) self-expressive or affective needs that go beyond the financial needs. Based on the present results, the (1) personal relevance or importance that an investor attaches to domains represented by a company's products and the (2) investor’s overall evaluation of or liking for a company’s product design will influence the investors’ pursuit towards satisfying both needs. This is because these factors were found to both influence (A) investors’ optimism about the company’s financial returns, and generate (B) some willingness to invest in the company over and beyond the company’s financial returns.

Implications to design practice In general, the findings identify new important roles that design may play in companies’ investor (or owner or shareholder) relationships, as forecast by Borja de Mozota (2003: p. 113) in the design management context. Specifically, product design may, based on the results, play role in the company’s attempts to (1) attract investments from investors who are appealed by the company’s product design as well as (2) define entirely “hybrid” strategies or business models that take, already at the outset, into account certain investors’ special attraction to the company’s current or future product design.

Attracting investors who are appealed by the company’s product design First of all, any firm can take advantage of the tendency of the personal relevance of various areas of interest, activities, and ideas to elicit extra willingness – in investors – to invest in companies that represent those domains with their products. In other words, given a company that designs and produces certain (kinds of) products, it may be highly useful for the company – when attempting to promote itself as an investment target in the stock market – to target especially such investors who find the domains represented by the company’s products as personally relevant.

Relevant domains may be identified by asking the question: “What activities, areas of interest, ideas, or ideals do our company’s products support or represent?” For instance, if the company’s products are tires, answers to this question might include, at least, “car-driving”, “road traveling”, and even “road safety”. If the company specializes on winter tire designs, additional answers might be “winter driving” or even just “winter weathers” in general. Accordingly, the company can pursue investors who find these domains personally relevant and offer the company as an investment target to them – with communications designed to highlight the potential personal relevance of the domains. Or, if the company’s products are specialized heart-related drugs, the answers to the question might include “healthcare”, “fight against illnesses”, and “well-being” generally – or even “cardiovascular performance” or “cardiovascular exercise/sport” particularly. And again, investors who find these domains personally relevant can be pursued with correspondingly designed communications.

Note that the investors targeted the above way need not recognize or be familiar with the company in advance. Thus, even a company that lacks an established brand or familiarity in the (stock) market can still utilize the above investor-targeting strategies – as long as its product design supports or represents certain domains.

Secondly, among investors who already are familiar with the company or its products, a company can target not only (a) those who find the company’s product domains as personally relevant, but additionally or alternatively also (b) those who have particularly positive overall evaluation – or liking – for the company’s product design. Evidently, the two groups will often be overlapping in part, and the greatest investment interest is likely to be found among investors who both find the company’s product domain as personally relevant and have strong overall liking for its product design. Nevertheless, it is useful to consider these issues separately, as well. Notably, there

might not be so many people finding, for example, certain very mundane product categories – such as domestic utensils or newspapers – as highly relevant personally (in an identification sense). But still: many people may have strong affect or liking for particular companies’ design within those categories (e.g., Iittala, New York Times). In effect, the company can benefit from this kind of product design affect among potential investors rather independently of whether the product domains in question are personally relevant to those investors.

Considering both the investor group that potentially finds the company’s product domain(s) as personally relevant and the (partly overlapping) investor group that has overall liking for the company’s product design, a useful way of promoting the company as an investment target will be to emphasize the company’s product design in its communication and advertising towards the selected investors. Indeed, as the results of the present research expressly showed, a company is likely to be able to attract greater investment by emphasizing its product design in its investment ads targeted to potential investors. This being the case, it is also reasonable to involve the company’s product designers (and product advertisement designers) in designing the company’s investment ads and other communication towards investors. Namely, product designers have expertise in understanding and communicating products’ appeal to people – an advantageous skill when the company shall appeal to investors, as well, with its product design.

In sum, the present results indicate that such investors who find a company’s product domain personally relevant and/or have positive evaluation of the company’s product design have high potential as investor groups for the company: it is likely that the company can quite effectively attract investments from these investors. This finding can serve segmentation and targeting of selected investors when the company wants to attract new investments – in order to, e.g., raise capital for new investments, realize an initial public offering (IPO) or other stock issue, or just generally widen its shareholder base and enhance its market valuation.. Coordination of design work and people – especially that of financial experts, product designers, and communication designers – is needed here, to generate communication that is as effective as possible. When it comes to communicating with the selected investors, the communication should logically be designed to address both financial and self-expressive/affective needs of the investors.

Creating hybrid business models based on appealing product design visions. Beyond attracting investments from investors to whom the company’s (current) product design appeals, corporate (design) managers, entrepreneurs, and designers should also consider defining new kind of “hybrid” business models that take, already at the outset, into account certain investors’ special attraction to the company’s current or future products.

Specifically, with hybrid business models we mean new business models, whereby corporate managers or entrepreneurs outline simultaneously (or, interdependently)

a) a product design vision: what kind of products (i.e., product categories as well as special design aspects and benefits) the company or new venture will develop/design and, consequently, introduce and sell in the market (and to whom users/buyers/customers), and

b) an investor vision: whom investors the company will attract with its product vision – due to the envisioned products’ being personally relevant to and liked by those investors – so as to obtain capital for the development/design of the very product(s).

An example of this kind of hybrid business model could be one whereby a company or entrepreneur envisions development and design of a new kind of solar panel -powered car and seeks a substantial part of the financial resources needed for the development/design of that product from investors who find cars, road traveling, and/or environmental friendliness as personally relevant domains worth supporting. The business model may also include the idea that some or many of the investors

will be actual users and buyers of the car, as soon as it will come to market5. The mass of future users/buyers is, however, meant to be outside the initial investor group, which will ensure that the initial investors will obtain also financial returns for their investment.

Another example of a mentioned kind of hybrid business model could be one whereby a company or an entrepreneur envisions development and design of a new gardening robot, which facilitates old people’s gardening activities. Here, the business model might include the idea that a substantial part of the financial resources needed for the development/design is obtained from investors who find gardens and, perhaps, ease-of-life as personally relevant domains worth supporting.

The recommendation about hybrid business models – as an implication of the results of the present study – is a fundamental extension of design management literature’s extant notion concerning processes and activities of designing at the strategic level of a company’s business. Especially, the recommendation echoes the view that management of design at the corporate level pertains not only to (i) product development/innovation or (ii) visual identity creation but also to (iii) definition of the company mission or vision (Borja de Mozota, 2003, p. 67; see also Svengren, 1995a, 1995b) – in this case, the strategic vision with respect to investors.

Limitations and further research When it comes to the limitations of the present research, one limitation relates to potential non-response bias. However, as mentioned in the method section, the fact that no significant differences were found between early and late respondents gives us confidence that non-response bias should not be a very serious concern.

Moreover, the sample of companies presented to investors was limited in the present study. In further research, the present study should be replicated, by addressing different kinds of companies from different industries, which support/represent different kinds of domains with their products. The experiment should also be conducted with investors from different countries. Moreover, whereas the present study examined individuals’ decisions to buy stock, also decisions to sell should be explored in further research, since the dynamics of the sell decision might be different to those of the buy decision (Kahneman and Tversky, 1979; Shefrin and Statman, 1985).

Finally, it would be interesting to study whether and to what extent the results of this study apply not only to individual investors but, perhaps, also to institutional investors and/or investment market intermediaries and professionals, such as investment analysts. One might think that professionals would not be influenced at all by the somewhat “soft”, attitudinal product evaluation factors proposed in this research. Nevertheless, some preliminary existing studies show that professional investment analysts, for instance, often make investment evaluations and decisions based on affective or attitudinal factors, as well (Ganzach, 2001). Thus, there is a potentially fruitful setting for studying how the product evaluation-related psychological and behavioral mechanisms proposed in this dissertation potentially influence the investments of professional and institutional investors, too.

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Appendix A. Stimuli presented to the experiment subjects, according to the conditions of the main factors

Product design emphasis in company investment ad

high low

Company/ product type

everyday


Specsavers is an England-based

company that develops, manufactures, and sells

eyeglass frames to consumers. The company

specializes on serving buyers that seek for

eyeglasses that are less inexpensive than normal. It has retail outlets in a few

countries around Europe, also Finland. In other word: you may also have yourself

have encountered Specsavers’s ads or stores when you have been buying

glasses for yourself or for a family member.




Specsavers is an England-based company

that develops, manufactures, and sells eyeglass

frames to consumers. The company specializes on

serving buyers that seek for eyeglasses that are

less inexpensive than normal. It has retail outlets in a few countries around

Europe, also Finland. In other word: you may also have yourself have

encountered Specsavers’s ads or stores when you have been buying glasses for

yourself or for a family member.



high-tech

























Product design emphasis in company investment ad

high low


medical























service

Travelex – makes moving and trading abroad easy

Travelex is an England-based company

that develops, manufactures, and sells products

and services related to currency exchange,

travelers’ checks and international payment transactions for small and medium

sized enterprises and consumers. The purpose of this kind of products/services is

to make international traveling and trade as easy as possible, and Travelex

focuses especially on service small firms and consumers in this regard. In other

words: you might have encounter Travelex’s services or outlets even yourself,

when traveling in Europe or elsewhere in the world.

Travelex’s international business has grown fairly quickly in the past


Travelex – makes moving and trading abroad easy

Travelex is an England-based company

that develops, manufactures, and sells products

and services related to currency exchange,

travelers’ checks and international payment transactions for small and medium

sized enterprises and consumers. The purpose of this kind of products/services is

to make international traveling and trade as easy as possible, and Travelex

focuses especially on service small firms and consumers in this regard. In other

words: you might have encounter Travelex’s services or outlets even yourself,

when traveling in Europe or elsewhere in the world.

Travelex’s international business has grown fairly quickly in the past


Where product design meets investor behaviorHow do individual investors’ evaluations of companies’ product design influence their investment decisions?

Jaakko Aspara

Do investors in the stock market care about companies’ product design when making investment decisions? The dissertation at hand sheds light on this question by studying how investors’ subjective evaluations of a company’s products influence their willingness to invest in the company’s stock. The focus is on individual investors, and the reported empirical studies include quantitative surveys and an experiment, con-ducted among Finnish individual investors.

The studies show that positive product design evaluations tend to (a) generate optimism about the financial returns of a company’s stock – and (b) even elicit “extra willingness” to invest in the company, over and beyond its expected financial returns.

Specifically, both optimism about a company’s financial returns and “extra willingness” to invest in it (beyond financial returns) are positively influenced by two product design -related factors. The first factor is (1) the personal relevance that an investor attaches to “domains of life” that the company’s products represent or support. Such domains can be vari-ous activities or areas of interest (e.g., road traveling, gardening, sport, electronics, aeronautics) – or more abstract themes or ideals (e.g., mobil-ity, healthcare, environment-protection). The second influ-ential factor is (2) the investor’s overall affect or liking for a company’s product design. This factor reflects the degree to which the investor perceives the company’s products to be pleasant, attractive, good, and likeable overall.

The results imply that companies can utilize product design’s potential to attract investments – from investors who are appealed by the company’s products and their design. Also “hybrid” business models can be created, which are based already at the outset, on certain investors’ fondness of the company’s current or future product design.

ISBN

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Where product design meets investor behavior

Publication series of the University of Art and Design Helsinki A 99www.taik.fi/bookshopHelsinki 2009© Jaakko AsparaGraphic design: Niina TurtolaISBN 978-951-558-310-9 (pdf)ISBN 978-951-558-304-8 (kirja)ISSN 0782-1832

Where product design meets investor behavior

How do individual investors’ evaluations of

companies’ product design influence their

investment decisions?

Jaakko Aspara

1

Introduction 8

2

Literature background 172.1 Design management and strategic issues – a short history 18 2.1.1 Strategic relevance of the marketplace distinction achievable through designed artifacts 20 2.1.2 Strategic relevance of the processes and activities of designing 21 2.1.3 Strategic relevance of coordination between various designs and coherent corporate identity 242.2 Design management and investors 26

3

Theory development: Product design and investors 303.1 Investment behavior -related constructs of interest 32 3.1.1 Financial expectations – Optimism and confidence 32 3.1.2 Familiarity and consideration 35 3.1.3 Extra investment willingness, beyond financial returns 383.2 Product design influences on investment behavior 41 3.2.1 Personal relevance of the domains represented by a company’s products 42 3.2.2 Overall affect for a company’s product design 53 3.2.3 Interdependencies 59 3.2.4 Review of hypotheses 59

4

Methodology of the empirical research 654.1 Philosophical-paradigmatic choices 664.2 Overview of the empirical studies 68 4.2.1 Studies 1a and 1b 68 4.2.2 Study 2 70

5

Studies 1a and 1b 725.1 Sample and data gathering 735.2 Overall study design – Studies 1a and 1b 765.3 Study 1a 78 5.3.1 Method – Model 1a 78 5.3.2 Results – Model 1a 915.4 Study 1b 96 5.4.1 Method – Model 1b 96 5.4.2 Results – Model 1b 104

6

Study 2 1136.1 Method – Study 2 1146.2 Results – Study 2 128

7

Discussion 1397.1 Contributions to research 140 7.1.1 Product design and investors’ needs 141 7.1.2 Investors and “product design” – In what sense? 1487.2 Practical implications to design management 154 7.2.1 Attracting investments from investors who are appealed by the company’s product design 155 7.2.2 Creating hybrid business models based on appealing product visions 1587.3 Limitations and further research 161 7.3.1 Limitations of the present studies 161 7.3.2 Avenues for further research 164

References 168Appendixes (A, B, C) 179Abstract 185List of Tables 187List of Figures 187List of Appendixes 188

Acknowledgements

This doctoral dissertation for the degree of Doctor of Arts is a result of a

journey that has been of great personal relevance and pleasure to me. The

personal relevance and pleasure have stemmed mostly from my long-run-

ning interest in the topic: product design and its significance for companies.

Notably, this dissertation is already the second doctoral dissertation for me,

as I wrote my first one in economics/business administration in 2007 (on a

non-related topic). However, I would say that the amount of personal learn-

ing has actually been greater this time: When you are truly interested in the

topic, you also tend to learn a lot. This time I’ve also been more mature in

terms of thoughts and skills, I believe – which has further opened me up to

new important ideas.

At the end of this journey, I am very grateful to Professor Marilyn Clark-

Murphy from Edith Cowan University (Joondalup, Australia) and Professor

Tore Kristensen from Copenhagen Business School (Copenhagen, Den-

mark) for acting as the pre-examiners of my dissertation. Likewise, I am

highly grateful to Research Director, Dr. Brigitte Borja de Mozota from Par-

sons Paris School of Art+Design, for being prepared to act as my opponent.

It is, indeed, a great honor to have these three distinguished scholars to

participate in the process.

Concerning the work itself, the greatest gratitude I owe to my supervi-

sor, Professor Ilpo Koskinen and co-supervisor, Professor Turkka Keinonen.

These two gentlemen expressed interest in my topic ever since day one, and

continued to encourage me throughout the process with constructive com-

ments and personal support. Thank you, Ilpo and Turkka, for continually

opening me up to new and important ideas, too!

Moreover, I am grateful to University of Art and Design Helsinki (UIAH)

for acting as such a supportive institution at the background. Thank you,

hence, to all UIAH faculty and administrative personnel – and, especially, to

Annu Ahonen and Niina Turtola for your support (and long days) in work-

ing with the graphic design, layout, and publication process of this book.

Many thanks go also to the Design Connections Graduate School

(DCGS), which I have had the privilege to participate in and get tutoring

from. Professor Turkka Keinonen, as the leader of DCGS, is to be thanked

here again. Thank you also to DCGS coordinators Dr. Tuuli Mattelmäki and

Dr. Maarit Mäkelä, for being warm, welcoming, and supportive both to my

topic and to me as a person – as well as all the DCGS co-students for the

same reasons.

Moreover, GloStra project – with Helsinki School of Economics and

TEKES (Finnish Funding Agency for Technology and Innovation) as its

funders – deserve my gratitude for cherishing this dissertation project as

a “satellite project” of GloStra. GloStra’s corporate partners are also to be

thanked, among them NasdaqOMX Finland. For support and funding, I

also want to sincerely thank Jenny and Antti Wihuri Foundation, Marcus

Wallenberg Foundation, and the Finnish Foundation for Share Promotion,

which have all provided me with scholarships for research more or less

related to the present topic.

At the personal level, Thank You Henrikki Tikkanen for being a great

colleague, a dear friend, and an inexhaustible source of good ideas, com-

ments, and support. Thank You all other friends of mine, as well, for your

support.

Finally, Thank You my beloved Laura, for the encouragement and love

as well as patience that you always show to me. And Thank You Mum and

Dad, brother Juhani (with Lotta), and grandma Mummi – I truly appreciate

you appreciating my doings.

In Helsinki, 20.11.2009

Jaakko Aspara

8

1 Introduction

9introduction

Both academicians and practitioners in the field of design management have

been increasingly interested in the strategic role of product design with

respect to company management (e.g., Borja de Mozota & Clipson, 1990;

Borja de Mozota, 2002; Buchanan, 2008; Hertenstein & Platt, 1997; Hes-

kett, 2001). In other words, there has been a growing interest in various

product design -related, strategic issues that are crucial to the management

of contemporary firms.

With regard to academia, the ground for a strategic business approach

to design was laid already in the late 1980s and early 1990s in the emerg-

ing academic discourse on design management. Blaich and Blaich (1993),

for example, emphasized the role of design manager in identifying ways in

which design can contribute strategic value to a company. They especially

stressed that design management is not only about administering design

projects and staff, but also about strategic issues related to linking corporate

goals to consumers’ point of view (through design). Subsequently, towards

the 2000s, researchers then increasingly explored what the role of product

design in company strategy indeed is or should be. A recent example is

Bruce and Bessant’s edited collection Design in Business (2002) that brings

together scholars to review and “lay out the strategic importance of design”

(p. xxii). In their collection, the contributors discuss different managerial

perspectives to design – including ones stemming from the fields of strate-

gy, marketing, operations management, organizational behavior, and law as

well as finance – and how these perspectives can contribute to “total design

management” and better integration of design in business.

With regard to practitioners, in turn, the transformation of industrial

designers’ profession towards more strategic issues is well demonstrated by

Valtonen’s recent dissertation (2007). Valtonen illustrates – by focusing on

Finland as her case country – how the work of “designers” in companies

changed during the 1990s and early 2000s from being constituted mainly

of operative product-development activities to include also work related to

company strategy. This means that designers’ work and expertise are being

increasingly used for strategic purposes and given more strategic importance

10 where product design meets investor behavior

(p. 344). Correspondingly, Valtonen claims, design management issues and

approaches have evolved “from creating a coherent product portfolio to a

broader view on corporate strategy as well as brand experience”. This has

also made the term “strategic design” more common (Valtonen, 2007, p.

124; see also Zetterlund, 2002; Kristensen & Lojacono, 2002).

However, there is one strategic business aspect that has been continually

and rather completely ignored over the years, when it comes to the strate-

gic perspectives of design management. That is the role and behavior of

investors with respect to a company’s products and product design strategy 1.

This ignorance is rather surprising, considering that investors are, in the

contemporary view 2, the ultimate overseers of a company’s strategies, as

well as suppliers of capital needed for implementing the strategies. More-

over, the strategies of a company determine its performance as a vehicle of

shareholders’ wealth management. In brief, for investors, the strategies of a

particular company determine the financial yields (dividends, capital gains)

that can and will be gained through investing in and holding the company’s

stock and/or trading it. The trading at large determines, in turn, the current

market valuation of the company’s stock, which is often considered as a

main measure of performance of the company and, therefore, its strategies.

[1] The focus here is on equity investors, i.e., ones who supply capital in exchange for the company’s (common) stock. Alternative terms to (equity) investor are shareholder/-owner and stockholder/-owner. In this dissertation (as in e.g., Benner, 2007), “investor” is used to denote participants in the stock market in general – that is, the population of potential purchasers of a firm’s stock. “Shareholder” is used to denote

the particular investors who hold a particular firm’s stock at a given moment.

[2] Indeed, companies’ strategies have been considered to be – in the past decades – increasingly driven and governed by the institutions and interests of the financial market and investors (e.g., Davis, 2002; Fligstein, 1990; Fligstein & Shin, 2004; Folkman, Froud, Johal, & Williams, 2007).This

phenomenon is often called “financialization” of the corporate world and society in general – and seen to be the contemporary phase of capitalism (e.g., Clark & Hebb, 2004; Clark, 2007; Froud, Haslam, Johal, & Williams, 2000; Froud, Leaver, & Williams, 2007; Hawley & Williams, 2000; Krippner, 2005; Martin, Casson, & Nisar, 2007; Tainio, 2003; Zorn, Dobbin, Dierkes, & Kwok, 2004, 2005).

11introduction

In fact, stock market valuation has also been used as a “measurement stick”

in recent design management literature (e.g., Rich, 2004).

Taking into account the increasing research interest in the strategic roles

of product design, on one hand, and the inevitable relation between inves-

tors and strategy, on the other, the scant number of references to investors

in design management literature is indeed surprising. The few references

to investors that do exist are mostly rather marginal remarks or claims. For

instance, it has been remarked that (good or successful) product design con-

tributes to corporate image, and investors have been marginally mentioned

as one stakeholder class among others (customers, employees, suppliers,

regulators, etc.) who will be attracted by the improved corporate image

(Bruce & Bessant, 2002, p. 15; Gray & Balmer, 1998; Schmitt, Simonson,

& Marcus, 1995). Another remark or claim has been that from sharehold-

ers’ perspective, “good design is good business” (Borja de Mozota, 2006),

implying that well-designed products indirectly attract investors by leading

to increased sales and better margins, more brand value, greater market

share, and higher return on investment (ROI). Some consultants have also

seen this to manifest in above-average stock market returns of “good-design”

companies (e.g., Rich, 2004).

At any rate, the crucial observation behind the present dissertation is

that beyond the aforementioned marginal references to investors in design

management literature, the literature is particularly underdeveloped in

regards to recent academic research in behavioral finance – the primary

academic discipline that studies investor behavior and psychology. Namely,

there is an emerging stream of research in behavioral finance that suggests

that people’s subjective evaluations of companies’ products influence their

attraction to companies as investors directly. For instance, Frieder and Sub-

rahmanyam (2005) hypothesize that individual investors may prefer stocks

of companies that have highly regarded, high-quality products – i.e., people’s

product quality evaluations might “spill over” to their investment decisions.

Importantly, it has also been suggested that in addition to financial benefits,

individuals may make investments partly based on self-expressive benefits


that can be gained from investing in certain kinds of companies, which

produce certain kinds of products (Fama & French, 2007; Statman, 2004;

Aspara, 2009; Aspara & Tikkanen, 2008).

To recap the research setting: design management research lacks theo-

retical development and empirical evidence related to the issue of how

investors relate to a company’s product design. This issue, in turn, coincides

with the question of whether and how individuals’ product design evalu-

ations will spill over to influence their investment decisions – a question

that recent behavioral finance research has started to examine (but which it,

too, has in fact examined only sparsely so far). Consequently, the purpose

of this dissertation is to address this dual research gap – by identifying the

perceptual and evaluative mechanisms of how a company’s product design

may attract investors.

Figure 1. Thematic depiction of the research gap

Research gap addressed in the present dissertation: Investor psychology/behavior regarding product design

Behavioral finance (investor psychology/

behavior)

Design management (strategic perspective)

Behavioral finance (investor

psychology/behavior)

Design management

(strategic perspective)

13introduction

Figure 1 illustrates how this research gap resides in a conjunction where-

by design management’s strategic perspective “meets” the behavioral finance

perspective to investor psychology and behavior. Therein, the research gap

is constituted by the sparse extant body of knowledge concerning investor

psychology/behavior regarding companies’ product design.

Specifically, I focus my theoretical development and empirical studies

on the perceptual and evaluative mechanisms of how individual investors’

subjective perceptions and evaluations of companies’ product design influ-

ence their decisions to invest in companies’ stocks. The core research ques-

tion is:

How do investors’ subjective perceptions and evaluations of a •

company’s product design influence their investment decisions

towards the company’s stock?

When it comes to the scope of the dissertation, my main object of study is

– as implied above – investor psychology and behavior with respect to companies’

product design. Hence, this dissertation does not focus on companies’ design

management capabilities, processes, or practices as main objects of study 3.

The focus is not even on investors’ perceptions of such capabilities or prac-

tices – but rather on investors’ perceptions and evaluations of companies’

products and product design, inasmuch as investors have perceptions of

these due to their existence (as artifacts) in the product markets4. Moreover,

it is important to note that the theoretical development and empirical data

are mainly focused on individual investors, i.e., private individuals who

[3] Nevertheless, an important purpose of the dissertation is, eventually, to give recommendations about design management strategies while discussing the results of the study.

[4] As artifacts, the products and their design are, of course, more or less direct outcomes of the design capabilities and practices of the companies. In any case, the study focuses on the former (artifact evaluations), rather than on the latter (capabilities and practices).


invest some of their money (or savings) in the stock market. This means

that institutional investors and investment intermediaries (such as invest-

ment analysts) are outside the primary scope of the present dissertation.

Theoretically, I develop hypotheses about the effects that product design-

related perceptions and evaluations have on investors’ decisions to invest in

companies’ stocks on the basis of (social) psychological theories on product-

related personal relevance and involvement (e.g., Alba & Hutchinson, 1987;

Bloch, Sherrell, & Ridgway, 1986; Laaksonen, 1994), identification (e.g.,

Bhattacharya & Sen, 2003; Scott & Lane, 2000; Aspara et al., 2008), and

affect (MacGregor, Slovic, Dreman, & Berry, 2000; Slovic, Finucane, Peters,

& MacGregor, 2002a, 2002b, 2007; Zajonc, 1980). I derive hypotheses by

applying and extending these individual-level theories to individuals’ invest-

ment decisions, and by presenting supportive findings from extant behav-

ioral finance research, when available. Yet, the theory development provides

new insights also to behavioral finance, as it explicates the mechanisms how

product design evaluations, in particular, spill over to people’s investment

decisions.

In order to test my hypothesis, I have conducted three studies. Two of

the studies (Studies 1a and 1b) analyze survey data on recent, real-life invest-

ment decisions of a sample of 340 investors. This data consists of investors’

retrospective self-reports about their decisions to invest in the stocks of par-

ticular companies, on one hand, and their evaluations of those companies’

products, on the other. I tested my hypotheses on this correlational data

by employing causal (path) modeling, and found support to most of the

hypotheses. Another, complementary study that I conducted (Study 2) was

a traditional psychological experiment. The participating subjects, 187 in

total, were active stock investors recruited at events related to stock invest-

ing. The results of this study also support the theoretical hypotheses and are

consistent with the results of the two other studies.

As to the results of the dissertation, I identify and find empirical evidence

of two important, product design -related factors that influence investors’

investment behavior and decisions concerning companies’ stocks. The first

15introduction

factor is (1) the personal relevance or importance that an investor attaches

to “life domains” represented by a company’s products. Such domains can

be heterogeneous activities or areas of interests (e.g., motoring/car-driving,

gardening, sport) – or more abstract themes or ideas (e.g., healthcare, eye

vision, mobility, environment-protection).The second factor, in turn, is (2)

the investor’s overall affect or liking for a company’s product design, reflect-

ing the degree to which the investor perceives the company’s products to be

pleasant, attractive, good, and likeable overall.

Concerning the mechanism of how these two product design factors

influence investor behavior, my results explicate how the factors may address

two types of investor needs, i.e., (A) financial needs and (B) self-expressive/

emotional needs. First, the results show how (1) the personal relevance that

an investor attaches to a domain represented by a company’s products as

well as (2) his5 overall affect for the company’s product design have posi-

tive effect on (A) his optimism about the company’s financial returns and

negative effect on the consideration that he gives to alternative investment

opportunities. Second, the results show that the two factors have positive

effect, due to self-expressive/emotional reasons, on (B) the investor’s deter-

mination to invest in the company rather than in another company that has

approximately similar expected financial returns. Even further, the factors

are found to elicit preparedness to invest in the company with lower finan-

cial returns expected from its stock than from another stock.

All in all, the results considerably extend the design management notion

of the strategic benefits that a company can enjoy from designing pleasur-

able and personally meaningful products (e.g., Battarbee, 2004; Battarbee

[5] Throughout this dissertation, I will only use the personal pronoun “he” (or “his”) when referring to individuals. I do this purely for sake of simplicity, to

avoid the complexity involved in repeating expressions like “he/she” and “his/her”. The use of “he” does not in any way suggest that the arguments would merely

apply to males, or that the arguments would be contingent on the gender of the individual.


& Koskinen, 2005; Clark, Smith, & Yamazaki, 2006; Koskinen, Battarbee, &

Mattelmäki, 2003; Normann & Ramírez, 1993; Verganti, 2003) – especially

by demonstrating that product design will not only create strategic distinc-

tion for the company in the product markets, but also in the stock markets.

In so doing, the present findings have implications for design/management

practice when it comes to attracting investments (especially from investors

who are appealed by the company’s product design) and creating strategic

missions and business models that take into account, already at the outset,

certain investors’ potential fondness of the company’s product design.

The structure of the dissertation is as follows. After this introduction

(Chapter 1), Chapter 2 presents a brief outline of what kind of strategic busi-

ness issues have been addressed in extant design management literature

as well as a review of how investors have been referred to in that literature.

In Chapter 3, then, I go on to present theory and hypotheses development

concerning the research question, based on earlier behavioral finance find-

ings and (social) psychological theories of affect as well as identification and

self-congruence. After the development of the hypotheses, Chapter 4 serves

as a brief introduction and review of the empirical studies that I conducted

to test the hypotheses. Chapter 5 presents two of these studies (Studies 1a

and 1b) and Chapter 6 the third, complementary study (Study 2). Finally,

in Chapter 7, I discuss the research contributions of the dissertation and

implications to practical design management.

17

2 Literature

background


2.1 design management and strategic issues – a short history

Above I began the discussion of scholarly interest in the strategic roles of

product design with an example from Bruce and Bessant (2002). In fact,

these authors even claim to be “first… to establish the strategic importance

of design as an integrated process” (Bruce & Bessant, 2002, back cover,

emphasis added). However, the academic discourse on design management

in fact started to emphasize the strategic importance and roles of product

design already much earlier. In fact, both in the US and Great Britain, where

the discourse started to emerge in the 1970s and 1980s, the linking of prod-

uct designs and coordinated design activities to corporate management and

business strategy was emphasized early on.

In the US, specifically, the Design Management Institute (DMI) was

founded in 1975 with affiliation to Massachusetts College of Art, and it has

throughout its history had the objective of promoting the understanding of

design as a crucial business tool and familiarizing business managers with

the nature, process, and significance of design, as well as designers with

business and management (Borja de Mozota, 2003). In the mid-1980s, the

practitioner-oriented DMI’s efforts grew more academic, as DMI started a

collaborative research project called “TRIAD Design Project” with Harvard

Business School, selecting such companies for case studies that could illus-

trate the benefits of corporate investment in design (Johansson & Svengren,

2003). The project also led to DMI’s starting to publish Design Management

Journal, which is still the leading (semi-)academic journal in this rather

small academic field.

In Great Britain, in turn, London Business School (LBS) pioneered as the

first academic institution to teach design issues to managers in 1976. Also

LBS’s work was first mostly practitioner-oriented, concerned with reporting

best practices (Gorb & Dumas, 1987), but by the end of the 1980s started to

develop into more academic research and discourse. Under the lead of the

19 literature background

head of LBS’s Department of Design Management, Peter Gorb, the discus-

sion grew also more international. For instance, the first international design

management conference in Finland was arranged in 1987, with Gorb serving

in its advisory board (Melgin, 1990, 1991; Valtonen, 2007, p. 123).

Gorb’s work did not go unnoticed in the US either, where one of the

most influential 20th century business scholars, the marketing ‘guru’ Philip

Kotler co-authored – in Journal of Business Strategy – an article stressing

design management as an important strategic tool (Kotler & Rath, 1984).

Kotler and Rath discussed the management of design as “a potent strategic

tool that companies can use to gain a sustainable competitive advantage”.

Informed by the work of Gorb (1979), they viewed design management par-

ticularly as the management of the processes connected to the design of

products, environments, information, and corporate identities, and various

design elements therein (e.g., performance, quality, durability, appearance,

cost).

In fact, the above Kotler reference also succinctly points out the basic

classes of corporate artifacts that design management rather early started to

address. Specifically, the design and management of corporation’s (i) prod-

ucts, (ii) environments (e.g., buildings, machines, tools), and (iii) information

(e.g., communications materials) were all in the focus (see also Gorb, 1990).

The adjacent focus on corporate identities, which was seen to encompass the

former three classes of corporate artifacts (along with employee behavior),

was also present early on – especially due to the influential work by the

consultant Wally Olins (e.g., 1978; 1985; 1989; 1991; 1995), whose work was

approaching the academic interface.

All in all, even if the academic interest in and publications on design

management were generally rather limited in the 1980s (Johansson &

Svengren, 2003), certain important, main themes concerning the strategic

relevance of design started to emerge in academic design management lit-

erature. By and large, these themes continue to be in place today and can

be identified to deal with (1) strategic relevance of the marketplace distinc-

tion that is achievable through designed artifacts, (2) strategic relevance of


managing the processes and activities of designing, and (3) strategic rel-

evance of coordination between various designs and coherent corporate

identity. The following sections briefly review these themes.

2.1.1 strategic relevance of the marketplace distinction achievable through designed artifactsIndeed, one central strategic theme of design management research has

focused on the fundamental strategic importance of (the management of)

design in the respective artifact classes of products, environments, and

information. Especially, the research early on started to outline and describe

how companies can through better designs achieve enhanced marketplace

distinction or differentiation (relative to competitors).

Such distinction will arguably occur through improvements in the arti-

facts’ consumer- and user-valued aspects, elements, functions, or charac-

teristics – e.g., functionality, quality, appearance, ergonomics, durability,

usability/ease of use (e.g., Kotler & Rath, 1984; Borja de Mozota, 1985; Borja

de Mozota & Clipson, 1990; Boztepe, 2008; Hayes, 1990; Lorenz, 1986;

Olson, Cooper, & Slater, 1998; Phatak & Chandron, 1989). Note that the

focus has indeed been not only on the shape and (aesthetic) appearance of

products, but “meaningful distinction” of their entire character (e.g., Lorenz,

1994). Also, many of the authors (Dickson et al., 1995; Hayes, 1990; Kotler

& Rath, 1984; Walsh, Roy, & Bruce, 1988) reminded about the importance

of taking into account the cost components of design – from the company

perspective – in terms of (cost-efficient) manufacturability of products and

other artifacts. At any rate, the claim was and has been that a company

could, by virtue of its designed artifacts, potentially enjoy increased strategic

distinction or differentiation among its target markets and/or competitive

advantage in general.

The object of study (and claims) in this stream of design management

literature has often dealt with marketplace distinction per se and the role


of design characteristics (i.e., functionality, quality, appearance, ergonom-

ics, durability, usability etc.) therein, rather than or in addition to actual

design or management processes of companies. The evidence has, as Roy

(1994; see also Gemser & Leenders, 2001; Hertenstein, Platt, & Veryzer,

2005) notes, mostly been anecdotal or based on “winning” companies and

successful designs. Nevertheless, authors with backgrounds in consumer,

marketing, and innovation management research have also applied more

systematic consumer and marketing research techniques to study and dem-

onstrate the distinction that can be achieved through product designs, espe-

cially 6 – inasmuch as the distinction manifests in consumers’ or buyers’

product evaluations, preferences, and choices (e.g., Berkowitz, 1987; Bloch,

1995; Creusen & Schoormans, 2005; Henderson, Cote, Leong, & Schmitt,

2003; Hertenstein, Platt, & Veryzer, 2005; Sewall, 1978; Veryzer, 1993, 1995,

1998; Veryzer & Hutchinson, 1998). The resulting, positive effects on com-

panies’ eventual market positions and performances have also been increas-

ingly demonstrated (e.g., Hertenstein, Platt, & Veryzer, 2005; Hertenstein,

Platt, & Brown, 2001).

2.1.2 strategic relevance of the processes and activities of designingWhile the above theme deals with the ultimate (external) marketplace dis-

tinction that can be achieved with product and other designs – “design as

differentiator” (see e.g., Borja de Mozota, 2002; Hayes, 1990) – another

strategic theme in the literature has focused on the management of (inter-

nal) processes and activities of designing within the company 7.

[6] Somewhat similar studies exist for logo designs (e.g., Henderson & Cote, 1998) and packaging designs (e.g., Schoormans & Robben, 1997).

[7] Of course, one of the main objectives of such processes and activities is the external marketplace distinction of the company, in the form of well-

designed (end) products and other artifacts.


Strategic, management perspectives regarding this second theme

evolved from design management’s early focus on administration of (inter-

nal as well as external/outsourced) designer staff, resources, and projects

(see e.g., Gorb, 1990; Topalian, 1980). While the importance of such opera-

tional administration was by no means forgotten about, more strategic

perspectives to the processes of designing emerged in the 1990s, so as to

complement the operational/administrative views. Indeed, Blaich & Blaich

(1993), for example, came to underline that design management is not just

the assignment of the administrative duties to a manager but also has a

role in identifying and communicating the ways that design can contrib-

ute strategic value to a company. In their view, design management should

entail – in addition to management of operative design resources at every

level of the company – a more strategic activity sphere. That is, contribut-

ing to corporate strategic goals by developing and auditing a design policy,

articulating the design policy alongside corporate strategy, and using design

to identify needs from the consumers’ point of view. In a similar vein, Kris-

tensen and Lojacono (2002, p. 109) later viewed “strategic design” largely

as a process/management competency: “strategic design is the knowledge

about what design can do for a company that pursues strategic options and

knowledge about the management of the overall design process” 8.

In fact, design management processes came, during the 1990s, to be

increasingly likened to the general innovation management processes of a

company (see e.g., Borja de Mozota, 2002; Hise, O’Neal, McNeal, & Para-

suraman, 1989; Roald; Verganti, 2003; Von Stamm, 2003; Walsh, 1996).

This likening included the integration of design management perspectives

[8] This also includes wisdom about what parts of design processes to outsource to external design consultancies and what not – as well as how.

[9] This became evident, at the latest, when researchers such as Hargadon and Leonard-Barton contributed to both design management discourse and business/strategy/management

discourse (Hargadon & Douglas, 2001; Hargadon & Sutton, 1997; Hargadon, 2003, 2005; Leonard-Barton, 1991, 1992; Leonard-Barton & Rayport, 1997).


with relevant perspectives from strategy, management, marketing, and

product innovation/development literatures9 – such as those related to value

chains, market analyses and branding, and concurrent engineering. A relat-

ed development in the literature was – as implied by the above reference to

Kristensen and Lojacono (2002) – the conceptualization of design activities,

processes, and resources at an even more abstract level, as a potential orga-

nizational capability or competence (e.g., Jevnaker, 2000, 2005; Johansson

& Holm, 2006; Terrey, 2008) related to innovation.

In any case, the question was, on one hand, increasingly about describing

and suggesting ways for integrating design processes and designers to the

(technological) research and product development processes of a company,

as well as to the user/market research, promotion, and branding processes

(e.g., Kristensen & Grønhaug, 2007; Lorenz, 1986; Perks, Cooper, & Jones,

2005; Turner, 2000; Veryzer, 2005) . On the other hand, the question was

even about viewing design management to be quite synonymous with strate-

gic innovation management. That is, design management was increasingly

seen to refer to the broad management of strategies and processes related to

developing new products and introducing them in the market – albeit with

a special emphasis on user- and market-centered thinking and methods as

strategic drivers (e.g., Clark & Fujimoto, 1991; Leonard-Barton & Rayport,

1997; Peters, 1989; Salvador, Bell, & Anderson, 1999). All in all, this strate-

gic sub-theme (i.e., design management being de facto strategic innovation

management) has become increasingly popular in recent years, manifesting

in the contents of several textbooks introduced on design management (e.g.,

Borja de Mozota, 2002; Von Stamm 2003).

