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 Study 2: survey on business angels Study 3: survey on entrepreneurs/firm managers planned for spring-summer 2009 planned for spring-summer 2009 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 Tl (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 companys products and brands influence their interest to invest in the companys stock. The companies included in the experiment scenario were privatelyheld (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. 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. 1.

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 Asparas 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 Asparas 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 Talouselm (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)

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 investors subjective evaluation of a companys products has positive effect on his interest to invest in the companys 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.

2 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 Subrahmanyams 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

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

3 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 individuallevel psychological data (rather than just aggregate proxies) is especially relevant given our studys focus on product evaluations and investment interest which are, essentially, psychological phenomena.

Secondly, in theoretical terms, our study differs from Frieder and Subrahmanyams 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 Subrahmanyams 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.

4 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 Subrahmanyams 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 investors subjective evaluation of a companys products has positive effect on his2 interest to invest in the companys 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 investors subjective evaluation of a companys products on his interest to invest in the company is partially, yet not fully mediated by (increased) optimism about the companys financial returns. This suggests that positive product evaluations influence investment interest

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.

5 both by generating self-induced optimism in the investors 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--vis home bias (cf. Campbell & Krussl, 2007; Coval & Moskowitz, 1999; French & Poterba, 1991; Kang & Stulz, 1997; Karlsson & Nordn, 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

6 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 individuals evaluation of a companys products (product evaluation, in brief) we refer to an individuals overall, affective evaluation (MacGregor et al., 2000) of a companys 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 individuals evaluation of a companys products is an affective phenomenon and manifests along bipolar dimensions of positive vs. negative impressions, such as goodbad, pleasantunpleasant, likeabledislikeable, attractive unattractive (cf. MacGregor et al., 2000), another interchangeable term for product evaluation would also be attitude toward the products3 (see Ajzen & Fishbein 1980; Ajzen 2001). Furthermore, since we are dealing with an individuals overall impressions of a companys 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

Indeed, an attitude towards a companys product would in Ajzen and Fishbeins (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 goodbad, pleasantunpleasant, likeabledislikeable, attractiveunattractive (Ajzen, 2001).

7 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 investors positive evaluation of a companys products i.e., liking them may lead the investor to navely reason that since he likes the companys products, others will like them, too, and the company will therefore succeed financially (Aspara & Tikkanen 2008). Inasmuch as such nave, self-induced optimism about the companys financial returns occurs, the investor will logically have increased proclivity to invest in and own the companys 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).

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.

8 Another reason why enhanced evaluations of the companys products may increase an investors proclivity to invest in the company is that according to a common psychological notion, an individuals positive attitude towards (i.e. positive overall evaluation of) an object in this case a company will manifest in the individuals 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 companys 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 investors expectations about the financial returns of the company and should therefore increase ones 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 companys products may increase an investors proclivity to invest in the company is the fact that positive affect implicated in ones positive evaluation of a companys 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

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.

9 to peoples collections (such as stamp collections): peoples 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 ones 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 companys 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 investors subjective evaluations of a companys products can influence his investment interest in the companys 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 individuals 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 singular 6. In sum, we can, thus, pose the following hypotheses: Hypothesis H1: An individual investors subjective evaluation of a companys products has positive effect on his interest to invest in the companys stock. Hypothesis H2: The effect that an individual investors subjective evaluation of a companys 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 investors

For instance, an individual may be highly familiar with a companys products (e.g., General Motors) without having positive evaluation them.

10 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 companys 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 investors subjective evaluation of a companys products has on his interest to invest in the company will be partially but not fully mediated by his optimism about the companys 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 investors 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 nondomestic and/or based farther away from the investors home country. This can be expected especially on the following grounds. As an investor is likely to have less investment-/valuerelevant 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-productrelated information in addition to the product evaluation (e.g., management and labor relations discussed in local media; local customers, suppliers, and competitors; local demand

11 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 companys 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 muchcited finance studies (Grinblatt & Keloharju 2000, 2001a;2001b, 2009; Rantapuska & Knpfer, 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.

