“Crowdsourcing capabilities: fueling new products? How firm size and business type matter”

Crowdsourcing has emerged as a valuable tool for organizations seeking to access ex-ternal knowledge and resources for their innovation processes. This study aims to investigate crowdsourcing capabilities in the context of new product development initiatives, with a focus on exploring the moderating effects of firm size and type. Structural Equation Modeling using Partial Least Squares (SEM-PLS) is used to analyze both the measurement and structural models, with data drawn from 217 owners and managers of diverse businesses in Indonesia. These businesses range from small to medium-scale enterprises across various types, including cafes, restaurants, fashion, culinary, and furniture. The findings reveal a positive and significant impact of crowdsourcing capabilities on new product development initiatives (β = 0.746, p = 0.000). Moreover, the relationship between crowdsourcing and new product development is moderated by firm size (whether small or medium) (β = 0.103, p = 0.045) and the type of business (β = 0.157, p = 0.012). The outcomes of this study are anticipated to enrich the body of knowledge and provide valuable guidance for enterprises seeking to harness crowdsourcing in their new product development processes, with specific factors like firm size and type taken into account.


INTRODUCTION
Crowdsourcing provides significant advantages to SMEs, offering access to an extensive pool of external knowledge and expertise, which fosters innovation and improved decision-making within the organization.This diversity of ideas enhances the potential for innovation.
Moreover, crowdsourcing enables SMEs to expand their operations beyond their limited resources by tapping into a larger workforce and expertise, enhancing their capacity to undertake more projects and refine design and manufacturing processes.
Additionally, crowdsourcing fosters closer relationships between SMEs and their customers and stakeholders.Through crowdsourcing platforms, firms can engage customers in the product creation or innovation process, meeting expectations, fostering innovation, and enhancing satisfaction.This continual involvement strengthens the relationship between firms and customers, leading to increased loyalty intentions.
However, it is crucial to recognize that crowdsourcing poses challenges for SMEs, such as a lack of awareness about suitable tools and platforms for their businesses and tasks.Many SMEs are unfamiliar with the platforms where crowdsourcing challenges are advertised, limiting their ability to fully leverage crowdsourcing as a problem-solving tool.SMEs may have a limited understanding of how to effectively adopt crowdsourcing in their innovation practices.This lack of awareness and understanding can impede firms from fully harnessing crowds' creativity to transform innovative ideas into actionable plans and tools.
While crowdsourcing offers valuable advantages, addressing challenges related to knowledge gaps and implementation is crucial for SMEs.Hence, the research focuses on understanding how crowdsourcing capabilities contribute to the advancement of new product development within the context of SMEs.