Eventually, two broad alternatives of linking strategic and design pro-

cesses came to be identified over the years (see Hertenstein & Platt, 1997):

in one, strategy drives design; in the other, design influences strategy. An

example of the former is how a company can and should translate its strate-

gic (brand) values and mission to the attributes and style of the tangible prod-

ucts that it develops/designs (e.g., Karjalainen, 2004). An example of the

latter is where product design processes, activities, and capabilities – and


the experimentation and innovation involved – actually drive the strategic

course of the company (e.g., Ravasi & Lojacono, 2005). This has been the

case with companies such as Alessi, Apple, Philips, and Sony. Also the idea

of product concepting or concept design – as a method of experimentation

with future product ideas (e.g., Keinonen & Takala, 2006) – is often associ-

ated with the latter approach.

2.1.3 strategic relevance of coordination between various designs and coherent corporate identityA third major strategic theme in design management literature has been

that focusing on the coordination and integration of a company’s designs

and design strategies across the various artifact classes (especially, prod-

uct design, informational/graphic design, and environmental design). The

objective of such coordination would be to make sure that the different cor-

porate designs contribute to a coherent corporate identity (or image), as per-

ceived by different stakeholders – or at least that messages conveyed would

not be divergent or inconsistent. As noted by many observers (e.g., Johan-

sson & Svengren, 2003; Ughanwa & Baker, 1989; Woodham, 1997), the

main early proponent of this view was Wally Olins (1985), a Briton who

operated in the interface of consultancy and academia. Olins attempted to

advocate a view of design (and identity) management as the materialization

of a company’s entire strategy – implemented in the form of the various

design objects of the company and through cooperation of the organiza-

tion’s product designers, graphic designers, architects, management devel-

opment people, and communication people (Olins, 1989).

Yet, the actual focus in this literature stream slipped, de facto, somewhat

continuously towards discussion of the two-dimensional visual symbols

related to corporate (visual) identity, such as corporate logotypes, colors, and

graphic elements, and their coordinated use on corporate advertising mate-

rials, letterheads, vehicles, buildings, etc. (see e.g., Dowling, 1994; Melewar


& Saunders, 1998; Melewar & Karaosmanoglu, 2006; Topalian, 1984). This

was perhaps because the coordination of the use of logotypes and colors in

terms of coherence was relatively simple to conceive and perhaps because

many of the influential authors, including Olins, had a background in

graphic design consultancy.

Only in the 1990s, did the more complex relationships of design and

corporate identity come to be addressed again (Hatch & Schultz, 1997; Topa-

lian, 2003). Actually, this time the pendulum of focus shifted from the man-

agement of two-dimensional visual symbols of the corporation somewhat

to another extreme, i.e., to quite abstract issues: how to (re)define or design

“corporate values”, “corporate personality”, “corporate voice” etc. and have

the organization and its employees behave and communicate accordingly.

In other words, the design management discourse came to be integrated

with the organizational identity and (corporate) brand identity discourses (see

Johansson & Svengren, 2003; Olins, 1990, p. 5). Nevertheless, despite the

increasing interest in abstract, organizational behavior determinants of cor-

porate identity and image, many contributors were also re-emphasizing the

fact that a company’s products are actually (always) at the core of its corporate

identity and corporate/brand image – and that product design (or product

innovation and development) should therefore be at the center of the corpo-

rate mission and strategy (e.g., Ashcraft & Slattery, 1996; Blaich & Blaich,

1993; Keefe, 1995; Montague, 1999; Ravasi & Lojacono, 2005; Stompff,

2003). In fact, even the visual identity advocate Olins emphasizes – as noted

by Bruce and Bessant (2002) – products as the ultimate determinant of a

company’s identity:

“When you think of Sony, what do you recall first? … Certainly not its advertising… Not even its symbol or logotype, if you can remember them. No. You think of its apparently endless range of brilliantly innova-tive products… Sony’s identity is largely conditioned by its products.” (Olins, 1989/1990, cited in Bruce and Bessant, 2002, p. 95).


2.2 design management and investors

As evident from the above review, there have been quite varied discussions

on the strategic roles and implications of design for company management

– and increasingly so in recent years. Nonetheless, as elaborated below, what

has been continually and rather completely ignored in the strategic perspec-

tives to design, is the role or behavior of investors in relation to a company’s

product design.

Now, where rarely occurring in design management literature, referenc-

es to investors have mostly appeared amidst a list or series of stakeholder

classes (customers, employees, investors, general public, etc.). Such lists

have appeared in connection with the general claim that design-generated

distinction/differentiation in products or other artifacts – as well as coor-

dinated and attractive corporate/brand identity – can make the company

more attractive to all stakeholders and therefore also investors (e.g., Bruce &

Bessant, 2002, p. 87; Schmitt, Simonson, & Marcus, 1995).

Beyond such general claims, slightly more specific and insightful perspec-

tives to the relation between investors and a company’s product design have

been presented by Andrew Hargadon and Brigitte Borja de Mozota. Harga-

don’s work has concentrated on depicting – often through elaborate case stud-

ies such as a study into Edison and his electric light innovation (Hargadon &

Douglas, 2001) – how success in design depends on how design “addresses

the needs of multiple actors” (Hargadon, 2005). Among these actors, Harga-

don often mentions investors – among others such as users, suppliers, dis-

tributors, content-providers, regulators, and the general public.

Borja de Mozota (2003, p. 113), in turn, notes that in future, design will

play an important role in firm’s financial (owner) relationships, among

other relationships – and remarks that design process is an identity process

that defines the company for itself, its customers, and its investors (p. 17).

Elsewhere, Borja de Mozota (2006) further prescribes that design manag-

ers should attempt to outline strategic vision -based, yet measurable links all


the way from customers’/market’s perceptions of the company’s design to

financial value creation. One of the ultimate questions for companies, Borja

de Mozota suggests, is “how should design appear to our shareholders?”

(pp. 47, 48).

Nevertheless, even Hargadon’s and Borja de Mozota’s arguments remain,

after all, rather superficial when it comes to investors. It is prescribed that

company managers, venture creators, or designers “have to address the

needs” of multiple actors – including investors – with product designs (Har-

gadon, 2005); “define the company identity” for investors through design

(Borja de Mozota, 2003); and ask “how should design appear to our share-

holders?” (Borja de Mozota, 2006). Yet, beyond these kinds of broad, rather

philosophical lines, no closer examinations seem to have so far emerged

into the generalizable mechanisms of how a firm’s product designs poten-

tially attract investors.

Particularly, even if we know and can (intuitively) assume that inves-

tors will be attracted by the increased sales and better margins, enhanced

brand value, greater market share, and better return on investment (ROI)

that “good design” potentially brings about (Borja de Mozota, 2006), the

extant research tells us little about the perceptual and evaluative processes

involved in investors’ decision-making. Curiously enough, even studies

(Rich, 2004) which have found (preliminary) evidence of the fact that com-

panies with highly-regarded product design fare better in terms of stock

market valuation have been totally ignorant of the mechanisms why or how

good product design would attract investors at the individual and subjective

level. The found correlation (Rich, 2004) between a precarious measure of

“good design” – such as the number of design awards won by companies –

and above-average stock market returns 10 tells us, indeed, nothing about the

perceptual and evaluative mechanisms involved in investors’ decision-mak-

ing 11. As a matter of fact, these stock return studies and measurements – as

done by consultants – also suffer greatly from confusing the explanandum

and explanans (i.e., what is explained with what). Most notably, inasmuch

as design awards are given to companies to a large extent on the basis of the


commercial success of the companies’ products, it is rather self-evident (or,

circular reasoning) that stock valuation – which fundamentally reflects the

commercial success of a company and its products – will correlate with the

number of awards.

Thus, the question remains: How do investors’ subjective perceptions

and evaluations of a company’s product design influence their investment

decisions? This is the main question which I aim to examine in this disser-

tation, theoretically as well as empirically. In the absence of design manage-

ment theory on the issue, I will develop my theoretical examination by draw-

ing on theoretical notions and empirical findings available in extant investor

research in the fields of behavioral finance and economic psychology. By

elaborating on these notions and findings and complementing them with

underlying (social) psychological theory on personal relevance and involve-

ment (e.g., Alba & Hutchinson, 1987; Bloch, Sherrell, & Ridgway, 1986;

Laaksonen, 1994), identification (e.g., Bhattacharya & Sen, 2003; Scott &

Lane, 2000, Aspara et al., 2008), and affect (MacGregor et al., 2000; Slovic

et al., 2002a, 2002b, 2007; Zajonc, 1980), I will develop a framework of

hypotheses concerning the very research question of how individuals’ sub-

jective perceptions and evaluations of companies’ product design influence

their investment decisions.

The contributions of my study address various streams of design man-

agement. Notably, my primary research question, theoretical development,

[10] In a number of studies commissioned by the Design Council (summarized in Rich, 2004), a set of stock exchange -listed companies were divided into groups on the basis of the number of design awards that the companies won. The studies generally suggest that the group of companies that

won a high number of design awards continually outperformed other stocks (i.e., the general stock market index). Specifically, the “good-design” companies outperformed the other stocks by 10–200 percentage units within different subperiods (booms, busts) during the overall period of 1993–2003.

[11] The authors of the studies in question themselves state or admit that they have not necessarily been interested in “how the correlation between fund criteria and [stock market] performance arises” (Rich, 2004, pp. 33–34).


and empirical evidence fundamentally extend the literature related to the

theme of strategic relevance of the marketplace distinction achievable through

designed artifacts (cf. section 2.1.1). While earlier research there has mostly

focused on strategic distinction that can be achieved through design in

product markets – often by studying users’ and consumers’ evaluations of

companies’ products and product design – the present research provides

insights into the distinction that a company’s product design can create

in the stock market, by studying the product design evaluations of inves-

tors. As implications of the results of the study, I am, consequently, able

to provide suggestions with respect to the two other strategic themes of

design management literature, as well: about managing the processes and

activities of designing (cf. section 2.1.2) and coordinating various designs and

coherent corporate identity (cf. section 2.1.3). This will be done in the Discus-

sion chapter.

30

3 Theory development: Product design and investors

31theory development: product design and investors

In this Chapter, I will develop a framework of hypotheses concerning how

individuals’ subjective perceptions and evaluations of companies’ product

design influence their investment decisions.

Before theorizing the mechanisms of how product design -related fac-

tors affect investment behavior (section 3.2), I will review the specific invest-

ment behavior -related constructs or variables of interest (section 3.1) – so

as to be able to subsequently theorize what influence the product design

-related factors have on those variables.

The investment behavior variables of interest can be broadly divided into

three realms. The first realm stems from the traditional finance research

notion that posits that investors’ investment decisions are primarily guid-

ed by financial considerations: Investors’ are seen to select investments,

including stocks, primarily based on their expected financial returns and

risks (Clark-Murphy & Soutar, 2004). An investment decision is, thus,

largely determined by the financial returns that a stock is expected to yield

(dividends, capital gains). Note that in terms of extant design management

literature that (marginally) refers to investors, these financial expectation

variables can be considered to relate to the issue how investors perceive the

company’s business in terms of e.g. likely return on investment (Borja de

Mozota, 2006). The specific financial expectations variables of interest will

be identified in section 3.1.1.

The second realm of investment behavior variables of interest relates to

the notion that investors “select” investments from those available in the

market. Traditional finance research assumes that an investor thoroughly

considers and compares alternative stocks relative to each other (and even

relative to other investment opportunities, such as savings accounts and

bonds) before making any investment decision. Yet, recent behavioral

finance research has paid increasing attention to how and to what extent

investors actually consider alternative stocks (e.g., Barber & Odean, 2008;

Fama & French, 2007). Especially, the role of a priori familiarity with certain

companies in deciding one’s investments has been explored (e.g., Coval &

Moskowitz, 1999; Grullon, Kanatas, & Weston, 2004; Huberman, 2001;


Merton, 1987). The variables of interest related to investment consideration

and familiarity will be identified in section 3.1.2.

The third realm of investment behavior variables of interest deals with

investment behavior aspects that go beyond the financial expectations and

considerations altogether. While traditional finance research has been rath-

er silent on such aspects, recent behavioral finance research has begun to

recognize that expected financial returns and risks may not entirely deter-

mine an investor’s willingness to invest in stocks. For instance, Fisher and

Statman (1997) remark that it is no more reasonable to assume individuals

to be concerned only about risk and return when constructing an invest-

ment portfolio than it is to assume them to be concerned only about cost

and nutrition when deciding what to eat. Thus, reviewing variables that go

beyond financial considerations (section 3.1.3) allows me to subsequently theo-

rize how product design -related factors also influence investment behavior

beyond financial considerations (section 3.2).

3.1 investment behavior -related constructs of interest

3.1.1 financial expectations – optimism and confidenceIn the present research framework, I do not focus on (measuring) the finan-

cial returns that an investor expects from a company – or risks related to

them – in absolute or objective terms. Rather, I focus on subjective aspects

of financial return expectations to which behavioral finance researchers

have increasingly referred.

Firstly, there is the subjective aspect of optimism. With respect to

behavioral finance, the concept of optimism relates to the broader notion

whereby it is acknowledged that the financial returns that investors expect

from company stocks are not wholly determined by objective mathemati-

cal calculation and forecasting of probabilities but also by one’s subjective


intuition and sentiments (see e.g., Hirshleifer, 2001; Wärneryd, 2001). In

fact, already Keynes (1936) discussed the optimism that people often have

in their new investments in companies and referred to “our rational selves

choosing between the alternatives as best we are able, calculating where we

can, but often falling back for our motive on whim or sentiment or chance”

(p. 163).

In effect, we can assume that higher optimism about the financial returns

of a company’s stock means higher overall financial returns expected from

it. In common finance terms, optimism in this sense would mean higher

expectancy (or expected mean) value of the company’s financial returns and/

or lower risk that those returns are perceived to bear 12. Since expected finan-

cial returns (and related risks) are, according to standard finance theory,

the fundamental determinant of stock investment choices (Clark-Murphy &

Soutar, 2004), we can consequently assume that individual investors’ stock

investment choices are contingent on potential optimism in their expecta-

tions about the financial returns from stocks. In simple terms, the more

optimism an investor has about the financial returns of a company’s stock,

the more attraction he will have towards the stock and the more likely he

will invest in it. This makes an investor’s optimism about the financial returns

of a particular company’s stock our first construct, or variable, of interest.

Note here that it is beyond the scope of this dissertation to delineate

whether optimism always means overoptimism in the sense of unreason-

ably high or inflated financial return expectations (cf. Hirshleifer, 2001;

Wärneryd, 2001), or the conditions when that is the case. Nor do I focus

on optimism as a dispositional or personality character of an investor (cf.

Hmieleski & Baron, 2009; Hilton, 2001) – but rather as a phenomenon

specific to an individual investor’s expectations of a particular stock. Thus, I

view an investor’s optimism about the financial returns of a particular stock

[12] lower risk in the form of lower expected variance of the returns or lower expected probability of really poor/negative returns


as a simple phenomenon that concerns the overall positivity of his expecta-

tions about the stock’s financial returns and, hence, attraction to it.

Secondly, since it is not only the overall/likeliest level of expected finan-

cial returns of a stock (i.e., optimism) that determines, according to finance

thinking, one’s willingness to invest in the stock but also the perceived risks

related to those returns, any framework of investment behavior should

explicitly incorporate some risk perception aspects. I choose to refer, in

this study, especially to the phenomenon of (over)confidence – which is a

perceived risk -related phenomenon to which behavioral finance research-

ers have increasingly referred (e.g., Daniel, Hirshleifer, & Subrahmanyam,

2001; Dorn & Huberman, 2005; Gervais & Odean, 2001; Glaser & Weber,

2007; Graham, Harvey, & Huang, 2009; Odean, 1998). As Glaser and

Weber (2007) note, there is no single definition for (over)confidence in the

literature, but most often this concept refers to investors’ (over)estimation

of the precision of their subjective information about the expected financial

returns of stocks (e.g., Gervais & Odean, 2001; Graham, Harvey, & Huang,

2009; Odean, 1998).

In general, then, the higher confidence an investor has in his own expec-

tations about the financial returns of a stock, the lower perceived risk he

tends to attach to the returns of the stock (see Glaser, Langer, & Weber,

2007). Thus, confident investors are assumed to perceive less risk in the

expected financial returns of a stock than less confident investors. Note

that this does not imply that higher confidence would automatically mean

exactly the same as lower perceived risk. Actually, perceived risk would, in

principle, refer to an investor’s subjective view of the probability distribution

(and related standard deviation) concerning how much he expects the finan-

cial returns of a stock to deviate from their likeliest mean (or expectancy)

value. In contrast, confidence could be understood as the investor’s (second-

order) belief of the extent to which his subjective view of that probability

distribution is correct or precise vs. imprecise or ambiguous (cf. Campbell

& Kräussl, 2007; see also Uppal & Wang, 2003) 13.

In any case, we can thus assume that the risks that an investor perceives


to relate to the financial returns of stocks and, hence, his stock investment

decisions are also contingent on confidence (and not only optimism) that he

has in his own, subjective expectations about the financial returns. There-

fore, an investor’s confidence in his expectations about the financial returns of

a particular company’s stock becomes another variable of interest to us. Note

however, again, that it is beyond the scope of this dissertation to delineate

whether confidence always means overconfidence in the sense of unreason-

ably high confidence in one’s own expectations (cf. Daniel, Hirshleifer, &

Subrahmanyam, 2001; Wärneryd, 2001), or the conditions when that is the

case. Also note that similarly as for optimism, I do not focus on confidence

as a dispositional or personality trait of an investor but as a phenomenon

specific to a particular investor’s expectations about a particular stock (cf.

Deaves, Lüders, & Duo, 2009; Jonsson & Allwood, 2003).

3.1.2 familiarity and considerationEconomics and finance literatures have traditionally assumed that all the

world’s stocks and other investment opportunities as well as all relevant

information about them are readily available and public for investors

(Wärneryd, 2001). Given these assumptions, the mainstream research has

not paid much attention to how investors actually end up considering cer-

tain stocks as investment targets and compare them with others – in terms

of expected financial returns or other terms.

Yet, recent research in behavioral finance (Barber & Odean, 2008; Fama

& French, 2007; Getzner & Grabner-Kräuter, 2004; Goldstein, Johnson,

[13] This also means that an individual can be fairly optimistic about the financial returns of a stock, expecting its mean returns value to be high and/or the

probable deviations around the mean to be low – but still have rather low confidence in (i.e., doubts about) whether he really has a precise/correct picture of

the probability distribution of the returns. The converse situation – relatively low optimism and relatively high confidence – is also possible.


& Sharpe, 2008) has increasingly embraced the idea of viewing stocks as

marketed “goods” or “products” – viewing the processes of one’s coming

to know, considering, comparing, and constructing preferences for stocks

with increasing interest. Thus, it has been recognized that stock markets

– particularly with the emergence of global, Internet-enabled marketplaces

(cf. Zwick & Dholakia, 2006a, 2006b; Zwick, Denegri-Knott, & Schroeder,

2007) – are crowded by thousands of alternative companies and stocks, and

individuals face, due to their cognitive limitations, formidable information

acquisition and processing problems in choosing which stocks to invest in

(Barber & Odean, 2008).

The consequent argument of the extant literature is quite an intuitive

one: investors consider purchasing only stocks that have first caught their

attention (Barber & Odean, 2008; Odean, 1999). However, mere attention

is, in most cases, obviously not likely to lead directly to investment consid-

eration, let alone decision. Rather, an individual will in most cases need to

search or have obtained at least certain information on a company that he

potentially proceeds to invest in. Behavioral finance research has recognized

this by referring to the special role that an investor’s familiarity with a com-

pany often plays. Indeed, it is a fairly established notion that investors tend

to prefer and choose to invest in familiar companies – mostly because they

have more precise information of familiar (than of less familiar) companies

and, thereby, face lower perceived risk to invest in them (Coval & Moskow-

itz, 1999; Frieder & Subrahmanyam, 2005; Grinblatt & Keloharju, 2000;

Grullon, Kanatas, & Weston, 2004; Huberman, 2001; Kang & Stulz, 1997;

Merton, 1987). Based on this literature, what should also be true is that if

there are two companies that have approximately similar expected financial

returns, the more familiar one is preferred due to inherent preference for

the familiar (Huberman, 2001) and/or comfort obtained from investing in

the familiar (Ackert & Church, 2009).

As a matter of fact, due to the quite widely recognized role of familiarity

in deciding people’s investment decisions, I choose to present as my first –

baseline – hypothesis the following:


Hypothesis H0: An investor’s familiarity with a company has

positive effect on his determination to invest in that company’s

stock rather than other companies’ stocks (that have approximately

similar expected financial returns/risks).

I present this hypothesis already at this point, indeed, because of the

prominence of the familiarity argument in earlier behavioral finance litera-

ture. My main product design -related, new propositions will be developed

later (section 3.2) and naturally go beyond mere company familiarity.

In addition to the rather static concept of an investor’s familiarity with a

company, another relevant construct pertaining to the investment decision

process is the more dynamic concept of consideration of alternatives. Spe-

cifically, I pay attention, in the present framework, to the degree of consid-

eration that an investor, who ponders whether to invest in a particular com-

pany, gives to alternative companies or investment targets. Fundamentally,

the relevance of this degree of consideration relates to the well-established

notion that individuals limit in investment choice setting – as in any other

choice setting – the amount of information-processing over alternatives, in

order to be able to reach a decision. This notion is, indeed, the underlying

assumption in the view that people use “heuristics” in reaching decisions, so

as to avoid endless gathering of further information on and deliberation over

innumerable alternatives (e.g., Gigerenzer, Todd, & ABC Research Group,

1999; Kahneman, Slovic, & Tversky, 1982; Simon, 1955, 1957, 1979).

At the one extreme, an individual might choose to make an investment

in a given company that just crosses his mind – without any consideration

given to any alternatives. At the other extreme, an individual might not be

able to reach a decision in his investment decision-making due to not being

able to cease consideration of one company – and its pros and cons – over

others. Seen from the perspective of a company (which engages in product

design), it will generally be advantageous if investors reach the decision to

invest in it earlier rather than later or not at all. Therefore, the degree of

consideration given to alternative investment opportunities (than the focal com-

pany) is a construct, or variable of interest, too.


3.1.3 extra investment willingness, beyond financial returnsAs implied above, most finance theory traditionally assumes that having

formed expectations about the financial returns of investments, a rational

investor – in order to invest a given amount of money in a certain stock

– requires that stock to have a better profile of expected returns (and per-

ceived risk) than others (Clark-Murphy & Soutar, 2004). On one hand, it is

assumed that given a choice between stocks of two or more companies with

equal expected return-risk profiles, an individual investor would be indiffer-

ent to which to choose.14 On the other hand, the assumption is that given a

choice between two or more equally risky stocks, an individual would cat-

egorically prefer and choose to put his money in the one with the highest

expected returns.

Yet, again, more recent behavioral finance research has begun to recog-

nize that the expected financial returns and risks may not entirely determine

an investor’s willingness to invest in stocks – just as cost and nutrition do

not entirely determine what they are willing to eat (Fisher & Statman, 1997).

Thus, even if it is assumed that most of one’s willingness to invest in a certain

company’s stock is determined by the expected financial return-risk profile

of the stock, one may have an additional component of investment willing-

ness determined by other factors. Let us call this additional component the

“extra willingness to invest in a stock, beyond its financial returns”.

Specifically, two variables pertaining to one’s extra willingness to invest

in a stock beyond its financial returns are of special interest. First, consider a

situation whereby an individual perceives two or more stocks to have approx-

imately equal financial returns and risk. In case the individual has no extra

willingness to invest in any of these stocks, he should be equally willing to

[14] In fact, due to the indifference, it might be difficult for the investor to make the decision which stock to invest in – to make up his mind.


Figure 2. Illustration of the construct “determination to invest in company A’s stock when it has equal expected financial returns as another stock B”.

Figure 3. Illustration of the construct “preparedness to invest in company A’s stock with lowered financial returns”.

Extra willingness to invest in company A’s stock, beyond its financial returns

Willigness to invest in company A’s stock, as determined by A’s expected financial returns

Extra willingness to invest in company B’s stock, beyond its financial returns

Willigness to invest in company B’s stock, as determined by B’s expected financial returns

Note. Assume that a person invests in company A’s stock.

Preparedness to invest in company A’s stock with lowered financial returns

Extra willingness to invest in company A’s stock, beyond its financial returns

Willigness to invest in company A’s stock, as determined by A’s expected financial returns

Extra willingness to invest in company B’s stock, beyond its financial returns

Willigness to invest in company B’s stock, as determined by B’s expected financial returns

Note. Assume that a person invests in company A’s stock.

Determination to invest in company A’s stock when equal financial returns

A B

A B


invest in each of them – and, hence, indifferent to which to choose. Never-

theless, to the extent that the individual still makes the decision to invest in

one of the stocks, say stock A, he evidently has a certain degree of determina-

tion to invest in company A’s stock when it has equal expected financial returns as

another stock B. This variable of interest should run from total indifference

to whether to invest in A or B, to the other extreme of total determination to

invest in A even if B has equal expected financial returns.

Second, an individual’s extra willingness to invest in a certain company

A’s stock beyond its financial returns may even manifest in his prepared-

ness to invest in company A’s stock with lowered financial returns. Clearly, if

an individual decides to invest in company A’s stock even if he expects it

to have a bit lower financial returns – at a given risk level – than company

B’s stock, the individual has obviously some extra willingness to invest in

company A’s stock beyond its financial returns. Note that extant research on

investors’ preparedness to give up on some financial returns so as to invest

in certain kind of companies – a quite radical idea for standard finance

research – is sparse. There have been some suggestions that investors may

obtain certain self-expressive, emotional, or experiential utility or benefits

(Fama & French, 2004; Kahneman, Wakker, & Sarin, 1997; Statman, 2004),

or psychic return (Beal, Goyen, & Phillips, 2005; Cullis, Lewis, & Winnett,

1992), from investments in e.g. socially responsible companies’ stocks or

stocks of companies based in their home country – making some investors

potentially satisfied with lower financial returns from such stocks. Indeed,

in the present research, I examine how a company’s product design might

elicit similar behavioral patterns.

Figures 2 and 3 illustrate these two final variables of interest. The Figures

assume that an individual will eventually invest (or has invested) in a com-

pany A’s stock over another company B’s stock. In Figure 2, the white parts

of the two columns represent one’s willingness to invest in company A’s

and company B’s stock, respectively, as determined by the stocks’ expected

financial returns. These white parts are of equal height, suggesting that the

expected financial returns of A and B are equal. The assumed investor has,


additionally, extra willingness to invest in both company’s stocks, beyond

their financial returns. However, the investor’s extra willingness to invest in

company A’s stock is greater than his extra willingness to invest in company

B’s stock. The difference between the sizes of these extra willingness com-

ponents will, in this case, constitute our variable of interest, determination

to invest in company A’s stock when it has equal expected financial returns as

another stock B – assuming that the investor ends up investing in company

A’s stock.

In Figure 3, in turn, the white parts of the columns represent, again, an

investor’s willingness to invest in the companies’ stocks, as determined by

the stocks’ expected financial returns. Now, the expected financial returns of

company B’s stock are evidently greater than those of company A’s. However,

the investor has extra willingness to invest in company A’s stock – enough

to make his total willingness to invest in company A’s stock (white part +

colored part) slightly greater than his total willingness to invest in company

B’s stock. The difference between the sizes of these extra willingness compo-

nents will, in this case, constitute our second variable of interest, preparedness

to invest in company A’s stock with lowered financial returns – assuming that

the investor ends up investing in company A’s stock. In effect, the investor

in this case, in a way, gives up on the corresponding amount of (expected)

financial returns in order to invest in A rather than B.

3.2 product design influences on investment behavior

While the previous sections (3.1.1 – 3.1.3) identified the specific investment

behavior -related variables of interest in the present research, this section

will develop the main theory of this dissertation – concerning the mecha-

nisms by which investors’ behavior (i.e., the variables identified above) will

be influenced by product design -related factors. The main product design

-related factors theorized are the (1) personal relevance that an investor


attaches to a certain domain(s) which the company’s products are perceived

to represent or support and (2) the investor’s overall affect for, or affective

evaluation of, the company’s product design.

To be able to follow the theory/hypothesis development more conve-

niently, the reader can refer to Figure 4 and Figure 5 on pages 61–62, which

will summarize the hypotheses into two models. The hypotheses are divided

between the two Figures on the basis of what kind of investment behavior

variables they pertain to. Specifically, Figure 4 focuses on those hypotheses

that address the effects of investors’ product design -related perceptions

and evaluations on their financial expectations (i.e., the variables of interest

introduced above in section 3.1.1: optimism and confidence) as well as on

their consideration about the companies’ stocks (i.e., the variable introduced

in section 3.1.2: consideration given to alternative investment targets).

Figure 5, in turn, focuses on those hypotheses that address the effects

that investors’ product design -related perceptions and evaluations poten-

tially have on their investment decisions beyond financial returns expected

from companies’ stocks (i.e., the variables introduced in section 3.1.3: deter-

mination to invest in a company’s stock rather than in another stock that has

similar expected financial returns; preparedness to invest in a company’s

stock with lower financial returns).

Note that the effects of/on familiarity (cf. section 3.1.2) are present in

both Figures.

3.2.1 personal relevance of the domains represented by a company’s productsIn this section, I develop hypotheses concerning how the personal relevance

that individuals attach to domains (of life) which a company’s products rep-

resent will influence their investment behavior, or behavioral tendencies,

towards that company’s stock.

First of all, it is a commonplace notion in product design and develop-


ment research (e.g., Battarbee & Mattelmäki, 2002; Battarbee & Koskinen,

2005; Kreuzbauer & Malter, 2005; Normann & Ramírez, 1993; Verganti,

2006) as well as in wider consumer, marketing, and sociological research

(e.g., Bloch & Richins, 1983; Csiksentimihalyi & Rochberg-Halton, 1981;

Ligas, 2000; Michaelidou & Dibb, 2006; Richins, 1994b) that people attach

subjective meanings to products and potentially value the product because of

those meanings (rather than strictly because of objective product attributes).

The assumption is usually that such product meanings – when involving

perceptions of personal value – lead to purchases of and/or pleasurable use

experiences with the products. Now, my intention is to present a theoretical

mechanism that explains how certain product-related meanings can also

lead to willingness to invest in the stock of a company that designs and

produces the products.

A central, underlying mechanism here relates to the degree of personal

relevance attached to a company’s products. Notably, personal relevance is

a phenomenon to which consumer researchers often refer when studying

people’s “involvement” with products and issues in general. Indeed, albeit

that the involvement concept in itself has been subject to ambiguity (see

Antil, 1984; Bloch & Richins, 1983; Mittal, 1995; Zaichkowsky, 1985, 1994),

it is mostly agreed that involvement essentially has to do with the personal

relevance, importance, and/or interest that a person attaches to a certain

object.

Moreover, although some assume that there may exist products which

are inherently ”high-involvement products”, “high-importance products”, or

“high-relevance products”, Antil (1984) notes that “it is not the product per

se that is involving, but the personal meaning or significance the individual

attributes to the characteristics of that product that results in involvement”

(p. 204). Moreover, I specifically focus on personal relevance as implicated

in enduring (or ego-)involvement. In enduring involvement, the personal

relevance of a product reflects its being related to the individual’s identity,

self-image, or self concept – and, therein, his personally important interests,

needs, and values (Bloch, 1981; Celsi & Olson, 1988; Zaichkowsky, 1985);


(leisure) activities (Celsi & Olson, 1988; Havitz & Dimanche, 1997; Havitz

& Mannell, 2005); and/or “ideals”, “themes” and “projects” of life in general

(Coulter, Price, & Feick, 2003; Huffman, Ratneshwar, & Mick, 2000).

Thus, there are actually two aspects to the phenomenon to consider.

First, there is (i) the degree of personal relevance of a certain activity, area

of interest, theme, or ideal to an individual and his identity – i.e., his iden-

tification with it. Note that from now on, I refer to such activities, areas

of interest, themes, and ideals – ones to which an individual may attach a

degree of personal relevance – with the single term “life domain” (or simply,

“domain”). Second, there is (ii) the degree to which an individual perceives

certain products to represent or support the domain. Both of these aspects

may and will vary from individual to individual (Laaksonen, 1994).

In any case, there are two main ways in which the personal relevance

of (life) domain(s) supported by certain products can lead to willingness to

invest in the stock of a company that designs and produces the products.

The first relates to (a) information-processing and the second to (b) self-

expression.

a) information perspective. The first notable aspect of the personal rel-

evance that an individual attaches to a certain life domain is the fact that

it motivates the individual to acquire and process information related to

the domain – learn about it. Especially in involvement research, there is

ample evidence that perceived personal relevance of a product’s domain

motivates a person to engage in (intentional) ongoing search of informa-

tion concerning the domain – as well as increases one’s subjective atten-

tion to incoming information that concerns the domain (Bloch, Sherrell,

& Ridgway, 1986; Petty, Cacioppo, & Schumann, 1983; Schmidt & Spreng,

1996). One implication of this is that the personal relevance of a domain

can be expected to increase one’s likely knowledge of and familiarity with

the domain and, further, product categories and products related to the

domain (see Alba & Hutchinson, 1987). Thus, my first hypothesis about

the personal relevance is:


Hypothesis H1: The personal relevance that an investor attaches

to a certain life domain has positive effect on his familiarity with

products that are perceived to represent or support the domain.

What can be further expected is that one’s familiarity with a certain

product or certain products, in turn, likely increases one’s familiarity with

the company that designs and produces those products. Of course, it is not

always the case that a person is aware of or familiar with the company that

produces a given product (such as Amer Sports Corporation as a producer

of Suunto watches), but the general tendency of greater company familiarity

following from familiarity with the company’s products is probable. In other

words:

Hypothesis H2: An investor’s familiarity with a particular

company’s products has positive effect on his familiarity with the

company.

Note that the above hypotheses actually suggest one subjective process

of how an investor may, in the first place, become aware of and familiar

with a certain company. Familiarity with a company, in turn, is important

because it is – as proposed in hypothesis H0 (p. 37) – often a determinant of

a decision to invest in the company (e.g., Coval & Moskowitz, 1999; Frieder

& Subrahmanyam, 2005; Grullon, Kanatas, & Weston, 2004; Huberman,

2001; Merton, 1987). Indeed, these hypotheses together suggest how a com-

pany may initially come to catch one’s subjective attention as a potential

stock investment target, even if the stock was not objectively a stock of high

visibility (cf. Barber & Odean, 2008; Gervais, Kaniel, & Mingelgrin, 2001).

Namely, an investor may be(come) familiar with a certain company – and

start to consider it as an investment target – as a consequence of the fact

that the company’s products represent a domain which is personally rel-

evant to the investor and which he therefore has (and obtains) lots of knowl-

edge about. For instance, an investor who finds motoring or car-driving

as a personally highly relevant domain is likely to be(come) familiar with


companies whose products support or represent car-driving (such as car

companies, tire companies, etc.) – and invest in such a company partly due

to the familiarity.

Moreover, besides familiarity, the present research is also to address

the level of consideration given to a particular stock before it is purchased

vis-à-vis consideration given to alternative stocks. With respect to this con-

sideration, we might expect – based on the extant finance research – that

one’s familiarity with a particular company, or its products, decreases the

consideration given to alternative companies when one has that company

available for investment. Namely, an individual’s familiarity with a particular

company’s products might make him feel that he has a special information

advantage to consider investment in that company rather than in other (less

familiar) companies (Frieder & Subrahmanyam, 2005; Klein & Bawa, 1976,

1977; Merton, 1987). Also, the individual might have heightened confidence

in his own expectations about the familiar company’s financial returns (Bar-

ber & Odean, 2001, 2002; Kang & Stulz, 1997; Li, 2009) – which in turn

would have negative influence on the consideration he gives to alternative

investment targets. Thus, based on finance research, the following hypoth-

eses can be presented (as null hypotheses), accounting both for a potential

direct effect of familiarity (H3.0) and an indirect one through confidence

(H4.0a and H4.0b):

Hypothesis H3.0: An investor’s familiarity with a particular

company’s products has negative effect on the consideration that

he gives to other companies as alternative investment targets.

Hypothesis H4.0a: An investor’s familiarity with a particular

company’s products has positive effect on the confidence that

he has in his own expectations about the financial returns of the

company’s stock.

Hypothesis H4.0b: The confidence that an individual has in his own

expectations about the financial returns of a particular company’s


stock has negative effect on the consideration that he gives to other

companies as alternative investment targets.

Nevertheless, these notions derived from the mainstream of behavioral

finance, do not hold necessarily. First of all, consumer research on the role

of prior knowledge in purchase settings has argued that that prior knowl-

edge may actually encourage further information search by making it easier

and less costly to process new information (Gursoy & McCleary, 2004;

Rao & Sieben, 1992). For instance, the knowledge of a company’s product

attributes may allow the individual to formulate more specific questions

(to himself) about the company as an investment target, relative to alterna-

tive investments targets in the same or other industries. Consequently, the

investor may be motivated to exercise more information search and consid-

eration both on the focal company in question and its alternatives (cf. Gur-

soy & McCleary, 2004). Likewise, relatively wide and heterogeneous prior

knowledge of a company’s product attributes – and the questions it helps to

raise – may actually decrease the investor’s confidence in his initial expecta-

tions of the company’s financial returns.

Second, familiarity with a particular company’s products may reflect

broader familiarity with the kind of products in question, perhaps even

outright expertise in the product category (see Alba & Hutchinson, 1987;

Brucks, 1985). Accordingly, one may have increased awareness of compet-

ing companies in the same category, as well, and about the most important

product-related attributes to consider in the investment decision-making

across the competitors (cf. Alba & Hutchinson, 1987). In addition, to the

extent that the familiarity with a particular company’s products stems from

personal relevance of the life domain represented by the products, the indi-

vidual may be motivated to find out the strengths and weaknesses of pos-

sible alternatives in more detail, as well as more carefully attend, process,

and comprehend relevant information (Celsi & Olson, 1988; Chaiken, 1980;

Chaiken, Liberman, & Eagly, 1989; Kim, Scott, & Crompton, 1997).

In sum, the above discussion, in fact, enables the presentation of the


following alternative hypotheses to the ones above (H3.0, H4.0a):

Hypothesis H3.1: An investor’s familiarity with a particular

company’s products has positive effect on the consideration that

he gives to other companies as alternative investment targets.

Hypothesis H4.1a: An investor’s familiarity with a particular

company’s products has negative effect on the confidence that


company’s stock.

b) self-expression perspective. Beyond the contribution of the perceived

relevance of a company’s product domain to an investor’s information pro-

cessing about investment alternatives, personal relevance may also influ-

ence the consideration he gives to the alternatives through self-expressive

tendencies of the investor. The underlying theoretical argument is the fol-

lowing. First of all, if one perceives a certain domain as personally relevant,

one will – as suggested above – identify with the domain and perceive it

congruent with one’s self or identity (or have “self-affinity” for it; see Aspara

et al., 2008). What an individual’s identification with or affinity for a certain

object (domain), in turn, does is that it arguably leads to his willingness to

give supportive treatment to the object and/or cooperatively give more of

his scarce resources to its service (Bhattacharya & Sen, 2003; Scott & Lane,

2000; Aspara et al., 2008).