12 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 nonrespondents. 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

13 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 COMPANYS PRODUCTS, OPTIMISM ABOUT THE COMPANYS 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 companys products , i.e., personal relevance of the companys 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

14 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 companys 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-domesticnear 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 nondomestic-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.

15

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 businessto-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 COMPANYS
PRODUCTS and OPTIMISM ABOUT THE COMPANYS 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

16 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 Zeisss 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 companys 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 subjects 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):
Lets 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 respondents 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 investors 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 COMPANYS PRODUCTS, was measured by asking the subjects: How familiar were you with this companys 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 companys products and 6 = This companys products were very familiar to me.

Finally, the covariate OPTIMISM ABOUT THE COMPANYS 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 investors subjective product evaluation of a particular companys 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 firms 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 firms products/services are in terms of design? (0 = very unattractive 6 = very attractive)

An index of subjective product evaluation of a companys products was obtained for each respondent (and each company presented to him) as a sum of his responses to these two

21

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

The Cronbachs alpha for the two items was .85, indicating good reliability of the two-item reflective scale.

22 at p < .05). This finding essentially gives support to hypothesis H1. That is, individual investors subjective evaluations of a companys products have positive effect on their interest to invest in the companys 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 & Krussl, 2007; Coval & Moskowitz, 1999; French & Poterba, 1991; Kang & Stulz, 1997; Karlsson & Nordn, 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 companys products on individual investors interest to invest in the company are fairly independent of the companys product type but the companys home country being foreign will somewhat reinforce the influence.

4.2.2 Analysis with Covariates

24

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 SUBJECTIVE INFORMATION OF THE COMPANY

included. Thus, even if the covariate

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 investors subjective evaluation of a companys 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 COMPANYS 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 investors subjective evaluation of a companys

Note that according to a common procedure, we did not include the three-way interaction effects of companyproduct 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.

25 products has positive effect on his interest to invest in the companys 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 companys 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 companys products, the main effect of the experimental factor should be attenuated when the individual-level measure of subjective product evaluations (SUBJECTIVE
EVALUATION OF THE COMPANYS 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 COMPANYS 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 PRODUCTS

and PRIOR FAMILIARITY WITH THE COMPANYS

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 COMPANYS PRODUCTS

(F(1, 236) = 3.01, p =.08) becomes

substantially smaller in size than the effect of SUBJECTIVE EVALUATION OF THE COMPANYS
PRODUCTS (F(1,

232) = 23.34, p <.0001). This indicates that the influence that an investors

positive evaluation of a companys 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 companys products.

Finally, hypothesis H3 predicted that the positive effect that subjective evaluation of the companys 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
COMPANYS FINANCIAL RETURNS. This

is also what we find: The effect of the covariate is attenuated, yet remains marginally

SUBJECTIVE EVALUATION OF THE COMPANYS PRODUCTS

significant (from F(1, 232) = 23.34, p <.0001 down to F(1, 231) = 3.36, p =.068), once the covariate OPTIMISM ABOUT THE COMPANYS FINANCIAL RETURNS is included. The covariate
OPTIMISM ABOUT THE COMPANYS FINANCIAL RETURNS

itself achieves high significance (F(1,

231) =67.42, p <.0001). Thus, the effect that subjective evaluation of the companys products has on investment interest is partially, yet not fully mediated by the investors optimism about the companys financial returns. This finding supports hypothesis H3, and suggests that positive product evaluations influence investment interest both by generating self-induced optimism in the investors financial expectations (I like the companys 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 COMPANYS 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 investors 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 COMPANYS 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 companys management quality and market position). Note, however, that in any case, the covariate SUBJECTIVE EVALUATION
COMPANYS PRODUCTS OF THE