LITERATURE REVIEW AND HYPOTHESES
Crowdsourcing equips SMEs with crucial insights into customer preferences and behaviors (Devece et al., 2019).It cultivates open innovation, bolstering SMEs' competitiveness and innovativeness (Martinez-Corral et al., 2019).SMEs harness crowdsourcing to expand operations, refine product development, and boost overall business performance (Qin et al., 2016).Crowdsourcing resources find utility across various stages of the product lifecycle, from design to distribution (Castillo et al., 2017).Social media platforms, renowned for their user-friendliness, cost-effectiveness, and expansive reach, have become indispensable tools for SMEs (Li et al., 2021).These platforms facilitate engagement with customers, feedback collection, and participation in decisionmaking processes (Cheng & Shiu, 2018).
Crowdsourcing platforms elevate SMEs' business performance by fostering connections between suppliers and customers, providing access to the collective wisdom of the crowd (Mansor et al., 2022).SMEs can amplify design and manufacturing operations, enhancing overall performance and quality (Qin et al., 2016).In marketing, prior studies highlight that labeling crowdsourced products can enhance market performance by up to 20% (Nishikawa et al., 2017).Crowdsourcing is applied to low-involvement products like fast food, beverages, and snacks (Pacauskas et al., 2018).Firms use crowdsourcing across various functions, encompassing product development, advertising, promotion, and marketing research (Whitla, 2009).Crowdsourced customer participation complements traditional methods, yielding valuable market insights (Gruner & Power, 2017).
In new product development, crowdsourcing spans diverse stages, involving idea generation by soliciting innovative design ideas from consumers (Li et al., 2018).Crowdsourcing extends to problem-solving, collaborative work, design, testing, and prototyping (Qin et al., 2016).Additionally, it provides expert support, granting access to specialized knowledge and skills not available internally (Qin et al., 2016).By leveraging networks, organizations tap into diverse expertise and perspectives, fostering more innovative solutions (Köhler & Chesbrough, 2019).
Crowdsourcing in new product development entails leveraging the collective intelligence and creativity of a crowd to generate innovative ideas and solutions (Zahay et al., 2018).Facilitated through online platforms, this approach enables organizations to tap into diverse perspectives, enhance technological capabilities, and foster the creation of novel products (Poetz & Schreier, 2012).
Particularly beneficial in the early stages of product development, crowdsourcing aids idea generation and concept development by accessing a wide range of external insights (Lin et al., 2022).Despite its potential, crowdsourcing in new product development is still evolving, and ongoing research aims to determine its efficacy and best practices (Zahay et al., 2018).
The process unfolds in stages, starting with firms using crowdsourcing to collect product ideas from the crowd via online platforms where participants submit descriptions or concept drawings (Nishikawa et al., 2017).Selected ideas undergo development into marketable products.Subsequently, organizations evaluate the fit of developed products within their portfolio, determining if they are new-to-the-world or product line extensions, aim-ing for a competitive advantage or market position maintenance (Zahay et al., 2018).).Therefore, it is assumed that the size of the firm serves as a moderating factor in the correlation between crowdsourcing capabilities and the development of new products.
Similarly, crowdsourcing has been found to be a valuable tool in various industries, including the fashion industry, retail, and food delivery.In the fashion industry, it can enhance product design using external talents and address the shortage of designers (Li et al., 2018).However, luxury brands may not actively promote the outcome as "customer-ideated" due to the strong reputation of their in-house designers (Nishikawa et al., 2017).In the retail sector, crowdsourcing can be used for presale methods, generating funds and assessing customer interest before product launch (Konhäusner, 2021).This helps retailers validate demand and mitigates the risk of investing in products that may not resonate with consumers.Crowdsourcing also aids in price determination, allowing retailers to gather customer input to establish the optimal pricing strategy (Konhäusner, 2021).The unique characteristics and requirements of various business types significantly influence how SMEs harness their capabilities to drive innovation and develop new products.
This study aims to analyze the interplay between crowdsourcing capabilities, firm characteristics, and new product development.
The following hypotheses are proposed: H1: There exists a correlation between the capabilities of crowdsourcing and the development of new products.
H2: The correlation between crowdsourcing capability and new product development is moderated by firm size.
H3: The correlation between crowdsourcing capability and new product development is moderated by the type of business.

METHOD
The research utilized a quantitative approach, using a cross-sectional survey methodology to collect data from SME managers and owners in Indonesia.
The initial list of SMEs was obtained from the central government institution overseeing SME development.A random sampling approach was utilized to mitigate bias and enhance the applicability of the findings to the broader target population.
A structured questionnaire was self-administered to a randomly selected group of participating SMEs.
The questionnaire featured two distinct sections: the first section focused on the demographic characteristics of the sample, while the second section assessed critical research constructs.A rigorous translation and retranslation process was conducted to guarantee the suitability of the questionnaire for Indonesian participants.Respondents were required to provide ratings using a five-point Likert scale.
To ensure the robustness of the research tool, the study integrated validated scales from reputable research studies to create a questionnaire tailored specifically for SMEs.In assessing the crowdsourcing capability of SMEs, the research utilized a measure- The primary reasons for utilizing social media platforms are to boost product and service visibility and market presence (28.57%) and streamline the process of generating product sales (33.64%).
Additionally, social media serves as a platform for collecting valuable feedback from customers (14.29%), aiding in the growth of one's customer base (13.36%), and promoting the exploration of ideas and innovative concepts to enhance the development of new products (10.14%).
Respondents predominantly depend on internal sources within their respective organizations, although external sources also play a significant role, accounting for 21.66% of the total respondents.A significant proportion, specifically 34.56%, utilizes a combination of both internal and external sources.