The present application of this argument is that one way through which

a person can give such supportive treatment (and his scarce resources) to a

certain personally relevant life domain is through investment in such a com-

pany that designs and produces products that represent the domain 15. It can be

expected, for example, that an investor who finds motoring or car-driving a

life domain that is personally relevant to him (i.e., his identity) is willing to

support this domain by investing in a company(/ies) whose products sup-

port or represent car-driving (such as car companies, tire companies, etc.).

Similarly, an investor who finds gardening a personally relevant domain


can be expected to have willingness to support that domain by investing in a

company whose products represent gardening (such as a company design-

ing garden tools).

Thus, when an individual is in the course of considering companies for

investment purposes, his viewing a particular company’s products as being

supportive or representative of a domain which he perceives personally self-

relevant may increase his propensity to choose that company as investment

target – and, hence, express his self or identity through the investment. Note

that the possible existence of such “self-expressive” investment choices has

been marginally speculated about in recent behavioral finance research, as

well (Statman, 2004).

Now, regarding the consideration given to alternative investment tar-

gets, the potential self-expression manifesting in the investment choice

can be expected to be consideration-decreasing – as already the term “(self-)

express” suggests. In other words, a person’s final investment decision may

be determined relatively swiftly in favor of one company that has products

expressive of one’s self – especially when there is a set of companies under

consideration with approximately similar expected financial returns. Thus,

at the same time as further consideration of alternatives would be cut short,

such self-expression -based choice would most likely manifest in one’s

determination to invest in one stock over alternatives with approximately

similar expected financial returns16. Thus, my hypotheses are:


to a certain life domain that a particular company is perceived to

represent with its products has negative effect on the consideration

that he gives to other companies as alternative investment targets.

[15] Other ways to give supportive treatment to the personally relevant life domain might be e.g., voting for a person or party (in elections) that supports the domain; volunteering in a community

that supports the domain; seeking a job or career where one can cherish the domain; and, of course, buying and using products that support or represent the domain.

[16] This is consistent with what has been called the principle of self-affinity for an object eliciting choice over similar alternative behaviors (Aspara et al., 2008).




represent with its products has positive effect on his determination

to invest in that company’s stock rather than other companies’

stocks which have approximately similar expected financial

returns/risks (but which are not perceived to represent the domain

in question with their products).

In a way, the above propositions suggest that a positive attitude towards

a certain domain that stems from the individual’s self(-concept) is likely to

manifest in his investment decision(s), as well, as a preference for a com-

pany whose products support or represent that domain. The effect of per-

sonal, product-related attitudes on investment preferences has earlier been

demonstrated by Getzner & Grabner-Kräuter (2004) – yet only in regards to

one’s attitude towards “green products” correlating with one’s preference for

“green shares” (and not more generally, as I suggest here). Moreover, what

the above propositions also imply is that in case two (or more) companies

are expected to have the ability to yield an approximately equal amount of

money to the investor, the investor would call the final investment decision

based on how the company makes its money – in terms of what kind of

domains its products support or represent. In general, there is some extant

research that speculates about such “profits-with-principles” motivations of

investors – i.e., their caring not only about how much money is made but

also about how it is made (cf. Jackson & Nelson, 2004; Nelson, 2005; Nils-

son, 2008; Schueth, 2003; Getzner & Grabner-Kräuter, 2004). However,

these extant pieces of literature have concentrated, again, on “ethical invest-

ing”, “socially responsible investing”, or “green investing”, while the present

propositions suggest that investors may have investment principles related

to the personal relevance and appeal (rather than ethicality) of companies’

product domains, as well.

Furthermore, the self-expressive motivation may not only determine

an individual’s investment decision in favor of one company over others

that have approximately similar expected financial returns. But – it may


even make an individual satisfied with lower financial returns from the

focal company’s stock than from others. Namely, insofar as one’s perceived

personal relevance of a domain leads to the aforementioned willingness to

give supportive treatment to a domain (and one’s scarce resources to its

service) in the form of investing in a company whose products represent

the domain, one may not “need” or “require” absolutely maximal financial

returns from such a company so as to still invest in it. After all, one has the

extra willingness to invest in the company – stemming from the willingness

to give support to the domain – on top of the willingness to invest that is

determined by the “mere” expected financial returns (see Figure 3, p.39).

Indeed: as one will obtain self-expressive, emotional benefits from invest-

ing in the stock (Statman, 2004; see also Aspara, 2009; Aspara & Tikkanen,

2008), one will not need as high financial benefits from the stock and still be

prepared and willing to invest in it. For instance, given the severe financial

problems recently faced by the auto industry, it seems obvious that many

investors have been prepared to invest in car companies even if the finan-

cial returns of these companies have not seemed very promising. According

to the theory presented here, this preparedness could be (at least partially)

explained by the fact that motoring/car-driving is highly relevant domain to

certain investors17. In terms of Patrick Jordan (2002) – a much-cited design

scholar – the question would be of obtaining “ideo-pleasure” from investing

in the stock of a company whose products support or represent a personally

relevant and valued domain. Yet, besides reflecting mere ideo(logical) plea-

sure, such an investment motivation may also be considered semi-rational

(from the investor’s subjective point of view). Namely, by investing in a

company whose products support or represent a personally valued domain

(e.g., a sport), one can aim to participate in advancing the viability and devel-

opment of that domain – of which one can oneself (later) benefit in terms

[17] Of course, the main reason is likely to be that investors think that the auto companies will, after all, pull themselves out of the financial crisis and eventually start to earn decent profits.


of better quality of life (e.g., better sport equipment and sport experiences).

Thus, my further hypothesis is:



represent with its products has positive effect on his preparedness

to invest in that company’s stock even with lower financial returns

expected from the stock than from other companies’ stocks (which

are not perceived to represent the domain in question with their

products).

To extend the adage mentioned earlier, this proposition suggests that

an investor’s evaluation of how (or the context in which) a company makes

its money – especially the extent that its product domain is personally rel-

evant – may even lead him to invest in the company by relaxing a bit on his

requirements concerning how much money is made. That is, the investor

may not require absolutely maximal financial returns, inasmuch the com-

pany’s product domain is personally relevant. Note that extant behavioral

finance research has – in the context of ethical and socially responsible

investing – also implied about an investor’s potential preparedness to give up

on some of financial returns, so as to invest in “green”, “ethical”, or “socially

responsible companies” (e.g., Beal, Goyen, & Phillips, 2005; Cullis, Lewis,

& Winnett, 1992; Getzner & Grabner-Kräuter, 2004; Statman, 2004). Nev-

ertheless, my theory essentially extends this argument to companies whose

products are perceived to support or represent certain personally relevant

domains (whatever they are).

Finally, it should be noted that the pursuit of the preferential and sup-

portive treatment and giving of scarce resources to the company’s product

domain through stock investment may be unconscious and/or conscious.

Accordingly, I recognize that the hypothesized effects (H6 and H7) may be

direct as well as indirect, i.e., manifest directly and/or through the mediating

variable of one’s (conscious) willingness to support the company, by investing

in its stock. Indeed, including this mediating variable in the analysis enables


verification of the very premise – stemming from the identification and

self-affinity theories – that the influence of identification on one’s behavior

occurs partly through one’s willingness to give supportive treatment to the

object of identification.

3.2.2 overall affect for a company’s product designIn this section, I develop hypotheses concerning how investors’ overall affect

for a company’s product design will further influence their investment behav-

ior, or behavioral tendencies, towards that company’s stock. Here, there are

three main ways of potential influence: the role of affect (a) in selection heu-

ristics, (b) in psychology of possessions, and (c) in financial expectations.

a) selection heuristic perspective. Somewhat independent of the degree

of personal relevance attached to life domains represented by a company’s

products, an individual investor may have positive (or negative) overall evalu-

ation of the company’s product design. As increasingly acknowledged even

by economics and finance literatures (Slovic et al. 2002a, 2002b, 2007),

an individual’s affective evaluation of any object (such as a company or the

product design of a company) involves affect attached to the perception of

the object (Zajonc, 1980; see also Damasio, 1994, 2003). This affect can be

considered to mean the specific quality of “goodness” vs. “badness” experi-

enced as a feeling state (with or without consciousness) and demarcating a

positive or negative overall quality of the object. As such, the affective evalu-

ation is like an overall (valenced) attitude: an index of the strength of how

much a person likes or dislikes the object (Ajzen & Fishbein, 1980), a sum-

mary evaluation of the object on bipolar dimensions of positive vs. negative

impressions, such as good–bad, pleasant–unpleasant, likeable–dislikeable,

attractive-unattractive (Ajzen, 2001).

Notably, feelings of goodness, pleasantness, and attractiveness evoked

by products (rather than their mere appearance/good-lookingness or


technical functionality) are also the main evaluative dimensions for prod-

ucts in contemporary design research (e.g., Jordan 2002; Norman, 2004).

Nevertheless, instead of being interested in consumers’ or users’ evalua-

tions of products along these dimensions – like design research usually –,

we are expressly interested in investors’ evaluations of companies’ products

along the same dimensions. Thus, what is at stake here is: How positively

does an investor evaluate a company’s product design? How good, pleas-

ant, and attractive does the investor find the company’s product design to

be overall?

In effect, evaluative images, marked by positive and negative affective

feelings, guide human judgments and decision making, along with (ratio-

nal) thinking and reasoning (Damasio, 1994; Slovic et al. 2002a, 2002b,

2007; Zajonc, 1980). Therefore, images and affective evaluations of com-

panies may be a major basis on which individuals make investment deci-

sions, as well (MacGregor et al., 2000). Notably, since an individual’s ability

to have information of and rationally judge and calculate all the ‘pros’ and

‘cons’ of various alternative stocks in terms of future financial returns is very

limited, the influence of affect will be further emphasized.

Indeed, people are generally able to make only very rough approxima-

tions of the return-risk profiles of alternative stocks. During investment con-

siderations, therefore, an individual may simply prefer and select to invest

in the stock of a company that he happens to like the most – or the prod-

uct design of which he likes the most – over alternative stocks which have

approximately similar returns-risk profiles. Slovic et al. refer to this kind of

decision-making as the use of “affect heuristic” (Slovic et al. 2002a, 2002b,

2007; Finucane et al., 2000). Specifically, rather than spending more of his

limited (mental and other) resources on conducting more and more infor-

mation search of and consideration over the various alternative investment

opportunities that have approximately similar financial return-risk profiles,

an investor likely tends to use his readily available affective impressions of

companies so as to arrive at his final investment choice. This kind of reliance

on the affect heuristic – shortcutting investment choices in favor of compa-


nies of which one has positive affective impressions – can also explain why

investors often seem think that “good companies” (i.e., companies with good

reputation) are good or preferable investment targets as well (De Bondt,1998;

Shefrin, 2001, 2002; van der Sar, 2004; Shefrin and Statman, 1995).

The core argument concerning product design, here, is that an individu-

al’s positive affective evaluation of a company’s products is likely to centrally

contribute to his overall affective impression of the company itself and,

thereby, to the potential use of affect heuristic in shortcutting the invest-

ment decision in favor of the company’s stock (see also Aspara et al., 2008;

Aspara & Tikkanen, forthcoming). In other words, hence, my hypothesis

is that investors have a tendency to view that “good-design companies” are

good/preferable investment targets, as well – with increased determination

to invest in such companies and tendency to shortcut consideration of alter-

natives. Thus:

Hypothesis H8: An investor’s positive overall affect for a particular

company’s product design has negative effect on the consideration

that he gives to other companies as alternative investment targets.


company’s product design has positive effect on his determination

to invest in that company’s stock rather than other companies’ stocks

which have approximately similar expected financial returns/risks.

Notably, the above hypotheses are also in line with the (social) psycholo-

gy notion that an individual who has a positive overall attitude (and, thereby,

affect) towards an object – here, a company’s product design – will have a

predisposition to behave in a consistently favorable way with respect to the

object (Fishbein & Ajzen, 1985; Zajonc, 1980). Indeed, due to psychological

drive to maintain “attitude-behavior consistency” (e.g., Abelson et al., 1968;

Festinger, 1957), it can be expected that an individual who has positive affect

for a company’s product design will not only e.g. talk favorably about the

products (and perhaps buy or use them) but also express his positive affect


by deciding an investment decision in favor of the company18. This should

be true at least when alternative investment opportunities have similar (i.e.,

not clearly better) expected financial returns (Aspara & Tikkanen, 2008), as

proposed above.

b) possession perspective. What is to be further noted regarding the role

of affect in investments (i.e., beyond simple affect heuristics and attitudinal

consistencies) is that one’s special affect towards something may even lead

to outright desire to possess it. This has been suggested by social psychologists

and sociologists studying people’s fondness of personal collections. Specifi-

cally, it has been shown, in collection literature, that people often have the

need and motivation to own and surround themselves with objects towards

which they have special affect (Danet & Katriel, 1989; Pearce, 1994). Col-

lection researchers also explicitly note the close relationship between one’s

affection for an object, on one hand, and will to possess the object, on the

other – possession being a way to acquire felt dominance over the liked

object through making it, in a sense, one’s personal belonging (Danet &

Katriel, 1989; cf. Tuan, 1984).

I extend this theory about possessions to a company’s product design by

viewing a company’s product design as a potential object that an individual

can attempt to “collect”, or possess – by way of owning the stock of the

company behind the design19. For instance, for an investor that really likes

Ford’s product design, ownership of Ford Motor Company’s stock can be

partially motivated by such a collection or possession motive. Thus, it may

be that having a stronger affective evaluation of a company’s product design

results in some degree of outright desire to possess the company, by way of

investing in and owning the company’s stock. Notably, having such intrinsic

desire to possess the company due to the partial collection motivation may,

in turn, manifest, again, not only as determination to invest in the compa-

ny’s stock rather than other stocks with equal financial returns (hypothesis

H9) but also in the individual’s preparedness to invest in the company’s

stock with lowered financial returns. Thus, my additional hypothesis is:



company’s product design has positive effect on his preparedness

to invest in that company’s stock with lower financial returns

expected from the stock than from other stocks.

Again, this proposition suggests that an investor’s evaluation of how

(or the context in which) a company makes its money – now especially the

extent that its product design is likeable overall – may lead him to invest in

the company by relaxing a bit on his requirements concerning how much

money is made.

Note that also the hypothesized effects of affective evaluation of a com-

pany’s product design (H9 and H10) may, again, be either direct, or chan-

neled indirectly through (conscious) willingness to support the company by

investing in its stock. Accordingly, tests of this mediating effect, besides the

direct effects, will be included in my analysis (see Figure 5, p. 62).

c) financial expectations perspective. Finally, not only may an inves-

tor’s affective evaluation of a company’s product design influence the

consideration he gives to alternatives and/or willingness to invest in the

company’s stock beyond financial returns, but it may also affect his actual

expectations of the financial returns from the company’s stock. Concerning

industry groups, MacGregor et al. (2000) found that individuals’ judgments

of the financial performance of industries are strongly related to affective

evaluations of them. Although MacGregor et al. (2000) focus primarily on

[18] In fact, should the individual not prefer – in an investment decision – the company for the design of which he has positive attitude, he might end up feeling cognitive/affective “dissonance”. By default, individuals tend to avoid ending up feeling such dissonance (Festinger, 1957;

Zajonc, 1980) – thus, favoring the company in the investment decision could also be understood as a (psychological) strategy of avoiding dissonance feelings.

[19] Of course, a more common way to “collect” a company’s

product design is to purchase and collect its products per se (cf. Fournier 1998). At any rate, collecting the products per se and the stock of the company designing/producing the products are phenomena that can well co-exist.


affective evaluations of industry groups and expectations of their financial

performance, they also suggest that a company with highly positive affective

evaluation is likely to be seen as good in terms of specific attributes such as

prospects for long-term financial success.

As an explanation to the above findings, Frieder and Subrahmanyam

(2005) suggest that individuals may (naively) interpret a company’s product

quality to automatically predict superior financial return performance for

the company. Such an interpretation may also involve the possibility that the

investor somewhat boldly assumes that “since I like the company’s product

design, other people will like it, too, and the company is therefore likely

to succeed financially” (Aspara & Tikkanen, 2008). Moreover, an investor

may even assume that firms with good quality products are well-run firms

and therefore expect superior financial investment performance of them

(see also Lakonishok, Shleifer, & Vishny, 1994). In any case, positive overall

evaluations of a company’s product design are likely to generate optimism

about the financial returns of the company’s stock and/or (more or less

naïve) confidence in one’s financial expectations. Thus, I hypothesize:


company’s product design has positive effect on the optimism in

his expectations about the financial returns of the company’s stock.


company’s product design has positive effect on the confidence


company’s stock.


3.2.3 interdependenciesAlong with the effects hypothesized above, there are likely to be further

interdependencies or feedback effects between the identified constructs.

Most importantly, the personal self-relevance that an individual attaches to

a domain is likely to have positive influence on his affective evaluation of

the product design of a company that is perceived to support or represent

the domain with its products. This is logical, and has been suggested by

e.g. myself and colleagues elsewhere (Aspara et al., 2008) on the basis of

identification and self-congruency theories. For instance, if an investor finds

motoring/car-driving as a personally relevant domain, he is likely to have

positive baseline affect for a company whose products represent or support

that domain (e.g. a car company, a tire company). Similarly, if an investor

finds gardening as a personally relevant domain, he is likely to have base-

line positive affect for a company whose products represent or support that

domain (e.g. a gardening tool company).

Thus, my last hypothesis, at this point, is:


to a certain life domain has positive effect on his overall affect for

the product design of a company whose products are perceived to

represent the domain.

3.2.4 review of hypotheses Figures 4 and 5 illustrate all the hypotheses proposed above. I have divided

the hypotheses into the two figures on the basis of what kind of invest-

ment behavior constructs they pertain to. Specifically, Figure 4 focuses on

those hypotheses (H1, H3-H5, H8, H11-H12) that address the effects of an

investor’s perceptions and evaluations of a company’s product design on his

financial expectations about a company’s stock (optimism and confidence


about financial returns) as well as on consideration given to alternative invest-

ment targets. Figure 5, in turn, focuses on those hypotheses (H2, H6-H7,

H9-H10) that address the effects that an investor’s product design -related

perceptions and evaluations potentially have on his investment decision

beyond the financial returns expected from the company’s stocks.

The effects of familiarity with the company (H0) are present only in the

model of Figure 5, so that the model of Figure 4 would remain simpler. The

partial interdependency between personal relevance of a company’s product

domain and overall affect for the company’s product design (H13) is, in turn,

present in both the models.

At any rate, in both Figures, the main explanatory constructs are notably

the same (indicated by the colored “balloons”). These explanatory constructs

pertain to the investor’s product design -related perceptions and evaluations.

They include an investor’s overall affect for the company’s product design

(balloon 1) – and the degree of personal relevance that the investor attaches

to a certain life domain (balloon 2.i), as combined with perception that the

company’s products represent/support that life domain (balloon 2.ii). Note

that the distinction of balloons 2.i and 2.ii, reflects the theoretical distinction

made earlier (p. 44): There is the (i) the degree of personal relevance that the

investor attaches to a life domain, on one hand, and (ii) the degree to which

he perceives the products to represent or support that domain, on the other.

Moreover, familiarity with the company’s products (balloon 3) is included in

both models.

Notably, the Figures could be superimposed so that all the hypothesized

effects of these constructs could be seen at once. Yet, I have chosen to pres-

ent the hypothesized effects with two separate figures, as depicting them all

in one figure results in an overly complicated, difficult-to-read framework.

While Figures 4 and 5 illustrate the main hypotheses of this dissertation

(and will be studied with empirical path models of Studies 1a and 1b, cor-

responding to the Figures), I will present one more hypothesis, which is a

corollary to the hypotheses proposed thus far. That is, a hypothesis about an

effect that can be expected to follow given the (accuracy of) the hypothesis

presented so far.


Figure 4. Summary of hypotheses: The effects of an investor’s evaluations of a company’s product design on his financial expectations about the company’s stock and consideration of alternatives (Model 1a).

H3.

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Figure 5. Summary of hypotheses: The effects of an investor’s evaluations of a company’s product design on his extra investment willingness, beyond expected financial returns (Model 1b).

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As a justification for the corollary, consider the fact that a company often

needs and wants to present – or promote – itself to investors for them to

consider the company as a potential investment target. Such promotion

activities are commonly conducted as part of “investor relations” or “investor

marketing” processes (e.g., Ebel & Hofer, 2003; Marcus, 2005; Vogelheim,

Schoenbachler, & Gordon, 2001). (Note that in the discussion section of

this dissertation, I will call for such promotion towards investors to become

included in design management’s tasks).

Now, consider that the hypotheses presented thus far suggest rather

unanimously that an investor’s (positive) evaluations of a company’s prod-

ucts and product design have positive effect on his interest to invest in the

company – be it due to financial expectations (e.g. optimism, confidence)

or investment willingness beyond expected financial returns or both. Tak-

ing together these two considerations, we can expect that to the extent that

a company emphasizes its product design to an investor – when presenting

itself as an investment target to the investor with some kind of advertise-

ment (ad) – the investor’s general willingness or interest to invest in the

company gets increased. Namely, higher product design emphasis in a

company’s investment advertisement is likely to make it more salient to

the investor how he might use investment in the company as a vehicle

of expressing his identification with and affect for the company’s product

design (and domains that the products support). An opposite case occurs

when an investor does not come to think at all about the company’s product

and product design when considering the company as an investment tar-

get. In such a case, the (potentially positive) product design evaluations

naturally would not have much effect on the investor’s interest to invest in

the company.

An analogous case is an advertisement for a consumer service, e.g. a

boat cruise, which emphasizes the fun dimension of the service. Assum-

ing that there are few people whose willingness to buy the cruise would

be negatively affected by their coming to think of the fun involved in the

cruise, the fun emphasis/appeal in the advertisement should, on average,


increase people’s willingness to buy the cruise. In a similar vein, the product

design -emphasis in a company’s investment advertisement can be expected

to have positive effect on general willingness to invest in the company’s

stock among investors.

Summarizing the above discussion, my final – corollary-like – hypoth-

esis is:

Hypothesis H14: Product design emphasis in a company’s

investment advertisement has positive effect on investor’s general

interest to invest in the company’s stock.

65

4 Methodology of the empirical research


4.1 philosophical-paradigmatic choices

In general, the selection of the types of empirical data and methods for

the present research stemmed from five philosophical positions. First, as

implied already by the nature and form of the hypotheses, the empirical

research would focus on examining correlational and/or causal relation-

ships between constructs of interest, with quantitative data and statistical

inference. According to a commonplace notion, such an approach has the

advantage of producing results that are generalizable beyond the immediate

study context, and can also be easily replicated in different contexts.

Second, I specifically adopted an approach whereby I would measure

individuals’ attitudinal constructs with respect to particular companies’ prod-

ucts, on one hand, and their investment behavior constructs with respect to

the same companies, on the other. The analysis would, then, examine the

correlations and variances between the constructs across individuals, i.e.,

between subjects (see e.g., Bagozzi, 1977) – and, thereby, accord to a “cogni-

tive research program”, which is common in consumer research (Anderson,

1986). Thus, the empirical studies represented an approach of between-

subjects testing of hypothesized relationships among constructs (e.g.: Will

individuals who have greater affect for a company’s product design have

higher investment interest towards the company?). At the same time, the

approach would be realist in the philosophy of science sense, and assume

that individuals’ psychological states and behaviors can be (mechanistically)

modeled, singled out, measured, and analyzed (see e.g., Wright & Bechtel,

2007). 20

[20] A possible alternative for examining the between-subject correlations of attitudinal constructs and behavioral constructs would have been

to ask individual investors to themselves interpret their own investment motivations. This alternative was, however, considered inferior, since it would

have risked producing overly self-rationalized accounts of the investors’ motivations and behavior.

67methodology of the empirical research

Third, the focus of the study would be on how individuals’ subjective

product design perceptions and evaluations influence their investment

behavior and decisions – rather than how some sort of objective (proxy

for) a company’s design excellence influences some sort of objective (proxy

for) investor attractiveness of the company. Therefore, the most credible

and valid data was considered to pertain directly to individuals’ subjective

company/design perceptions and evaluations, on one hand, and to their

investment behaviors and decisions, on the other – rather than to aggregate

or average index data over a population of investors (cf. Frieder & Subrah-

manyam, 2005; Madden, Fehle, & Fournier, 2006). This meant, in effect,

adopting consumer research -style data and techniques, which is actually an

approach that many authors have recently advocated in the field of investor

research (Clark-Murphy & Soutar, 2004, 2005; Fama & French, 2004; Stat-

man, 2004).

Fourth, it was assumed that credible and valid data about both an indi-

vidual’s attitudes and his behaviors can be gathered by asking the individ-

ual himself to give self-reports about them (Ajzen, 2008; Anderson, 1986;

Weaver & Schwartz, 2008). Although this kind of data is not free of biases

(which will be attended to in section 7.3.1), the choice of data was essentially

a philosophical-paradigmatic choice of presuming that self-reported data

about one’s attitudes and mental decision-making processes is more valid

than purely behavioral-observational data, as the latter would necessarily be

limited to a narrow set of overt behaviors or behavior outcomes.

Fifth, I adopted the philosophical view that methodological triangula-

tion (see Campbell & Fiske, 1959; Denzin, 1978; Webb, 1966), especially

when it comes to data, is a feasible strategy for empirical research and can

enhance the validity and reliability of the findings. As explained in the next

section, my eventual approach was to use two main types of data so as to

complementarily examine the same research questions: retrospective and

prospective. Specifically, retrospective data on real stock investment deci-

sions that the investors had recently made was considered advantageous

due to the very fact that the data would pertain to decisions that the investors


had actually made, in real life. Yet, retrospective data would inevitably suffer

from some subjects’ less than perfect memory about their past decisions (as

well as potential post-rationalization of the decisions). Therefore, I decided

to pursue prospective data, as well. Specifically, the investors would be

presented certain scenario-like investment decision-making settings and

experimental data would be gathered about their attitudes and prospective

investment intentions. 21

4.2 overview of the empirical studies

In this dissertation, I examine the hypotheses with three empirical studies.

Two of the studies (Study 1a and Study 1b) are based on data that was gath-

ered from the same investors through one and the same survey (question-

naire), while the last study (Study 2) is based on data gathered from differ-

ent investors at a different instance.

4.2.1 studies 1a and 1bStudies 1a and 1b are based on the methodological approach of causal model-

ing of correlational data on latent variables. That is an approach which has

in recent decades been used increasingly often – in psychological and con-

sumer research – to test or confirm hypothesized effects of individuals’ atti-

tudes on their behaviors (Bagozzi, 1980; Baumgartner & Homburg, 1996;

Bentler & Speckart, 1979; Bentler, 1980). The notion of “latent variables”

means, in essence, that the variables or constructs of interest (such as affect

or personal relevance) are not directly measured, but the researcher mea-

sures those constructs with a number of manifest variables/indicators. The

causal modeling, then, explains the statistical properties of the measured

variables in terms of the hypothesized latent variables and their relation-


[21] Note that a hypothetical third option – data gathering at the same moment that investors make real investment decisions – was considered too difficult to realize in practice, due to the difficulty of getting real-time access to investment decision-making situations. Moreover, people usually view their money investments to be a rather sensitive and private

issue and will not want outsiders to intervene in or observe their decision-making.

[22] The word “causal” is not, in the context of causal modeling on correlational data, meant to refer to any profound philosophical meaning of “cause”. Rather it refers to a hypothesized, unobserved process, so that phrases such as

“process modeling” or “system modeling” would actually be viable substitute labels for “causal modeling” (Bentler, 1980, p. 420). In effect, the potential “causation” revealed by the modeling implies correlation and the fact that the one variable serves as predictor for another.

ships (Bentler, 1980) 22. In simple terms, the modeling yields statistical

indicators concerning how well one latent variable is correlated with – and,

hence, predicts – another variable. At the same time, statistics are obtained

about how well the multiple manifest or measured variables actually relate

or “load” on the latent variable.

A commonly-cited, basic aspect of study design in causal modeling is

the fact (or requirement) that the researcher has derived, based on theory,

maps of the (latent) variables of interest and their hypothesized (correla-

tional) relationships. These relationships are then to be confirmed with the

data. Notably, I have developed such maps, in essence, in section 3.2 (with

graphical depictions presented in Figures 4 and 5, pp. 61–62).

Concerning further details of the study design and measurement, my

application of causal modeling to correlational data – in Studies 1a and 1b

– involved asking a sample of investors at the same time (in one question-

naire) about (i) their recent decisions (i.e., behavior) to invest in a particular

company, on one hand, and (ii) their attitudes towards the company prior to

the investment, on the other. The study design also involved some aspects

that can be considered “quasi-experimental”, namely certain (quasi-)manip-

ulations detailed in sections 5.3.1 and 5.4.1, respectively for Studies 1a and 1b.

However, since all the data (both attitudinal and behavioral) were collected at

the same time (retrospectively) and there was no actual manipulation imple-

mented (to the attitudinal constructs) before the outcome (behavior) was


measured, the study design is best described simply as correlational design

(rather than true quasi-experimental design) (Mark & Reichardt, 2004).

All in all, the use of retrospective self-reports about attitudes and behav-

ior – as in Studies 1a and 1b – is rather common in causal modeling on

correlational data and can be considered fairly valid in many cases (Mark

& Reichardt, 2004; Pearson, Ross, & Dawes, 1992). In the present context,

I consider it valid especially because it allowed asking investors about real

investment decisions that they had actually made recently, instead of ask-

ing them about their investment motivations in general or presenting them

with entirely hypothetical investment scenarios. However, the use of retro-

spective data inevitably poses its limitations – mostly due to respondents’

non-perfect memory as well as tendency to give such reports about their

past attitudes and behaviors that are bent towards their current attitudes/

behavior and/or towards their presumptions of what is socially desirable

(e.g., Levine, Safer, & Lench, 2006; Pearson, Ross, & Dawes, 1992). There-

fore, I chose – in the spirit of triangulation – to complement Studies 1a and

1b with another study, Study 2, which would not rely on retrospective data.

4.2.2 study 2Besides not relying on retrospective data, Study 2 would, in fact, apply the

most traditional and well-accepted methodological approach to studying

individual’s psychology and behavior, i.e., randomized experiment.

Study 2 was designed to address, implicitly, all the hypotheses H0-H13

– by way of explicitly testing for the corollary hypothesis H14, as explained

in section 3.2.4. Focusing mainly on examining one hypothesis (H14) was

motivated by the fact that randomized experiments are best suited to stud-

ies where one has one (or two) categorical explanatory (i.e., independent)

variable(s) – the levels of which can be manipulated by the researcher – and

one continuous dependent variable. In other words, randomized experiment

is not very well suited to examining complex causal maps in their entirety –


with multiple, continuous predictor, mediator, and dependent variables (like

those in Models 1a and 1b).

Therefore, the approach in Study 2 was simply to assign a sample of

investors randomly to different groups; present a particular company to the

groups with investment advertisements that differed in terms of their prod-

uct design emphasis; ask the investors about their interest to invest in the

company; and analyze whether the investment interest, on average, differed

between the groups.

72

5 Studies 1a and 1b

73studies 1a and 1b

5.1 sample and data gathering

As the wider population of interest in Studies 1a and 1b, I had such people

who might invest some of their savings or net worth in stocks of publicly

traded companies. I approached three hundred individuals per three con-

sumer product companies from different industries, listed in Helsinki Stock

Exchange, Finland. The approached individuals were (randomly) sampled

from a list of such stockowners of the companies who had become stock-

owners during the past 1.5 years – presumably recently enough to be able to

remember the investment decision and its context. The lists were provided

by the companies. The three companies had well-known product brands

at the national level, so that valid product design evaluation data could be

obtained. Notably, the inclusion of three companies to the study was con-

sidered reasonable in the sense that it would likely enable some detection of

whether the (hypothesized) causal effects were dependent on company or

industry – through inclusion of company dummy/interaction variables into

the models to be analyzed. Yet, limiting the number of companies to three

would ensure that the number of company dummy/interaction variables

would not grow excessively large (as it might if the number of companies

was much higher).

I sent a survey questionnaire to the investors in question by mail in sum-

mer of 200723, with a prepaid reply envelope. The cover letter is presented

in Appendix A. 340 usable questionnaires were returned from the total of

900 contacted investors, yielding a response rate of 37.8 %. The eventual

sample size was adequate for the main data analysis method used, partial

least squares (PLS) path modeling (see Chin & Newsted, 1999).

Due to the non-perfect response rate, there was a potential non-response

bias and, especially, the possibility that those investors who responded to the

survey (appr. 38% of the contacted investors) might have different tendencies

with respect to the hypotheses than the non-respondents. This (self-)selection

bias might lead to the effects of product domain relevance and/or affect for


product design appearing to be greater (or weaker) in my results than what

those effects would be in a wider population of investors. While it is difficult

to definitely overrule this possibility, I used a common procedure to control

for the bias in question: distinguishing the respondents who answered late

(i.e., closer to the deadline) from the early respondents and analyzing the

differences between these two groups. In this procedure, the assumption is

that late respondents liken to non-respondents, and based on analysis of how

they differ from early respondents, one can conclude whether serious non-

response/selection bias exists (see e.g., Armstrong & Overton, 1977).

In any case, the early vs. late respondent check showed no significant

differences between earlier and later respondents. This indicates that non-

response/self-selection bias should not be a serious concern.

A description of the investors in the final sample of Studies 1a and 1b –

individuals who had invested in the three companies A, B, and C respective-

ly – is provided in Table 1, in terms of a set of personal background variables.

The background variables include gender, age, education, monthly income,

total number of stocks owned, and stock following activity.

[23] Note that as a tactic to increase response rate, the cover letter of the questionnaire told the recipient that she had a chance to win a prize if she returned the questionnaire. Specifically, it was mentioned that there would be a lottery involving three prizes, drawn among all the respondents that returned the questionnaire. The chances of winning were apparent to the participant (less

than 1:100), since the cover letter also mentioned the approximate number of study participants. The prizes were: a tire set, a ski set, and a knife set – all with the value of a few hundred euros. The participant could note that the prizes would be donated by companies participating in the study. However, as all the participants were informed of the possibility to win whichever of these heterogeneous prizes, it

is unlikely that the lottery setting seriously interfered with the study design. Interference could have been a greater problem if each respondent had been informed of only one kind of lottery prize available to him – in that case those interested in the product category represented by the particular prize might have been more likely to self-select themselves to the sample.

75studies 1a and 1b

Overall sample

Company A’s investors

Company B’s investors

Company C’s investors Chi square P value

Gender

female

male

23.7%

76.3%

22.5%

77.5%

28.4%

71.7%

18.3%

81.7%

2.951 .229

Age

below 15

15–25

26–40

41–60

over 60

0.6%

2.4%

22.3%

44.5%

30.3%

0.8%

2.3%

14.7%

45.7%

36.4%

0.8%

1.6%

27.6%

39.4%

30.7%

0.0%

3.7%

25.9%

50.6%

19.8%

13.022 .111

Education (highest)

middle school

high school

vocational school

college/bachelor

university/master

9.5%

5.7%

11.6%

22.9%

50.3%

8.7%

3.9%

15.8%

28.4%

43.3%

11.8%

7.9%

9.5%

21.3%

49.6%

7.3%

4.9%

8.5%

17.1%

62.2%

12.686 .123

Monthly income

below 2000€

2000–3999€

4000–5999€

over 6000€

15.0%

47.2%

21.3%

16.5%

14.2%

54.3%

19.7%

11.8%

19.8%

44.4%

21.4%

14.3%

8.8%

40.0%

23.8%

27.5%

14.865 .021

Total no. of stocks owned

1-2 stocks

3-5 stocks

6-10 stocks

over 10 stocks

2.1%

21.3%

37.0%

39.6%

3.9%

23.9%

40.8%

31.5%

0.8%

18.9%

37.0%

43.3%

1.2%

21.0%

30.9%

46.9%

8.993 .174

Stock following activity

daily

weekly

monthly

yearly or less

36.0%

44.8%

14.8%

4.4%

34.1%

48.1%

14.0%

3.9%

37.5%

44.5%

13.3%

4.7%

36.6%

40.2%

18.3%

4.9%

1.990 .921

Table 1. Description of the sample of Studies 1a and 1b: Personal characteristics of the investor-respondents


Unfortunately, I am unaware of any studies that would map the current

characteristics of average Finnish stock investors 24, which means that I am

unable at this time to compare the characteristics of the sample to the general

stock investor population. However, the distribution of investor characteris-

tics in the sample seems to accord to an intuitive notion of individual inves-

tors: the distribution is skewed towards middle-aged (rather than very young

or old), college/university educated, and medium/high-income people. Most

of the investors also have moderately diversified stock portfolios (with 6 or

more stocks) and tend to follow their stocks at least weekly.

I also analyze, in Table 1, whether there were differences in the back-

ground variables between investors who had invested in the different com-

panies included in the study. In most variables, no statistically significant

differences are detected. This warrants a conclusion that the investors of

the three companies included in the study did not differ significantly by the

company but likely represent a rather general profile of (Finnish) individual

investors. An exception was in the variable of monthly income, where some

differences can be detected: specifically, company C’s investors seemed to

have somewhat higher average income.

5.2 overall study design – studies 1a and 1b

As explained above in section 4.2.1, the basic methodological-philosophical

choice for Studies 1a and 1b was to gather and analyze retrospective data on

real investment decisions that individual investors had recently made.

[24] The Finnish Foundation for Share Promotion (http://www.porssisaatio.fi/en/) has conducted some surveys on individual stock investors, but

their data is mostly on household level rather than individual level. The dataset used in the studies of Grinblatt & Keloharju (2009), in turn, is so old (from 1995-1997)

compared to the present dataset (2007) that it makes little sense to compare the sets.

77studies 1a and 1b

Another methodological choice was whether the investment decision

would be framed as a choice between buying two (or more) stocks or whether

it would be framed as an opportunity to invest in one stock, addressed alone

(see Clark-Murphy & Soutar, 2004; Jones, Frisch, Yurak, & Kim, 1998). In

other words, would a subject be questioned about his investment decision as

if it had been a choice between two (or more) stocks or as if the stock in which

the individual had invested had been a stand-alone investment opportunity?

I chose to apply both the approaches: the latter approach in examining

the effects of investors’ product design perceptions on their financial expec-

tations and consideration about companies’ stocks (Model 1a, Figure 4, p.

61) and the former approach in examining the effects of investors’ product

design perceptions on their investment decisions beyond financial returns

expected from companies’ stocks (Model 1b, Figure 5, p. 62). In other words,

questions pertaining to the dependent variables of Model 1a (Figure 4) –

investor’s optimism and confidence about the financial returns from the

company’s stock as well as consideration he gave to alternative investment

opportunities – were framed as if the company’s stock had been a stand-

alone investment opportunity. In contrast, questions pertaining to depen-

dent variables in Model 1b (Figure 5) – investor’s determination to invest in

company A’s stock when it has equal expected financial returns as another

stock B and investor’s preparedness to invest in company A’s stock with low-

ered financial returns – were framed as if the investment in the company’s

stock had been a choice between two stocks.

