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’
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.
-
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
whose brands have low recognizability.
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
whose brands have low recognizability.
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.
Hypothesis H8.2: The influence that an investor advertisement’s emphasis on product-evaluative
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.
Hypothesis H8.3: The influence that an investor advertisement’s emphasis on product-evaluative
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
----------------------
INSERT TABLE 2 ABOUT HERE
----------------------
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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INSERT TABLE 3 ABOUT HERE
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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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INSERT TABLE 4 ABOUT HERE
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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,
and its future prospects as a company are promising.
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,
and its future prospects as a company are promising.
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 – 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.
High recognizabiliy, high likeability
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 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
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.
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 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
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.
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
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 – 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 – 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.
high-tech
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 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
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.
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 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
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.
Product design emphasis in company investment ad
high low
Company/ product type
medical
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,
and its future prospects as a company are promising.
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,
and its future prospects as a company are promising.
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
years, and its future prospects as a company are promising.
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
years, and its future prospects as a company are promising.
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
978-951-558
-304
-8U
NIV
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Y OF A
RT A
ND
DESIG
N H
ELSINK
I
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w.taik.fi
/booksh
opC
over design
by N
iina Tu
rtola
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
12 where product design meets investor behavior
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).
14 where product design meets investor behavior
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.
16 where product design meets investor behavior
& 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
18 where product design meets investor behavior
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
20 where product design meets investor behavior
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
21 literature background
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.
22 where product design meets investor behavior
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).
23 literature background
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
24 where product design meets investor behavior
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
25 literature background
& 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).
26 where product design meets investor behavior
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
27 literature background
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
28 where product design meets investor behavior
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).
29 literature background
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;
32 where product design meets investor behavior
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
33theory development: product design and investors
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
34 where product design meets investor behavior
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
35theory development: product design and investors
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.
36 where product design meets investor behavior
& 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:
37theory development: product design and investors
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.
38 where product design meets investor behavior
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.
39theory development: product design and investors
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
40 where product design meets investor behavior
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,
41theory development: product design and investors
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
42 where product design meets investor behavior
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-
43theory development: product design and investors
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);
44 where product design meets investor behavior
(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:
45theory development: product design and investors
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
46 where product design meets investor behavior
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
47theory development: product design and investors
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
48 where product design meets investor behavior
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
he has in his own expectations about the financial returns of the
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
49theory development: product design and investors
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:
Hypothesis H5: The personal relevance that an investor attaches
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).
50 where product design meets investor behavior
Hypothesis H6: The personal relevance that an investor attaches
to a certain life domain that a particular company is perceived to
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
51theory development: product design and investors
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.
52 where product design meets investor behavior
of better quality of life (e.g., better sport equipment and sport experiences).
Thus, my further hypothesis is:
Hypothesis H7: The personal relevance that an investor attaches
to a certain life domain that a particular company is perceived to
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
53theory development: product design and investors
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
54 where product design meets investor behavior
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-
55theory development: product design and investors
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.
Hypothesis H9: An investor’s positive overall affect for a particular
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
56 where product design meets investor behavior
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:
57theory development: product design and investors
Hypothesis H10: An investor’s positive overall affect for a particular
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.
58 where product design meets investor behavior
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:
Hypothesis H11: An investor’s positive overall affect for a particular
company’s product design has positive effect on the optimism in
his expectations about the financial returns of the company’s stock.
Hypothesis H12: An investor’s positive overall affect for a particular
company’s product design has positive effect on the confidence
he has in his own expectations about the financial returns of the
company’s stock.
59theory development: product design and investors
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:
Hypothesis H13: The personal relevance that an investor attaches
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
60 where product design meets investor behavior
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.
61theory development: product design and investors
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.
0: –
/ H
3.1:
+
H5:
–
H4.
0a: +
/ H
4.1a
: –
H4.
