How Do Interaction Activities among Customers and between Customers and Firms Influence Market Performance and Continuous Product Innovation? An Empirical Investigation of the Mobile Application Market

Mobile application markets ( MAMs ) significantly differ from other existing marketplaces at least in two aspects. First, customers (app users) and firms (app providers) frequently interact with each other in real time, which is not common in the conventional marketplaces. Second, many app providers incorporate customers’ opinions or suggestions into their software upgrades, representing one of the most unique and interesting aspects of MAMs . Therefore, it has become critical to understand the impact of interaction activities not only among customers, but also between customers and firms on the market performances of new products in MAMs . One of the most significant issues firms face is whether firms reflect on customers’ postpurchase interaction activities, and the next interesting question is how firms respond to them. This study explores the effects of customer‐to‐customer ( C2C ), customer‐to‐firm, and firm‐to‐customer interaction activities on market performance. In addition, this study investigates how communication activities influence a firm's tendency to pursue continuous product innovation through research and development ( R & D ). Using data obtained from a major MAM , T store, three models that are respectively related to product sales, product lifetime, and a firm's R & D activity for product upgrades, are applied to empirically test hypotheses concerning the effects of interaction activities. In our analyses of market performance, a hierarchical log regression model with 10,840 weekly transactions data set related to product sales (model A ) and 291 aggregate transactions related to product lifetime (model B ) is used. Results indicate that C2C and customer‐to‐firm communication activities have a positive impact on sales, but little relationship with product lifetime. However, a firm's continuous product R & D has a positive impact on both sales and lifetime performance. Our analysis of a firm's R & D (model C ) shows that C2C and customer–firm communication increases a firm's R & D activity. Taken together, these results have important implications for customer–firm interactions, market performance, and R & D strategies.