The specifics of the study designs for Studies 1a and 1b are detailed below,

including the variable measures, i.e., the specific questions presented to the

investors. When it comes to data analysis, the specific causal modeling tech-

nique that I used was partial least squares (PLS) path modeling (Fornell &

Cha, 1994). The two-fold study design led to examination of two structural

path models, corresponding to Figures 4 and 5, respectively. Specifically, I

employed SmartPLS (Ringle, Wende, & Will, 2005), which allows for the

simultaneous testing of hypotheses while enabling single- and multi-item

measurement, as well as the use of both reflective and formative scales


(Fornell & Bookstein, 1982). This shows in the fact that some of the con-

structs were measured with single-item/question scales, while some were

measured with multiple items/questions.

5.3 study 1a

5.3.1 method – model 1aModel 1a focused on examining the effects of investors’ product design

-related evaluations on their financial expectations about companies’ stocks

as well as on their considerations of alternative stocks. The structural PLS

model specified as Model 1a is depicted, to its essential parts, in Figure 4 (p.

61). The study setting for this model involved asking the investors about the

focal companies in which they had invested (“investee companies”) – with-

out framing the questions in a way that would have assumed that the invest-

ment had been a choice between two stocks.

Specifically, the purpose of Model 1a was to test the hypotheses concern-

ing the following dependent variables:

optimism about the company’s financial returns a)

confidence about the company’s financial returns b)

consideration of alternative stocks c)

The data for this model consisted of each respondent’s

perceptions and attitudes (familiarity, personal relevance, overall 1.

affect) related to the product design of the focal (investee) com-

pany, prior to his decision to invest in that company (as retro-

spectively reported by the respondent); and

financial expectations/behavior with respect to that company (a-c 2.

above), which had led to the investment in question (as retro-

spectively reported by the respondent).

79studies 1a and 1b

Correspondingly, the analysis involved examination, with PLS path model-

ing, of the correlation relationships between (1) the perceptual/attitudinal

variables and (2) the investment behavior variables – over the whole sample

of investors.

While the dependent variables were listed above (a-c), the model’s main

predictor variables were:

overall affect for the company’s product design •

(balloon 1 in Figure 4, p. 61)

personal relevance of the company’s product domain •

(balloons 2.i and 2.ii in Figure 4)

Note that I explain in the next section below, how and why the constructs

‘personal relevance of life domain X’ and ‘perception that company A’s prod-

ucts represent/support life domain X’ – as depicted in Figure 4 (balloons 2.i

and 2.ii, respectively) – were collapsed into one measurement variable, i.e.

personal relevance of the company’s product domain. Besides the dependent and predictor variables listed above, Model 1a

contained – as an intervening mediating variable – one’s familiarity with the company’s products (balloon 3 in Figure 4).

Finally, in addition to the paths shown in Figure 4, I included into the

model direct paths from familiarity with the company’s products towards optimism about the company’s financial returns and from

personal relevance of the company’s product domain towards opti-mism about the company’s financial returns and confidence about the company’s financial returns. I included these paths, despite their

non-presence in the theoretical hypotheses, so that I would be able control

for the occurrence of the corresponding effects – since the occurrence of the

effects in the data would indicate that my theoretical model/propositions

were incomplete. Also, I included into the model indicators of the investee

companies as dummy control variables, in order to control the potential

investee-company-specificity (as well as domain-specificity) of the effects in

the model. Furthermore, I included interaction terms of the predictor vari-

ables and the company dummy variables.


specifics of the study design concerning personal relevance of the

company’s product domain. Regarding the explanatory variable person-al relevance of the company’s product domain, it must be noted that

a company’s products may be perceived to represent or support a variety of

(life) domains (domains X, Y, Z, etc.). For instance, tires (of a tire company)

might be perceived to represent ‘car-driving’, ‘roads’, ‘road safety’, ‘traffic’,

or even just ‘being mobile’. Since it would be impossible to examine all the

domains that different investors (respondents) potentially perceive the com-

pany’s products to represent or support, my approach was to select one such

domain – per each of the focal/investee companies – which most investors

would likely consider the company to represent or support with its products

(to a high degree). In Richins’s words (1994a) such a perception is a “public/

shared meaning” related to the products of a company.

Now, if the domains were successfully selected (or quasi-manipulated)

to be ones that all (or most) the investors would – due to a shared, public

meaning – (ii) perceive the companies’ products to represent, the subse-

quent analysis could concentrate exclusively on analyzing the effects of the

(i) degree of personal relevance of those domains on the dependent vari-

ables. (For the distinction of these two aspects ii vs. i, see p. 44).

In Richins’s terms (1994a), the (i) degree of personal relevance would in

this setting be a “private meaning”, varying over the individual investors. In

other words, even if all the investors (ii) perceived a company’s products to

represent a certain domain, the investors would differ in regards to (i) how

relevant that domain was to them personally. In sum, this meant, on one

hand, that the (i) degree of personal relevance would be the specific variable

whose values I would enter into my PLS analysis over the sample of investors

– yet, only after pre-testing that the selected domains would indeed be such

that all the investors would (ii) perceive the companies’ products to represent

(to a high degree). On the other hand, the exact degree to which a compa-

ny’s products would be perceived to represent a certain random domain by

individual respondents would not enter the analysis as a variable 25 – since I

would presume (and pre-test) this degree to be constant and high (reflecting

the public meaning).

81studies 1a and 1b

But how to find and select such domains that all (or most) investors

would likely perceive a certain focal company’s products to represent?

For the purposes of the present study, I opted for selecting such domains

through a most self-evident, user-oriented way: by paying attention to the

use purpose or domain of the products. Indeed, a most common (public)

meaning related to a product is its use area, the activity domain in which it

provides functional value to users (see e.g., Battarbee & Mattelmäki, 2002). I

selected the domains for study accordingly. For instance, a company design-

ing and producing tires was assumed to represent the (activity) domain of

‘motoring/car-driving’ with its products. Table 2 lists the selected domains

for each of the three focal companies whose investors were included in the

sample.

To recap, it was assumed that the selected domains, listed in Table 2,

would be such domains that investors in general would (publically) per-

ceive the focal/investee companies’ products to represent or support. To test

this assumption, the survey instrument included pretest questions; Table

3 presents the findings of these tests. Based on the mean values, it can be

seen that for all the company–domain combinations, the respondents over-

all agreed (mean>0.0) with statements claiming that the focal company’s

products represented the domain. All the means differ significantly from

the neutral value of 0.0 at p<.001 level.

measures – predictor variables. When it comes to the predictor variables

of Model 1a, the scale items are presented in Table 4.

The latent predictor variable personal relevance of the company’s product domain was measured with a two-item reflective scale. According

to the theoretical discussion of section 3.2.1, the questions were developed to

[25] Note that I illustrate, in Figure 4 (p.61), the fact that my analysis omits the individual-level modeling of the degree to which a company’s products are perceived to represent a selected domain by linking the corresponding moderating construct with a dashed (instead of solid) arrow to the path model.


Table 2.

The selected (quasi-manipulated) domain per focal/investee company, in Study 1a

Focal (investee) company

Focal company’s products

Domain – Which domain the products are supposed to represent?

A tires motoring/ car-driving

B garden and other domestic free-time tools gardening/ visiting summer house

C sports equipment and apparel sport

Table 3.

Tests for the assumption that the selected domains were domains that the investors perceived the focal/investee companies to represent (Study 1a/b)

Domain Item Focal company: Meana

motoring/ car-driving

“The products of [company A’s product brand] supported/represented motoring very well.”

“[Company A] was committed to developing products that support/represent motoring.”

A: 1.93***

A: 1.57***

gardening/visiting summer house

“The products of [company B’s product brand] supported/represented gardening (/visiting summer house) very well.”

“[Company B] was committed to developing products that support/represent gardening (/visiting summer house).”

B: 1.53***

B: 1.60***

sport

“The products of [company C’s product brand] supported/represented a certain sport very well.”

“[Company C] was committed to developing products that support/represent a certain sport .”

C: 1.55***

C: 1.63***

a The values in the table are mean values of respondents’ responses to questions that requested them to indicate the extent to which they agreed (vs. disagreed) with the statement on a 7-point Likert scale (-3=totally disagree… +3=totally agree). *** planned comparison of mean to value 0 (neutral value of 7-point disagree-agree scale) significant at p<.001 level

83studies 1a and 1b

ask about the personal importance that the investor attached to the domain

represented by the products of the company in which he had invested, i.e.,

his identification with the company’s product domain. As explained in the

previous section, the domain whose personal relevance a respondent was

asked to report had been selected to be such a domain which investors in

general would perceive the company’s products to represent or support.

For the first item of the two-item scale, the respondent was asked: “How

relevant a thing was [domain X] to you personally?” (For instance, investors

who had invested in the tire company were asked, “How important a thing

was motoring/car-driving to you personally?”). This question stemmed from

the general fact that personal relevance of the company’s product domain

should mean that one perceives the domain to be personally important to

oneself (Bloch & Richins, 1983). The responses were recorded on a 7-point

scale: 0=“made no difference”… 6=”very important.”

For the second item, the respondent was asked: “How well did [domain

X] reflect you as a person?”. This question reflected the notion that the

personal relevance meant in the hypotheses was, specifically, relevance or

importance to one’s self/identity (rather than certain other kind of personal

relevance). The specific question used adapted the question by Bergami and

Bagozzi (2000). The responses were recorded on a 7-point scale: 0=”not at

all”… 6=”very well”.

The reliability of this two-item reflective scale for personal relevance of the company’s product domain was satisfactory, as the scale achieved

a Cronbach’s alpha of .74, average variance extracted (AVE) of .80, and com-

posite reliability of .89. 26

The other latent predictor variable, overall affect for the compa-ny’s product design, was measured with a multiple-item reflective scale,

specifically with six items. As is conventional in psychological studies that

[26] According to conventional view, criteria for adequate/satisfactory reliability are .7 for Cronbach’s alpha, .5 for AVE, and .8 for composite reliability (see e.g., Netemeyer, Bearden, & Sharma, 2003).


Cons

truc

tM

easu

rem

ent

type

Mea

sure

men

tSc

ale

relia

bilit

y (fo

r mul

ti-it

em s

cale

s)

pers

on

al r

elev

ance

o

f th

e co

mpa

ny’

s pr

od

uct

do

mai

n

Refle

ctiv

e, 2

-item

sc

ale

(eac

h ite

m w

ith

7-po

int s

cale

)

1. “

How

rele

vant

a th

ing

was

[dom

ain

A] t

o yo

u pe

rson

ally

?”

0=“m

ade

no d

iffer

ence

”…6=

”ver

y im

port

ant”

2. “

How

wel

l did

[dom

ain

A] re

flect

you

as

a pe

rson

?”

0=”n

ot a

t all”

… 6

=”ve

ry w

ell”

Cron

bach

’s a

lpha

: .74

AVE:

.80

Com

posi

te re

liabi

lity:

.89

ove

rall

aff

ect

for

the

com

pan

y’s

pro

du

ct d

esig

n

Refle

ctiv

e, 6

-item

sc

ale

(eac

h ite

m w

ith

7-po

int s

cale

)

1-3

“Wha

t wer

e [c

ompa

ny X

]’s p

rodu

cts

like

in y

our o

pini

on?”

-3=”

very

unp

leas

ant”

… +

3=”v

ery

plea

sant

”

-3=”

very

una

ttra

ctiv

e”…

+3=”

very

att

ract

ive”

-3=”

very

bad

”… +

3=”v

ery

good

”

4. “

Wha

t was

you

r att

itude

tow

ards

[com

pany

X]’s

pro

duct

s lik

e?”

-3=”

high

ly n

egat

ive”

… +

3=”h

ighl

y po

sitiv

e”

5. “

Did

you

like

[com

pany

X]’s

pro

duct

s?”

-3=”

didn

’t lik

e at

all”

… +

3=”l

iked

ver

y m

uch”

6. “

The

prod

ucts

of [

com

pany

X’s

pro

duct

bra

nd n

ame]

wer

e

of c

lear

ly b

ette

r des

ign

than

thos

e of

com

petit

ors’

” a

0=“s

tron

gly

disa

gree

”… 6

=“st

rong

ly a

gree

”

Cron

bach

’s a

lpha

: .90

AVE:

.66

Com

posi

te re

liabi

lity:

.92

fam

ilia

rity

wit

h t

he

com

pan

y’s

pro

du

cts

Refle

ctiv

e, s

ingl

e-ite

m s

cale

(with

7-p

oint

sca

le)

1. “

How

wel

l did

you

kno

w th

e pr

oduc

ts o

f [co

mpa

ny X

’s

prod

uct b

rand

nam

e]?

0=”n

ot a

t all”

… 6

=”ve

ry w

ell”

fam

ilia

rity

wit

h t

he

com

pan

yRe

flect

ive,

sin

gle-

item

sca

le

(with

7-p

oint

sca

le)

1. “

How

wel

l did

you

kno

w th

e [c

ompa

ny X

]?

0=”n

ot a

t all”

… 6

=”ve

ry w

ell”

a Th

is ite

m w

as b

ased

on

the

assu

mpt

ion

that

the

affe

ctiv

e ev

alua

tion

of a

com

pany

’s pr

oduc

ts w

ill b

e ex

hibi

ted

larg

ely

rela

tive

to c

ompe

titio

n.

Table 4.

Items for predictor variables in Study 1a (/b)

85studies 1a and 1b

deal with individual’s overall affective evaluations of (i.e., attitudes towards)

objects (Ajzen, 1991, 2005; for investment context, see MacGregor et al.,

2000), the variable was measured, first of all, with bipolar, semantic dif-

ferential scales. Such scales consist of a set of bipolar evaluative/affective

adjective pairs such as pleasant-unpleasant, attractive-unattractive, good-bad.

Each adjective pair is placed on opposite ends of a 7-point scale (-3…+3), and

respondents are requested to mark each scale as it reflects their evaluation

of the object. In the present study, the target object was the overall product

design of the company in which the respondent had invested – so, the ques-

tions probed the investor’s overall evaluation of the company’s products

in terms of pleasantness, attractiveness, and goodness. Notably, feelings

of pleasantness, attractiveness, and goodness are commonly viewed to be

among main evaluative dimensions for products in contemporary design

research (e.g., Jordan, 2002; Norman, 2004).

In addition to the semantic differentials, I also included direct questions

probing the respondent’s overall evaluation of the company’s products:

“What was your attitude towards [company X]’s products like?” •

(anchored by -3=“highly negative” and +3=“highly positive”),

and

“Did you like [company X]’s products?” •

(anchored by -3= “didn’t like at all” and +3= “liked very much”).

Finally, the respondent-investor was asked to state his agreement with

the statement “The products of [company X’s product brand name] were

of clearly better design than those of competitors”. The responses were

recorded on a 7-point Likert scale anchored by 0=“strongly disagree” and

6=“strongly agree”. This item was based on the assumption that the affec-

tive evaluation of a company’s product design will be conceived largely rela-

tive to competition.

The eventual measure for overall affect for the company’s prod-uct design consisted of all the aforementioned six reflective items (three

semantic differentials; two direct questions; one agree-disagree question).

Cons

truc

tM

easu

rem

ent

type

Mea

sure

men

tSc

ale

relia

bilit

y (fo

r mul

ti-it

em s

cale

s)

pers

on

al r

elev

ance

o

f th

e co

mpa

ny’

s pr

od

uct

do

mai

n

Refle

ctiv

e, 2

-item

sc

ale

(eac

h ite

m w

ith

7-po

int s

cale

)

1. “

How

rele

vant

a th

ing

was

[dom

ain

A] t

o yo

u pe

rson

ally

?”

0=“m

ade

no d

iffer

ence

”…6=

”ver

y im

port

ant”

2. “

How

wel

l did

[dom

ain

A] re

flect

you

as

a pe

rson

?”

0=”n

ot a

t all”

… 6

=”ve

ry w

ell”

Cron

bach

’s a

lpha

: .74

AVE:

.80

Com

posi

te re

liabi

lity:

.89

ove

rall

aff

ect

for

the

com

pan

y’s

pro

du

ct d

esig

n

Refle

ctiv

e, 6

-item

sc

ale

(eac

h ite

m w

ith

7-po

int s

cale

)

1-3

“Wha

t wer

e [c

ompa

ny X

]’s p

rodu

cts

like

in y

our o

pini

on?”

-3=”

very

unp

leas

ant”

… +

3=”v

ery

plea

sant

”

-3=”

very

una

ttra

ctiv

e”…

+3=”

very

att

ract

ive”

-3=”

very

bad

”… +

3=”v

ery

good

”

4. “

Wha

t was

you

r att

itude

tow

ards

[com

pany

X]’s

pro

duct

s lik

e?”

-3=”

high

ly n

egat

ive”

… +

3=”h

ighl

y po

sitiv

e”

5. “

Did

you

like

[com

pany

X]’s

pro

duct

s?”

-3=”

didn

’t lik

e at

all”

… +

3=”l

iked

ver

y m

uch”

6. “

The

prod

ucts

of [

com

pany

X’s

pro

duct

bra

nd n

ame]

wer

e

of c

lear

ly b

ette

r des

ign

than

thos

e of

com

petit

ors’

” a

0=“s

tron

gly

disa

gree

”… 6

=“st

rong

ly a

gree

”

Cron

bach

’s a

lpha

: .90

AVE:

.66

Com

posi

te re

liabi

lity:

.92

fam

ilia

rity

wit

h t

he

com

pan

y’s

pro

du

cts

Refle

ctiv

e, s

ingl

e-ite

m s

cale

(with

7-p

oint

sca

le)

1. “

How

wel

l did

you

kno

w th

e pr

oduc

ts o

f [co

mpa

ny X

’s

prod

uct b

rand

nam

e]?

0=”n

ot a

t all”

… 6

=”ve

ry w

ell”

fam

ilia

rity

wit

h t

he

com

pan

yRe

flect

ive,

sin

gle-

item

sca

le

(with

7-p

oint

sca

le)

1. “

How

wel

l did

you

kno

w th

e [c

ompa

ny X

]?

0=”n

ot a

t all”

… 6

=”ve

ry w

ell”

a Th

is ite

m w

as b

ased

on

the

assu

mpt

ion

that

the

affe

ctiv

e ev

alua

tion

of a

com

pany

’s pr

oduc

ts w

ill b

e ex

hibi

ted

larg

ely

rela

tive

to c

ompe

titio

n.


The reliability of this multiple-item scale was good, as it achieved an alpha

score as high as .9, AVE of .66, and composite reliability of .9.

The final predictor variable in Model 1a, familiarity with the com-pany’s products, was measured with a single-item scale. The respondent

was asked: “How well did you know the products of [company X’s product

brand name]?” The responses were recorded on a 7-point scale, anchored by

0=”not at all” and 6=”very well”.

measures – dependent variables. The scales for the dependent measures

of Model 1a were new and developed for this study, due to lack of earlier

research in the area. The consideration that the investor practiced towards

alternative investment opportunities when investing in the focal company’s

stock (consideration of alternative stocks) was measured with two

reflective items. First, the subjects were asked: “When you were about to

buy [ focal company]’s stock, how much did you consider buying other com-

panies’ stocks?” The responses were recorded on a bipolar 7-point, reverse-

coded scale anchored by:

0=“[Focal company]’s stock was merely one alternative among •

the innumerable stocks that I considered.”

…

6=”I did not consider other companies’ stocks at all.”•

Second, the subjects were asked: “When you were about to buy [ focal

company]’s stock, had you decided to invest in whatever company comes

along or did you specifically want to buy [ focal company]’s stock?” Here, the

responses were recorded on a bipolar reverse 7-point scale anchored by:

0=“I would have in any case invested in one stock or another.” •

…

6=”I had specifically decided to invest in [ focal company]’s •

stock.”

Note that the reverse-coding of the scales meant that greater response

values on the items meant smaller value for consideration of alternative

87studies 1a and 1b

stocks. The reliability of this two-item reflective scale was satisfactory, as

the scale achieved an alpha score of .80, average variance extracted (AVE) of

.83, and composite reliability of .91.

The potential optimism that an investor had in his expectations about

the focal company’s stock (optimism about the company’s financial returns) was, in turn, measured by asking the subjects: “To what extent

did you have the following beliefs contributing to your decision to buy

[ focal company]’s stock?”. There were originally four statements to which

the respondents were specifically asked to respond and on which responses

were recorded on a 7-point scale:

“I believed that the development of [ focal company]’s earnings •

would be good in the long run.”

“I believed that the development of [ focal company]’s earnings •

would be good in the near term.”

“I believed that the stock price of the [ focal company]’s would •

rise in the long run.”

“I believed that the stock price of the [ focal company]’s would •

rise in the near term.” 27

All the scales were anchored by 0=”did not contribute at all to my invest-

ment decision” and 6=”essentially contributed to my investment decision”.

However, whereas responses on the first three items showed fairly high cor-

relation with each other and satisfactory outer loadings with the latent vari-

able (>.50), the last item did not, having outer loading of .3928. Therefore,

the fourth item was dropped from the final reflective scale of optimism about the company’s financial returns. The reliability of the remain-

27] The last item was dropped from the final scale due to low factor loading.

[28] This may be due to the possibility that respondents interpreted the item to inquire about their relative desire for near term stock returns vs. long term stock returns and earnings.


ing three-item reflective scale was satisfactory, with an adequate alpha score

of .68, AVE of .61, and composite reliability of .82.

Finally, the confidence that an investor potentially had in his own expec-

tations about the financial returns of the company’s stock (confidence about the company’s financial returns), was measured by asking the

respondents how “surprising” the financial returns of the stock had appeared

to them during the time period following the investment. The logic for this

measure was that a greater feeling of surprise – as felt after the investment

– about the financial returns from the stock would reflect greater/excessive

confidence in one’s pre-purchase expectations about the returns (see Glaser,

Langer, & Weber, 2007). The specific questions were:

“Has the stock price development of [ focal company] after your 1.

investment appeared surprising to you?”

“Has the earnings development of [ focal company] after your 2.

investment appeared surprising to you?”

The responses were recorded on a bipolar 7-point reverse scale anchored

by “0=not at all surprising” and “6=highly surprising”. The reliability of the

scale was satisfactory, with an adequate alpha score of .83, AVE of .86, and

composite reliability of .92.

discrimininant validity and multicollinearity. The feasibility of ana-

lyzing a model like Model 1a (or 1b) rests on the assumption that the predictor

(as well as dependent) variables reflect distinct concepts, i.e., exhibit discrimi-

nant validity. For instance, the measurement items for personal relevance of the company’s product domain should not measure “the same thing”

as the measurement items for overall affect for the company’s product design – since the model is based on the assumption that these are theo-

retically distinct constructs.

Commonly, discriminant validity is examined by looking into corre-

lations between the variables (Campbell & Fiske, 1959). Table 5 presents

correlations between the main variables of Model 1a. In simple terms, the

89studies 1a and 1b

correlations between the variables should not be too high (too close to one).

Specifically, one can calculate the extent to which the two scales overlap by

using the following formula:

rxx ryy

rxy

,where rxy is correlation between variables x and y, rxx is the reliability of

x, and ryy is the reliability of y. A result less than .85 tells us that discriminant

validity likely exists between the two scales.

Looking into the correlations between the predictor variables – person-al relevance of the company’s product domain, overall affect for the company’s product design, and familiarity with the company’s products – the results of the formula remain below .6 for all the combina-

tions. Also the correlations between the dependent constructs remain low

enough, even below .3. Thus, the discriminant validity was adequate.

The discriminant validity of the predictor variables, especially, is also

related to the concern about multicollinearity. The correlations between the

predictor variables should not be too high, since too high between-variable

correlations can make the PLS path modeling unstable and the results unre-

liable. However, since in the present case, the simple correlations of the

predictor variables remain close to or below .5, multicollinearity should not

be a serious concern.


personal relevance of the company’s product domain

overall affect for the company’s product design

familiarity with the company’s products

optimism about the company’s financial returns

confidence about the company’s financial returns

consider-ation of alterna-tives

personal relevance of the company’s product domain

0.74

overall affect for the company’s product design

0.29 0.90

familiarity with the company’s products

0.31 0.56 N/A

optimism about the company’s financial returns

0.05 0.12 0.09 0.68

confidence about the company’s financial returns

0.05 -0.07 -0.04 0.16 0.83

consideration of alternatives

-0.14 -0.18 -0.13 -0.14 -0.24 0.80

Notes: Numbers on the diagonal are Cronbach’s alpha scores. N.A. = no alpha score calculated because the construct is measured by single item.

Table 5.

Correlations between the main variables of Model 1a

91studies 1a and 1b

5.3.2 results – model 1a As results for Model 1a, I list the path coefficients and t-values of the calcu-

lated Model 1a in Table B1 of Appendix B. Figure 6 presents these results in a

simplified form, with significant paths/effects noted. In the calculated mod-

el, the predictor variables explain 20.5 % of consideration of alternative stocks, 10.3 % of optimism about the company’s financial returns,

and 10.7 % of confidence about the company’s financial returns,

respectively. Of the predictor-mediator variables – overall affect for the company’s product design and familiarity with the company’s prod-ucts – 33.0 % and 9.0 % are explained, respectively.

The hypotheses tested in Model 1a were hypotheses H1, H3–H5, H8,

and H11–H13.

First of all, with regard to the variable personal relevance of the com-pany’s product domain, there is a significant positive effect by this vari-

able on familiarity with the company’s products (coeff.=+.31, p<.001).

This finding suggests – as proposed in hypothesis H1 from the information-

acquisition perspective – that the higher personal relevance an investor

attaches to a life domain, the more familiar he tends to be with (such a

company’s) products that represent or support the domain in question.

The further paths from familiarity with the company’s products towards consideration of alternative stocks must be regarded with

special attention, since I presented alternative hypotheses concerning these

paths. The finding is that familiarity with a company’s products has

in fact a positive direct effect on consideration of alternative stocks,

which is significant (coeff.=+.17, p<.05). This suggests, in support of hypoth-

esis H3.1 derived from consumer/user theory, that investors’ familiarity with

a particular company’s products actually increases the consideration they

give to alternative investment targets prior to investing in that company’s

stock. At the same time, the finding is in stark contrast with the null hypoth-

esis H3.0 that was derived from the mainstream of behavioral finance

theory and expected that investors’ familiarity with a particular company’s


Figure 6. Results, Model 1a: The effects of investors’ evaluations of a company’s product design on their financial expectations about the company’s stock (and consideration of alternative investment targets)

+.17

* (H

3.1

supp

.)

–.16

* (H

5 su

pp.)

(H4.

0a, H

4.1a

not s

upp.

)

–.40

***

(H4.

0b s

upp.

)

–.18

a (H

8 su

pp.)

+.27

**(H

11 s

upp.

)(H

12 n

ot s

upp.

)

+.13

**

(H13

sup

p.)

+.31

***

(H1

supp

.)

Ove

rall

affe

ct fo

rco

mpa

ny Y

’spr

oduc

t des

ign

Pers

onal

rele

vanc

e of

do

mai

n x

Confi

denc

e ab

out

com

pany

Y’s

fin

anci

al re

turn

s

Opt

imis

m

abou

tco

mpa

ny Y

’s

finan

cial

retu

rns

Cons

ider

atio

n gi

ven

to a

ltena

tive

inve

stm

ent t

arge

ts

(oth

er th

anco

mpa

ny Y

)

Perc

eptio

n th

at c

ompa

ny Y

’spr

oduc

tsre

pres

ent/

supp

ort

do

mai

n x

Fam

iliar

ity w

ith

com

pany

Y’s

prod

ucts

12.i2.

ii3

a p

< .1

0; *

p <

.05;

**p

< .0

1; *

**p

< .0

01

93studies 1a and 1b

products would decrease the consideration they gave to alternative invest-

ment targets.

Moreover, familiarity with the company’s products is found to

have no significant effect on confidence about the company’s financial returns. This finding, while calling for rejection of the null hypothesis

H4.0a, is in line with the found support for hypothesis H3.1 and non-sup-

port for H3.0. Especially, the finding does not support the idea that an indi-

vidual’s familiarity with a company’s products would tend to cause him to

be (over)confident about his expectations about the financial returns from

the company’s stock – an idea sometimes implied in the mainstream of

behavioral finance (cf. Barber & Odean, 2000, 2001). All in all, while an

investor’s confidence in his own financial expectations about a company’s

stock is found to have – as expected in hypothesis H4.0b – a significant

negative effect on the consideration that he gives to alternative investment

opportunities (confidence about the company’s financial returns

consideration of alternative stocks, coeff.= –.40, p<.001), that (over)

confidence does not seem to stem from investor’s familiarity with the com-

pany’s products.

Nevertheless, in regards to the self-expression perspective, personal relevance of the company’s product domain is found to have a negative

direct effect on consideration of alternative stocks, which is signifi-

cant (coeff.=–.16, p<.05). That is, the higher personal relevance an investor

attaches to a life domain that a particular company’s products represent, the

less consideration he tends to give to alternative investment targets while

leaning towards investing in that company’s stock. This supports hypothesis

H5, derived from the theory that the personal relevance will generate ten-

dency in investors to express their selves or identities through shortcutting

the final investment choice in favor of the company whose product domains

they find personally relevant (and ending the consideration of alternatives).

With regard to the overall evaluations of companies’ product designs,

overall affect for the company’s product design is found to have a

direct negative effect on consideration of alternative stocks (coeff.=–.18,


p<.10), as well. Being marginally significant, this effect hints, as proposed

in hypothesis H8, that the more positive an investor’s overall affect for a

company’s product design, the less consideration he tends to give to alterna-

tive investment targets while investing in that company’s stock. The theory

behind is that an investor may use his affect for the company’s product

design as a short-cut (affect heuristic), so as to arrive at an investment deci-

sion without all the consideration given to alternatives.

Moreover, there is positive direct effect by overall affect for the com-pany’s product design on optimism about the company’s financial returns, which is highly significant (coeff.=+.27, p<.01). That is, the more

positive an investor’s overall affect for a particular company’s product

design, the greater optimism the investor has in his expectations about the

financial returns from the company’s stock. This supports hypothesis H11.

However, note that while this optimism is likely to positively influence one’s

preference and choice to invest in that company’s stock, the results do not

indicate that it would decrease the consideration that one gives to alterna-

tive stocks as investment targets. Namely, the path optimism about the company’s financial returns towards consideration of alternative stocks is non-significant.

On the other hand, no significant path from overall affect for the company’s product design towards confidence about the company’s financial returns is found, either. Thus, hypothesis H12, concerned

with the issue whether there is direct relationship between product design

affect and (naïve) confidence in one’s own financial return expectations (or

tendency to underestimate risk; cf. Slovic et al., 2007; Statman, Fisher, &

Anginer, 2008) does not receive support.

With regard to the interdependencies or feedback effects between

design-related predictor variables in Model 1a, there is a positive direct effect

by personal relevance of the company’s product domain on over-all affect for the company’s product design, which is highly signifi-

cant (coeff.=+.13, p<.01). This suggests, as proposed in hypothesis H13, that

the higher personal relevance an investor attaches to a life domain that a

95studies 1a and 1b

particular company’s products represent, the more positive is his overall

affect for the company’s product design.

Finally, regarding the control paths included in the analysis but not

hypothesized in the theory development, there are no significant paths from

familiarity with company’s products towards optimism about the company’s financial returns, nor from personal relevance of the company’s product domain towards optimism about the company’s financial returns or confidence about the company’s financial returns. This gives us confidence in the fact that my theory development

has not missed important effects among the constructs. Incidentally, the

effect of familiarity with company’s products on overall affect for the company’s product design is, in contrast, positive and highly signifi-

cant. This may reflect the well-known fact that mere familiarity for an object

may cause some affect towards it (e.g., Zajonc, 1980).

With regard to the dummy company variables, in contrast, many of

these variables have direct and/or moderating effects on the dependent vari-

ables and the relationships between personal relevance of the compa-ny’s product domain, and overall affect for the company’s product design, and familiarity with the company’s products, and the depen-

dent variables. This finding suggests that there are likely to be certain compa-

ny- and/or industry-specific factors unidentified in my model that addition-

ally explain some of individuals’ financial expectations and considerations,

and/or strengthen or weaken the impact of the explanatory, product design

-related constructs thereon. For example, the focal (investee) company being

“B” is found to have significant, negative moderating effect on the relation-

ship between familiarity with the company’s products and consider-ation of alternative stocks. This finding may result from the fact that an

increase in familiarity with that company’s products had even more substan-

tial negative effect on an investor’s consideration of alternative stocks when

it came to that company’s stock. The finding might also result from a situ-

ation that the respondents’ overall familiarity with that company’s products

was on average at higher level than familiarity with other companies’ brands.


5.4 study 1b

5.4.1 method – model 1bWhile Model 1a focused on examining the effects of investors’ product

design -related perceptions and evaluations on their financial expectations

about companies’ stocks (as well as consideration of alternatives), Model 1b

focused on examining the effects of investors’ product design perceptions

on their investment decisions beyond financial returns expected from com-

panies’ stocks. The structural PLS model specified as Model 1b is depicted,

to its essential parts, in Figure 5 (p. 62). Note that for this second PLS model,

the study setting involved framing the questions and/or variables as if the

investment had been a choice between two stocks.

Specifically, the purpose of Model 1b was to test the hypotheses concern-

ing the following main dependent variables:

determination to invest when equal financial returnsa)

preparedness to invest with lower financial returnsb)

For this model, the inquiry involved a quasi-manipulative setting (see

the following section) whereby a respondent was:

asked to retrospectively recall the time when he had invested in •

the focal (investee) company’s stock,

presented with the name of another, real stock-exchange-listed •

company (“comparison company”),

requested to respond to questions pertaining to the perception •

and attitude constructs related to product design, concerning

both the investee company and the comparison company, and

requested to ponder his investment as if it had been a choice •

between the investee company and the comparison company.

97studies 1a and 1b

Thus, the data for this model consisted of each respondent’s

perceptions and attitudes (personal relevance, overall affect, 1.

familiarity) related to the product design of both the company in

which he had invested (investee company) and another company

(comparison company), at the time of his decision to invest in

the former; and

view to his investment decision as if it had been a choice between 2.

the investee company and the comparison company.

Both data 1. and 2. above were, again, retrospective in nature.

The main predictor variables in Model 1a were theoretically and conceptu-

ally the same as in Model 1a:

personal relevance of the company’s product domain •

and

overall affect for the company’s product design• difference.

familiarity with the company’s products• difference

However, as implied above, the quasi-manipulative setting (related to

personal relevance of the company’s product domain) was slightly

different for Model 1b than for Model 1a – due to the framing of the ques-

tions in Model 1b as if the investment had been a choice between two stocks.

The details of this quasi-manipulation will be described in the following

section. This setting also involved slightly different measurement approach

for the variables overall affect for the company’s product design and

familiarity with the company’s products, indicated by the subscripts

“difference”.

Note that I also included into Model 1b the additional mediating vari-

able, willingness to support the company through investment. The

inclusion of this variable reflected the theoretical notion that the hypoth-

esized effects in Model 1b may be direct as well as indirect, i.e., manifest

directly and/or through the mediating variable of one’s increased (conscious)


willingness to support the company, by investing in its stock (see section

3.2.1, p. 52) . Moreover, familiarity with the company was included as a

variable between the predictor variable familiarity with the company’s products and the main dependent variables, so that hypothesis H0 could

be confirmed.

Finally, in addition to the paths shown in Figure 5, I included into the

model a direct path from familiarity with the company to prepared-ness to invest with lower financial returns. I included this path,

despite its non-presence in the theoretical hypotheses, so that I would be

able control for the occurrence of the corresponding effect – the occurrence

of the effect in the data would indicate that my theoretical model/proposi-

tions were incomplete. Also, indicators of the investee companies as well

as comparison companies were, again, included in the model as dummy

control variables.

specifics of the study design concerning personal relevance of the

company’s product domain. For Model 1b, not only was the (I) domain

selected or quasi-manipulated respectively for each investee company in the

study to be such a domain that the respondents (who had invested in the

company) would likely have perceived the company’s products to represent

– as for Model 1a. But, Model 1b also involved selecting or quasi-manipulat-

ing (II) a comparison company for each of the focal companies. Specifically,

a comparison company was selected to be such a company whose products

the respondents would likely perceive as non-representative of the domain

(I) in question. This way the study setting corresponded with the way the

hypotheses H6 and H7 were framed.

Because of the controlled selections done by me as a researcher, one

can consider the (I) selections of the domains for the focal companies

and (II) the selections of the comparison companies to indeed be “quasi-

manipulations”. Moreover, to enable better generalizability of the results,

I manipulated half of the respondents for each investee company to have

one comparison company, while the other half to have another comparison

99studies 1a and 1b

company. All in all, these quasi-manipulated product domains and com-

parison companies are listed in Table 6. For instance, for a tire company, I

selected the domain (I) to be motoring/car-driving – like in Model 1a (Table

2). In this case, the comparison companies (II) were, in turn, manipulated

to include a company producing interior decoration items and a company

producing domestic tools – products that would not likely be perceived to

support or represent the domain of motoring/car-driving.

Should the quasi-manipulation be successful (reported below), a sub-

sequent analysis would be able to address the effects of the degree of the

personal relevance of a domain which the investee company’s products repre-

sented – but which the products comparison companies did not represent

(due to the very manipulation) – on the dependent variables. The dependent

variables would, in turn, take the form of contrasting a subject’s willingness

to invest in the stock of the focal (investee) company vs. that of the compari-

son company (as framed in the hypotheses, especially H6–H7).

In fact, Table 3 concerning Model 1a (p. 82) already presented the suc-

cessfulness of the quasi-manipulation, when it comes to the presumption

(I) that the selected domain for each investee company in the study was

such a domain that the respondents who had invested in the company per-

ceived the company’s products to represent. What remains to be checked,

for Model 1b, is the presumption (II) that the selected comparison com-

panies’ products would not be perceived to represent the same domains

in question. These tests (or quasi-manipulation checks) are presented

in Table 7. As can be seen from the table, for all manipulated domains

and for all manipulated comparison companies, the investor-respondents

overall disagreed (mean<0.0) with statements claiming that a comparison

company’s products represented the selected domain. The means differed

significantly from the neutral value of 0 at p<.05 level. Thus, the quasi-

manipulation was successful also when it comes to the selection of the

comparison companies.

Note that, the same quasi-manipulation setting also allowed me to

address the effect of the differential overall affects as well as familiarities


Investee company

Investee company’s products

Quasi-manipulated domain X (supposed to be represented by the investee company’s products)

Quasi-manipulated comparison companies

Quasi-manipulated comparison companies’ products (supposed to be non-representative of domain X)

A car and other tires motoring & car-driving D;

Bfashion/interior decoration; gardening and dom. tools

B

gardening and other domestic tools

gardening & visiting summer cottage

E; A

food products; car and other tires

Csports equipment and apparel

sport D; B

fashion/interior decoration; gardening and dom. tools

Table 7. Tests for the assumption that the selected domains were domains that the investors perceived the comparison companies not to represent (Study 1b)

Quasi-manipulated [domain X]

Item Quasi-manipulated comparison company1: Mean

Quasi-manipulated comparison company2: Mean

motoring/ car-driving

1: “The products of [comparison company D/B] supported/represented motoring very well.”

2: “[Comparison company D/B] was committed to developing products that support/represent motoring.”

D: -1.35***

D: -1.19***

B: -1.06***

B: -1.10***

gardening/ visiting summer cottage

1: “The products of [comparison company E/A] supported/represented gardening (/visiting summer house) very well.”

2: “[Comparison company E/A] was committed to developing products that support/represent gardening (/visiting summer house).”