0b: –
H8:
–H
11: +
H12
: +H
13: +
H1:
+
Ove
rall
affe
ct fo
r co
mpa
ny Y
’spr
oduc
t de
sign
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
ts re
pres
ent/
supp
ort
do
mai
n x
Fam
iliar
ity w
ith
com
pany
Y’s
pr
oduc
ts
12.i2.
ii3
62 where product design meets investor behavior
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).
Fam
iliar
ity w
ith
com
pany
Y Det
erm
inat
ion
to in
vest
in c
ompa
ny
Y’s
stoc
k ra
ther
than
in o
ther
st
ocks
that
hav
e ap
prox
imat
ely
equ
al fi
nanc
ial r
etur
ns
Prep
ared
ness
to
inve
st in
com
pany
Y’s
st
ock
with
low
ered
fina
ncia
lre
turn
s
Perc
eptio
n th
at c
ompa
ny Y
’spr
oduc
tsre
pres
ent/
supp
ort
do
mai
n x
12.i2.
ii3
H2:
+
H1:
+
H7:
+
H6:
+
H0:
+
H10
: +
H9:
+
H13
: +
Fam
iliar
ity w
ith
com
pany
Y’s
prod
ucts
Ove
rall
affe
ct fo
r co
mpa
ny Y
’s
prod
uct
desi
gn
Will
ingn
ess
to s
uppo
rtco
mpa
ny Y
by
way
of i
nves
ting
Pers
onal
rele
vanc
e of
do
mai
n x
63theory development: product design and investors
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,
64 where product design meets investor behavior
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
66 where product design meets investor behavior
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
68 where product design meets investor behavior
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-
69methodology of the empirical research
[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
70 where product design meets investor behavior
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 –
71methodology of the empirical research
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
74 where product design meets investor behavior
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
76 where product design meets investor behavior
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
78 where product design meets investor behavior
(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.
80 where product design meets investor behavior
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.
82 where product design meets investor behavior
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).
84 where product design meets investor behavior
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.
86 where product design meets investor behavior
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.
88 where product design meets investor behavior
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.
90 where product design meets investor behavior
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
92 where product design meets investor behavior
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
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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,
94 where product design meets investor behavior
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.
96 where product design meets investor behavior
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)
98 where product design meets investor behavior
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
100 where product design meets investor behavior
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
102 where product design meets investor behavior
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?”
103studies 1a and 1b
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
104 where product design meets investor behavior
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
105studies 1a and 1b
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
r th
e co
mpa
ny’
s pr
od
uct
d
esig
ndi
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
mpa
ny di
ff.
wil
lin
gn
ess
to s
upp
ort
th
e co
mpa
ny
by
inve
stin
g
det
erm
inat
i-o
n t
o in
vest
w
hen
eq
ual
fi
nan
cial
re
turn
s
prep
ared
-n
ess
to
inve
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
106 where product design meets investor behavior
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
107studies 1a and 1b
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
108 where product design meets investor behavior
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.
109studies 1a and 1b
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
**(H
1 su
ppor
ted)
O
vera
ll af
fect
for
com
pany
Y’s
prod
uct
desi
gn
Pers
onal
rele
vanc
e of
do
mai
n x
Fam
iliar
ity w
ith
com
pany
Y
Prep
ared
ness
to
inve
st i
n co
mpa
ny
Y’s
stoc
k w
ith lo
wer
ed
finan
cial
retu
rns
Perc
eptio
n th
at c
ompa
ny Y
’spr
oduc
ts
repr
esen
t/su
ppor
t d
om
ain
x
Fam
iliar
ity
with
com
pany
Y’s
prod
ucts
12.i2.
ii
3
Det
erm
inat
ion
to in
vest
in c
ompa
ny
Y’s
stoc
k ra
ther
than
in o
ther
sto
cks
that
hav
e ap
prox
imat
ely
equ
al fi
nanc
ial
retu
rns
+.29
*(H
2 su
ppor
ted)
+.15
**(H
0 su
ppor
ted)
+.06
a (H
6 su
ppor
ted,
dire
ct e
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
**
110 where product design meets investor behavior
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
111studies 1a and 1b
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
112 where product design meets investor behavior
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
114 where product design meets investor behavior
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
116 where product design meets investor behavior
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-
118 where product design meets investor behavior
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
120 where product design meets investor behavior
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.