RESULTS
The initial analysis aimed to assess the reliability of all study constructs, including the evaluation of the reliability of the items, composite reliability (CR), and average variance explained (AVE).
To ensure the reliability of the items, it is advisable for the observed variables to demonstrate a loading of at least 0.6 on a latent variable (Hair et al., 2021).In the study, establishing discriminant validity among the constructs was a pivotal step in the Structural Equation Modeling (SEM) analysis.
To rigorously assess this validity, two widely recognized methods were used.Firstly, the Fornell-Larcker criterion was applied, comparing the square root of the Average Variance Extracted (AVE) for each construct with its correlations with other constructs.As presented in Table 3, the square root of the AVE for Crowdsourcing Capability (CC) was found to be 0.792, while for New Product Development (NPD), it was 0.825.These values, highlighted in bold along the diagonal, unequivocally demonstrate that the variance explained by the items within each construct is significantly higher than their correlations with other constructs, affirming the presence of discriminant validity.This meticulous application of the Fornell-Larcker criterion assures the proper specification of the measurement model and the distinctiveness of the studied constructs.Secondly, a Heterotrait-Monotrait Ratio (HTMT) analysis was conducted, presented in Table 4, as an additional method to assess discriminant validity in SEM.HTMT ratios below the threshold of 0.85, as recommended by Kline (2023), indicate discriminant validity.In the study, all HTMT ratios for Firm Size (M1), Business Type (M2), Crowdsourcing Capability (CC), and New Product Development (NPD) are substantially below this threshold.This compelling evidence further validates the discriminant validity among the constructs, confirming their distinctiveness and the robustness of the SEM analysis.The assessment of the structural model involved a comprehensive analysis of key metrics to evaluate the hypotheses (Hair et al., 2021).Specifically, the structural path coefficient (β) and the t-values obtained through the bootstrap approach were examined.A summary of the crucial findings is presented in Table 6.

DISCUSSION
This section focuses on the primary research objectives, particularly examining the impact of social media-enabled crowdsourcing capabilities on new product development.The analysis, based on a sample of 217 business owners and managers, revealed that all participants use social media to enhance their marketing efforts.Upon closer examination, as a second-order construct, it is evident that crowdsourcing capabilities significantly influence new product development (H1).This capability is closely tied to an organization's proficiency in defining problems and understanding the expertise required for collaborative solutions.SME owners and managers can effectively engage external crowdsolvers and align specific issues with their expertise using a strategic approach.Well-defined problems serve as a powerful motivator for crowdsolvers, driving them to contribute their valuable skills, ultimately resulting in the generation of higher-quality solutions.Crowdsolvers, who are typically well-versed in the field of crowd marketing, tend to select activities that align closely with their qualifications and areas of expertise.Aligned with the perspective of Randhawa et al. ( 2019), organizations identified as "seekers" actively engage with an external group comprising potential problem solvers.This underscores the proactive role of organizations in seeking solutions from external contributors.SME owner-managers who can accurately identify and articulate these problems have a higher likelihood of attracting highly skilled problem solvers.The success of SMEs in leveraging crowdsourcing capabilities hinges on their ability to inspire and continuously motivate crowdsolvers throughout the entire process.This motivation is crucial for optimizing the contributions of crowdsolvers and achieving the best possible outcomes.Crowdsourcing capabilities extend to the evaluation of ideas proposed by crowdsolvers.Consistent with the insights provided by Köhler and Chesbrough (2019), organizations adeptly leverage various expertise.This broadens the understanding of the strategic importance of an organization's ability to utilize diverse knowledge.Through careful management and integration of various expertise, organizations create a supportive environment for generating innovative solutions.Once significant contributions have been made, companies must carefully analyze and select the most optimal solutions.This step is particularly important because crowdsolvers often present multiple alternative solutions.The ability to discern and choose the most suitable option is imperative for effective crowdsourcing.
Based on empirical evidence, the research supports the hypothesis (H2) that firm size significantly influences the relationship between SME crowdsourcing capabilities and new product development.Firm size emerges as a critical factor affecting strategic decision-making and the ability to leverage crowdsourcing for innovation.The empirical evidence strongly suggests that the type of business managed by SMEs plays a significant role in moderating the relationship between their crowdsourcing capabilities and the development of new products.This finding supports the third hypothesis (H3), highlighting the impact of the business type on SMEs' capacity to effectively utilize crowdsourcing for new product development.In the present business environment, a growing number of SMEs are actively considering crowdsourcing as a valuable mechanism for driving the development of new products.This strategic approach enables these companies to accelerate the process of conceptualizing and developing innovative products that are in line with market demands.However, the success of such initiatives depends on various factors, including the specific type of business in which the SME operates.In the fashion industry, which heavily relies on creative and customized design solutions, SMEs often encounter challenges due to their limited access to skilled designers and the accompanying resources.Crowdsourcing in the fashion sector has the potential to become a transformative strategy.It entails actively engaging with a diverse and extensive group of designers and creators through open invitations.This allows SMEs to acquire initial design concepts and subsequently refine them into high-quality products.The practice of crowdsourcing in fashion design provides several advantages, particularly the opportunity to acquire a diverse range of high-quality design ideas at a comparatively low cost (Jiao et al., 2021).This illustrates how the nature of the business, especially in the sector of fashion, can greatly impact the effectiveness of crowdsourcing as a method for generating innovative product concepts.
The empirical evaluation of the model establishes a solid foundation, providing compelling evidence for the relationship between crowdsourcing capabilities and the development of new products.These findings hold great significance for scholars and academics, as they can integrate these insights into the wider framework of crowdsourcing models that are specifically designed for the requirements of SMEs.One important implication for business owners and managers that arises from this research is the recognition that SMEs' crowdsourcing capabilities should focus on key aspects of the crowdsourcing process.This strategic focus enables SMEs to discover innovative solutions for new product development that align with customer expectations, ultimately resulting in the creation of more appealing and competitive products.Therefore, it is crucial for business owners and managers to have a thorough grasp of how to accurately define problems, identify the most suitable crowdsolvers, motivate participants engaged in crowdsourcing activities, and rigorously evaluate the quality of ideas and solutions generated.This study not only provides valuable insights for the academic discourse on crowdsourcing but also offers practical takeaways for business practitioners who aim to utilize crowdsourcing for improved new product development and customer satisfaction.
There are several limitations that need to be taken into consideration in the study.One notable limitation is the relatively small sample size of only 217 business owners and managers.In the present digital landscape, only a small portion of SMEs actively participate in social media for the purpose of developing new products.Furthermore, an even smaller subset of these SMEs utilizes social media-enabled crowdsourcing.Hence, it is possible that the findings may not fully capture the behaviors and practices of the broader SME population regarding this matter.Another limitation arises from the study's narrow focus solely on the province of North Sumatra, Indonesia.Hence, it is possible that the findings may not have generalizability on a nationwide or cross-country level.To enhance the robustness and pertinence of the research, future studies should consider broadening the geographical scope.This would entail incorporating a wider range of locations that are more diverse and inclusive, thereby ensuring a higher level of representation.Despite these limitations, the study highlights the potential of crowdsourcing for SMEs on social media as a powerful mechanism for idea generation and problem-solving, particularly in the context of new product development.These findings offer valuable insights for SMEs seeking innovative strategies to overcome challenges and improve their product offerings.