E: -0.38*

E: -0.42*

A: -1.09***

A: -0.96***

sport

1: “The products of [comparison company D/B] supported/represented sport very well.” 2: “[Comparison company D/B] was committed to developing products that support/represent sport.”

D: -2.07***

D: -2.11***

B: -1.69***

B: -1.63***

* planned comparison of mean to value 0 (disagree-agree scale neutral) significant at p<.05 level*** planned comparison of mean to value 0 (disagree-agree scale neutral) significant at p<.001 level

Table 6. The selected domains and comparison companies per focal/investee company, in Study 1b

101studies 1a and 1b

that the investors had towards the companies (investee vs. comparison

company) on the dependent variables (hypotheses H9, H10, H0, and H2).

Specifically:

the subject’s overall affect for (and familiarity with) the compa-1.

ny’s products would be measured for both the investee company

and the comparison company,

the difference in the affect (and familiarity) measures (i.e., 2.

investee company measure minus comparison company mea-

sure) would be calculated for each subject, and

the effect of this difference on the subject’s relative willingness 3.

to invest in the focal (investee) company’s stock vs. the compari-

son company’s stock would be analyzed.

Due to these difference measures used in Model 1b, the variables in

question have the subscript “difference”:

overall affect for the company’s product design• difference.

familiarity with the company’s products• difference

familiarity with the company• difference

Note again that for the predictor variable personal relevance of the company’s product domain, I did not use a difference-based measure,

since the quasi-manipulated domain to which the measurement questions

pertained was not represented by the comparison company’s products (as

per the successful quasi-manipulation of the comparison company). Hence,

the degree of personal relevance of the domain in question would only affect

investment interest in the focal company, whose products would represent

the domain per the quasi-manipulation

Before the analysis of the data, one more procedure was conducted:

respondents that indicated ownership of not only the investee company but

also the comparison company presented to them (less than 10 % of respon-

dents) were screened out from the data, in order to ensure similar com-

parison scenario among all the respondents included in the analyses. This


left Model 1b to be calculated with an effective sample of 293 investors (in

contrast to 340 for Model 1a).

measures – predictor variables. Since the predictor constructs in Model

1b were essentially the same as in Model 1a, the predictor variable measure-

ments for Model 1b were based on similar questions as the predictor vari-

able measurements in Model 1a. Yet, as mentioned in the above section, the

variable overall affect for the company’s product designdifference used

in calculating Model 1b was the difference between the respondent’s (sum)

score concerning overall affect for the focal company’s product design and

his (sum) score concerning overall affect for the comparison company’s

product design. That is, the variable values consisted of each respondent’s

overall affect for the focal company’s product design minus his overall affect

for the comparison company’s product design. Analogously, also the vari-

ables familiarity with the company’s productsdifference and familiarity with the companydifference were difference measures. For the exact items

used – which were the same as in Study 1a – see Table 4 (p. 84).

measures – dependent variables. The measures for the dependent vari-

ables of Model 1b were new and developed by myself, again due to lack of

earlier survey-based measures. Recall that the study setting behind Model

1b involved making the investor reflect his decision to invest in the focal

(investee) company as if it had been a choice between the focal company and

the comparison company. This setting was reflected in both the dependent

variable measures of the model.

The first dependent variable, determination to invest when equal financial returns, was measured with a single-item indicator by asking

the subjects:

“If you had been convinced at the time of buying the [investee

company]’s stock that the financial returns from the [comparison

company’s] stock would with absolute certainty be exactly the

same as those of the [investee company]’s, how would you have

invested?”


The responses were recorded on a bipolar 7-point scale anchored by:

0=“Which stock to invest in would have made no difference to •

me”

…

6=”I would still have invested in [investee company]’s stock”.•

The other dependent variable, preparedness to invest with lower financial returns, was measured with a single-item indicator as well, by

asking the subjects:

“How much greater financial returns (assuming that the

investment time horizon and investment risk would have stayed

the same) should you have been promised from the [comparison

company]’s stock, so that you would have chosen to invest in

[comparison company]’s stock instead of [investee company]’s

stock? Circle a percentage.”

The responses were recorded by asking the subjects to choose a percent-

age out of the following:

1% (higher), •

2% (higher), •

5% (higher), •

10% (higher), •

20% (higher), •

30% (higher), •

50% (higher), •

100% (higher). •

A logarithm transformation was performed on the reported percentage

to obtain the variable value.

The mediating variable of the model, willingness to support the company through investment, was measured by asking the subjects:

“How strong a desire did you have to support [investee company]’s business


by investing in its stocks?”. The responses were recorded on a 7-point bipo-

lar scale, anchored by:

0=“no such desire at all” •

…

6=“very strong desire”. •

discrimininant validity and multicollinearity. Since the predictor

variables in Model 1b were theoretically the same and based on the same

items as in Model 1a, the discriminant validity among the predictor variables

was similar as with Model 1a, i.e., good. With the same formula used with

Model 1a (p. 89), the correlations (Table 8) between the predictor variables

in Model 1b gave results below .5 for all the combinations. The discriminant

validity among the dependent constructs was satisfactory, as well, with cor-

relations remaining below .5 there, too.

As mentioned in connection to Model 1a, discriminant validity of the

predictor variables is also related to the concern about multicollinearity. The

correlations between the predictor variables should not be too high, since

too high between-variable correlations can make the PLS path modeling

unstable and the results unreliable. In any case, since in Model 1b (like in

Model 1a) correlations of the predictor variables remained well below .5,

multicollinearity should not be a serious concern.

5.4.2 results – model 1b

descriptive statistics concerning stock investment willingness

beyond expected financial returns. Before reporting the hypotheses

testing results from the PLS analysis of Model 1b, it is interesting to look

into certain descriptive statistics concerning the dependent variables includ-

ed in the model.

Notably, based on standard finance notion, one might think that all the


pers

on

al

rele

van

ce o

f th

e co

mpa

ny’

s pr

od

uct

d

om

ain

ove

rall

af

fect

fo

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e co

mpa

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s pr

od

uct

d

esig

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ff.

fam

ilia

rity

w

ith

th

e co

mpa

ny’

s pr

od

uct

s diff.

fam

ilia

rity

w

ith

th

e co

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ff.

wil

lin

gn

ess

to s

upp

ort

th

e co

mpa

ny

by

inve

stin

g

det

erm

inat

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hen

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ual

fi

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turn

s

prep

ared

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ess

to

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st w

ith

lo

wer

fi

nan

cial

re

turn

s

pers

on

al r

elev

ance

of

the

com

pan

y’s

pro

du

ct

do

mai

n0.

72

ove

rall

aff

ect

for

the

com

pan

y’s

pro

du

ct

des

ign

diff.

0.16

0.89

fam

ilia

rity

wit

h t

he

com

pan

y’s

pro

du

cts di

ff.0.

180.

42N

/A

fam

ilia

rity

wit

h t

he

com

pan

y diff.

0.11

0.20

0.30

N/A

wil

lin

gn

ess

to

supp

ort

th

e co

mpa

ny

by in

vest

ing

0.27

0.15

0.16

0.01

N/A

det

erm

inat

ion

to

in

vest

wh

en e

qu

al

fin

anci

al r

etu

rns

0.20

0.23

0.22

0.19

0.38

N/A

prep

ared

nes

s to

inve

st

wit

h l

ow

er fi

nan

cial

re

turn

s0.

05-0

.03

0.06

-0.0

30.

400.

46N

/A

Notes: Numbers on the diagonal are Cronbach’s alpha scores. N.A. = no alpha score calculated because the construct is measured by single item.

Table 8. Correlations between the main variables of Model 1b


investors’ responses would fall on a (response) value indicating that only

financial returns and risks mattered in investors’ investment decisions.

In contrast, the behavioral hypotheses implicated in Model 1b (H6-H7,

H9-H10) presume that individuals may have extra willingness to invest in

a company’s stock, beyond its expected financial returns/risk. Examining

the actual distribution of values in my data on the two dependent variables

in question (determination to invest when equal financial returns and preparedness to invest with lower financial returns), the

behavioral presumption receives support. Figure 7 presents the frequency

distributions of respondents’ answers on the items pertaining to the depen-

dent variables.

Indeed, with regard to determination to invest when equal finan-cial returns (upper panel, Figure 7), only 14.3 % of the investors answered

according to the leftmost benchmark value, indicating that if offered an

alternative investment with equal financial returns and risk, they would

have been indifferent as to which investment to choose. The rest, 85.7 %,

exhibited more or less strong determination to invest in the focal (investee)

company’s stock, beyond its expected financial returns/risk. In a similar

vein, only 16.8 % of the respondents answered according to the leftmost

benchmark value on preparedness to invest with lowered financial returns (lower panel, Figure 7), indicating that even a minimal increase

(1%) in risk-free financial returns offered by another (comparison) com-

pany’s stock would have made them switch investments. The rest, 83.2

%, exhibited preparedness to invest in the focal company’s stock with

lower financial returns offered from that stock than from another stock.

tests of hypotheses. As results for Model 1b, I list the path coefficients and

t-values of the calculated model in Table B2 of Appendix B. Figure 8 presents

these results in a simplified form, with significant paths/effects noted. In

total, the model explains 22.1 % of determination to invest when equal financial returns and 21.2 % of preparedness to invest with lower financial returns, respectively. In the calculated model, both personal


Figure 7. Respondents’ willingness to invest in the focal company’s stock beyond its expected financial returns/risk (Study 1b)

20

15

10

5

01 % higher

2 % higher

5 % higher

10 % higher

20 % higher

30 % higher

50 % higher

4 5 6

30

25

20

15

10

5

00 1 2 3

determination to invest when equal financial returns: 0 = indifferent regarding which stock to choose (focal company vs. comparison company) in case the stocks would have had equal expected financial returns ... 6 = determinate to invest in focal company’s stock even if the comparison company’s stock would have had equal expected financial returns

% o

f res

pond

ents

preparedness to invest with lowered financial returns: How much higher (risk-free) financial returns from another (comparison) company’s stock would the respondent have required so as to switch his investment to that stock?

% o

f res

pond

ents

100 % higher


relevance of the company’s product domain and overall affect for the company’s product designdiff. have significant (p <.05) direct and/or

indirect effects on the dependent variables, in support of my hypotheses. In

addition, all significant parameters are in the proposed directions, providing

general support for the hypotheses.29

With regard to the dependent variable determination to invest when equal financial returns, the direct effect on this variable by overall affect for the company’s product designdiff. is found to be positive,

and highly significant (coeff.=+.27, p<.001). Thus, the more positive overall

affect an investor has for a particular company’s product design – relative

to another company’s product design – the more determined the inves-

tor is to invest in that (former) company’s stock rather than in the other

company’s stock, in case the expected financial returns from the stocks are

approximately similar. This finding supports hypothesis H9. Moreover, the

direct effect of personal relevance of the company’s product domain

on determination to invest when equal financial returns is found

to be positive, as well, and marginally significant (coeff.=+.06, p<.10). This

hints that the higher personal relevance an investor attaches to a life domain

that a company’s products represent, the greater is his determination to

invest in that company’s stock rather than in other another company’s stock

that has approximately similar expected financial returns/risks. This find-

ing supports hypothesis H6.

Furthermore, the analysis reveals the following significant, indirect paths

– through the mediating variable willingness to support the company by investing – from the predictor constructs towards determination to invest when equal financial returns:

[29] Note that I eliminated the interaction terms of company dummies and predictor variables from the final Model 1b presented here, in order to simplify the model and because the interaction terms were not highly significant. However, the dummy company variables were left into the model so that company/domain-specificity of the results could be detected.


Figure 8. Results, Model 1b: The effects of investors’ evaluations of a company’s product design on their extra investment willingness, beyond expected financial returns

+.18

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ffect

)

+.27

***

(H9

supp

orte

d, d

irect

effe

ct)

+.11

* (

H9

& H

10 s

upp.

, ind

irect

effe

ct)

+.25

***

(H6

& H

7 su

pp.,

indi

rect

effe

ct)

+.09

* (H

13 s

uppo

rted

)

Will

ingn

ess

to

supp

ort c

ompa

ny Y

by

way

of i

nves

ting

+.35

**

+.43

**


1a) overall affect for the company’s product designdiff.

willingness to support the com-pany by investing (+.11, p<.05) ,

1b) personal relevance of the company’s product domain willingness to support the company by investing (+.25, p<.001), and

2) willingness to support the company by investing determination to invest when equal financial returns (+.35, p<.001)

Considered together, these effects mean that increases in the personal

relevance of a life domain represented by a company’s products as well as

in overall affect for the company’s product design both increase investors’

willingness to support the company by investing in its stock – which in turn

increases their determination to invest in the company’s stock rather than

in other stocks that have approximately similar expected financial returns.

Thus, both hypothesis H6 and H9 receive further support, when it comes

to indirect effect by the two product design -related explanatory factors on

determination to invest in a company – as channeled via the investor’s will-

ingness to support the company by investing.

With regard to the dependent variable preparedness to invest with lower financial returns, the direct effects by personal relevance of the company’s product domain and overall affect for the company’s product design are non-significant. However, we find, again, the follow-

ing significant indirect paths from both the explanatory constructs towards

preparedness to invest with lower financial returns, through the

mediating variable willingness to support the company by investing:

1a) overall affect for the company’s product designdiff.

willingness to support the compa-ny by investing (+.11, p<.05) , and

1b) personal relevance of the company’s product domain

willingness to support the company by investing (+.25, p<.001) and


2) willingness to support the company by investing preparedness to invest with lower financial returns (+.43, p<.001)

Considered together, these effects mean that personal relevance of a

domain represented by a company’s products and overall affect for the com-

pany’s product design increase investors’ willingness to support the com-

pany by investing in its stock – which further increases their preparedness

to invest in the company’s stock even with lowered financial returns. Thus,

both H7 and H10 receive support, when it comes to indirect effect by the

two product design -related explanatory factors on preparedness to invest

in the company’s stock with lowered financial returns – as channeled via

conscious willingness to support the company by investing.

In very simple terms, the two factors related to a company’s product

design thus effectively generate willingness to invest in the company’s stock,

even if the investment meant giving up on some financial returns.

Furthermore, when it comes to familiarity with the company’s productsdiff., this variable is found to have significant positive effect on

familiarity with the companydiff. (coeff.=+.29, p<.05), which in turn has

significant positive effect especially on determination to invest when equal financial returns (coeff.=+.15, p<.01). These results support my

hypotheses H2 and H0 – consistent with the earlier behavioral finance sug-

gestion (Frieder & Subrahmanyam, 2005) that familiarity with a company’s

products increases investment attraction. In contrast, the control path from

familiarity with the companydiff. to preparedness to invest with lower financial returns remains non-significant, as expected – there is

no theoretical reason, either, to expect that mere familiarity with a company

would lead to investors’ being prepared to give up on any financial returns.

Finally, with regard to the dummy company variables, many of these

variables show significant effects on the dependent variables. This suggests

that similarly as in Model 1a, there are likely to be certain company- and/or

industry-specific factors unidentified in Model 1b that additionally explain


some of individuals’ extra willingness to invest in companies’ stocks beyond

financial returns, and/or strengthen or weaken the impact of the explana-

tory constructs thereon. For example, the comparison company being “D”

is found to have significant, negative effect on preparedness to invest with lower financial returns (in a focal company’s stock). This finding

may result from the fact that the investors on average would not have had

much preparedness to give up on financial returns when investing in a focal

company (e.g., A or C), in case the comparison company presented to them

was company D.

113

6 Study 2


Study 2 was designed to address, implicitly, all the hypotheses H0–H13

– by way of explicitly testing the corollary hypothesis H14, as explained in

sections 3.2.4 and 4.2.2. The corollary hypothesis H14 expected that prod-

uct design emphasis in a company’s investment advertisement has positive

effect on an investor’s general interest to invest in the company’s stock.

In essence, Study 2 complements Studies 1a and 1b by utilizing differ-

ent kind of data – prospective (rather than retrospective) – and by applying

the most traditional and well-accepted methodological approach to study-

ing individuals’ psychology and behavior, i.e., randomized experiment. In

order to test hypothesis H14, I replaced the multiple dependent variables

of the causal maps (Figures 4 and 5, pp. 61-62) with a single dependent

variable that addresses an investor’s general-level interest to invest in a com-

pany (interest to invest). The main explanatory variable was, according

to hypothesis H14, the degree to which the company’s product design is

emphasized in an investment advertisement of the company. Analysis of

variance (ANOVA) was the main analysis method to test the hypothesis.

Nevertheless, I also included the main explanatory variables of the disser-

tation (personal relevance of the company’s product domain and

overall affect for the company’s product design) to the analysis, by

performing additional analyses of covariance (ANCOVA) where these vari-

ables acted as covariates.

6.1 method – study 2

subjects. For Study 2, the subjects were recruited at “stock exchange eve-

ning” events of the Finnish Foundation for Share Promotion. This non-

profit foundation arranges a series of such events twice a year, and they are

open to the public and targeted especially to people who are interested and

(actively) engaged in making investments in the stock market. The duration

of one event is a couple of hours, during which the investors get to listen to

115study 2

Overall sample

Genderfemalemale

32.0% 68.0%

Agebelow 2525– [35] 36–4546–5556–65over 65

4.0%9.1%8.5%16.5%39.2%22.7%

Education (highest)middle schoolhigh schoolvocational schoolcollege/bacheloruniversity/masterlicenciate/doctor

1.7%9.6%9.6%31.1%40.7%7.3%

Yearly income1–50 000€ 50 001–100 000€100 001–150 000€150 001–250 000€250 001–500 000€500 001–1000 000€

55.9%32.8%7.9%1.7%1.1%0.6%

Total no. of stocks owned01–2 stocks3–5 stocks6–10 stocks11–20 stocks21–30 stocksover 30 stocks

6.3%6.8%15.9%24.4%30.7%10.2%5.7%

Stock following activitydailyweeklymonthlyonce in three monthsonce in six monthsonce a yearonce in two years

14.9%37.1%23.4%9.7%5.1%6.3%3.4%

Table 9. Description of the subjects of Study 2: Personal characteristics of the investor-respondents


presentations by executives of publicly-listed corporations as well as experts

of the general economy.

Subjects were recruited to the study at four events. At each event, a stand

was arranged in the proximity of the auditorium door where the event was

held. A poster informing about the possibility to participate in the study was

attached to the wall beside the stand. A set of papers – including a cover let-

ter, the study stimuli, and a return envelope – was given to investors passing

by. Almost all passers-by were willing to take the papers with them (until

the material ran out). The text of the cover letter is presented in Appendix

C. The subjects were informed of a possibility to win book prizes (with a

value of approximately 50 euros) in a lottery, should they fill in and return

the questionnaire. In total, 605 copies of the study material were distributed

over the four events. Usable responses were received back from 187 inves-

tors, resulting in a rather conventional response rate of 31 %.

Due to the non-perfect response rate, again, there was a potential

non-response bias and, especially, the possibility that those investors who

responded to the survey (appr. 30% of the contacted investors) might have

different tendencies with respect to the hypotheses than the non-respon-

dents – similarly as in Studies 1a and 1b (see section 5.1). Thus, I again used

the common procedure to control for the bias in question: distinguishing

the respondents who answered late (i.e., closer to the deadline) from the

early respondents and analyzing the differences between these two groups.

The early vs. late respondent check showed no significant differences

between earlier and later respondents. This indicates that non-response/

self-selection bias should not be a very serious concern.

A description of the investors in the final sample of subjects in Study 2 is

provided in Table 9, in terms of a set of personal background variables. The

background variables include gender, age, education, yearly income, total

number of stocks owned, and stock following activity.

As mentioned in connection with Studies 1a and 1b (section 5.1), I am

unaware of any studies that would map the characteristics of average Finn-

ish stock investors, which means that we are unable at this time to compare

117study 2

the characteristics of the subjects in Study 2 to the general stock investor

population. Comparisons between the subject in Study 2 (Table 9) and the

sample in Studies 1a and 1b (Table 1) can be made, however. Like in Studies

1a/1b, the distribution of investor characteristics in the sample for Study 2

seems to accord to an intuitive notion of individual investors: the distri-

bution is bent towards middle-aged (rather than very young or very old),

college/university educated, and medium/high-income people. Most of the

investors are have also moderately diversified stock portfolios (with 6 or

more stocks) and tend to follow their stocks at least weekly.

Due to different answering options (scales) used in Study 2 vs. Studies

1a/1b, the differences between distributions of the investor characteristics

cannot, unfortunately, be tested statistically. Yet, by inspection, the investors

in Study 2 appear to be more often female and slightly older. This might

be due to the facts that women are more ready and willing to attend stock

investment events than men and that older (perhaps retired) people have

more time to go to stock investment events than younger people. After all,

the subjects of Study 2 were recruited from stock investment event (which

requires time to attend), whereas the respondents of Studies 1a/1b were

recruited straight from stockowner registers of the focal companies.

In any case, the general similarity in the distribution of investor charac-

teristics in the samples of Studies 1a/1b and 2 can be considered an indica-

tion of the fact that both the samples reflected a quite general population of

(Finnish) people who save and invest in stocks.

design. Study 2 employed a two-way factorial design. For the first factor, (1)

investor-subjects were assigned randomly to conditions according to how

companies (investment targets) were presented to them in an investment

advertisement (ad). In the first condition/treatment, subjects encountered

a company presentation/advertisement which markedly emphasized the

potential personal relevance of the company’s products as well as their use

value (‘product design emphasis in company investment ad’ = high). This

condition would presumably serve to prime the subjects to process product-


related relevance and affect more saliently than the second condition. In the

second condition, the subjects encountered a company presentation which

emphasized the products of the company and their potential personal rel-

evance and value to a lesser extent (‘product design emphasis in company

investment ad’ = low).

The main purpose of the second factor (2) was to enhance the external

validity and generalizability of the study over different kinds of companies.

Hence, the subjects were randomly assigned to evaluate one of four alterna-

tive types of companies, distinct in terms of the type of products produced

by the companies. The companies’ product types were:

everyday consumer products (everyday)1.

ordinary products designed for consumer’s daily use: •eyeglasseshome country England•

high-tech business/consumer products (high-tech)2.

high-technology products designed for and used by • both businesses and consumers: lenses and other opti-cal products home country Germany•

medical products (medical)3.

medical products designed for and used by both busi-•nesses and consumers: pharmaceutical treatment products home country France•

business/consumer services (service)4.

service products designed for and used by both busi-•nesses and consumers: currency exchange serviceshome country England•

As implied in the above list, I chose all the companies to be non-domestic

i.e., non-Finnish. The reason for this was simply to put the research in the

interesting context of cross-border investing – and partially to complement

119study 2

Studies 1a and 1b, wherein the companies were domestic. Note that since

all the companies addressed in Study 2 were non-domestic, the analysis

and results should not be confounded by “home bias” due to investors’ gen-

eral preference for domestic over non-domestic companies (see reviews by

e.g., Campbell & Kräussl, 2007; Karlsson & Nordén, 2007; Morse & Shive,

2006; Sercu & Vanpée, 2007). Indeed, home bias could confound the

results if part of the included companies were domestic and part of them

non-domestic – but should not confound the results when all the companies

are non-domestic, as here. Moreover, the companies were selected from the

main Central/Western European countries (England, Germany, France),

since these countries fall, from Finnish perspective, to the same category in

terms of distance, size, and reputation (i.e., “the big and developed Western

European countries”). In effect, the geographic distances of the countries in

question from Finland are quite similar, between 1,000–2,000 kilometers

– as are their “mental distances”. Therefore, home bias should not be a seri-

ous confounding effect in the sense of differential distances to the company

home bases (cf. Grinblatt & Keloharju, 2001), either.

In sum, the study employed a 2 X 4 design, with ‘product design emphasis

in company investment ad’ (high or low) and ‘company/product type’ (every-

day; high-tech; medical; service) serving both as between-subjects factors.

procedure. In the cover letter distributed with the study material (Appen-

dix C), the subjects were told that the questionnaire related to research that

studied private individuals’ stock investments and, especially, their inter-

est to invest in various companies in connection with stock issues (such

as initial public offerings, IPOs). It was underlined that there would be no

“right answers” to the questions and that the person should respond to them

according to his personal, current views and opinions.

In the actual study material, a subject was first presented with two pages

of background questions about his personal demographics and characteris-

tics as an investor. The background questions were followed by the stimuli

(company presentation/ad), which was followed by questions pertaining to


the dependent variable (interest to invest). Thereafter, questions pertain-

ing to the company-specific covariates were presented.

stimuli and manipulations. The information content (sentences) of the

company presentations/ads were the same in the high and low conditions

of ‘product design emphasis in company investment ad’ – so that differen-

tial amount of information conveyed would not confound the results. Yet,

the high condition for the factor was achieved, in effect, by (i) adding to

the company presentation a heading that highlighted in bold typeface the

products of the company and their potential personal relevance and use

value (e.g., “Carl Zeiss – premium lenses for the sake of faultless vision”).

Moreover, (ii) one sentence in the presentation was underlined and set in

italics, namely a sentence which further highlighted how the subject might

personally connect with the company’s products (e.g., “In other words: even

in your own pocket, there might be a product whose functionality is ensured by

Zeiss’s technology”). To see what the stimuli looked like for subjects in high

condition of ‘product design emphasis in company investment ad’, see the

left column of Table 10.

In the low condition of the factor, the company ad lacked both the head-

ing as well as the highlighting of the sentence at the end of the text (i.e.,

the underlining and italics).30 Consequently, even if the subjects in the low

condition had the same text to process (in literal terms), they would not

likely pay so much attention to potential product-related relevance and affect

associated to the company. To see what the stimuli looked like for subjects in

low condition of ‘product design emphasis in company investment ad’, see

the right column of Table 10. Note however, again, that the actual body texts

[30] To further enhance the strength of the manipulation for ‘product design emphasis in company investment ad’, the aforementioned heading (e.g., “Carl Zeiss – premium lenses for the sake of faultless vision”) was repeated, in the high condition, next to the question pertaining to the dependent variable measure. In the low condition, no such heading was presented in connection with the dependent variable question. See the section on ‘Measures – Dependent variable’ for details.

121study 2

indeed included the same wordings and sentences in both the conditions.

This tactic was chosen so that the objective information contents in both

conditions would indeed be the same and that any effects found on invest-

ment willingness would not be due to different amounts of information

conveyed about the firms.

The manipulation of the ‘company/product type’ factor involved, simply,

presenting to a subject the ad of one of the four alternative companies, fea-

turing the company name, logo, and presentation text (see the four rows of

Table 10). Notably, the presentation texts for each firm were of similar length

(appr. 120 words) and followed a similar pattern across the conditions. The

form of the first sentence was: “[Company X] is a [country C]-based company

that develops, manufactures, and sells [company X’s product categories] to

[company X’s typical customers or customer industries]”. This was followed

by a sentence describing the use purpose or value of the company’s prod-

ucts or product classes, the particular use value they provide and particular

user groups towards which they are targeted.

The following (second last) sentence, then, was the one related to the

manipulation of ‘product design emphasis in company investment ad’ –

i.e., underlined and put in italics in the high product emphasis condition,

as explained above (e.g., “In other words: even in your own pocket, there

might be a product whose functionality is ensured by Zeiss’s technology”).

Finally, the last sentence of the company presentation was (regardless of the

condition of the ‘product design emphasis...’ factor): “[Company X]’s inter-

national business has grown fairly quickly in the past years, and its future

prospects as a company are fairly promising.” The reason for having this

kind of concluding sentence was, on one hand, to ensure that the subjects

in each condition would remain in the investing mindset before starting to

respond to the actual questions. On the other hand, the fact that the compa-

ny ad for subjects in each condition ended with the same sentence – a state-

ment about the company as a business/investment target – would ensure

that the explicit information conveyed about the companies as investment

targets would be as similar as possible.


Prod

uct

desi

gn e

mph

asis

in c

ompa

ny in

vest

men

t ad

high

low


ever

y-da

y

Spec

save

rs –

put

s yo

ur s

ight

into

ord

er.

Spec

save

rs is

an

Engl

and-

base

d co

mpa

ny th

at d

evel

ops,

m

anuf

actu

res,

and

sel

ls e

yegl

ass

fram

es to

con

sum

ers.

The

co

mpa

ny s

peci

aliz

es o

n se

rvin

g bu

yers

that

see

k fo

r eye

glas

ses

that

are

less

inex

pens

ive

than

nor

mal

. It h

as re

tail

outle

ts in

a

few

cou

ntrie

s ar

ound

Eur

ope,

als

o Fi

nlan

d. In

oth

er w

ord:

you

m

ay a

lso h

ave

your

self

have

enc

ount

ered

Spe

csav

ers’s

ads

or

stor

es w

hen

you

have

bee

n bu

ying

gla

sses

for y

ours

elf o

r for

a

fam

ily m

embe

r.

Spec

save

rs’s

inte

rnat

iona

l bus

ines

s ha

s gr

own

fairl

y qu

ickl

y in

th

e pa

st y

ears

, and

its

futu

re p

rosp

ects

as

a co

mpa

ny a

re

prom

isin

g.

Spec

save

rs is

an

Engl

and-

base

d co

mpa

ny th

at d

evel

ops,

m

anuf

actu

res,

and

sel

ls e

yegl

ass

fram

es to

con

sum

ers.

The

co

mpa

ny s

peci

aliz

es o

n se

rvin

g bu

yers

that

see

k fo

r eye

glas

ses

that

are

less

inex

pens

ive

than

nor

mal

. It h

as re

tail

outle

ts in

a

few

cou

ntrie

s ar

ound

Eur

ope,

als

o Fi

nlan

d. In

oth

er w

ord:

you

m

ay a

lso

have

you

rsel

f hav

e en

coun

tere

d Sp

ecsa

vers

’s a

ds o

r st

ores

whe

n yo

u ha

ve b

een

buyi

ng g

lass

es fo

r you

rsel

f or f

or a

fa

mily

mem

ber.

Spec

save

rs’s

inte

rnat

iona

l bus

ines

s ha

s gr

own

fairl

y qu

ickl

y in

th

e pa

st y

ears

, and

its

futu

re p

rosp

ects

as

a co

mpa

ny a

re

prom

isin

g.

high

-te

ch

Carl

Zeis

s –

prem

ium

lens

es fo

r the

sak

e of

faul

tless

vis

ion

Carl

Zeis

s is

a G

erm

any-

base

d co

mpa

ny th

at d

evel

ops,

m

anuf

actu

res,

and

sel

ls o

ptic

s an

d le

ns p

rodu

cts

to c

onsu

mer

s an

d va

rious

indu

strie

s, a

s w

ell a

s lic

ense

s its

trad

emar

k to

se

lect

ed c

ompa

nies

. The

pro

duct

s, s

uch

as e

yegl

ass

lens

es,

cont

act l

ense

s, a

nd c

amer

a le

nses

, are

man

ufac

ture

d w

ith

prem

ium

mat

eria

ls a

nd te

chni

ques

. The

hig

h qu

ality

and

fa

ultle

ssne

ss o

f the

end

pro

duct

s is

impo

rtan

t in

thei

r dai

ly u

se,

whe

ther

the

ques

tion

is a

bout

spe

ctac

les

or th

e le

ns o

f a c

ell

phon

e ca

mer

a. In

oth

er w

ords

: eve

n in

you

r ow

n po

cket

, the

re

mig

ht b

e a

prod

uct w

hose

func

tiona

lity

is en

sure

d by

Zei

ss’s

tech

nolo

gy.

Zeis

s’s

inte

rnat

iona

l bus

ines

s ha

s gr

own

fairl

y qu

ickl

y in

the

past

yea

rs, a

nd it

s fu

ture

pro

spec

ts a

s a

com

pany

are

pro

mis

ing.

Carl

Zeis

s is

a G

erm

any-

base

d co

mpa

ny th

at d

evel

ops,

m

anuf

actu

res,

and

sel

ls o

ptic

s an

d le

ns p

rodu

cts

to c

onsu

mer

s an

d va

rious

indu

strie

s, a

s w

ell a

s lic

ense

s its

trad

emar

k to

se

lect

ed c

ompa

nies

. The

pro

duct

s, s

uch

as e

yegl

ass

lens

es,

cont

act l

ense

s, a

nd c

amer

a le

nses

, are

man

ufac

ture

d w

ith

prem

ium

mat

eria

ls a

nd te

chni

ques

. The

hig

h qu

ality

and

fa

ultle

ssne

ss o

f the

end

pro

duct

s is

impo

rtan

t in

thei

r dai

ly u

se,

whe

ther

the

ques

tion

is a

bout

spe

ctac

les

or th

e le

ns o

f a c

ell

phon

e ca

mer

a. In

oth

er w

ords

: eve

n in

you

r ow

n po

cket

, the

re

mig

ht b

e a

prod

uct w

hose

func

tiona

lity

is e

nsur

ed b

y Ze

iss’

s te

chno

logy

.

Zeis

s’s

inte

rnat

iona

l bus

ines

s ha

s gr

own

fairl

y qu

ickl

y in

the

past

yea

rs, a

nd it

s fu

ture

pro

spec

ts a

s a

com

pany

are

pro

mis

ing.

Table 10. Stimuli presented to the experiment subjects in Study 2, according to the conditions of the main factors

123study 2

Prod

uct

desi

gn e

mph

asis

in c

ompa

ny in

vest

men

t ad

high

low


med

-ic

al

Nov

exel

– c

ures

for d

ifficu

lt in

fect

ions

.

Nov

exel

is a

Fra

nce-

base

d co

mpa

ny th

at d

evel

ops,

man

ufac

ture

s,

and

sells

cur

es a

nd m

edic

ines

for p

harm

aceu

tical

indu

stry

, ho

spita

ls, a

nd d

rug

user

s. T

he k

ind

of p

rodu

cts

and

cure

s th

at

Nov

exel

pro

duce

s ar

e im

port

ant i

n tr

eatin

g di

fficu

lt in

fect

ions

, w

hen

norm

al a

ntib

iotic

s ar

e no

t effe

ctiv

e. In

oth

er w

ords

: If a

n ac

quai

ntan

ce o

f you

rs so

me

time

ends

up

to a

hos

pita

l for

a d

ifficu

lt in

fect

ion

dise

ase,

it m

ight

be

that

he

will

be

trea

ted

with

a m

edic

al

prod

uct d

evel

oped

by

Nov

exel

.

Nov

exel

’s in

tern

atio

nal b

usin

ess

has

grow

n fa

irly

quic

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measures – dependent variable. The dependent variable interest to invest was measured, in the present study, after presenting the subjects an

investment scenario. The idea was to present the subject a scenario whereby

he should imagine having a certain amount of money at hand – an amount

that he would have supposedly decided to invest in certain stock(s). After

presenting the scenario, the subject would reflect his interest in investing

the money in question in the stock of the focal company. The amount of

money at stake was set to be significant, yet under 10 % of the value of the

subject’s stock portfolio – the final figure used in the scenario was 7%. In its

entirety, the scenario read as follows (as translated in English; the original

was in Finnish):

“Let’s now assume that you have just sold a certain stock

investment of yours (at profit). As a result, you have an amount

of R euros of ”discretionary” money, equivalent of 7 percent of the

value of your stock portfolio (for instance, 7 000 € of money if the

value of your stock portfolio is 100 000 €). Now, you have already

decided that you will invest that sum of money in appropriate

stocks.

Please describe, in the table below, your interest to invest the

aforementioned R euros in the stock of [company X], [company Y],

and [company Z], respectively, in case all of these firms were listed

in the same international stock exchange, NasdaqOMX.

note. According to your bank/advisor, the ”transaction costs”

(trading fees, account fees, etc.) as well as the ease of making the

investments would be the same, regardless of whether you invest

in [company X], [company Y], or [company Z] stock ( even if the

home countries of the firms are different).”

Note that the scenario, as well as the questions, pertained to not only the

focal company (Central European) of the study but also to two other compa-

125study 2

Figure 9. Presentation of the dependent variable question in the condition: ‘product design emphasis in company investment ad’=high (Study 2)

nies (Finnish and Swedish). However, for reasons of simplicity, the analysis

in the present study focuses only on one of the companies (the Central Euro-

pean one) – this is to avoid modeling the country effects in investing, which

are beyond the scope of the present study or dissertation. Note also that it

was emphasized to the subjects that in terms of transaction costs (trading

fees, account fees etc.), investing in the foreign stocks offered would not be

harder than investing in domestic stocks.

With reference to the aforementioned amount of money, R euros (7 % of

the total value of the respondent’s stock portfolio), the dependent variable

interest to invest was measured by asking the subject “How interested

would you be to invest R euros (or a significant part of it) in [company X]?”.

The answers were recorded on a 7-point scale, anchored by: “0= not at all

interested”... “6=extremely interested”. Note that – as described already in footnote 30 (p.120) – the heading

related to the manipulation (e.g., “Carl Zeiss – premium lenses for the sake

of faultless vision”) was repeated in the high condition of ‘product design

emphasis in company investment ad’ next to the question pertaining to the

dependent variable measure. In the low condition, no such heading was

presented. Thus, the actual question was, in the high condition, presented

in the following form (Figure 9):

Question Answering optionsAnswer (number 0-6)

Carl Zeiss – premium optics for multiple purposes

How interested would you be to invest R euros (or a significant part of it) in Zeiss?

0 = not at all interested … 6 = extremely interested


In the low condition of ‘product design emphasis in company investment

ad’, the presentation of the question was, in turn, as follows (Figure 10):

[31] Before these questions, the product domains of the companies were indicated to be: “eye vision” in the case of the ‘everyday’ product company (the products of which were eyeglass frames); “healthcare” in the

case of the ‘medical’ product company (the products of which were pharmaceutical treatment products); “international trade and mobility” in the case of the ‘service’ company (the products of which were currency exchange

services); and “optics” in the case of the ‘high-tech’ product company (the products of which were lenses and optical products).

Question Answering optionsAnswer (number 0-6)

How interested would you be to invest R euros (or a significant part of it) in Zeiss?

0 = not at all interested … 6 = extremely interested

Figure 10. Presentation of the dependent variable question in the condition: product design emphasis in company investment ad’=low (Study 2)

covariates. The covariate personal relevance of the company’s prod-uct domain was measured, in the present study, with two items. Both

items were measured with 7-point scales. The items were (with their respec-

tive anchors) 31:

“Do you feel that the firm’s product domain is personally impor-1.

tant to you?”

“0 = the product domain is significantly • less important to

me than to an average person in the street”

…

127study 2

“6 = the product domain is significantly • more important

to me than to an average person in the street”

” Is the firm’s product domain ‘close to your heart’?” 2.

“0 = not at all close to my heart” •

…

“6 = highly close to my heart”•

The reliability of the two-item scale was good; the Cronbach’s alpha was

.80. The final variable value was obtained as a sum of the subject’s respons-

es to the two items.

The covariate overall affect for the company’s product design

was measured, in the present study, with a three-item scale, each item mea-

sured on 7-point continuum. The three items were (with their respective

anchors):

How good do you think or believe that 1. the firm’s products/ser-

vices are in terms of functionality or usability?

“0 = very bad” •

…

“6 = very good”•

How good do you think or believe that 2. the firm’s products/ser-

vices are in terms of design?

“0 = very unattractive” •

…

“6 = very attractive”•

Considering the firm’s products, what is your 3. opinion about the

firm’s product trademark?

“0 = I don’t like the product trademark at all” •

…

“6 = I like the product trademark very much”•

Notably, besides attractiveness (item 2) and overall opinion/likeabil-

ity (item 3), functionality and usability (item 1) is commonly viewed to


be among main the evaluative dimensions for products in contemporary

design research (e.g., Buchanan, 2001; Jordan, 2002; Norman, 2004). The

reliability of this three-item scale was also good, as it achieved a Cronbach’s

alpha of .85. The final variable value was obtained as a sum of the subject’s

responses to the three items.