122 where product design meets investor behavior
Prod
uct
desi
gn e
mph
asis
in c
ompa
ny in
vest
men
t ad
high
low
Company/ product type
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
Company/ product type
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
kly
in th
e pa
st y
ears
, and
its
futu
re p
rosp
ects
as
a co
mpa
ny a
re p
rom
isin
g.
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
, whe
n no
rmal
ant
ibio
tics
are
not e
ffect
ive.
In o
ther
wor
ds: I
f an
acqu
aint
ance
of y
ours
som
e tim
e en
ds u
p to
a h
ospi
tal f
or a
diffi
cult
infe
ctio
n di
seas
e, it
mig
ht b
e th
at h
e w
ill b
e tr
eate
d w
ith a
med
ical
pr
oduc
t dev
elop
ed b
y N
ovex
el.
Nov
exel
’s in
tern
atio
nal b
usin
ess
has
grow
n fa
irly
quic
kly
in th
e pa
st
year
s, a
nd it
s fu
ture
pro
spec
ts a
s a
com
pany
are
pro
mis
ing.
ser-
vice
Trav
elex
– m
akes
mov
ing
and
trad
ing
abro
ad e
asy
Trav
elex
is
an E
ngla
nd-b
ased
com
pany
that
dev
elop
s,
man
ufac
ture
s, a
nd s
ells
pro
duct
s an
d se
rvic
es re
late
d to
cur
renc
y ex
chan
ge, t
rave
lers
’ che
cks
and
inte
rnat
iona
l pay
men
t tra
nsac
tions
fo
r sm
all a
nd m
ediu
m s
ized
ent
erpr
ises
and
con
sum
ers.
The
pu
rpos
e of
this
kin
d of
pro
duct
s/se
rvic
es is
to m
ake
inte
rnat
iona
l tr
avel
ing
and
trad
e as
eas
y as
pos
sibl
e, a
nd T
rave
lex
focu
ses
espe
cial
ly o
n se
rvic
e sm
all fi
rms
and
cons
umer
s in
this
rega
rd. I
n ot
her w
ords
: you
mig
ht h
ave
enco
unte
r Tra
vele
x’s s
ervi
ces o
r out
lets
ev
en y
ours
elf,
whe
n tr
avel
ing
in E
urop
e or
else
whe
re in
the
wor
ld
Trav
elex
’s in
tern
atio
nal b
usin
ess
has
grow
n fa
irly
quic
kly
in th
e pa
st y
ears
, and
its
futu
re p
rosp
ects
as
a co
mpa
ny a
re p
rom
isin
g.
Trav
elex
is
an E
ngla
nd-b
ased
com
pany
that
dev
elop
s,
man
ufac
ture
s, a
nd s
ells
pro
duct
s an
d se
rvic
es re
late
d to
cur
renc
y ex
chan
ge, t
rave
lers
’ che
cks
and
inte
rnat
iona
l pay
men
t tra
nsac
tions
fo
r sm
all a
nd m
ediu
m s
ized
ent
erpr
ises
and
con
sum
ers.
The
pu
rpos
e of
this
kin
d of
pro
duct
s/se
rvic
es is
to m
ake
inte
rnat
iona
l tr
avel
ing
and
trad
e as
eas
y as
pos
sibl
e, a
nd T
rave
lex
focu
ses
espe
cial
ly o
n se
rvic
e sm
all fi
rms
and
cons
umer
s in
this
rega
rd. I
n ot
her w
ords
: you
mig
ht h
ave
enco
unte
r Tra
vele
x’s
serv
ices
or o
utle
ts
even
you
rsel
f, w
hen
trav
elin
g in
Eur
ope
or e
lsew
here
in th
e w
orld
. Tr
avel
ex’s
inte
rnat
iona
l bus
ines
s ha
s gr
own
fairl
y qu
ickl
y in
the
past
ye
ars,
and
its
futu
re p
rosp
ects
as
a co
mpa
ny a
re p
rom
isin
g.