CONCLUSION
The aim of this study was to investigate how crowdsourcing capabilities influence new product development initiatives, while also examining how this is influenced by the size and type of the company.The results of the empirical analysis indicate that crowdsourcing capabilities positively and significantly affect new product development.Furthermore, it was found that this relationship is influenced by the size and type of the company, indicating that the impact of crowdsourcing capabilities on new product development may vary depending on the characteristics of the company.This study highlights the importance for organizations to effectively leverage crowdsourcing to generate successful new products.Therefore, owners and managers of small and medium-scale enterprises (SMEs) are encouraged to harness the collective intelligence and creativity of various parties.This enables companies to access a wide range of ideas, perspectives, and expertise that can drive the innovation process and result in the development of new products.Although larger companies may have broader resources and a better ability to leverage crowdsourcing initiatives, many small businesses operating in creative sectors, such as the fashion business, may have an advantage in adopting and transforming external contributions into successful new products.Fashion companies often rely on creativity, innovation, and design, which align well with the utilization of crowdsourcing for developing new products.Meanwhile, although culinary businesses are also innovative and creative in their field, their categorization often differs from industries like fashion.However, owners and managers of culinary businesses can also benefit from crowdsourcing initiatives, particularly in areas such as recipe development, menu planning, and customer engagement strategies.
Chaochotechuang and Mariano (2016)tudies conducted byAfuah and Tucci (2012)andSalisu and Bakar (2019).Additionally, the evaluation of the scope of new product development relied on four items, as specified in the studies ofMa et al. (2012)andChaochotechuang and Mariano (2016).
(Kock, 2015)arketing, Volume 20, Issue 2, 2024 http://dx.doi.org/10.21511/im.20(2).2024.16mentscalecomprisingsmallerenterprisesmay encounter limitations in this regard.Additionally, the study delves into the moderating effect of various business types, recognizing that they may face unique challenges when adopting crowdsourcing as a strategy to drive innovation in new product development.Furthermore, the study utilized the Full Collinearity VIF method, as introduced by Kock and Lynn (2012), to identify potential common method bias that could have influenced the PLS-SEM analysis(Kock, 2015).The results consistently revealed VIF values below the threshold of 3.3, signifying the absence of any significant common method bias.The full collinearity VIF values for all variables ranged from 1.785 to 2.706, confirming the reliability and validity of the study's findings.Business revenue ranges from IDR 501 million to IDR 1.5 billion, with smaller segments falling within the IDR 1.51 billion -IDR 2.5 billion range, representing 18.89% of the total revenue.

Table 1 .
Construct items and loadings

Table 5 .
Predictive accuracy and relevance

Table 6 .
Structural model