The final covariate familiarity with the company – meant as a con-

trol variable – was measured with a single-item scale. The subject was asked:

“How familiar were you with this company (before receiving/answering this

questionnaire)?” The responses were recorded on a 7-point scale, anchored

by:

“0 = not at all familiar”•

…

“6 = I was very familiar with the company”.•

6.2 results – study 2

No manipulation checks were necessary in the present study. Manipulation

of the ‘company/product type’ was de facto effective, since the firms were dif-

ferent and of rather varying type. Also the manipulation of ‘product design

emphasis in company investment ad’ was de facto effective, since the intrin-

sic features (heading, underlining&italics) of the message form unquestion-

ably varied across the two conditions, which makes manipulation checks

unnecessary (see O’Keefe, 2003).

the effect of product design emphasis in company’s investment ad

(hypothesis h14). Hypothesis H14 predicted that high ‘product design

emphasis in company investment ad’ would have positive effect on an indi-

vidual’s interest to invest in the company. This hypothesis was examined

in a 2 X 4 analysis of variance (ANOVA), where the other factor was ‘com-

pany/product type’: everyday; high-tech; medical, or service (see Table 11 for

cell means).

129study 2

Company/product type

Low product design emphasis in company investment ad

High product design emphasis in company investment ad

Everyday 1.79 (1.82) 2.87 (1.63)High-tech 2.95 (1.93) 3.14 (1.71)Medical 2.53 (2.03) 3.00 (1.77)Service 1.14 (1.21) 2.08 (1.44)

Figure 11. (Least-squares) mean interest to invest in the company (Study 2)

Table 11. Means (and standard deviations) for interest to invest in the company in Study 2

Note. The ratings indicate interest to invest in the focal company (0=”not at all interested”… 6=”extremely interested”). The numbers in parentheses are standard deviations.

low high

Product design emphasis in the company’s investment advertisement

Inte

rest

to in

vest

in th

e co

mpa

ny

1

2

3

4

0


The analysis revealed a significant main effect of ‘product design empha-

sis in company investment ad’ (F(1, 164) = 6.28, p = .013), with subjects in the

high condition having higher interest to invest in the company (MhiPDemph

= 2.77) than those in the low condition (MlowPDemph= 2.10; p = .013). Figure

11 presents the least-squares means for the two groups, respectively (with

the different conditions of ‘company/product type’ collapsed). The results

indicate strong support for hypothesis H14: Product design emphasis in a

company’s investment advertisement had positive effect on investor’s gen-

eral willingness to invest in the company’s stock.

When it comes to ‘company/product type’, the analysis revealed a sig-

nificant main effect, as well (F(3, 164) = 5.05, p = .002). Pairwise compari-

sons showed that especially when the company’s product type was service,

subjects had lower interest to invest in the company (Mservice = 1.61) than

in the rest of the conditions (Mhigh-tech = 3.05; Mmedical = 2.76; Meveryday = 2.33; p

< .05 for comparisons Mservice vs. Mhigh-tech and Mservice vs. Mmedical). interest to invest of subjects in the other (latter) product type conditions did not differ

significantly from each other.

With regard to the interaction of the experimental factors, the analysis

found no significant two-way interaction between ‘product design emphasis

in company investment ad’ and ‘company/product type’ (F(3, 164) = .62, p

>.5). In other words, the effect of product design emphasis in a company’s

investment ad on investors’ interest to invest in the company’s stock did not

differ significantly by company/product type. This finding gives us confi-

dence in the generalizability of the found effects.

additional analyses with covariates. Originally, hypothesis H14 was

posed as a corollary to the other (main) hypotheses of the overall disserta-

tion. The presumption was that high product design emphasis in a com-

pany’s investment advertisement would make it more salient to the investor

how he might use investment in the company as a “vehicle” for expressing

the personal relevance of the company’s product domain to him as well as

his overall affect with the company’s product design. By and large, high

131study 2

product design emphasis in a company’s investment advertisement should,

therefore, have positive effect on one’s interest to invest in the company –

which (main) effect was also confirmed above.

On the other hand, what is said above also means that controlling for the

impacts of personal relevance of the company’s product domain and

overall affect for the company’s product design – as measured sub-

jectively at the time of investment – on an individual’s interest to invest

should attenuate the main effect of ‘product design emphasis in company

investment ad’ on interest to invest. Even the main effect of ‘company/

product type’ on interest to invest should be attenuated insofar as the

original main effect by this variable was actually due to the fact that the

mean values of the particular two variables differed among investors across

the firms. Thus, a relevant additional analysis is to include personal rel-evance of the company’s product domain and overall affect for the company’s product design as control variables – covariates – into the

earlier 2 (‘product design emphasis in company investment ad’) X 4 (‘com-

pany/product type’) ANOVA. Such analysis would be, in effect, analysis of

covariance (ANCOVA)32.

As anticipated (and reported below), the effects of ‘product design

emphasis in company investment ad’ and ‘company/product type’ on

interest to invest in the company were indeed substantially attenuated

[32] Before proceeding with the ANCOVA, I checked whether there were significant interaction terms between the covariates and the experimental factors of the model (‘product design emphasis in company investment ad’ and ‘company/product type’) (see Huitema, 1980). This is called the test of homogeneity among slopes. The occurrence of significant interaction terms

would mean that the effect of the factor(s) would depend on the exact value of the covariate variable – and would make the results difficult to interpret and, in fact, ANCOVA inappropriate to use. Thus, in order to test for the interactions between the covariates and the factors, I included each of the covariates separately as a covariate in the standard ANOVA model for

‘product design emphasis in company investment ad’ and ‘company/product type’. None of these analysis, however, indicated a significant interaction between the covariates and the factors. Thus, the normal ANCOVA was appropriate to use, and the covariates were all included into a final 2 X 4 ANCOVA, without the interaction terms (see Huitema, 1980).


when personal relevance of the company’s product domain and

overall affect for the company’s product design were included as

covariates in the ANCOVA. I also included familiarity with the com-pany as a covariate, so as to control that any found effects would not be due

to mere differences in investors’ familiarity with the companies (cf. Frieder

& Subrahmanyam, 2005).

In the ANCOVA, both personal relevance of the company’s prod-uct domain (F(1, 150) = 7.55; p = .007) and overall affect for the com-pany’s product design (F(1, 150) = 14.99; p = .0002) were revealed to be

highly significant covariates for interest to invest. This suggests that the

individual- level differences in personal relevance of the company’s product domain and overall affect for the company’s product design explain investors’ interest to invest in particular companies to a

substantial extent. In other words, both the personal relevance that an inves-

tor attaches (at individual level) to a company’s product domain and inves-

tor’s overall affect for the company’s product design have positive effects on

his interest to invest in the company. Moreover, the effects are independent,

since both the covariates achieved significance33. As a further illustration of

these effects, I present the observed means (and standard deviations) for

interest to invest at different levels of the covariates in Figure 12. There

is a clearly upward trend in investment interest with increasing level of per-sonal relevance of the company’s product domain (upper panel) and

overall affect for the company’s product design (lower panel). All in

all, the findings give further support especially to hypotheses H6-H7 and

H9-H10 of this dissertation.

Furthermore, as the covariates were included in the ANCOVA, the pre-

viously reported effect of ‘company/product type’ on interest to invest

[33] Multicollinearity should not be a concern here, since the correlation between the two covariates was under .5.

133study 2

Figure 12. Observed means and standard deviations for interest to invest, at different levels of the main covariates (personal relevance of the company’s product domain and overall affect for the company’s product design) of Study 2

Note. The height of the “bars” are equal to double the standard deviation of observations.


Personal relevance of the company’s product domain

6.0

4.5

3.0

1.5

0.0

0 3 6 9 12

Overall affect for the company’s product design

6.0

4.5

3.0

1.5

0.0

0 5 10 15 20



(F(3, 164) = 5.05, p = .002) became non-significant (F(3, 150) = 1.49; p =

.22). Importantly, this suggests that the type of the company or its products

does not, per se, explain investors’ interest to invest in particular companies

insofar as we account for investors’ differential (average) personal rele-vance of the company’s product domain and overall affect for the company’s product design per company. In other words, to the extent

that investors’ overall investment interest differs by company or company’s

product type, this seems to be due to the fact that the personal relevance that

investors, on average, attach to those companies’ product domains and/or

investors’ average affect for those companies’ product design differ.

When it comes to the other experimental factor – ‘product design empha-

sis in company investment ad’ – the previously reported effect for invest-ment interest (F(1, 164) = 6.28, p = .013) was substantially attenuated due

to the covariates, as well, yet remained significant (F(1, 150) = 4.20, p = .042).

This finding suggests while much of the effect of ‘product design emphasis

in company investment ad’ on interest to invest can be explained by

the eventual levels of personal relevance of the company’s product domain and overall affect for the company’s product design at the

time of the investment decision34, the ‘product design emphasis in com-

pany investment ad’, per se, still has some direct main effect on interest

[34] As a matter of fact, I also analyzed whether ‘product design emphasis in company investment ad’ had some effect on the covariates personal relevance of the company’s product domain and overall affect for the company’s product design. An ANOVA with personal relevance of the company’s product domain as the dependent variable revealed no significant effect by ‘product design emphasis in company’s

investment ad’ (F(1, 170) =1.53, p > .2). This suggests that the personal relevance that an investor attaches to the broader domain that the company’s products represent is unaffected by product design emphasis in a single company (investment) advertisement. An ANOVA with overall affect for the company’s product design as the dependent variable, in contrast, did reveal a significant effect by ‘product design emphasis in company

investment ad’ (F(1, 161) = 6.44, p =.012), with investors in the high product design emphasis condition having higher affect for the companies’ product design (MhiPDemph = 10.11) than those in the low condition (MlowPDemp= 8.57; p = .012). This result suggests that an investor’s affect for the company’s product design may, actually, be enhanced by high product design appeal in the firm’s investment advertisement.

135study 2

to invest. One more analysis concerning this issue is performed in the

section below.

Note, finally, that familiarity with the company did not achieve sig-

nificance in the ancova (F(1, 150) = .23, p = .63). This confirms the prediction

that neither the effect of ‘product design emphasis in the company’s invest-

ment ad’ nor the positive effects of personal relevance of the company’s product domain or overall affect for the company’s product design

on interest to invest can be explained by mere differences in investors’

familiarity with the companies (cf. Frieder & Subrahmanyam, 2005)35.

analysis of optimism as an additional covariate. The fact that the main

effect of ‘product design emphasis in company investment ad’ remained

significant in the above analysis might be partly due to a phenomenon

whereby high product design emphasis in a company’s investment ad has

direct effect on investor’s optimism about the financial returns of the com-

pany (corresponding to the expectation of hypothesis H11) 36. I examined

also this possibility by analyzing, first, whether ‘product design emphasis

in company investment ad’ had effect on investors’ optimism and, second,

whether including optimism in the earlier ANCOVA would further attenu-

ate the effect of ‘product design emphasis in company investment ad’ on

interest to invest.

In the first stage of this analysis, a one-way ANOVA with ‘product design

emphasis in company investment ad’ as the independent variable and

optimism about the company’s financial returns as the dependent

[35] The non-significance of familiarity with the company should not be due to multicollinearity (correlation with the other covariates), either, since the correlations between familiarity with the company and the two other covariates were under .5.

[36] optimism about the company’s financial returns was measured in the questionnaire of Study 2 by asking the subject: “If you were considering to invest in the firm at the moment, what would be your “hunch” about the attractiveness of the firm’s business in terms of

long-term investment returns?”. The responses were recorded on a 7-point scale, anchored by 0=”highly unattractive” and 6 =”highly attractive”.


variable revealed, indeed, a significant main effect (F(1, 168) =10.48, p < .01).

Specifically, investors in the high condition of ‘product design emphasis in

company investment ad’ had higher optimism about the company’s finan-

cial returns (MhiPDemph = 3.26) than those in the low condition (MlowPDemph=

2.59; p < .01).

In the second stage of the analysis, I included optimism as an addition-

al covariate to the ANCOVA with the experimental factor ‘product design

emphasis in company investment ad’ (high, low) and dependent variable

interest to invest. Also the earlier covariates were included: personal relevance of the company’s product domain, overall affect for the company’s product design, and familiarity with the company.

As suspected, optimism about the company’s financial returns

resulted to be a significant covariate in the ANCOVA (F(1, 155) =26.80, p

< .0001), and substantially reduced the observed effect of ‘product design

emphasis in company investment ad’ (F(1, 155) =2.80, p = .096) on interest to invest – as compared to the ANCOVA without optimism as covariate

(F(1, 156) =6.21, p = .014). When it comes to the other (main) covariates,

the effect of overall affect for the company’s product design was

substantially reduced, as well, albeit remained significant (from F(1, 156)

=20.20, p < .001 down to F(1, 155) =6.17, p = .014). Likewise, the effect of

personal relevance of the company’s product domain was reduced,

yet remained significant (from F(1, 156) =10.19, p = .002 to F(1, 155) =3.93, p =

.049), when optimism was included.

All in all, these additional analyses suggest, on one hand, that product

design emphasis in company’s investment advertisement has direct effect

on investor’s optimism about the financial returns of the company. On the

other hand, the analyses suggest that optimism about a company’s financial

returns partly (but not fully) mediates the effects of the personal relevance

of the company’s product domain and overall affect for the company’s prod-

uct design on investors’ interest to invest in the company. This is consis-

tent with the hypothesized paths (H11, and H6-H7 and H9-H10), as well as

the results of the Studies 1a (concerning H11) and 1b (concerning H6-H7,

H9-H10). A summary of all the hypotheses of the dissertation and the sup-

port they received from Studies 1a/1b and 2 is provided in Table 12.

137study 2

Hyp

othe

sis

Alte

rnat

ive

hypo

thes

is (i

f ava

ilabl

e)Re

sult

sH

0: A

n in

vest

or’s

fam

iliar

ity w

ith a

com

pany

has

pos

itive

effe

ct o

n hi

s de

term

inat

ion

to in

vest

in th

at c

ompa

ny’s

sto

ck ra

ther

than

oth

er

com

pani

es’ s

tock

s (t

hat h

ave

appr

oxim

atel

y si

mila

r exp

ecte

d fin

anci

al

retu

rns/

risks

).

H0:

Pos

itive

effe

ct s

uppo

rted

(St

udy

1b)

H1:

The

per

sona

l rel

evan

ce th

at a

n in

vest

or a

ttac

hes

to a

cer

tain

life

do

mai

n ha

s po

sitiv

e ef

fect

on

his

fam

iliar

ity w

ith p

rodu

cts

that

are

pe

rcei

ved

to re

pres

ent o

r sup

port

the

dom

ain.

H1:

Pos

itive

effe

ct s

uppo

rted

(St

udy

1a;

Stud

y 1b

)

H2:

An

inve

stor

’s fa

mili

arity

with

a p

artic

ular

com

pany

’s p

rodu

cts

has

posi

tive

effe

ct o

n hi

s fa

mili

arity

with

the

com

pany

.H

2: P

ositi

ve e

ffect

sup

port

ed (

Stud

y 1b

)

H3.

0: A

n in

vest

or’s

fam

iliar

ity w

ith a

par

ticul

ar

com

pany

’s p

rodu

cts

has

nega

tive

effe

ct o

n th

e

cons

ider

atio

n th

at h

e gi

ves

to o

ther

com

pani

es a

s

alte

rnat

ive

inve

stm

ent t

arge

ts.

H3.

1: A

n in

vest

or’s

fam

iliar

ity w

ith a

par

ticul

ar

com

pany

’s p

rodu

cts

has

posi

tive

effe

ct o

n th

e co

nsid

erat

ion

that

he

give

s to

oth

er c

ompa

nies

as

alte

rnat

ive

inve

stm

ent t

arge

ts.

H3.

1: P

ositi

ve e

ffect

sup

port

ed (

Stud

y 1a

)H

3.0:

Neg

ativ

e ef

fect

not

sup

port

ed

(Stu

dy 1

a)

H4.

0a: A

n in

vest

or’s

fam

iliar

ity w

ith a

par

ticul

ar

com

pany

’s p

rodu

cts

has

posi

tive

effe

ct o

n th

e

confi

denc

e th

at h

e ha

s in

his

ow

n ex

pect

atio

ns a

bout

th

e fin

anci

al re

turn

s fr

om th

e co

mpa

ny’s

sto

ck.

H4.

1a: A

n in

vest

or’s

fam

iliar

ity w

ith a

par

ticul

ar

com

pany

’s p

rodu

cts

has

nega

tive

effe

ct o

n th

e co

nfide

nce

that

he

has

in h

is o

wn

expe

ctat

ions

abo

ut

the

finan

cial

retu

rns

from

the

com

pany

’s s

tock

.

H4.

0a: P

ositi

ve e

ffect

not

sup

port

ed

(Stu

dy 1

a)H

4.1a

: Neg

ativ

e ef

fect

not

sup

port

ed

(Stu

dy 1

a)

H4.

0b: T

he c

onfid

ence

that

an

indi

vidu

al h

as in

his

ow

n ex

pect

atio

ns

abou

t the

fina

ncia

l ret

urns

from

a p

artic

ular

com

pany

’s s

tock

has

ne

gativ

e ef

fect

on

the

cons

ider

atio

n th

at h

e gi

ves

to o

ther

com

pani

es

as a

ltern

ativ

e in

vest

men

t tar

gets

.

H4.

0b: N

egat

ive

effe

ct s

uppo

rted

(S

tudy

1a)

H5:

The

per

sona

l rel

evan

ce th

at a

n in

vest

or a

ttac

hes

to a

cer

tain

life

do

mai

n th

at a

par

ticul

ar c

ompa

ny is

per

ceiv

ed to

repr

esen

t with

its

prod

ucts

has

neg

ativ

e ef

fect

on

the

cons

ider

atio

n th

at h

e gi

ves

to o

ther

co

mpa

nies

as

alte

rnat

ive

inve

stm

ent t

arge

ts.

H5:

Neg

ativ

e ef

fect

sup

port

ed (

Stud

y 1a

)

H6:

The

per

sona

l rel

evan

ce th

at a

n in

vest

or a

ttac

hes

to a

cer

tain

life

do

mai

n th

at a

par

ticul

ar c

ompa

ny is

per

ceiv

ed to

repr

esen

t with

its

prod

ucts

has

pos

itive

effe

ct o

n hi

s de

term

inat

ion

to in

vest

in th

at

com

pany

’s s

tock

rath

er th

an o

ther

com

pani

es’ s

tock

s w

hich

hav

e ap

prox

imat

ely

sim

ilar e

xpec

ted

finan

cial

retu

rns/

risks

.

H6:

Pos

itive

indi

rect

effe

ct s

uppo

rted

, th

roug

h ‘w

illin

gnes

s to

sup

port

the

com

pany

’ (St

udy

1b)

H6:

Pos

itive

dire

ct e

ffect

mar

gina

lly

supp

orte

d (S

tudy

1b)

H6:

Pos

itive

effe

ct s

uppo

rted

(S

tudy

2, c

ovar

iate

effe

ct)

Table 12. Summary of the hypotheses of the dissertation and the support they received in Studies 1a/1b and 2.


Hyp

othe

sis

Alte

rnat

ive

hypo

thes

is (i

f ava

ilabl

e)Re

sult

s

H7:

The

per

sona

l rel

evan

ce th

at a

n in

vest

or a

ttac

hes

to a

cer

tain

life

do

mai

n th

at a

par

ticul

ar c

ompa

ny is

per

ceiv

ed to

repr

esen

t with

its

prod

ucts

has

pos

itive

effe

ct o

n hi

s pr

epar

edne

ss to

inve

st in

that

co

mpa

ny’s

sto

ck e

ven

with

low

er fi

nanc

ial r

etur

ns e

xpec

ted

from

the

stoc

k th

an fr

om o

ther

com

pani

es’ s

tock

s.

H7:

Pos

itive

indi

rect

effe

ct s

uppo

rted

, th

roug

h ‘w

illin

gnes

s to

sup

port

the

com

pany

‘(St

udy

1b)

H7:

Pos

itive

dire

ct e

ffect

not

sup

port

ed

(Stu

dy 1

b)

H8:

An

inve

stor

’s p

ositi

ve o

vera

ll af

fect

for a

par

ticul

ar c

ompa

ny’s

pr

oduc

t des

ign

has

nega

tive

effe

ct o

n th

e co

nsid

erat

ion

that

he

give

s to

oth

er c

ompa

nies

as

alte

rnat

ive

inve

stm

ent t

arge

ts.

H8:

Neg

ativ

e ef

fect

mar

gina

lly s

uppo

rted

(S

tudy

1a)

H9:

An

inve

stor

’s p

ositi

ve o

vera

ll af

fect

for a

par

ticul

ar c

ompa

ny’s

pr

oduc

t des

ign

has

posi

tive

effe

ct o

n hi

s de

term

inat

ion

to in

vest

in

that

com

pany

’s s

tock

rath

er th

an o

ther

com

pani

es’ s

tock

s w

hich

hav

e ap

prox

imat

ely

sim

ilar e

xpec

ted

finan

cial

retu

rns/

risks

.

H9:

Pos

itive

indi

rect

effe

ct s

uppo

rted

, th

roug

h ‘w

illin

gnes

s to

sup

port

the

com

pany

’ (St

udy

1b)

H9:

Pos

itive

dire

ct e

ffect

sup

port

ed (

Stud

y 1b

)H

9: P

ositi

ve e

ffect

sup

port

ed

(Stu

dy 2

, cov

aria

te e

ffect

)

H10

: An

inve

stor

’s p

ositi

ve o

vera

ll af

fect

for a

par

ticul

ar c

ompa

ny’s

pr

oduc

t des

ign

has

posi

tive

effe

ct o

n hi

s pr

epar

edne

ss to

inve

st in

that

co

mpa

ny’s

sto

ck w

ith lo

wer

fina

ncia

l ret

urns

exp

ecte

d fr

om th

e st

ock

than

from

oth

er s

tock

s.

H10

: Pos

itive

indi

rect

effe

ct s

uppo

rted

, th

roug

h ‘w

illin

gnes

s to

sup

port

the

com

pany

’ (St

udy

1b)

H10

: Pos

itive

dire

ct e

ffect

not

sup

port

ed

(Stu

dy 1

b)

H11

: An

inve

stor

’s p

ositi

ve o

vera

ll af

fect

for a

par

ticul

ar c

ompa

ny’s

pr

oduc

t des

ign

has

posi

tive

effe

ct o

n th

e op

timis

m in

his

exp

ecta

tions

ab

out t

he fi

nanc

ial r

etur

ns fr

om th

e co

mpa

ny’s

sto

ck.

H11

: Pos

itive

effe

ct s

uppo

rted

(St

udy

1a)

H11

: Pos

itive

effe

ct s

uppo

rted

(St

udy

2,

cova

riate

effe

ct)

H12

: An

inve

stor

’s p

ositi

ve o

vera

ll af

fect

for a

par

ticul

ar c

ompa

ny’s

pr

oduc

t des

ign

has

posi

tive

effe

ct o

n th

e co

nfide

nce

he h

as in

his

ow

n ex

pect

atio

ns a

bout

the

finan

cial

retu

rns

from

the

com

pany

’s s

tock

.

H12

: Pos

itive

effe

ct n

ot s

uppo

rted

(St

udy

1a)

H13

: The

per

sona

l rel

evan

ce th

at a

n in

vest

or a

ttac

hes

to a

cer

tain

life

do

mai

n ha

s po

sitiv

e ef

fect

on

his

over

all a

ffect

for t

he p

rodu

ct d

esig

n of

a c

ompa

ny w

hose

pro

duct

s ar

e pe

rcei

ved

to re

pres

ent t

he d

omai

n.

H13

: Pos

itive

effe

ct s

uppo

rted

(St

udy

1a;

Stud

y 1b

)

H14

: Pro

duct

des

ign

emph

asis

in a

com

pany

’s in

vest

men

t ad

vert

isem

ent h

as p

ositi

ve e

ffect

on

inve

stor

’s g

ener

al in

tere

st to

in

vest

in th

e co

mpa

ny’s

sto

ck.

H14

: Pos

itive

effe

ct s

uppo

rted

(St

udy

2,

expe

rimen

tal e

ffect

)

139

7 Discussion


7.1 contributions to research

While design management research has marginally referred to the relation

between investors and a company’s product design or product design strate-

gy (e.g., Borja de Mozota, 2003; 2006; Hargadon, 2005), it has lacked closer

psychological and behavioral examinations of the mechanisms by which a

company’s product design actually attracts investors. The present disserta-

tion contributes to the understanding of these mechanisms by explicating

the theory as well as providing empirical evidence of how individual inves-

tors’ subjective perceptions and evaluations of companies’ product design

influence their decisions to invest in companies’ stocks.

The present research identifies two important, product design -related

factors that influence investors’ investment behavior and decisions con-

cerning companies’ stocks. The first factor is (1) the personal relevance or

importance that an investor attaches to “life domains” represented by a com-

pany’s products. The life domains can be heterogeneous activities or areas

of interests (e.g., motoring/car-driving, gardening, sport, optics) – but also

more abstract themes or ideas (e.g., healthcare, eye vision, mobility, social

responsibility). The second factor, in turn, is (2) the investor’s overall affect

or liking for a company’s product design. This factor reflects the degree to

which the investor perceives the company’s products to be pleasant, attrac-

tive, good, and likeable overall.

At the general level, the identification and evidence of these factors adds

an important dimension to design management literature’s notion about

strategic relevance of the marketplace distinction achievable through designed

artifacts (see section 2.1.1). In earlier design management research, the good-

ness and effectiveness of a company’s product design – implicating the fact

that the company’s product artifacts are subjectively appealing to users/

consumers – have mostly been assumed to influence people’s willingness to

use and buy those products, and this way create strategic distinction, differen-

tiation, and competitive advantage for the company (e.g., Borja de Mozota,

141discussion

2002; Hertenstein & Platt, 1997; Kotler & Rath, 1984; Olson, Cooper, &

Slater, 1998; Phatak & Chandron, 1989). The important dimension added

by the present research is that the aforementioned product design -related

factors also influence people’s or individual investors’ willingness to invest in

the company. In other words, the present research identifies and finds evi-

dence of an additional way through which products and product design may

create important strategic, marketplace distinction for the company – i.e., in

the stock market.

In effect, the findings imply that designing pleasurable products (e.g.,

Jordan, 2002) – by being empathic about and addressing the personal

meanings and emotions that people attach to products (Battarbee, 2004;

Battarbee & Koskinen, 2005; Clark, Smith, & Yamazaki, 2006; Koskinen,

Battarbee, & Mattelmäki, 2003; Normann & Ramírez, 1993; Verganti, 2003)

– may not only create strategic distinction and competitive advantage for the

company in the product markets, but also in the financial, or stock markets.

At the same time, the findings also provide novel explanations and evidence

to behavioral finance research, particularly with respect to how people’s

product design evaluations may “spill over” to their investment decisions.

All in all, the contributions of the dissertation to the fields of design man-

agement as well as behavioral finance are summarized in Table 13 (p. 150-151)

and further discussed below.

7.1.1 product design and investors’ needsEspecially, the present results can be considered to explicate the specific

ways in which a company’s product design can “address investors’ needs”

– something that earlier design management research has only marginally

touched on (cf. Hargadon, 2005). Indeed, the study implies two broad types

of investor needs which a company’s product design may address: (A) finan-

cial needs and (B) self-expressive/emotional needs that go beyond the finan-

cial needs. Based on the results, the (1) personal relevance or importance


that an investor attaches to “life domains” represented by a company’s prod-

ucts and the (2) investor’s overall affect or liking for a company’s product

design may influence the investors’ pursuit towards satisfying both needs.

In effect, the results elucidate the suggestion – made tentatively by Borja de

Mozota (2003, p. 17) – that a company’s products and product design deter-

mine much of a company’s identity for not only its customers but also its

investors.

investors’ financial needs. First of all, the present results point out the

role of personally relevant life domains in contributing to an investor’s spe-

cial familiarity with products that represent those domains – and, further,

with companies that design and produce such products. Familiarity, in turn,

is important in regards to the financial needs since investors need to learn

and acquire information about companies and their attractiveness in terms

of investing (prospective/expected financial returns). Specifically – as earlier

behavioral finance research (Barber & Odean, 2008; Odean, 1999) notes –

an investor cannot (or is highly unlikely) to invest in a company with which

he is totally unfamiliar or which has not grabbed his attention. Moreover,

the level of familiarity with a company is also likely to have direct influence

on one’s investment willingness, as found by the present and earlier studies

(e.g., Ackert & Church, 2009; Coval & Moskowitz, 1999; Frieder & Subrah-

manyam, 2005; Grinblatt & Keloharju, 2000; Grullon, Kanatas, & Weston,

2004; Huberman, 2001; Merton, 1987; Ortmann, Gigerenzer, Borges, &

Goldstein, 2008).

Indeed, with respect to the familiarity literature, the present findings

point out that a company is likely to find potential investors that are most

familiar with the kind of products the company produces – and often read-

ily even with the company itself – from among investors who find the life

domains that the company’s products represent personally relevant. Such

people are by default, the results indicate, more likely to be willing to invest

in the company than others. This is something that neither design manage-

ment nor behavioral finance research has recognized before. For instance,

143discussion

an investor who considers motoring/car-driving to be a personally relevant

domain is likely to be(come) familiar with companies whose products

support or represent that domain (such as car companies, tire companies,

road construction companies, fuel companies etc.) – and, thereby, develop

heightened interest to invest in such companies due to the very familiarity.

Yet, the findings of the present research also underline that the effects

of product perceptions on investment decisions are not due to mere famil-

iarity effects (cf. Frieder & Subrahmanyam, 2005). Concerning investors’

financial needs, the present results show especially that an investor’s overall

affect – or liking – for a company’s product design (A) has influence on the

investor’s expectations of the financial returns of a company’s stock, as well

as (B) cause (heuristic) determination to invest in a stock over alternatives

that have approximately similar expected financial returns.

Specifically, the results suggest (A) that one’s liking for a company’s prod-

uct design (in the form of affective evaluation of the design) has direct posi-

tive effect on one’s optimism concerning the company’s financial returns

when the company is considered as an investment target. This effect makes

one’s liking for a company’s product design logically a factor that increases

an investor’s investment willingness. The finding is consistent with the

recent notion of behavioral finance that one’s overall affect for a company

will correlate with one’s perceptions of the financial prospects of a company

(MacGregor et al. 2000; Statman, Fisher, & Anginer, 2008; Aspara & Tik-

kanen, 2008, forthcoming) – and that individual investors often presume

that “good companies”37 are good investment targets as well (e.g., De Bondt,

1998; Shefrin, 2001, 2002; van der Sar, 2004; Shefrin and Statman, 1995).

Nevertheless, instead of dealing with good company reputation or affect for

a company in general, the present finding constitutes new evidence of the

correlation between one’s affect for a company’s products, in particular, and

[37] good in terms of good overall corporate reputation, good current financial standing/soundness, or good management team


one’s perceptions of the financial prospects of a company. In other words,

we have new evidence of the fact that investors tend to perceive that com-

panies with “good products/design”, especially, are good investment targets

– not just companies with generally good reputation (cf. De Bondt, 1998;

Shefrin, 2001, 2002; Shefrin and Statman, 1995; Statman, Fisher, & Ang-

iner, 2008).

Moreover, my findings add to the literature positing that (B) investors

may use affect for a company as a heuristic – i.e., affect heuristic (Slovic et

al. 2002a, 2002b, 2007; Finucane et al., 2000; Aspara & Tikkanen, forth-

coming) – in order to reach an investment decision over alternative stocks

that appear to have approximately similar expected financial returns. Yet,

my findings constitute, here again, new evidence of the heuristic-like role of

an investor’s affect for a company’s product design, in particular – beyond

the role of one’s affect for the company in general.

The strategic implication of these findings is that a given company is

likely to find investors with special attraction – optimism and investment

heuristic – directed towards the company among such investors who have

strong overall liking for the company’s products and product design. Since

such people have increased interest to invest in the company, the company

may strategically benefit from presenting itself as an investment target to

them, in particular.

Note, by the way, that from an investor protection perspective, it might

present a problem if an investor’s affect or liking for a company’s product

design caused excessive (over)optimism about the company as an invest-

ment target. While the present study cannot definitely overrule this possibil-

ity, it must be emphasized that the present results pertain to optimism as

opposed to pessimism rather than to (over)optimism as opposed to a certain

“right” level of financial expectations. In other words, the present results

should not be interpreted to indicate that an investor’s liking for a com-

pany’s product design automatically leads to harmful levels of optimism

(albeit it does generate some optimism). Rather, we should remember that

some optimism (as opposed to pessimism) is often, or always, needed for an

145discussion

investor to make a particular investment (cf. Branzei & Zietsma, 2003) – the

investors’ positive affect towards or liking for a company’s product design

may contribute such needed optimism. Notably, what also speaks against

the interpretation that an investor’s affect for a company’s product design

would automatically lead to overly biased financial expectations is the find-

ing that an investor’s liking for a company’s product design did not increase

investor’s (over)confidence about his assessments about the company’s

financial returns. Relatedly, recall also that familiarity with a company’s

products was found to actually increase the degree to which the investor

also considered investment targets alternative to that company.

investors’ self-expressive/emotional needs. Besides the above (A) finan-

cial needs, the results of the present dissertation also provide new insights

to investors’ (B) self-expressive and emotional needs – and how investors’

evaluations of companies’ product design can address those needs. In brief,

investors seem to have not only financial needs but also self-expressive and

emotional needs which they seek to satisfy with investments – and compa-

nies’ product design will potentially address those needs, too.

Specifically, my finding was that both the design-related factors – per-

sonal relevance that an investor attaches to life domains represented by the

company’ products as well as an investor’s overall affect or liking for a com-

pany’s product design – have, first of all, positive effect on (i) the investor’s

willingness to invest in the company’s stock rather than in other stocks that

have approximately similar expected financial returns/risks. Secondly, these

factors were found to even elicit (ii) preparedness to invest in the company’s

stock with lower financial returns expected from the stock than from others,

at a given risk level.

Notably, these effects were found to be partially channeled via an

investor’s willingness to support such a company by investing, whose product

domain the investor finds personally relevant and for whose product design

the investor has overall affect or liking. This was an expected result on the

basis of social psychological theories on identification and self-expression


(Aspara et al., 2008; Bhattacharya & Sen, 2003; Scott & Lane, 2000). For

example, an investor who finds gardening as a personally relevant domain

will have willingness to support that domain by investing in a company

whose products represent gardening (such as a company designing garden

tools). With respect to overall affect for the company’s product design, the

findings even hint that in addition to the aforementioned reliance on affect

heuristic to decide and investment in favor of a company with “good prod-

ucts/design”, investors may have collection or possession motives to invest in

companies of good design. This is consistent with psychological literature

that points out the close relationship between one’s affection for things, on

one hand, and will to collect or possess them, on the other (see e.g., Danet

& Katriel, 1989; Pearce, 1994). For instance, for an investor that really likes

Apple’s product design, investment in Apple Corporation can be partially

motivated by a motive to get that company’s design, in a way, into one’s

“collection” or “possession”– by way of owning the stock of the company

behind the design.

The results essentially support the point that has been marginally men-

tioned in behavioral finance research: that most investors have preferences

that go beyond expected financial returns and risk (Fisher & Statman, 1997;

Hoffmann, von Eije, & Jager, 2006). Specifically, the findings constitute

tangible support for the earlier speculation that individuals may obtain

emotional or experiential utility (Beal, Goyen, & Phillips, 2005; Cullis,

Lewis, & Winnett, 1992; Fama & French, 2004, 2007) and self-expressive

benefits (Statman, 2004) from investing in and owning companies’ stocks.

In other words, investors may seek to satisfy self-expressive or emotional

needs in and through making investments, besides financial needs. While

earlier behavioral finance research has implied that satisfaction of an inves-

tor’s self-expressive needs (besides financial) may occur in socially respon-

sible, ethical, or green investing (e.g., Beal, Goyen, & Phillips, 2005; Cullis,

Lewis, & Winnett, 1992; Getzner & Grabner-Kräuter, 2004) and sometimes

in home-country investing (Statman, 2004), present research makes an

extension by demonstrating that no connection to responsibility, ethical, or

147discussion

green issues (or home-country) is needed. Indeed, investors seem to pursue

satisfaction of self-expressive and emotional needs – and obtain self-expres-

sive and emotional benefits/utility – just by investing in companies whose

product domains they find personally relevant or valuable and/or whose

product design they like overall.

To recap, the novelty of these findings concerning investors’ self-expres-

sive motives – and interestingness for design management – is in that they

point out the potential that a company has, in its product design, to address

investors’ self-expressive and emotional needs (besides the financial ones).

Indeed, the findings imply that the degree to which an investor attaches per-

sonal relevance to life domains represented by the company’s products and

the degree of the investor’s overall affect for a company’s product design

are major determinants of the degree to which the company can address

the investor’s self-expressive/emotional needs. From a company’s strategic

perspective, this means that a company is likely to find investors who are

especially attracted to invest in the company from among people who have

positive (or most positive) overall liking for the company’s product design

and/or who find the life domains that the company’s products represent

personally important. These people may, according to the results, even be

prepared to give up on some financial return requirements so as to invest in

the company’s stock. Thus, we have here also new evidence of the fact that

investors’ motivation to invest in companies that have good and personally

relevant products/product design can be another “profits-with-principles”

investment motivation – i.e., investors’ caring not only about how much

money is made but also about how it is made (cf. Jackson & Nelson, 2004;

Nelson, 2005; Nilsson, 2008; Schueth, 2003; Getzner & Grabner-Kräuter,

2004).


7.1.2 investors and “product design” – in what sense?Along with the contributions discussed above, the results of the present

studies also enable participation in the ever-ongoing debate (see e.g., Love,

2001; Valtonen, 2007) concerning “what design is” – especially when it

comes to product design and investors.

First of all, the results discussed above essentially reveal how the poten-

tial personal relevance of a company’s product domain to an investor, as

well as an investor’s overall affect for the company’s product design, influ-

ence the investor’s investment willingness in the company – both regarding

financial considerations and beyond. Now, exactly by making this revelation,

the results can be considered to provide an extensive answer to the question

why and how a company’s products – as embodying certain kind of product

design – do matter to investors, in the broad and general sense.

A slightly different question is, nevertheless: What will investors them-

selves (subjectively) understand or mean by the term “product design”? Nota-

bly, this interpretivist question was not a central question under examina-

tion in the present dissertation. Yet, some answers can be outlined to this

question as well.

To start with, based on the results of the present studies, it seems that

investors do not much differentiate between an overall impression of the

company’s products versus an overall impression of the company’s product

design. This shows especially in the high correlations between investors’

evaluations of the “goodness/attractiveness of a company’s products” and

“goodness/attractiveness of the company’s product design”. Thus, investors’

thinking and behavior seem to reflect the idea that since a company’s (end)

products essentially and inevitably embody its product design(s), there isn’t

(or cannot be) much difference between one’s impression of the company’s

products and one’s impression of its product design. Moreover, since inves-

tors’ evaluations of companies’ products in the senses of “(good) function-

ality/usability”, “good design”, “good design relative to competitors”, and

(general) “goodness”, “attractiveness”, and “pleasantness” correlated highly,

149discussion

it seems that investors’ idea of “good design” is corresponding to quite a

global evaluation of the company’s products – i.e., the products being good in

many interrelated senses (or as a gestalt). This also suggests that investors’

idea of “good design” seems not to be limited merely to the aesthetic or

visual aspects of the products, for example.