124 where product design meets investor behavior
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
126 where product design meets investor behavior
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
128 where product design meets investor behavior
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
130 where product design meets investor behavior
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).
132 where product design meets investor behavior
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.
Interest to invest in the company
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
Interest to invest in the company
134 where product design meets investor behavior
(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”.
136 where product design meets investor behavior
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.
138 where product design meets investor behavior
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
140 where product design meets investor behavior
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
142 where product design meets investor behavior
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
144 where product design meets investor behavior
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
146 where product design meets investor behavior
(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).
148 where product design meets investor behavior
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
150 where product design meets investor behavior
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.
152 where product design meets investor behavior
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.
154 where product design meets investor behavior
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
156 where product design meets investor behavior
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
158 where product design meets investor behavior
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
160 where product design meets investor behavior
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.
162 where product design meets investor behavior
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
164 where product design meets investor behavior
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) –
166 where product design meets investor behavior
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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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
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Path
-co
eff.
t-va
lue
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othe
sis
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othe
size
d pa
ths
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onal
rele
vanc
e of
the
com
pany
’s p
rodu
ct d
omai
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mili
arity
with
the
com
pany
’s p
rodu
cts
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86.
19**
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1 su
ppor
ted
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onal
rele
vanc
e of
the
com
pany
’s p
rodu
ct d
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erat
ion
of a
ltern
ativ
e st
ocks
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622.
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supp
orte
dPe
rson
al re
leva
nce
of th
e co
mpa
ny’s
pro
duct
dom
ain
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rall
affe
ct fo
r the
com
pany
’s p
rodu
ct d
esig
n0.
131
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13 s
uppo
rted
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iliar
ity w
ith th
e co
mpa
ny’s
pro
duct
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nce
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t the
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pany
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ial r
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arity
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ll af
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he c
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e ab
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rted
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urns
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ider
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n of
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ks0.
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onal
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pany
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nce
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t the
com
pany
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nanc
ial r
etur
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088
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onal
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e of
the
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pany
’s p
rodu
ct d
omai
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ptim
ism
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ncia
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urns
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210.
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arity
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pany
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cts
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rall
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ct fo
r the
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pany
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my
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rols
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l/in
vest
ee c
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ny B
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denc
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ncia
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urns
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cal/
inve
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pany
C
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denc
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inve
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pany
B
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imis
m a
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pany
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ncia
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pany
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ider
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n of
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ive
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ks1.
192
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ider
atio
n of
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rnat
ive
stoc
ks-0
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pany
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my
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ract
ions
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l/in
vest
ee c
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ny B
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nal r
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ance
of t
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om-
pany
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ct d
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n Co
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ion
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ativ
e st
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31.
33 a
181
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ct o
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sis
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ny C
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e st
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41.
65*
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l/in
vest
ee c
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ny B
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nal r
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ance
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ct d
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n Co
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nce
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pany
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ial r
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.004
0.03
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l/in
vest
ee c
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ny C
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nal r
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ance
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’s p
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ct d
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nce
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t the
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pany
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nanc
ial r
etur
ns0.
122
0.67
Foca
l/in
vest
ee c
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ny B
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nal r
elev
ance
of t
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om-
pany
’s p
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ism
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ny’s
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ncia
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urns
0.19
20.
93
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vest
ee c
ompa
ny C
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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
com
pany
’s p
rodu
ct d
omai
nW
illin
gnes
s to
sup
port
the
com
pany
by
inve
stin
g0.
251
4.59
***
H6,
H7,
H9,
H10
Ove
rall
affe
ct fo
r the
com
pany
’s p
rodu
ct d
esig
nW
illin
gnes
s to
sup
port
the
com
pany
by
inve
stin
g0.
110
1.99
*su
ppor
ted
–
Will
ingn
ess
to s
uppo
rt th
e co
mpa
ny b
y in
vest
ing
Det
erm
inat
ion
to in
vest
whe
n eq
ual fi
nanc
ial r
etur
ns0.
352
6.14
***
part
ial m
edia
tion
Will
ingn
ess
to s
uppo
rt th
e co
mpa
ny b
y in
vest
ing
Prep
ared
ness
to in
vest
with
low
er fi
nanc
ial r
etur
ns0.
425
7.78
***
Cont
rols
Fam
iliar
ity w
ith th
e co
mpa
nyPr
epar
edne
ss to
inve
st w
ith lo
wer
fina
ncia
l ret
urns
-0.0
290.
69
Com
pany
dum
my
cont
rols
Com
paris
on c
ompa
ny D
Det
erm
inat
ion
to in
vest
whe
n eq
ual fi
nanc
ial r
etur
ns-0
.042
0.97
Com
paris
on c
ompa
ny D
Pr
epar
edne
ss to
inve
st w
ith lo
wer
fina
ncia
l ret
urns
-0.1
632.
65**
183
Effe
ct o
f
On
Path
co
eff.
t-va
lue
Hyp
othe
sis
Com
paris
on c
ompa
ny D
Ove
rall
affe
ct fo
r the
com
pany
’s p
rodu
ct d
esig
n0.
206
4.54
***
Com
paris
on c
ompa
ny D
Fam
iliar
ity w
ith th
e co
mpa
ny’s
pro
duct
s0.
061
1.22
Com
paris
on c
ompa
ny D
Fam
iliar
ity w
ith th
e co
mpa
ny-0
.041
1.03
Com
paris
on c
ompa
ny A
Det
erm
inat
ion
to in
vest
whe
n eq
ual fi
nanc
ial r
etur
ns0.
024
0.58
Com
paris
on c
ompa
ny A
Pr
epar
edne
ss to
inve
st w
ith lo
wer
fina
ncia
l ret
urns
-0.0
871.
68
Com
paris
on c
ompa
ny A
Ove
rall
affe
ct fo
r the
com
pany
’s p
rodu
ct d
esig
n-0
.174
3.29
***
Com
paris
on c
ompa
ny A
Fam
iliar
ity w
ith th
e co
mpa
ny’s
pro
duct
s-0
.009
0.24
Com
paris
on c
ompa
ny A
Fam
iliar
ity w
ith th
e co
mpa
ny-0
.146
2.06
*
Foca
l/in
vest
ee c
ompa
ny C
Det
erm
inat
ion
to in
vest
whe
n eq
ual fi
nanc
ial r
etur
ns0.
033
0.79
Foca
l/in
vest
ee c
ompa
ny C
Prep
ared
ness
to in
vest
with
low
er fi
nanc
ial r
etur
ns-0
.029
0.74
Foca
l/in
vest
ee c
ompa
ny C
Ove
rall
affe
ct fo
r the
com
pany
’s p
rodu
ct d
esig
n-0
.072
1.62
a
Foca
l/in
vest
ee c
ompa
ny C
Fam
iliar
ity w
ith th
e co
mpa
ny’s
pro
duct
s-0
.175
2.75
**
Foca
l/in
vest
ee c
ompa
ny C
Fam
iliar
ity w
ith th
e co
mpa
ny-0
.025
0.78
Foca
l/in
vest
ee c
ompa
ny B
Det
erm
inat
ion
to in
vest
whe
n eq
ual fi
nanc
ial r
etur
ns-0
.212
2.26
*
Foca
l/in
vest
ee c
ompa
ny B
Prep
ared
ness
to in
vest
with
low
er fi
nanc
ial r
etur
ns-0
.210
2.28
*
Foca
l/in
vest
ee c
ompa
ny B
Ove
rall
affe
ct fo
r the
com
pany
’s p
rodu
ct d
esig
n0.