However, a few words of caution are needed, with respect to the above.

Notably, the correlation of investors’ evaluations in the above senses (“func-

tionality/usability”, “goodness”, “goodness of design”, “attractiveness” etc.)

in the present studies might be due to an incidental fact that the Finnish

companies included in the studies just happen to perform well on all the

corresponding dimensions. In other words, “product design” may not equal

(or mean exactly the same as) “products” or “product functionality” or “prod-

uct quality” in investors’ minds – not even though investors’ evaluations of

these aspects correlated highly. Also, it must be noted that the words corre-

sponding to “(good) design” have slightly different connotations in different

languages. So, the correlations between investors’ evaluations of different

dimensions of “good design” might actually be different in English than

they were in the present data that involved Finnish (“hyvää muotoilua”).

Moreover, it is also possible that an investor’s impression of a company’s

products/design being good is influenced by the products’ presumed past

or current commercial success and profitability (in addition to the inverse

direction of influence that was proposed presently). Finally, note that exami-

nation of investors’ perceptions of companies’ design capabilities, practices,

or processes was not within the scope of this dissertation. So, the results do

not allow us to make detailed conclusions about the extent to which inves-

tors view “(good) design” to be about “(good) product design capabilities,

processes, and practices” in contrast to mere “(good) end products” dis-

cussed above.

In any case, regardless of these words of caution, note that it is, after all,

not an absolutely crucial question what investors’ exactly mean or under-

stand by the word “(good) design” – insofar as we can make predictions about

their investment behavior by asking them to evaluate company’s products


Rese

arch

fie

ldTh

e pr

esen

t re

sear

ch

cont

ribu

tes

to/e

xten

ds t

he re

sear

ch o

n …

…by

Des

ign

man

age-

men

t (D

M)

stra

tegi

c/m

arke

tpla

ce d

istin

ctio

n th

at c

an b

e ac

hiev

ed th

roug

h •

desi

gned

art

ifact

s (=

gen

eral

DM

rese

arch

them

e, s

ee s

ectio

n 2.

1.1)

stra

tegi

c be

nefit

s of

(de

sign

ing)

ple

asur

able

pro

duct

s to

whi

ch

•pe

ople

can

att

ach

pers

onal

mea

ning

s an

d em

otio

ns (

e.g.

, Ba

ttar

bee,

200

4; B

atta

rbee

& K

oski

nen,

200

5; C

lark

, Sm

ith,

& Y

amaz

aki,

2006

; Kos

kine

n, B

atta

rbee

, & M

atte

lmäk

i, 20

03;

Nor

man

n &

Ram

írez,

199

3; V

erga

nti,

2003

)

show

ing

that

pro

duct

des

ign

-rel

ated

fact

ors

influ

ence

peo

ple’

s •

or in

divi

dual

inve

stor

s’ w

illin

gnes

s to

inve

st in

the

com

pany

–

i.e.,

prod

uct d

esig

n m

ay n

ot o

nly

crea

te s

trat

egic

dis

tinct

ion

and

com

petit

ive

adva

ntag

e fo

r the

com

pany

in th

e pr

oduc

t mar

kets

, bu

t als

o in

the

stoc

k m

arke

ts.

prod

uct d

esig

n as

add

ress

ing

inve

stor

s’ n

eeds

(am

ong

thos

e of

•

othe

r sta

keho

lder

s) (

cf. H

arga

don,

200

5)id

entif

ying

two

broa

d ty

pes

of in

vest

or n

eeds

whi

ch p

rodu

ct

•de

sign

-rel

ated

fact

ors

may

add

ress

, i.e

., (A

) fin

anci

al n

eeds

and

(B

) se

lf-ex

pres

sive

/em

otio

nal n

eeds

iden

tifyi

ng tw

o pr

oduc

t des

ign

-fact

ors

that

influ

ence

inve

stor

s’

•pu

rsui

t for

sat

isfy

ing

both

nee

ds –

i.e.

:pe

rson

al re

leva

nce

or im

port

ance

that

an

inve

stor

att

ache

s 1.

to “

life

dom

ains

” re

pres

ente

d by

a c

ompa

ny’s

pro

duct

s in

vest

or’s

ove

rall

affe

ct o

r lik

ing

for a

com

pany

’s p

rodu

ct

2. de

sign

sh

owin

g ho

w th

e tw

o pr

oduc

t -de

sign

fact

ors

(1 a

nd 2

) in

fluen

ce•

(A. fi

nanc

ial n

eeds

:) o

ptim

ism

and

con

fiden

ce a

bout

the

•co

mpa

ny’s

fina

ncia

l ret

urns

; fam

iliar

ity w

ith th

e co

mpa

ny;

cons

ider

atio

n of

alte

rnat

ive

stoc

ks

(B. s

elf-e

xpre

ssiv

e/em

otio

nal n

eeds

:) (

i) d

eter

min

atio

n to

•

inve

st in

the

com

pany

in c

ase

anot

her c

ompa

ny h

as a

ppr.

sim

ilar e

xpec

ted

finan

cial

retu

rns;

(ii)

pre

pare

dnes

s to

inve

st

in th

e co

mpa

ny e

ven

if it

offe

rs s

omew

hat l

ower

fina

ncia

l re

turn

s th

an a

noth

er s

tock

ex

plic

atin

g th

e ro

le o

f an

inve

stor

’s fa

mili

arity

with

a c

ompa

ny’s

•

prod

ucts

and

with

the

com

pany

itse

lfsh

owin

g ho

w p

rodu

ct d

esig

n em

phas

is (

with

per

sona

l app

eal)

•

in c

ompa

nies

’ inv

estm

ent a

dver

tisem

ents

will

incr

ease

inve

s-to

rs’ i

nter

est t

o in

vest

in th

e co

mpa

nies

Table 13.

Research contributions of the dissertation

151discussion

Rese

arch

fie

ldTh

e pr

esen

t re

sear

ch

cont

ribu

tes

to/e

xten

ds t

he re

sear

ch o

n …

…by

Beha

vior

al

finan

ceho

w p

rodu

ct (

mar

ket)

eva

luat

ions

may

spi

ll ov

er to

and

affe

ct

•in

vest

ors’

inve

stm

ent d

ecis

ions

(Fr

iede

r & S

ubra

hman

yam

, 20

05)

iden

tifyi

ng a

nd p

rovi

ding

em

piric

al e

vide

nce

on th

e af

orem

en-

•tio

ned

effe

cts

of p

rodu

ct d

esig

n -r

elat

ed fa

ctor

s on

inve

stm

ent

deci

sion

s (s

ee 1

, 2, A

and

B a

bove

)ex

plic

atin

g an

d pr

ovid

ing

empi

rical

evi

denc

e th

at th

e fo

und

ef-

•fe

cts

are

not m

erel

y du

e to

fam

iliar

ity e

ffect

s

how

com

pany

-rel

ated

affe

ct m

ay in

fluen

ce a

n in

vest

or’s

inve

st-

•m

ent d

ecis

ions

(e.

g., F

inuc

ane

et a

l., 2

000;

Mac

Gre

gor e

t al.,

20

00; S

lovi

c et

al.,

200

2a, 2

002b

, 200

7; S

tatm

an, F

ishe

r, &

An

gine

r, 20

08)

iden

tifyi

ng a

nd p

rovi

ding

em

piric

al e

vide

nce

on h

ow a

ffect

for a

•

com

pany

’s p

rodu

ct d

esig

n, e

spec

ially

, can

influ

ence

inve

stm

ent

deci

sion

s(A

.) o

ptim

ism

and

con

fiden

ce a

bout

the

com

pany

’s fi

nanc

ial

•re

turn

s; fa

mili

arity

with

the

com

pany

; con

side

ratio

n of

al

tern

ativ

e st

ocks

(B

.) (

i) d

eter

min

atio

n to

inve

st in

the

com

pany

in c

ase

an-

•ot

her c

ompa

ny h

as a

ppr.

sim

ilar e

xpec

ted

finan

cial

retu

rns;

(i

i) p

repa

redn

ess

to in

vest

in th

e co

mpa

ny e

ven

if it

offe

rs

som

ewha

t low

er fi

nanc

ial r

etur

ns th

an a

noth

er s

tock

sh

owin

g ho

w p

rodu

ct d

esig

n em

phas

is (

with

per

sona

l app

eal)

•

in c

ompa

nies

’ inv

estm

ent a

dver

tisem

ents

will

incr

ease

inve

s-to

rs’ i

nter

est t

o in

vest

in th

e co

mpa

nies

inve

stor

pre

fere

nces

that

go

beyo

nd e

xpec

ted

finan

cial

retu

rns

•an

d ris

k (e

.g.,

Fish

er &

Sta

tman

, 199

7; H

offm

ann,

von

Eije

, &

Jage

r, 20

06)

emot

iona

l or e

xper

ient

ial u

tility

(e.

g., B

eal,

Goy

en, &

Phi

llips

, •

2005

; Cul

lis, L

ewis

, & W

inne

tt, 1

992;

Fam

a &

Fre

nch,

200

7;

Fam

a &

Fre

nch,

200

4) a

nd s

elf-e

xpre

ssiv

e be

nefit

s (S

tatm

an,

2004

) th

at in

vest

ors

may

obt

ain

from

sto

ck in

vest

men

ts

iden

tifyi

ng a

nd p

rovi

ding

em

piric

al e

vide

nce

the

effe

cts

of p

rod-

•uc

t des

ign

-rel

ated

fact

ors

1 an

d 2

(see

abo

ve)

on

(B. s

elf-e

xpre

ssiv

e/em

otio

nal n

eeds

:) (

i) d

eter

min

atio

n to

•

inve

st in

the

com

pany

in c

ase

anot

her c

ompa

ny h

as a

ppr.

sim

ilar e

xpec

ted

finan

cial

retu

rns;

(ii)

pre

pare

dnes

s to

inve

st

in th

e co

mpa

ny e

ven

if it

offe

rs s

omew

hat l

ower

fina

ncia

l re

turn

s th

an a

noth

er s

tock

sh

owin

g ho

w p

rodu

ct d

esig

n em

phas

is (

with

per

sona

l app

eal)

•

in c

ompa

nies

’ inv

estm

ent a

ds w

ill in

crea

se in

vest

ors’

inte

rest

to

inve

st in

the

com

pani

esde

mon

stra

ting

that

•

no c

onne

ctio

n to

resp

onsi

bilit

y, et

hica

l, or

gr

een

issu

es (

or h

ome-

coun

try)

is n

eede

d fo

r sel

f-exp

ress

ive/

emot

iona

l inv

estin

g: In

vest

ors

can

obta

in s

elf-e

xpre

ssiv

e an

d em

otio

nal b

enefi

ts/u

tility

just

by

inve

stin

g in

com

pani

es w

hose

pr

oduc

t dom

ains

they

find

per

sona

lly re

leva

nt o

r val

uabl

e an

d/or

who

se p

rodu

ct d

esig

n th

ey li

ke o

vera

ll.


and “product design” (regardless of what this exactly means to them). And

this prediction was what we could, in effect, do in the present studies.

Finally, one should not forget, either, the other product design –related

factor which was studied (besides overall product design affect/evalua-

tion) – and which was found to influence investment willingness. That is,

the personal relevance of the life domain(s) that the company’s products

represent or support. Now, the extent to which a company’s products sup-

port or represent personally relevant life domains may not be readily part

of investors’ own conception of what “(good) product design” means, but it

is surely determined by the company’s product design – and it influenced

investors’ (subjective) evaluations of the companies’ product design and

positively influenced their investment decisions.

In fact, investors’ preference to invest in companies whose products sup-

port or represent (life) domains that are personally relevant to them could be

understood as their “advocacy” or “nurturance” (Bloch & Richins, 1983) of

such domains and, thereby, of companies that design products supporting

such domains. To further illustrate, consider that investment that is made

in company Y with the partial motivation to nurture (or, maintain, enhance,

advocate, or patronize) a personally relevant life domain – due to the com-

pany’s product design supporting that domain – has actually the following

parallels:

voting for a person or party, in elections, that supports a •

personally relevant domain (e.g., health care; architecture)

joining or volunteering in a community that supports a •

personally relevant domain (e.g., a certain sport; environment-

protection)

seeking a job or career where one can cherish a personally •

relevant domain (e.g., education; chemistry)

donating one’s money or time to an organization that •

represents a personally relevant domain (e.g., art; health care)

cherishing the environments essential to a personally relevant •

domain (e.g., forests; forest hunting)

153discussion

buying and using products that support or represent a •

personally relevant domain (e.g., a sport; cooking)

Thus, investing in a company that designs and produces such products that

support or represent a certain, personally relevant life domain becomes,

in one sense, just an additional or alternative way (to the ones above) to

engage in life- domain/product-design nurturance, advocacy, or patronage.

Indeed, one can nurture, advocate, and patronize, for example, health care

by investing in a diagnostics product company; architecture by investing in

a construction company; sports by investing in sports equipment company;

environment-protection by investing in solar energy systems company;

education by investing in school book company; chemistry by investing in

laboratory equipment company; art by investing in paint and brush com-

pany; hunting by investing in outdoors equipment company; and cooking

by investing in pan & kettle company. In addition to such obvious examples,

note that one can also nurture, advocate, and patronize e.g., healthcare by

investing in a company that specializes on better-to-health, low-fat snack

designs (even if snacks in general are not healthy); architecture by invest-

ing in a construction company that specializes on avant-garde architecture

designs (even if construction companies in general represented medio-

cre architecture); environment-protection by investing in a company that

specializes on hybrid car designs (even if cars in general were bad to envi-

ronment); or sports by investing in a company that specializes on sporty

mp3 player designs (even if mp3 players in general had nothing to do with

sports).

All in all, then, what a company’s product design might, in some cases,

also mean to investors – in a profound sense – is the extent to which the

company’s products support or represent life domains that they find per-

sonally relevant, and which they can correspondingly support by way of

investing in the company.


7.2 practical implications to design management

As mentioned, the theoretical development and empirical evidence of this

dissertation contribute primarily to design management literature’s notion

about the strategic relevance of the marketplace distinction achievable

through designed artifacts (cf. section 2.1.1), especially when it comes to

strategic distinction and attraction that a firm’s products and product design

can create among investors (in the stock market). Nevertheless, the findings

concerning this issue have direct implications – which are at the same time

theoretical and practical – with respect to two other major themes of design

management literature, as well: i.e., how to coordinate various designs and

coherent corporate identity (cf. section 2.1.3) and how to manage the processes

and activities of designing (cf. section 2.1.2) at the strategic level of a com-

pany’s business. In other words, the results of the present research have

important direct implications to companies’ design and other managers and

executives.

In general, the findings identify new important roles that design may

play in companies’ financial (or owner or shareholder or investor) relation-

ships, as forecast by Borja de Mozota (2003, p. 113) in the design manage-

ment context. Specifically, product design may, based on the results, play

a role (1) in attracting investments from investors who are appealed by the

company’s product domains and product design, as well as (2) in defin-

ing “hybrid” strategies or business models that take, already at the outset,

into account certain investors’ special attraction to the company’s current or

future product design.

155discussion

7.2.1 attracting investments from investors who are appealed by the company’s product designThe general finding of the present dissertation – that investors will be attract-

ed by product design -related factors – emphasizes and elucidates to manag-

ers that a company’s products and product design are central in determin-

ing an (attractive) corporate identity not only for the company’s customers

but also for its investors (cf. Borja de Mozota, 2003, p. 17). Accordingly,

the requirement to coordinate the corporate identity as well as design work

within the company (cf. section 2.1.3) should be considered in new light

– especially when it comes to the role of products and product design in

designing communications towards selected investors.

First of all, any firm can take advantage of the tendency of the person-

al relevance of various areas of interest, activities, and ideas to elicit extra

willingness – in investors – to invest in companies that represent those

domains with their products. In other words, given a company that designs

and produces certain (kinds of) products, it may be highly useful for the

company – when attempting to promote itself as an investment target in

the stock market – to target especially such investors who find the domains

represented by the company’s products as personally relevant.

Relevant domains may be identified by asking the question: “What activ-

ities, areas of interest, ideas, or ideals do our company’s products support

or represent?” For instance, if the company’s products are tires, answers

to this question might include, at least, “car-driving”, “road traveling”, and

even “road safety”. If the company specializes on winter tire designs, addi-

tional answers might be “winter driving” or even just “winter weathers”

in general. Accordingly, the company can pursue investors who find these

domains personally relevant and offer the company as an investment target

to them – with communications designed to highlight the potential person-

al relevance of the domains. Or, if the company’s products are specialized

heart-related drugs, the answers to the question might include “healthcare”,

“fight against illnesses”, and “well-being” generally – or “cardiovascular


performance” or even “cardiovascular exercise/sport” especially. And again,

investors who find these domains personally relevant can be pursued with

correspondingly designed communications.

Note that the investors targeted the above way need not recognize or be

familiar with the company in advance. Thus, even a company that lacks an

established brand or familiarity in the (stock) market can still utilize the

above investor-targeting strategies – as long as its product design supports

or represents certain domains. Note, however, also that the personal rel-

evance of a domain actually increases the probability that the individuals

will be familiar with the company’s product category, particular products,

or even the company itself (to the extent that they support or represent the

domain). For instance, if an investor finds road traveling or safety as highly

relevant domains personally, he is relatively likely to (have) come across and

become familiar with companies designing and producing cars and tires.

Secondly, among investors who already are familiar with the company or

its products, a company can target not only (1) those who find the company’s

product domain(s) as personally relevant, but additionally or alternatively

also (2) those who have particularly positive overall affect – or liking – for

the company’s product design. Evidently, the two groups will often be over-

lapping in part, and the greatest investment interest is likely to be found

among investors who both find the company’s product domain as person-

ally relevant and have strong overall liking for its product design. Neverthe-

less, it is useful to consider these issues separately, as well. Notably, there

might not be so many people finding, for example, certain very mundane

product categories – such as domestic utensils or newspapers – as highly

relevant personally (in an identification sense). But still: many people may

have strong affect or liking for particular companies’ design within those

categories (e.g., Fiskars, New York Times). In effect, the company can ben-

efit from this kind of product design affect among potential investors rather

independently of whether the product domains in question are personally

relevant to those investors.

Considering both the investor group that potentially finds the company’s

157discussion

product domain(s) as personally relevant and the (partly overlapping) inves-

tor group that has overall liking for the company’s product design, a useful

way of promoting the company as an investment target will be to emphasize

the company’s product design in its communication and advertising towards

the selected investors. Indeed, as the results of the present research (Study 2)

expressly showed, a company is likely to be able to attract greater investment

by emphasizing its product design in its ads targeted directly to potential

investors. This being the case, it is also reasonable to involve the company’s

product designers (and product advertisement designers) in designing the

company’s investment ads and other communication towards investors.

Namely, product designers have expertise in understanding and communi-

cating products’ appeal to people – an advantageous skill when the company

wants to appeal to investors, as well, with its product design.

In sum, the present results indicate that such investors who find a com-

pany’s product domain personally relevant and/or have particular affect

for the company’s product design have high potential as investor groups

for the company: it is likely that the company can quite effectively attract

investments from these investors. This finding can serve segmentation

and targeting of selected investors when the company wants to attract new

investments – in order to, e.g., raise capital for new investments, realize an

initial public offering (IPO) or other stock issue, or just generally widen its

shareholder base and enhance its market valuation. When it comes to com-

municating with the selected investors, the communication should logically

be designed to address both financial and self-expressive needs of the inves-

tors. Coordination of design work and people – especially that of financial

experts, product designers, and communication designers – is needed here,

to generate communication that is as effective as possible and to reinforce

a corporate image/identity that the investors perceive as coherent. In effect,

the designed communication should attract investments through both rein-

forcing financial expectations concerning the company (optimism about

and/or confidence in product sales, earnings, stock returns) and framing

the investment in the company (explicitly or implicitly) as an opportunity


to express one’s identification and affection towards particular product

domains and product design of the company.

7.2.2 creating hybrid business models based on appealing product visionsBeyond attracting investments from investors to whom the company’s (cur-

rent) product design appeals, corporate (design) managers, entrepreneurs,

and designers should also consider defining new kind of “hybrid” business

models that take, already at the outset, into account certain investors’ special

attraction to the company’s current or future products.

Specifically, with hybrid business models I mean new business models,

whereby corporate managers or entrepreneurs outline simultaneously (or,

interdependently)

aa) product design vision: what kind of products (i.e., product catego-

ries as well as special design aspects and benefits) the company

or new venture will develop/design and, consequently, introduce

and sell in the market (and to whom users/buyers/customers),

and

an b) investor vision: which investors the company will attract with

its product design vision – due to the envisioned products’ being

personally relevant to and liked by those investors – so as to obtain

capital for the development/design of the very product(s).

The difference of this kind of hybrid business model from the ordinary

business models held by corporations in recent decades is clear. Namely,

while conventional business models tend to “isolate” investors from the rest

[38] In this sense, for instance Apple Computer already runs a hybrid business model – considering that “Apple shareholders are typically very loyal [and also] own the company's products” (McIntyre, 2008; see also Aspara & Tikkanen, 2008; Schoenbachler, Gordon, & Aurand, 2004).

159discussion

of the business model by assuming that investors are only interested in

the financial returns that the business is likely to yield, the hybrid busi-

ness model will assume – as its essential “component” – the contribution

of investors who are inherently interested in and attracted by the products

and product design that the company envisions. The hybrid model has the

advantage that capital and investors (needed for product development/

design and related activities) are easier to attract – per the results of the

present research – among people to whom the product domain is person-

ally relevant and product design likeable. Such investors are also likely to be

more committed than (random) investors who only care about the financial

returns of the company. Of course, the hybrid business model may involve

also investors that are “in” for the company merely due to financial reasons

(perhaps, institutional investors). Yet, the fundamental idea is indeed that

a considerable part of the investors (who supply capital) lend their support

to the company and its business model not only because expected financial

returns but also because they are inherently appealed by the products and

product designs of the company (even if those products did not exist yet, but

were still under development).

An example of this kind of hybrid business model could be one whereby

a company or entrepreneur envisions development and design of a new

kind of solar panel -powered car and seeks a substantial part of the financial

resources needed for the development/design of that product from inves-

tors who find cars, road traveling, and/or environmental friendliness as per-

sonally relevant domains worth supporting. The business model may also

include the idea that some or many of the investors will be actual users and

buyers of the car, as soon as it comes to market38. The mass of future users/

buyers is, however, meant to be outside the initial investor group, which will

ensure that the initial investors will also obtain financial returns for their

investment (besides the self-expressive and emotional returns from realiza-

tion of the product vision).

Another example of a of hybrid business model could be one whereby

a company or an entrepreneur envisions development and design of a new


gardening robot, which facilitates old people’s gardening activities. Here,

the business model might include the idea that a substantial part of the

financial resources needed for the development/design is obtained from

investors who find gardens and, perhaps, ease-of-life as personally relevant

domains worth supporting.

The recommendation about hybrid business models – as an implica-

tion of the results of the present study – is a fundamental extension of

design management literature’s extant notion concerning processes and

activities of designing (cf. section 2.1.2) at the strategic level of a company’s

business.

Especially, the recommendation echoes the view that management of

design at the corporate level pertains not only to (i) product development/

innovation or (ii) visual identity creation but also to (iii) definition of the

company mission or vision (Borja de Mozota, 2003, p. 67; see also Sven-

gren, 1995a, 1995b). Indeed, the product design vision and investor vision

of the hybrid business model must be outlined – already at the outset – into

a conceptually coherent whole that is likely to be functionable. The question

may at first be, to a large extent, about preliminary product concept design

(see e.g., Keinonen & Takala, 2006), however with special emphasis put,

early on, on considering which investors the product concept (or vision)

will attract. This work inevitably requires conceptualizing a workable idea or

concept of (i) what kind of products will be developed/designed and offered

to the markets, as an integral part of (iii) the company’s overall mission

definition. This integrated conceptualization should – as a whole – appeal to

the envisioned investors.

The implementation of the outlined business model, then, requires fur-

ther integration of practical product development and design work with the

investor vision, so that capital needed for that work can be obtained and

secured, in practice, from the envisioned investors. Insofar as all this stra-

tegic design management related to the hybrid business model – both in the

outlining phase as well as implementation phase – result to be successful,

the envisioned product concept(s) will be realized in the form of market-

161discussion

able products. In the ideal outcome, use value will be consequently created

to the users/buyers of the products, while both profits and self-expressive/

emotional value are generated to the company’s investors or shareholders.

All in all, the hybrid business model clearly reflects an idea of a truly

strategic approach to design management, i.e., of viewing design as a new

paradigm for arriving at ideas and methods that can be used to enhance a

company’s business strategy and vision through understanding functional-

ity, psychology, sociology, shape, and aesthetics of product artifacts (Borja

de Mozota, 1992). Moreover, it reflects an idea where design can be a major

driver of the company’s strategy rather than merely being influenced by

strategy (see e.g., Hertenstein & Platt, 1997; Ravasi & Lojacono, 2005). Such

approaches have indeed been emerging in design management thought for

the past two decades. What this dissertation has now essentially done is to

explore what role investors might have therein.

7.3 limitations and further research

7.3.1 limitations of the present studies There are certain limitations in the present studies. The potential non-

response/selection bias in the studies presents a possibility that in a wider

population of investors, the found effects of the product design factors on

investment behavior might be weaker than what my data indicated. This

would be the case if such investors among whom the found effects were

more prevalent chose to respond to the questionnaires more often than

investors among whom the effects were weak or non-existent. However, as

described in the Method sections (5.1 and 6.1), I controlled for non-response

bias with the conventional procedure of comparing early and late respon-

dents. Since the tests did not indicate any significant differences between

early vs. late respondents, one can conclude that non-response bias should

not be a very serious concern.


In Studies 1a and 1b, an additional limitation is caused by a potential

retrospection bias. Notably, investors’ retrospective self-reports about their

attitudes towards a company at the time of investment are inevitably “con-

structed” to some extent at the time of answering rather than purely corre-

sponding to an accurate memory of those attitudes (see e.g., Barrett, 1997;

Levine, Prohaska, Burgess, Rice, & Laulhere, 2001; Levine & Safer, 2002;

Levine, Safer, & Lench, 2006). Similarly, investors’ retrospective views about

their decisions to invest in companies are to some extent constructed at the

time of answering. Especially, there is the possibility that the investors “post-

rationalize” their investment decisions by overestimating (retrospectively)

the positivity of their affect for the companies’ product design (to justify the

decision to themselves or the researcher). They may even retrospectively

overestimate their expectations about the financial returns from particular

stocks. (cf. Bem, 1972).

While the results of Studies 1a and 1b might admittedly be somewhat

biased in the above senses, the concerns are actually not very great regard-

ing the general effects on the main dependent variables. In particular, there

is no reason to believe that the investors in general would post-rationalize

their decisions by overestimating the extent to which they were prepared to

sacrifice expected financial returns when investing in the particular compa-

ny – or the extent to which they were determined to invest in the company in

case another company would have offered the same financial returns. After

all, exaggerating such preparedness or determination – which, in effect,

imply some disregard of money – would be all but rational. This point gives

us confidence that the results from Studies 1a and 1b will be rather accurate

and, at least, show the right direction of the effects – even if based on retro-

spective self-reports.

Note also that Study 2 was essentially designed, in the spirit of data tri-

angulation, to gather complementary evidence – evidence which would not

suffer from retrospection bias of Studies 1a and 1b. Now, since the evidence

from Study 2 was by and large consistent and pointed to the same direction

as that of Studies 1a and 1b, the overall validity and reliability of the results of

163discussion

the dissertation can be considered to be fairly good. Especially, the revelation

of the strong effect by the experimental factor of product design emphasis

in a company’s investment advertisement gives us confidence in the results.

Also, the high statistical significance of covariates in Study 2 (reflecting the

same product design -related factors that were examined in Studies 1a and

1b) renders credibility in the results overall.

Yet, it must be noted that Study 2 has its own limitations, as well. Espe-

cially, the complexities of the psychological-behavioral mechanisms could

not be modeled in Study 2 to the extent that they were modeled in Studies

1a and 1b, due to the relatively simple experimental setting of Study 2. More-

over, the fact that the “case companies” in Study 2 were all foreign brings

its own limitation: Based on the results of Study 2, we cannot be absolutely

certain that the same effects (especially concerning the product emphasis

in the investment advertisement) would be found similarly for domestic

companies, or in similar effect size. Thus, it is possible that the effect sizes

would be either greater or smaller for domestic companies – and it is also

possible that the effects might be different for companies located in coun-

tries at differential distances than the companies of Study 2. Nevertheless,

considering the fact that Studies 1a and 1b addressed domestic companies

while Study 2 addressed foreign companies and the fact that the results

were consistent across the studies, we can be fairly confident that our results

hold to a large extent independent of whether the companies are domestic

or foreign (relative to the investors).

It must also be noted that both the theoretical development and empiri-

cal data of the studies focused on addressing the effects of positive affect

for a company’s product design (or its relevance). In contrast, the effects

of highly negative affective evaluations (or total irrelevance felt) were not

explicitly addressed, as a separate case. Of course, it is possible that the

effects of an investor’s highly negative affect for a company’s product design

are simply inverse to those of highly positive affect. Nevertheless, this is not

necessarily the case and hypotheses concerning the influences of investors’

potential negative affective evaluations of companies’ products and product


design should be further analyzed theoretically and empirically tested.

Final limitations to be addressed relate to the variable measurements.

Most notably, the measurement items that were used for the dependent vari-

ables (optimism, confidence, determination to invest when equal returns,

preparedness to invest with lowered returns, interest to invest) were mostly

new and developed for this study, being therefore somewhat exploratory.

Their validities and reliabilities were not completely proved even if issues

of discriminant and convergent validity were addressed in some measure.

The new survey measures for optimism and confidence about a company’s

financial returns, in particular, will need further validation – considering

the importance of correct measurement of financial returns expectations for

finance research. Indeed, the conceptualization of optimism as the overall

positivity of an investor’s expectations of the (likely) financial returns of a

stock and confidence as the investor’s belief of the precision of his subjec-

tive information/view of the financial returns probability distribution of the

stock a priori (and, therefore, one’s felt surprise of the realized returns, a pos-

teriori) need further validation. Also, language issues need to be accounted

for: The original measurement items in the present studies were in Finnish

and have been translated into English for this dissertation. This means that

the impression that an English-speaking reader of this dissertation obtains

of the content of the measurement items might not perfectly match with

the impression obtained by the studied Finnish investors (e.g., “design”,

“returns”, “risk”, “surprise”) – not even if the author did exercise great care-

fulness in translating the items.

7.3.2 avenues for further researchEvidently, the present research is among the first of its kind – if not the first

– to examine how investors’ evaluations of companies’ products and product

design influence their investment decisions. In fact, the present dissertation

is also among the first responses to the call to use consumer-psychological

165discussion

theories and research techniques in studying individuals’ investment pref-

erences (Clark-Murphy & Soutar, 2004, 2005; Fama & French, 2004; Stat-

man, 2004). Nevertheless, much further research is needed in the area.

First of all, replicating the present studies with different companies from

different industries, and supporting/representing different domains with

their products, should be considered in further research. Similarly, investors

from different countries, and having different personal backgrounds, will

need to be studied more extensively – so that it can be confirmed whether

the (causal) effects found in this study are present with investment publics

in general, around the world. Concerning home countries, future research

must also pay more explicit attention to and explicitly model the potentially

confounding factors related to cross-border investing and home bias – which

remained beyond the scope of the present dissertation (albeit that the case

companies in Study 2 were foreign). Moreover, interaction effects of the

found causal factors and investors’ personal characteristics should be con-

sidered further. It is worth noting that in additional analyses that I have con-

ducted on the present data, I have not found significant interaction effects

by e.g., number of stocks owned, investment volume, investment tracking

activity, or basic demographics. Yet, further research should examine such

and other interaction variables in more detail.

What is more – as implied at the end of the limitations section above –

the measurement variables used in the present studies should be further

scrutinized and validated in future research, especially when it comes to the

finance-related dependent variables (optimism, confidence, determination

to invest when equal returns, preparedness to invest with lowered returns).

In effect, the operationalization and further validation of the variables

could and should constitute one stream of future research in its own right.

With respect to the product design -related predictor variables, in turn, an

important avenue of further research would be to extend the contents of the

variables to explicitly include also investors’ perceptions of the companies’

organizational product design capabilities (cf. e.g., Jevnaker, 2000, 2005;

Johansson & Holm, 2006; Kristensen & Lojacano, 2002; Terrey, 2008) –


i.e., beyond the end-product (or product artifact) perceptions, on which the

present variables focused.

When it comes to more far-reaching extensions of the current research,

it would be interesting to study whether and to what extent the results of

this dissertation apply not only to individual investors but, perhaps, also

to institutional investors and/or investment market intermediaries and

professionals, such as investment analysts and investment advisors. One

might think that professionals would not be influenced at all by the some-

what “soft” and affective product design factors proposed in this research.

Nevertheless, some preliminary existing studies show that professional

investment analysts, for instance, often make investment evaluations and

decisions based on affective or attitudinal factors, as well (Ganzach, 2001).

Thus, there is indeed a fruitful setting for studying how the product design

-related psychological and behavioral mechanisms proposed in this disserta-

tion potentially influence the investments of professional and institutional

investors, too.

In addition, it will also be important to examine the effectiveness of

various design management strategies suggested in section 7.2 in further

research, based on the insights developed in the present dissertation. To

start with, further research should further examine the real-life effectiveness

of advertisements and other communications that are targeted to investors

and emphasize the company’s product design. One way to study this issue

would be to examine whether product advertising campaigns or trade shows

wherein the company’s product design is prominently presented result in

increased number of investors buying the company’s stock and/or with

[39] There is some research that examines the stock price reactions to advertising campaigns in general (see e.g. the review by Srinivasan & Hanssens, 2009). However, advertisement campaigns that

explicitly emphasize a company’s product design have not been examined. Also, rather than the reactions of stock prices – which may be influenced by a multitude of complex factors – further studies should consider

examining investor interest (as enhanced by the product design appeals in advertising) in more direct ways.

167discussion

increasing volume39. Another way to study the issue would be to examine

the effects that product design illustrations incorporated in companies’ real-

life stock issue prospectuses (or, ads for stock issues) have on investors’

interest to participate in the stock issues. Note also that while appealing

communication about a company’s product design increases – according

to the present results – investors’ interest to invest in the company, there is

basically nothing in the present results that requires such communications

to be restricted to the company’s current products (i.e., those already in the

market). Even appealing projections of products – or product concepts –

that the company is just envisioning but not yet producing (or having in

the market) may increase investors’ interest and willingness to invest in

the company. Companies in auto and mobile communications industries,

for instance, commonly present such future-oriented, visionary product

concepts through media (see Keinonen & Takala, 2006), and it would be

interesting to study to what extent, exactly, the presentation and illustration

of such product concepts indeed influence investors’ investment interest.

Similarly, it will be highly interesting to explore the kind of hybrid busi-

ness models proposed, which integrate at the outset such investors to a

company’s business model, to whom the company’s product domain and

product design overall appear genuinely appealing. Further research on

these strategic design management applications could deploy a variety of

methods, including case studies of companies and their intended design

strategies and business models; statistical measurements on the manifest

strategies of company populations; manager surveys among large samples

of companies; consumer and investor surveys, and field experiments. Also

action-oriented design research on the novel kind of hybrid business mod-

els should be pursued.

All in all, I indeed encourage further research and applications in this

important area to be conducted both in academia and managerial practice

of design management. There are, presumably, many insights still to be

developed to strategic design management – when it comes to managing

design not only with users/buyers of the company’s products in mind, but

also the company’s investors and shareholders.

168

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179

appendix a Cover letter sent to investors in study 1 (1a and 1b)

Dear [company D]’s stockholder,

You have been chosen to be a participant in a study by Helsinki School of Econom-ics. The study seeks to find out about investors’ attitudes towards various firms as well as about factors influencing their investment decisions.

Your contact address was obtained from the shareholder register of [company D]. Shareholder registers are, according to law, public records and available at corpora-tions’ headquarters as well as at the Finnish Central Securities Depository. From [company D]’s shareholder register, we have randomly chosen appr. 250 sharehold-ers to participate in the study.

Helsinki School of Economics is conducting the research independently and purely for scientific purposes.

The companies appearing in the questions have – in order to support scientific research – approved the study and wish that the stockowners whom the survey has been sent would respond to it. The company whose stock you own, [company D], is one of these participating companies. Other companies participating are e.g. [company A], [company B], and [company C].

It is optional to respond to the survey, but by responding you can contribute to the progress of an important Finnish economic study. Your participation is also very important for 2 master’s theses and one doctoral dissertation. Every answer is very valuable and important!

We hope that you would respond to all the questions in the questionnaire. There are no right answers to the questions, meaning that you can answer the questions entirely based on your personal views. Answering the questionnaire takes about 20 minutes.

The answers are treated confidentially and anonymously. In other words, your per-sonal information is not associated with the answers in any analyses, and one can-not identify the answers of an individual respondent from the results of the study. In addition, all of your personal information will be deleted from our databases after the study has ended.

No-one but the researchers belonging to the research team (3 persons) will have access to the answers. The participating companies or any third parties will not have access to the answers.

We will draw a lottery among respondents who have returned the questionnaire by 30.7.2007. Prizes in the lottery include a sport equipment set, a knife set, and car tire set, with a value of 300 euros or more.

Thus, we kindly ask you to return the filled-in questionnaire by 30.7, in the attached reply envelope.

Gratefully for your help,

On behalf of the research team: N.N and M.M.Helsinki School of Economicse-mail: [email protected]

180

appendix b / Table B1. Results, Model 1a: The effects of investors’ evaluations of a company’s product design on their financial expectations about the company’s stock (as well as consideration of alternatives)

Effe

ct o

f

On

Path

-co

eff.

t-va

lue

Hyp

othe

sis

Hyp

othe

size

d pa

ths

Pers

onal

rele

vanc

e of

the

com

pany

’s p

rodu

ct d

omai

nFa

mili

arity

with

the

com

pany

’s p

rodu

cts

0.30

86.

19**

*H

1 su

ppor

ted

Pers

onal

rele

vanc

e of

the

com

pany

’s p

rodu

ct d

omai

nCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

-0.1

622.

03*

H5

supp

orte

dPe

rson

al re

leva

nce

of th

e co

mpa

ny’s

pro

duct

dom

ain

Ove

rall

affe

ct fo

r the

com

pany

’s p

rodu

ct d

esig

n0.

131

2.61

**H

13 s

uppo

rted

Fam

iliar

ity w

ith th

e co

mpa

ny’s

pro

duct

sCo

nfide

nce

abou

t the

com

pany

’s fi

nanc

ial r

etur

ns-0

.080

0.83

H4.

0a/4

.1a

not

supp

orte

dFa

mili

arity

with

the

com

pany

’s p

rodu

cts

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks0.

170

2.03

*H

3.1

supp

orte

d H

3.0

not s

upp.

Ove

rall

affe

ct fo

r the

com

pany

’s p

rodu

ct d

esig

nCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

-0.1

751.

60a

H8

mar

g. s

upp.

Ove

rall

affe

ct fo

r the

com

pany

’s p

rodu

ct d

esig

nO

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

0.27

02.

44**

H11

sup

port

edO

vera

ll af

fect

for t

he c

ompa

ny’s

pro

duct

des

ign

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

0.10

10.

83H

12 n

ot s

uppo

rted

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks-0

.404

4.19

***

H4.

0b s

uppo

rted

Cont

rols

Fam

iliar

ity w

ith th

e co

mpa

ny’s

pro

duct

sO

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

-0.0

530.

73O

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks0.

071

0.62

Pers

onal

rele

vanc

e of

the

com

pany

’s p

rodu

ct d

omai

nCo

nfide

nce

abou

t the

com

pany

’s fi

nanc

ial r

etur

ns0.

088

1.00

Pers

onal

rele

vanc

e of

the

com

pany

’s p

rodu

ct d

omai

nO

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

-0.0

210.

21Fa

mili

arity

with

the

com

pany

’s p

rodu

cts

Ove

rall

affe

ct fo

r the

com

pany

’s p

rodu

ct d

esig

n0.

521

10.2

9***

Com

pany

dum

my

cont

rols

Foca

l/in

vest

ee c

ompa

ny B

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

-0.2

800.

66Fo

cal/

inve

stee

com

pany

C

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

0.23

10.

57Fo

cal/

inve

stee

com

pany

B

Opt

imis

m a

bout

the

com

pany

’s fi

nanc

ial r

etur

ns-0

.214

0.54

Foca

l/in

vest

ee c

ompa

ny C

O

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

0.01

50.

04Fo

cal/

inve

stee

com

pany

B

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks1.

192

1.86

*Fo

cal/

inve

stee

com

pany

C

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks-0

.108

0.27

Com

pany

dum

my

inte

ract

ions

Foca

l/in

vest

ee c

ompa

ny B

X P

erso

nal r

elev

ance

of t

he c

om-

pany

’s p

rodu

ct d

omai

n Co

nsid

erat

ion

of a

ltern

ativ

e st

ocks

0.18

31.

33 a

181

Effe

ct o

f

On

Path

-co

eff.

t-va

lue

Hyp

othe

sis

Foca

l/in

vest

ee c

ompa

ny C

X P

erso

nal r

elev

ance

of t

he c

om-

pany

’s p

rodu

ct d

omai

nCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

0.19

41.

65*

Foca

l/in

vest

ee c

ompa

ny B

X P

erso

nal r

elev

ance

of t

he c

om-

pany

’s p

rodu

ct d

omai

n Co

nfide

nce

abou

t the

com

pany

’s fi

nanc

ial r

etur

ns-0

.004

0.03

Foca

l/in

vest

ee c

ompa

ny C

X P

erso

nal r

elev

ance

of t

he c

om-

pany

’s p

rodu

ct d

omai

nCo

nfide

nce

abou

t the

com

pany

’s fi

nanc

ial r

etur

ns0.

122

0.67

Foca

l/in

vest

ee c

ompa

ny B

X P

erso

nal r

elev

ance

of t

he c

om-

pany

’s p

rodu

ct d

omai

n O

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

0.19

20.

93

Foca

l/in

vest

ee c

ompa

ny C

X P

erso

nal r

elev

ance

of t

he c

om-

pany

’s p

rodu

ct d

omai

nO

ptim

ism

abo

ut th

e co

mpa

ny’s

fina

ncia

l ret

urns

-0.0

490.

33

Foca

l/in

vest

ee c

ompa

ny B

X F

amili

arity

with

the

com

pany

’s

prod

ucts

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

0.06

50.

22

Foca

l/in

vest

ee c

ompa

ny C

X F

amili

arity

with

the

com

pany

’s

prod

ucts

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

-0.0

130.

06

Foca

l/in

vest

ee c

ompa

ny B

X F

amili

arity

with

the

com

pany

’s

prod

ucts

Opt

imis

m a

bout

the

com

pany

’s fi

nanc

ial r

etur

ns0.

457

1.35

a

Foca

l/in

vest

ee c

ompa

ny C

X F

amili

arity

with

the

com

pany

’s

prod

ucts

Opt

imis

m a

bout

the

com

pany

’s fi

nanc

ial r

etur

ns-0

.070

0.39

Foca

l/in

vest

ee c

ompa

ny B

X F

amili

arity

with

the

com

pany

’s

prod

ucts

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks-1

.114

3.11

***

Foca

l/in

vest

ee c

ompa

ny C

X F

amili

arity

with

the

com

pany

’s

prod

ucts

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks-0

.397

2.31

*

Foca

l/in

vest

ee c

ompa

ny B

X O

vera

ll af

fect

for t

he c

ompa

ny’s

pr

oduc

t des

ign

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

-0.1

360.

28

Foca

l/in

vest

ee c

ompa

ny C

X O

vera

ll af

fect

for t

he c

ompa

ny’s

pr

oduc

t des

ign

Confi

denc

e ab

out t

he c

ompa

ny’s

fina

ncia

l ret

urns

-0.5

691.

22

Foca

l/in

vest

ee c

ompa

ny B

X O

vera

ll af

fect

for t

he c

ompa

ny’s

pr

oduc

t des

ign

Opt

imis

m a

bout

the

com

pany

’s fi

nanc

ial r

etur

ns-0

.713

1.63

a

Foca

l/in

vest

ee c

ompa

ny C

X O

vera

ll af

fect

for t

he c

ompa

ny’s

pr

oduc

t des

ign

Opt

imis

m a

bout

the

com

pany

’s fi

nanc

ial r

etur

ns-0

.104

0.27

Foca

l/in

vest

ee c

ompa

ny B

X O

vera

ll af

fect

for t

he c

ompa

ny’s

pr

oduc

t des

ign

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks-0

.086

0.14

Foca

l/in

vest

ee c

ompa

ny C

X O

vera

ll af

fect

for t

he c

ompa

ny’s

pr

oduc

t des

ign

Cons

ider

atio

n of

alte

rnat

ive

stoc

ks0.

345

1.00

Foca

l/in

vest

ee c

ompa

ny B

X C

onfid

ence

abo

ut th

e co

mpa

ny’s

fin

anci

al re

turn

sCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

0.29

72.

03*

Foca

l/in

vest

ee c

ompa

ny C

X C

onfid

ence

abo

ut th

e co

mpa

ny’s

fin

anci

al re

turn

sCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

0.23

82.

29*

Foca

l/in

vest

ee c

ompa

ny B

X O

ptim

ism

abo

ut th

e co

mpa

ny’s

fin

anci

al re

turn

sCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

-0.3

691.

01

Foca

l/in

vest

ee c

ompa

ny C

X O

ptim

ism

abo

ut th

e co

mpa

ny’s

fin

anci

al re

turn

sCo

nsid

erat

ion

of a

ltern

ativ

e st

ocks

-0.0

220.

08

a p

< .1

0 (o

ne-s

ided

); *

p <

.05

(one

-sid

ed);

**p

< .0

1 (o

ne-s

ided

); *

** p

<.0

01 (

one-

side

d).

Not

es: T

he t-

valu

es w

ere

calc

ulat

ed th

roug

h a

boot

stra

ppin

g ro

utin

e w

ith 3

40 c

ases

and

500

sam

ples

.

182

appendix b / Table B2. Results, Model 1b: The effects of investors’ evaluations of a company’s product design on their investment decisions, beyond financial returns

Effe

ct o

f

On

Path

co

eff.

t-va

lue

Hyp

othe

sis

Hyp

othe

size

d di

rect

pat

hsPe

rson

al re

leva

nce

of th

e co

mpa

ny’s

pro

duct

dom

ain

Fam

iliar

ity w

ith th

e co

mpa

ny’s

pro

duct

s0.

177

2.69

**H

1 su

ppor

ted

Pers

onal

rele

vanc

e of

the

com

pany

’s p

rodu

ct d

omai

nD

eter

min

atio

n to

inve

st w

hen

equa

l fina

ncia

l ret

urns

0.06

11.

25a

H6

mar

g.

supp

orte

dPe

rson

al re

leva

nce

of th

e co

mpa

ny’s

pro

duct

dom

ain

Prep

ared

ness

to in

vest

with

low

er fi

nanc

ial r

etur

ns-0

.043

1.06

Pers

onal

rele

vanc

e of

the

com

pany

’s p

rodu

ct d

omai

nO

vera

ll af

fect

for t

he c

ompa

ny’s

pro

duct

des

ign

0.09

02.

04*

H13

sup

port

ed

Ove

rall

affe

ct fo

r the

com

pany

’s p

rodu

ct d

esig

nD

eter

min

atio

n to

inve

st w

hen

equa

l fina

ncia

l ret

urns

0.27

33.

57**

*H

9 su

ppor

ted

Ove

rall

affe

ct fo

r the

com

pany

’s p

rodu

ct d

esig

nPr

epar

edne

ss to

inve

st w

ith lo

wer

fina

ncia

l ret

urns

0.04

90.

89

Fam

iliar

ity w

ith th

e co

mpa

ny’s

pro

duct

sFa

mili

arity

with

the

com

pany

0.28

92.

01*

H2

supp

orte

d

Fam

iliar

ity w

ith th

e co

mpa

nyD

eter

min

atio

n to

inve

st w

hen

equa

l fina

ncia

l ret

urns

0.14

82.

37**

H0

supp

orte

d

Hyp

othe

size

d pa

ths

thro

ugh

med

iato

r (W

illin

gnes

s to

su

ppor

t…)

Pers

onal

rele

vanc

e of

the

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184

appendix c Cover letter distributed to investors in Study 2

Dear stock investor,

The questionnaire in front of you is related to research by Helsinki School of Economics, in which we aim to study stock investments of private individuals, including their interest to in-vest in various kinds of companies in connection with e.g. stock issues. By responding to the questionnaire, you can considerably facilitate the doctoral research of one of the researchers, as well as help to ensure valid results from the study.

Helsinki School of Economics does the research independently and merely for scientific pur-poses.

This means that although the questionnaire presents questions concerning certain example companies, your answers do not end up in any form to the use of those companies. As a mat-ter of fact we, as researchers, have chosen the example companies in a random way just for this questionnaire and have not been in any contact with the companies in question.

It is voluntary to respond to the questionnaire, but by answering you can contribute to the ad-vancement of important scientific research. As mentioned, your participation is also very im-portant for one doctoral dissertation. Every answer is therefore highly valuable and important.

We hope that you answer to all the questions. There are no right answers to the questions, meaning that you can respond entirely according to your own personal views and opinions. In other words, the idea is that you answer the questions in accordance to how you currently feel, and based on the information presented in the questionnaire (without acquiring further information from somewhere).

Answering the questions takes approximately 15-20 minutes.

The answers are treated confidentially and anonymously. In other words, your personal information is not associated with the answers in any analyses, and one cannot identify the answers of an individual respondent from the results of the study. In addition, all of your per-sonal information will be deleted from our databases after the study has ended.

No-one but the researchers belonging to the research team (3 persons) will have access to the answers. The example companies or any third parties will not have access to the answers.

We will draw a lottery among respondents who have returned the questionnaire by 28.3.2009. Prizes in the lottery include several books (worth, on average, 50 euros). If you want to partici-pate in the lottery, please write down your email address on the first page of the questionnaire, so we can contact you in case.

If you wish, we will also send a summary of the results of the study to your email address.

All in all, we kindly ask you to return the filled-in questionnaire by 28.3, in the attached reply envelope.

Thankfully,

N.N & N.NHelsinki School of Economicse-mail: [email protected]; puh. xxx xxxx xxx (N.N)

185

abstract

Design management research has increasingly advocated strategic perspec-

tives to product design. However, one important, strategic business aspect

has been rather completely ignored in extant research. That is, the role and

behavior of investors in respect to a company’s product design. The purpose

of this dissertation is to address this research gap by examining, in particular,

the following research question: How do investors’ subjective perceptions and

evaluations of a company’s product design influence their investment decisions

towards the company’s stock? My theory and hypothesis development con-

cerning the underlying psychological and behavioral mechanisms are based

on (social) psychological theories of personal relevance and involvement,

identification and self-expression, and affect – as related to products and

product design. The theory development is also supported by recent notions

from behavioral finance research on investor behavior. The focus is on indi-

vidual/private investors, who actively invest in the stock market (rather than

institutional or professional investors).

In order to test a set of hypotheses developed, I conducted three studies

by gathering quantitative (survey) data on investors who are active investors

in the Finnish stock market. Two of the studies involved a correlational survey

dataset (n≈300), analyzed with causal (path) modeling. The third study was

a conventional randomized experiment (n≈190).

As to the results of the dissertation, my theoretical analysis and empirical

evidence reveal two important, product design -related factors that influence

investors’ willingness and decisions to invest in companies’ stocks. The first

factor is (1) the personal relevance or importance that an investor attaches

to “life domains” that the company’s products represent or support. Such

life domains can be various activities or areas of interests (e.g., road travel-

ing, gardening, sport) – or more abstract themes or ideas (e.g., healthcare,

mobility, environment-protection). The second factor is (2) the investor’s

overall affect or liking for a company’s product design. This factor reflects the

degree to which the investor perceives the company’s products to be pleas-

ant, attractive, good, and likeable overall. The results show, first of all, how

these two product design -related factors have positive effect on an inves-

tor’s optimism about the company’s financial returns and negative effect on

the consideration that he/she gives to alternative investment targets. More-

over, the results suggest that the two factors also contribute to investors’

investment decisions beyond the financial returns expected from companies.

Indeed, the two product design factors are found to have positive effect on

186

investors’ determination to invest in the focal company rather than in other

companies that have approximately similar expected financial returns. And

even further: the factors are found to elicit preparedness to invest in the

company with lower financial returns expected from the company than from

other companies (i.e., by easing up on financial return requirements on the

company).

In sum, the findings suggest that the more personally relevant a com-

pany’s product domain is to an investor – and/or the more overall liking the

investor has for the company’s product design – the greater is the investor’s

willingness to invest in the company.

The results considerably extend the design management notion of the

strategic benefits that a company can enjoy from designing pleasurable and

personally meaningful products – especially by showing that product design

will not only create strategic distinction for the company in the product mar-

kets, but also in the stock markets. In so doing, the present findings have

implications for (design) management practice when it comes to attracting

investments (especially from investors who are appealed by the company’s

product design) as well as creating hybrid business models (that take into

account, already at the outset, certain investors’ potential fondness of the

company’s current or future product design).

187

list of tablesTable 1. Description of the sample of Studies 1a and 1b: Personal characteristics of the investor-respondents 75

Table 2. The selected (quasi-manipulated) domain per focal/investee company, in Study 1a 82

Table 3. Tests for the assumption that the selected domains were domains that the investors perceived the focal/investee companies to represent (Study 1a/b) 82

Table 4. Items for predictor variables in Study 1a (/b) 84

Table 5. Correlations between the main variables of Model 1a 90

Table 6. The selected domains and comparison companies per focal/investee company, in Study 1b 100

Table 7. Tests for the assumption that the selected domains were domains that the investors perceived the comparison companies not to represent (Study 1b) 100

Table 8. Correlations between the main variables of Model 1b 105

Table 9. Description of the subjects of Study 2: Personal characteristics of the investor-respondents 115

Table 10. Stimuli presented to the experiment subjects in Study 2, according to the conditions of the main factors 122-123

Table 11. Means (and standard deviations) for interest to invest in the company in Study 2 129

Table 12. Summary of the hypotheses of the dissertation and the support they received in Studies 1a/1b and 2. 137-138

Table 13. Research contributions of the dissertation 150-151

In Appendix B:

Table B1. Results, Model 1a: The effects of investors’ evaluations of a company’s product design on their financial expectations about the company’s stock (as well as consideration of alternatives) 180-181

Table B2. Results, Model 1b: The effects of investors’ evaluations of a company’s product design on their investment decisions, beyond financial returns 182-183

list of figuresFigure 1. Thematic depiction of the research gap 12

Figure 2. Illustration of the construct “determination to invest in company A’s stock when it has equal expected financial returns as another stock B”. 39

Figure 3. Illustration of the construct “preparedness to invest in company A’s stock with lowered financial returns”. 39

Figure 4. Summary of hypotheses: The effects of an investor’s evaluations of a company’s product design on his financial expectations about the company’s stock and consideration of alternatives (Model 1a). 61

Figure 5. Summary of hypotheses: The effects of an investor’s evaluations of a company’s product design on his extra investment willingness, beyond expected financial returns (Model 1b). 62

Figure 6. Results, Model 1a: The effects of investors’ evaluations of a company’s product design on their financial expectations about the company’s stock (and consideration of alternative investment targets) 92

Figure 7. Respondents’ willingness to in the focal company’s stock beyond its expected financial returns/risk (Study 1b) 107

188

Figure 8. Results, Model 1b: The effects of investors’ evaluations of a company’s product design on their extra investment willingness, beyond expected financial returns 109

Figure 9. Presentation of the dependent variable question in the condition: ‘product design emphasis in company investment ad’=high (Study 2) 125

Figure 10. Presentation of the dependent variable question in the condition: product design emphasis in company investment ad’=low (Study 2) 126

Figure 11. (Least-squares) mean interest to invest in the company (Study 2) 129

Figure 12. Observed means and standard deviations for interest to invest, at different levels of the main covariates (personal relevance of the company’s product domain and overall affect for the company’s product design) of Study 2 133

list of appendixesAppendix A Cover letter sent to investors in Study 1 (1a and 1b) 179

Appendix B Detailed results – Models 1a and 1b 180

Appendix C Cover letter distributed to investors in Study 184

1

’Myynnin tila’

Itse tutkimus

TOP MANAGEMENT FORUM/080214/PP/AMS

Yksityissijoittaja-tutkimusEsitys Veraventuren kk-palaverissa Kuopiossa 26.6.2009

Assistant professor Jaakko ASPARAHelsinki School of Economics

2

Yksityissijoittajatutkimus: Toteutus

Tutkimus oli kyselytutkimus | Kohteena yksityissijoittajaverkoston sijoittajat

| Lomake jaettiin 107 sijoittajalle.+ 32 jaettiin Veraventuren tilaisuudessa 27.1.2009 henkilökohtaisesti

verkoston sijoittajille.+ 73 postitettiin tammikuun 2009 lopulla verkoston sijoittajille.+ 2 jaettiin Veraventuren tilaisuudessa 17.3.2009 henkilökohtaisesti

verkoston sijoittajille.

| 35 lomaketta saatiin takaisin vastausprosentti kohtuullinen 33%

2

3

Yksityissijoittajatutkimus: Tavoitteet

Tutkimuksessa pyrittiin1. kuvailemaan sijoittajia ja heidän sijoituskäyttäytymistään:

a. henkilökohtaiset piirteet taustatekijät (demografiat, koulutus- ja työtausta, yrittäjähenkisyys)sijoittamiseen keskeisesti liittyvät tekijät (tulot, varallisuus)

b. piirteet pääomasijoittajana kokemus, tehdyt sijoitukset, nykyinen salkku, hallitusjäsenyydet

c. viime vuosien (2007–2008) pääomasijoitukset arvo ja määrä (tehdyt uudet, jatkosijoitukset, luovutetut)uusien sijoitusten deal flow : tietoon tulleet sijoituskohteet, harkitut, sijoitukset

› yleinen deal flow› sijoittajan 3 parhaiten tuntemaan toimialaan liittyvä deal flow

d. aiotut pääomasijoitukset seuraavan 3 vuoden aikana (2009–2011)yleisestiliittyen sijoittajan 3 parhaiten tuntemaan toimialaan (myös: mitkä toimialat)

4


Tutkimuksessa pyrittiin

…

2. laskemaan (1-kohdan perusteella) verkoston sijoittajien yhteis-/kokonaismääreitä+ varallisuus

+ viime vuosina tehdyt sijoitukset

+ aiotut sijoitukset

3. hakemaan – sikäli kun mahdollista (huom. pieni n=35) – tiettyjä selitystekijöitä yksittäisen sijoittajan sijoituskäyttäytymisen

+ esim. deal flown selittäminen toimialan tuntemisella

3

5


Tutkimuksessa pyrittiin

…

4. ennustamaan tietyn verohuojennusskenaarion vaikutusta sijoitusaikomuksiin

+ ”…miten sijoitusaikomukseesi seuraavan 3 vuoden aikana (2009-2011) vaikuttaisi se, jos alle kuusi vuotta vanhoihin innovatiivisiin yrityksiin tehdyistä ja yli kolme vuotta pidetyistä pääomasijoituksista saisi X% huojennuksen luovutusvoittoverosta?”

+ puolella vastaajista X-prosenttiluku oli 50% ja puolella 100%

5. selvittämään sijoittajien mielipiteitä koskien SijoittajaExtran kehittämistä

+ ominaisuuksien hyödyllisyys/tarpeellisuus

+ kiinnostus sijoittaa uuteen rahastoon

Tutkimuksen tuloksia1.a) Sijoituskäyttäytyminen: Henkilökohtaiset piirteet

4

7

1a) Henkilökohtaiset piirteet –Taustatekijöitä

© Helsinki School of Economics HSE (Jaakko Aspara)

| Sijoittajan koulutustaustaKäytännössä kaikilla enkeleillä on kaupallinen ja/tai insinöörikoulutus.

Erityisesti kaupallinen koulutus antanee hyvät valmiudet sijoittamiseen.

Toisaalta: miten muun koulutustaustan henkilöitä saisi houkuteltua vahvemmin mukaan sijoitustoimintaan?

8


| Sijoittajan koulutustausta


Kaupallisesti koulutetuista enkeleistä

•(yllättävän) monella on erityisalana markkinointi ja/tai strateginen johtaminen.

•(yllättävän) harvalla on erityisalana rahoitus.

5

9


| Sijoittajan tämänhetkinen työ/positio


Suurin osa enkeleistä ei ole työssä käyviä.

Jää aikaa ja tarmoa enkelisijoitustoimintaan.

Toisaalta: miten työssäkäyviä saisi houkuteltua vahvemmin mukaan sijoitustoimintaan?

10


| Sijoittajan aiemmat työt/positiot


Suurin osa enkeleistä on ollut töissä yritysmaailmassa.

Yritysmaailman kokemus antanee hyvät valmiudet.

Toisaalta: miten julkisen sektorin asiantuntijoita saisi myös sijoittamaan?

6

11


| Sijoittajan oma yrittäjäkokemus


Yli puolet enkeleistä on toiminut joskus yrittäjänä.

Yrittäjäkokemus antaa valmiudet ja innon enkelisijoittamiseen.

Toisaalta: miten ei-yrittäjiä saisi harjoitt(el)amaan sijoitustoimintaa?

12


| Sijoittajan tuntemat (menestyksekkäät) yrittäjät


Neljä viidesosaa sijoittajista tuntee yli 5 menestyksekästä yrittäjää.

Esimerkkejä ja uskallusta olla yritteliäässä sijoitustoiminnassa mukana.

Toisaalta: miten yrittäjiä tuntemattomatkin saataisiin sijoittamaan?

7

13


| Sijoittajan yrittäjähenkisyys


Lähes kaikki sijoittajista ovat ainakin ”jokseenkin yrittäjähenkisiä”.

Uskallusta olla yritteliäässä sijoitustoiminnassa mukana.

Toisaalta: miten epäyrittäjähenkisetkin saataisiin sijoittamaan?

14

1b) Henkilökohtaiset piirteet –Sijoittamiseen liittyviä tekijöitä

| Nettovarallisuus


Suurella osalla sijoittajista varallisuus välillä 1M€ - 5M€.

On varaa sijoittaa (ja riskeerata).

Toisaalta: miten vähemmän varakkaita saisi kiinnostumaan enkelisijoittamisesta?

Erityisesti välin 0.5M€ - 1M€sijoittajat ovat yllättävän vähissä.

8

15

2. Yhteis-/kokonaismääreet:Nettovarallisuus

| Tutkittujen 34 sijoittajan kokonaisnettovarallisuus oliyhteensä: 33 M€ – 117 M€

| Veraventuren verkostossa olevien 100+ (?) sijoittajankokonaisnettovarallisuus olisi (kertoimella 3):

99 M€ – 351 M€


Tutkimuksen tuloksia1.a) Sijoituskäyttäytyminen – piirteet pääomasijoittajana

9

17

1b) Piirteet pääomasijoittajana

| Milloin ensimmäinen pääomasijoitus?


•Suuri osa enkeleistä tehnyt sijoituksia melko vähän aikaa (alle 6 vuotta).

•Viidesosa tehnyt sijoituksia yli 10 vuotta.

Pääomasijoitusuran pituuden keskiarvo

•jos ei-sijoittaneet mukana: 3.3–5.4 vuotta

•jos ei-sijoittaneet ei mukana: 4.1–6.7 vuotta

18


| ”Uran” aikana tehdyt pääomasijoitukset yhteensä


•Suuri osa enkeleistä on tehnyt 3-5 pääomasijoitusta.

•Lähes kukaan ei ole tehnyt yli 10 pääomasijoitusta.

10

19


| Mitä varoja sijoittaja sijoittaa?


Melkein kaikki enkelit sijoittavat henkilökohtaisia varojaan.

•11 % sijoittaa sekähenkilökohtaisia ettäperheen/suvun varoja.

(Tosin pelkkiä perheen/suvun tai muiden varoja sijoittavat ovat saattaneet jättää vastaamatta useammin.)

20


| Kuinka monta pääomasijoitusta salkussa tällä hetkellä?


•Useimmilla salkussa 2–5 pääomasijoitusta.

•Hyvin harvoilla 6 tai enempää.

11

21


| Kuinka paljon sijoitettu varoja salkussa oleviin kohteisiin?


•Useimmilla sijoitettuna 100 k€ – 500 k€ varoja.

•Neljäsosalla ei tällä hetkellä sijoituksia salkussa.

22

2. Yhteis-/kokonaismääreetKohteisiin sijoitetut varat

| Tutkittujen 35 sijoittajan salkussa oleviinpääomasijoituskohteisiin sijoittamat varat olivat yhteensä: 4.1M€ – 15.3 M€

| Veraventuren verkostossa olevien 100+ (?) sijoittajanpääomasijoituskohteisiin sijoittamat varat olisivat(kertoimella 3):

12.3 M€ – 45.9 M€


12

23


| Arvio salkussa olevien kohteiden arvosta tällä hetkellä (suhteessa sij. rahamäärään)


• Hieman yli puolet sijoittajista [(32%+6%+6%)/76%) arvioi sijoitustensa arvon olevan ”plussalla.”

• Joka kuudennella [(12%+6%)/76%) sijoitusten arvo on tippunut alle puoleen.

Tutkimuksen tuloksia1.c) Sijoituskäyttäytyminen – Viime vuosien pääomasijoitukset

13

25

1c) Viime vuosien pääomasijoitukset –Arvot ja määrät

| Uudet pääomasijoitukset vuosina 2007-2008, €


• Puolet sijoittajista sijoitti ainakin 50 000 € vuosina 2007-2008.

• Neljäsosa sijoittajista ei tehnyt yhtään pääomasijoitusta vuosina 2007-2008.

26

2. Yhteis-/kokonaismääreetKohteisiin sijoitetut varat vuosina 07-08

| Tutkittujen 35 sijoittajan vuosina 2007-2008 tekemätpääomasijoitukset olivat arvoltaan yhteensä: 2.3 M€ – 11 M€

| Veraventuren verkostossa olevien 100+ (?) sijoittajantekemät pääomasijoitukset olisivat arvoltaan yhteensä(kertoimella 3):

6.9 M€ – 33 M€


14

27


| Uudet tehdyt sijoitukset vuosina 2007-2008, kpl


•Yli kaksi kolmasosaa sijoittajista teki ainakin yhden uuden sijoituksen vuosina 2007-2008.

• Kolmasosa sijoittajista teki 2 tai useamman uuden sijoituksen.

28

2. Yhteis-/kokonaismääreetKohteisiin sijoitetut varat vuosina 07-08

| Tutkittujen 35 sijoittajan vuosina 2007-2008 uudetpääomasijoituskohteet olivat lukumäärältään yhteensä: n. 50 kpl

| Veraventuren verkostossa olevien 100+ (?) sijoittajanuudet pääomasijoituskohteet olisivat lukumäärältäänyhteensä (kertoimella 3):

n. 150 kpl


15

29


| Jatkosijoituksia aiempiin kohteisiin vuosina 2007-2008, kpl


•Jopa puolet sijoittajista teki jatkosijoituksen kohteeseen, johon oli sijoittanut aiemmin.

30


| Muiden yksityissijoittajien mukanaolo vuosina 2007-2008


•Melko harva sijoittaa uuteen kohteeseen, jos kohteeseen ei sijoita muita yksityissijoittajia.

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| VC-yhtiöiden mukanaolo sijoituksissa vuosina 2007-2008


•Puolella sijoittajista on ollut VC-yhtiösamanaikaisena sijoittajana vuosina 07-08.

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| Merkittävät varojen lähteet pääomasijoituksille 2007-2008


Melko harva sijoittaja ottaa rahat pääomasijoituksiinsa aiempien pääomasijoitusten irtautumisista.

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| Realisoidut voitot/tappiot pääomasijoituksista 2007-2008


•Kukaan ei realisoinut tappioita pääomasijoituksistaan vuosina 07-08?

•Puolet ei realisoinut voittoja eikä tappioita (mutta ”realisoiminen” ilmeisesti epäämääräinen käsite, vrt. seuraava kalvo)

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| Irtautumiset pääomasijoituksista 2007-2008


•Kolme neljäsosaa ei irtautunut yhdestäkään pääomasijoituksesta 07-08.

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1c) Viime vuosien pääomasijoitukset –Deal flow

| Tietoon tulleet suomalaiset pääomasijoituskohteet 2007-2008


•Vaihtelu tietoon tulleiden kohteiden määrässä on suurta.

•Puolet sijoittajista saa tietoonsa 2 vuodessa alle 15 kohdetta.

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| Veraventuren kautta tietoon tulleet suomalaiset pääomasijoituskohteet 2007-2008


•Vaihtelu tietoon tulleiden kohteiden määrässä on taas suurta.

•Puolet sijoittajista saa tietoonsa 2 vuodessa alle 5 kohdetta Veraventuren kautta.

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| Vakavasti harkitut suomalaiset pääomasijoituskohteet vuosina 2007-2008


Suurin osa sijoittajista harkitsi vakavasti alle 6 kohdetta 2 vuoden aikana.

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| Uudet tehdyt sijoitukset vuosina 2007-2008, kpl


•Yli kaksi kolmasosaa sijoittajista teki ainakin yhden uuden sijoituksen vuosina 2007-2008.

• Kolmasosa sijoittajista teki 2 tai useamman uuden sijoituksen.

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| Seuraavilla kalvoilla esiintyvät ”3 tutuinta toimialaa” ovat toimialat, jotka kukin sijoittaja nimesi itselleen tutuimmiksi.+ ”Merkitse … merkinnät ”T1”, ”T2”, ”T3” kolmen sellaisen toimialan

kohdalle, jotka ovat olleet sinulle toimialoina erityisen tuttuja jo ainakin 5 vuoden ajan.”

| ”Tutuimpia toimialoja” koskevista määristä on kuitenkin karsittu pois deal flow toimialoilta, jotka olivat tulleet sijoittajille tutuiksi juuri sen takia, että he olivat harkinneet toimialoja sijoituskohteina

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| …Eli ”tutuimpia toimialoja” koskevat määrät koskevat toimialoja, jotka olivat tulleet sijoittajille tutuiksi esim. sen takia, että + sijoittaja työskenteli (tai työskenteli edelleen) ko. toimialan

yrityksessä

+ sijoittaja konsultoi (tai konsultoi edelleen) ko. toimialan yrityksiä

+ yritys, jossa sijoittaja työskenteli (tai työskentelee edelleen), myi tuotteitaan tai palveluitaan ko. toimialalla toimiville yrityksille

+ yritys, jossa sijoittaja työskenteli (tai työskentelee edelleen), osti tuotteitaan tai palveluitaan toimialalla toimivilta yrityksiltä

+ sijoittaja oli/on itse toimialan tuotteiden melko innokas käyttäjä

+ sijoittaja oli/on yleisesti kiinnostunut toimialasta

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| Listatut toimialat+ Maatalous

+ Kemikaalit ja materiaalit

+ Teolliset ja B2B-tuotteet

+ Teolliset ja B2B-palvelut

+ Rakentaminen

+ Kuljetus

+ Kuluttajatuotteet ja vähittäiskauppa

+ Kuluttajapalvelut

+ Energia ja ympäristö

+ Rahoituspalvelut

+ Kiinteistöt

+ Kommunikaatio

+ Tietokone- ja kuluttajaelektroniikka

+ Biotieteet, ”Life sciences”

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| Kohteet tutuilta toimialoilta deal flow’ssa 2007-2008


väliarvio

väliarvio

Voi (melko turvallisesti) todeta, että

•ainakin puolet tietoon tulleista kohteista tulee tutuimmilta toimialoilta

•ainakin kolmasosa vakavasti harkituista kohteista on tutuimmilta toimialoilta

•noin kaksi kolmasosaa tehdyistä sijoituksista on tutuimmille toimialoille

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3) Selitystekijät sijoituskäyttäytymiseen

| Noin kaksi kolmasosaa (63 %) sijoittajien tekemistä sijoituksista (2007-2008) suuntautui toimialoille, jotka olivat 3 tutuimman joukossa (kullekin sijoittajalle)

| Johtuu pääosin siitä, että tietoon tulleista sijoituskohteista vähintään noin puolet kohdistuu tutuimmille toimialoille.

Ne sijoituskohteet, jotka tulevat sijoittajien tietoon ja/tai joihin he kiinnittävät huomiota ovat vahvasti painottuneet tutuimpiin toimialoihin.

”Tietoisuus- /harkintajoukko” (awareness/consideration set) on vahvasti painottunut tuttuihin toimialoihin.

| Sekä tutuilta että ei-tutuilta toimialoilta sijoitus tehdään 5-9 prosenttiin tietoon tulleista kohteista.


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vakavasti harkitut kohteet tietoon tulleet kohteet X100%

X100%sijoitetut kohteet

vakavasti harkitut kohteet

sijoitetut kohteet tietoon tulleet kohteet X100%

Suhteellisesti useampi kohde hylätään tutuilta toimialoilta ilman vakavaa harkintaa.

”huonot kohteet” tunnistetaan suoralta kädeltä, toimialakohtaisen kokemuksen perusteella?

Mutta suhteellisesti useampaan vakavasti harkittuun kohteeseen sijoitetaan ennalta tunnetuilla toimialoilla.

Ei-tutulla toimialalla arkajalkaillaanlopullisen sijoituspäätöksen kanssa?

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| Miksi toimialat, jotka olivat tuttuja ja joille sijoitettiin, olivat tuttuja?

Suurin osa tutuista toimialoista, joille sijoittajat ovat taipuvaisia sijoittamaan, on tuttuja, koska sijoittajat ovat työskennelleet aiemmin toimialalla.

Yritykset saavat toimialakohtaista kokemusta, ja sijoittajan kokema riski on pienempi toimialakohtaisen tuntemuksen takia.

Mutta miten sijoittajat saataisiin kiinnittämään huomiota myös muuta kautta tuntemiensa toimialojen yrityksiin?

Tutkimuksen tuloksia1.d) Sijoituskäyttäytyminen – Aiotut pääomasijoitukset

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1d) Aiotut pääomasijoitukset

| Kuinka monta sijoitusta olisi ”ideaalisalkussa”?


Harva sijoittaja olisi valmis ottamaan salkkuunsa yli 5 pääomasijoituskohdetta.

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| Kuinka paljon sijoittaja arvioi sijoittavansa uusia varoja pääomasijoituskohteisiin seuraavan 3 vuoden aikana (09-11)?


Suurin osa sijoittajista aikoo sijoittaa 50 k€ – 500 k€

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2. Yhteis-/kokonaismääreetSijoitusaikomukset

| Varat, jotka tutkitut 35 sijoittajaa aikovat sijoittaa uusiinpääomasijoituskohteisiin 2009-2011 olivat yhteensä: 3.5 M€ – 11.2 M€

| Varat, jotka Veraventuren verkostossa olevat 100+ (?) sijoittajaa aikovat sijoittaa olisivat (kertoimella 3):

10.5 M€ – 33.6 M€


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| Toimialat sijoittajan kolmen tutuimman alan joukossa


•ICT-alat (kommunikaatio sekä tietokoneet ja kuluttajaelektroniikka) ovat yleisimmin tutut alat.

•Kuluttajapalvelut erittäin harvalle tuttu ala.

•Melko harvalle tuttuja aloja myös energia&ympäristö, materiaalit ja biotieteet.

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| Kokonaissijoituskiinnostus eri toimialojen pääomasijoituskohteisiin seuraavien 3 vuoden aikana (2009-2011)

Ympyrän koko on kertolaskun tulos =

niiden sijoittajien määrä, joille toimiala on 3 tutuimman joukossa *keskimääräinen sijoitushalukkuus näiden sijoittajien joukossa

Tutkimuksen tuloksia4) Verohuojennusskenaarion vaikutukset

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Kokeellinen asetelma

| Asetelma+ ”…miten sijoitusaikomukseesi seuraavan 3 vuoden aikana (2009-2011) vaikuttaisi se,

jos alle kuusi vuotta vanhoihin innovatiivisiin yrityksiin tehdyistä ja yli kolme vuotta pidetyistä pääomasijoituksista saisi X% huojennuksen luovutusvoittoverosta?”

+ puolella vastaajista X-prosenttiluku oli 50% ja puolella 100%

| Vastausvaihtoehdot+ sijoittaisin vähemmän kuin tilanteessa, jossa verolainsäädäntö säilyy nykyisenä

+ sijoittaisin saman verran kuin tilanteessa, jossa verolainsäädäntö säilyy nykyisenä

+ sijoittaisin 0– 10 % enemmän

+ sijoittaisin 10– 25% enemmän

+ sijoittaisin 25– 50% enemmän

+ sijoittaisin 50 – 100 % enemmän

+ sijoittaisin kaksin-kolminkertaisesti

+ sijoittaisin yli kolmin-viisinkertaisesti

+ sijoittaisin yli viisinkertaisesti


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4) Verohuojennusskenaarion vaikutukset


| Aikomus lisätä pääomasijoituksia seuraavien 3 vuoden aikana (2009-2011) •100%:n verohuojennusskenaariossa yleisin

lisäysaikomus on +25..50%

•50%:n verohuojennusskenaariossa useamman sijoittajan lisäysaikomus on +0…10%

•Kenenkään sijoittajan sijoitusaikomus ei kaksinkertaistu.

100% verohuojennusskenaariossa muutamat sijoittajat vähentäisivät sijoituksiaan.

ko. sijoittajat sijoittavat sijoitusyhtiön kautta

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| Aikomus lisätä pääomasijoituksia seuraavien 3 vuoden aikana (2009-2011): Keskiarvot verohuojennusprosentin mukaan

Sijoitusaikomuksen lisääntymiseen ei näyttäisi vaikuttavan merkitsevästi se, onko verohuojennusprosentti 50% vai 100%.

Kummassakin skenaariossa sijoittajien sijoitusaikomus nousee 20-30%

Keskiarvot laskettu ”vastaushaaru-koiden” ylä- ja alareunan keskilukujen perusteella.

•Poislukien ne, jotka aikovat vähentää sijoituksiaan

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| Aikomus lisätä pääomasijoituksia seuraavien 3 vuoden aikana (2009-2011): Keskiarvot verohuojennusprosentin mukaan

Jossain määrin näyttää siltä, että (suurempi) verohuojennus lisäisi sijoitusaikomusta enemmän varakkailla sijoittajilla.

Otos on kuitenkin liian pieni ”vedenpitävän” johtopäätöksen tekemiseksi.

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