807
16.9
6***
Foca
l/in
vest
ee c
ompa
ny B
Fam
iliar
ity w
ith th
e co
mpa
ny’s
pro
duct
s0.
190
2.90
**
Foca
l/in
vest
ee c
ompa
ny B
Fam
iliar
ity w
ith th
e co
mpa
ny0.
093
1.41
a
a p <
.10
(one
-sid
ed);
*p
< .0
5 (o
ne-s
ided
); *
*p <
.01
(one
-sid
ed);
***
p <
.001
(on
e-si
ded)
.N
otes
: The
t-va
lues
wer
e ca
lcul
ated
thro
ugh
a bo
otst
rapp
ing
rout
ine
with
292
cas
es a
nd 5
00 s
ampl
es.
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
Yksityissijoittajatutkimus: Tavoitteet
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
Yksityissijoittajatutkimus: Tavoitteet
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
1a) Henkilökohtaiset piirteet –Taustatekijöitä
| Sijoittajan koulutustausta
© Helsinki School of Economics HSE (Jaakko Aspara)
Kaupallisesti koulutetuista enkeleistä
•(yllättävän) monella on erityisalana markkinointi ja/tai strateginen johtaminen.
•(yllättävän) harvalla on erityisalana rahoitus.
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1a) Henkilökohtaiset piirteet –Taustatekijöitä
| Sijoittajan tämänhetkinen työ/positio
© Helsinki School of Economics HSE (Jaakko Aspara)
Suurin osa enkeleistä ei ole työssä käyviä.
Jää aikaa ja tarmoa enkelisijoitustoimintaan.
Toisaalta: miten työssäkäyviä saisi houkuteltua vahvemmin mukaan sijoitustoimintaan?
10
1a) Henkilökohtaiset piirteet –Taustatekijöitä
| Sijoittajan aiemmat työt/positiot
© Helsinki School of Economics HSE (Jaakko Aspara)
Suurin osa enkeleistä on ollut töissä yritysmaailmassa.
Yritysmaailman kokemus antanee hyvät valmiudet.
Toisaalta: miten julkisen sektorin asiantuntijoita saisi myös sijoittamaan?
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1a) Henkilökohtaiset piirteet –Taustatekijöitä
| Sijoittajan oma yrittäjäkokemus
© Helsinki School of Economics HSE (Jaakko Aspara)
Yli puolet enkeleistä on toiminut joskus yrittäjänä.
Yrittäjäkokemus antaa valmiudet ja innon enkelisijoittamiseen.
Toisaalta: miten ei-yrittäjiä saisi harjoitt(el)amaan sijoitustoimintaa?
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1a) Henkilökohtaiset piirteet –Taustatekijöitä
| Sijoittajan tuntemat (menestyksekkäät) yrittäjät
© Helsinki School of Economics HSE (Jaakko Aspara)
Neljä viidesosaa sijoittajista tuntee yli 5 menestyksekästä yrittäjää.
Esimerkkejä ja uskallusta olla yritteliäässä sijoitustoiminnassa mukana.
Toisaalta: miten yrittäjiä tuntemattomatkin saataisiin sijoittamaan?
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1a) Henkilökohtaiset piirteet –Taustatekijöitä
| Sijoittajan yrittäjähenkisyys
© Helsinki School of Economics HSE (Jaakko Aspara)
Lähes kaikki sijoittajista ovat ainakin ”jokseenkin yrittäjähenkisiä”.
Uskallusta olla yritteliäässä sijoitustoiminnassa mukana.
Toisaalta: miten epäyrittäjähenkisetkin saataisiin sijoittamaan?
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1b) Henkilökohtaiset piirteet –Sijoittamiseen liittyviä tekijöitä
| Nettovarallisuus
© Helsinki School of Economics HSE (Jaakko Aspara)
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.
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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€
© Helsinki School of Economics HSE (Jaakko Aspara)
Tutkimuksen tuloksia1.a) Sijoituskäyttäytyminen – piirteet pääomasijoittajana
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1b) Piirteet pääomasijoittajana
| Milloin ensimmäinen pääomasijoitus?
© Helsinki School of Economics HSE (Jaakko Aspara)
•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
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1b) Piirteet pääomasijoittajana
| ”Uran” aikana tehdyt pääomasijoitukset yhteensä
© Helsinki School of Economics HSE (Jaakko Aspara)
•Suuri osa enkeleistä on tehnyt 3-5 pääomasijoitusta.
•Lähes kukaan ei ole tehnyt yli 10 pääomasijoitusta.
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1b) Piirteet pääomasijoittajana
| Mitä varoja sijoittaja sijoittaa?
© Helsinki School of Economics HSE (Jaakko Aspara)
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.)
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1b) Piirteet pääomasijoittajana
| Kuinka monta pääomasijoitusta salkussa tällä hetkellä?
© Helsinki School of Economics HSE (Jaakko Aspara)
•Useimmilla salkussa 2–5 pääomasijoitusta.
•Hyvin harvoilla 6 tai enempää.
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1b) Piirteet pääomasijoittajana
| Kuinka paljon sijoitettu varoja salkussa oleviin kohteisiin?
© Helsinki School of Economics HSE (Jaakko Aspara)
•Useimmilla sijoitettuna 100 k€ – 500 k€ varoja.
•Neljäsosalla ei tällä hetkellä sijoituksia salkussa.
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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€
© Helsinki School of Economics HSE (Jaakko Aspara)
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1b) Piirteet pääomasijoittajana
| Arvio salkussa olevien kohteiden arvosta tällä hetkellä (suhteessa sij. rahamäärään)
© Helsinki School of Economics HSE (Jaakko Aspara)
• 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
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1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Uudet pääomasijoitukset vuosina 2007-2008, €
© Helsinki School of Economics HSE (Jaakko Aspara)
• Puolet sijoittajista sijoitti ainakin 50 000 € vuosina 2007-2008.
• Neljäsosa sijoittajista ei tehnyt yhtään pääomasijoitusta vuosina 2007-2008.
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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€
© Helsinki School of Economics HSE (Jaakko Aspara)
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1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Uudet tehdyt sijoitukset vuosina 2007-2008, kpl
© Helsinki School of Economics HSE (Jaakko Aspara)
•Yli kaksi kolmasosaa sijoittajista teki ainakin yhden uuden sijoituksen vuosina 2007-2008.
• Kolmasosa sijoittajista teki 2 tai useamman uuden sijoituksen.
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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
© Helsinki School of Economics HSE (Jaakko Aspara)
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1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Jatkosijoituksia aiempiin kohteisiin vuosina 2007-2008, kpl
© Helsinki School of Economics HSE (Jaakko Aspara)
•Jopa puolet sijoittajista teki jatkosijoituksen kohteeseen, johon oli sijoittanut aiemmin.
30
1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Muiden yksityissijoittajien mukanaolo vuosina 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
•Melko harva sijoittaa uuteen kohteeseen, jos kohteeseen ei sijoita muita yksityissijoittajia.
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1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| VC-yhtiöiden mukanaolo sijoituksissa vuosina 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
•Puolella sijoittajista on ollut VC-yhtiösamanaikaisena sijoittajana vuosina 07-08.
32
1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Merkittävät varojen lähteet pääomasijoituksille 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
Melko harva sijoittaja ottaa rahat pääomasijoituksiinsa aiempien pääomasijoitusten irtautumisista.
17
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1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Realisoidut voitot/tappiot pääomasijoituksista 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
•Kukaan ei realisoinut tappioita pääomasijoituksistaan vuosina 07-08?
•Puolet ei realisoinut voittoja eikä tappioita (mutta ”realisoiminen” ilmeisesti epäämääräinen käsite, vrt. seuraava kalvo)
34
1c) Viime vuosien pääomasijoitukset –Arvot ja määrät
| Irtautumiset pääomasijoituksista 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
•Kolme neljäsosaa ei irtautunut yhdestäkään pääomasijoituksesta 07-08.
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1c) Viime vuosien pääomasijoitukset –Deal flow
| Tietoon tulleet suomalaiset pääomasijoituskohteet 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
•Vaihtelu tietoon tulleiden kohteiden määrässä on suurta.
•Puolet sijoittajista saa tietoonsa 2 vuodessa alle 15 kohdetta.
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1c) Viime vuosien pääomasijoitukset –Deal flow
| Veraventuren kautta tietoon tulleet suomalaiset pääomasijoituskohteet 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
•Vaihtelu tietoon tulleiden kohteiden määrässä on taas suurta.
•Puolet sijoittajista saa tietoonsa 2 vuodessa alle 5 kohdetta Veraventuren kautta.
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1c) Viime vuosien pääomasijoitukset –Deal flow
| Vakavasti harkitut suomalaiset pääomasijoituskohteet vuosina 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
Suurin osa sijoittajista harkitsi vakavasti alle 6 kohdetta 2 vuoden aikana.
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1c) Viime vuosien pääomasijoitukset –Deal flow
| Uudet tehdyt sijoitukset vuosina 2007-2008, kpl
© Helsinki School of Economics HSE (Jaakko Aspara)
•Yli kaksi kolmasosaa sijoittajista teki ainakin yhden uuden sijoituksen vuosina 2007-2008.
• Kolmasosa sijoittajista teki 2 tai useamman uuden sijoituksen.
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1c) Viime vuosien pääomasijoitukset –Deal flow
© Helsinki School of Economics HSE (Jaakko Aspara)
| 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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1c) Viime vuosien pääomasijoitukset –Deal flow
© Helsinki School of Economics HSE (Jaakko Aspara)
| …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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1c) Viime vuosien pääomasijoitukset –Deal flow
© Helsinki School of Economics HSE (Jaakko Aspara)
| 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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1c) Viime vuosien pääomasijoitukset –Deal flow
| Kohteet tutuilta toimialoilta deal flow’ssa 2007-2008
© Helsinki School of Economics HSE (Jaakko Aspara)
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.
© Helsinki School of Economics HSE (Jaakko Aspara)
44
3) Selitystekijät sijoituskäyttäytymiseen
© Helsinki School of Economics HSE (Jaakko Aspara)
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?
23
45
3) Selitystekijät sijoituskäyttäytymiseen
© Helsinki School of Economics HSE (Jaakko Aspara)
| 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
24
47
1d) Aiotut pääomasijoitukset
| Kuinka monta sijoitusta olisi ”ideaalisalkussa”?
© Helsinki School of Economics HSE (Jaakko Aspara)
Harva sijoittaja olisi valmis ottamaan salkkuunsa yli 5 pääomasijoituskohdetta.
48
1d) Aiotut pääomasijoitukset
| Kuinka paljon sijoittaja arvioi sijoittavansa uusia varoja pääomasijoituskohteisiin seuraavan 3 vuoden aikana (09-11)?
© Helsinki School of Economics HSE (Jaakko Aspara)
Suurin osa sijoittajista aikoo sijoittaa 50 k€ – 500 k€
25
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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€
© Helsinki School of Economics HSE (Jaakko Aspara)
50
1d) Aiotut pääomasijoitukset
| Toimialat sijoittajan kolmen tutuimman alan joukossa
© Helsinki School of Economics HSE (Jaakko Aspara)
•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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1d) Aiotut pääomasijoitukset
| 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
27
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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
© Helsinki School of Economics HSE (Jaakko Aspara)
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4) Verohuojennusskenaarion vaikutukset
© Helsinki School of Economics HSE (Jaakko Aspara)
| 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
28
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4) Verohuojennusskenaarion vaikutukset
© Helsinki School of Economics HSE (Jaakko Aspara)
| 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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4) Verohuojennusskenaarion vaikutukset
© Helsinki School of Economics HSE (Jaakko Aspara)
| 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.