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 investors subjective evaluation of a companys products has positive effect on his interest to invest in the companys stock (in support of hypothesis H1); ii. the effect that subjective evaluation of the companys 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 investors subjective evaluation of a companys 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 companys 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 individuals investment decisions. Essentially, Frieder and Subrahmanyams 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 investors subjective evaluation of a companys products on investment interest is greater than the effect of his prior familiarity with the companys 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--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 selfinduced optimism in the investors financial expectations (I like the companys 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 companys financial returns is the investors positive evaluation of a companys 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-Kruter 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 investors subjective evaluation of a companys 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 companys 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 companys 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 individuals 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 nonresponse/selection bias and the possibility that those investors who responded to the experiment might have different tendencies with respect to the hypotheses than the nonrespondents. 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 investorrespondents
overall sample Gender female male Age below 25 2535 3645 4655 5665 over 65 Education (highest) middle school high school vocational school college/bachelor university/master licenciate/doctor Yearly income 150 000 50 000100 000 100 001150 000 150 001250 000 250 001500 000 500 0011000 000 Net worth 0100 000 100 001500 000 500 0011 000 000 1 000 0015 000 000 Total no. of stocks owned 0 12 stocks 35 stocks 610 stocks 1120 stocks 2130 stocks over 30 stocks Stock following activity daily weekly monthly once in three months once in six months once a year once in two years 1.5% 10.6% 4.6% 18.2% 37.9% 27.3% 4.6% 10.6% 9.1% 22.7% 42.4% 10.6% 48.5% 39.4% 7.6% 1.5% 3.0% 0.0% 25.8% 45.5% 16.7% 12.1% 6.1% 3.0% 18.2% 27.3% 28.8% 12.1% 4.6% 13.9% 38.5% 26.2% 7.7% 6.2% 4.6% 3.1% 25.8% 74.2%

39 Table 2. Means (and standard deviations) for interest to invest in the company
Company-product type / Company home country Business-to-business products: Domestic company A0 Non-domestic-near company B0 Non-domestic-far company C0 Services: Domestic company A1 Non-domestic-near company B1 Non-domestic-far company C1 Personal goods: Domestic company A2 Non-domestic-near company B2 Non-domestic-far company C2 Subjective product evaluations = Low 2.41 (1.77) 1.94 (1.60) 2.53 (2.03) 2.92 (1.59) 3.18 (1.70) 1.14 (1.21) 1.66 (1.65) 2.35 (1.80) 1.79 (1.82) Subjective product evaluations = High 2.72 (1.83) 2.50 (1.79) 3.00 (1.77) 2.54 (1.71) 3.46 (1.56) 2.08 (1.44) 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 companys home country

41

Figure 2. The effect of subjective product evaluations on investment interest (least squares means) by target companys 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 Zeisss technology. Zeisss 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 Zeisss technology. Zeisss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

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. jaakko.aspara@hse.fi Amitav CHAKRAVARTI Associate Professor New York University, Stern School of Business 44 West 4th Street New York, NY 10012 Email. achakrav@stern.nyu.edu

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

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 companys 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 companys products have a systematic influence on individual investors decisions to invest in the companys 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 investororiented, 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 companys 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; Wrneryd 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 companys 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 companys 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 companys 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 companys 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 companys 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 investororiented advertisement that features a companys 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 companys 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 companys 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 preexisting 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 companys products rather than the companys 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

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 investors subjective evaluation of the companys products, it can be expected to increase the investors interest in investing in the company for three reasons. First, a heightened affective evaluation of a companys products liking them may lead the investor to navely reason that since he likes the companys products, others will like them, too, and the company will therefore succeed financially (Aspara and Tikkanen 2008). Due to such nave, self-induced financial optimism, the investor will exhibit increased interest to invest in and own the companys 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 companys products may increase an investors interest to invest in the company is that, according to a common psychological notion, an individuals positive attitude towards an object (i.e., positively affective overall evaluation of it) will manifest in the individuals 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 companys 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 attitudebased favoring is quite non-related to the investors expectations about the financial returns of the company and should therefore increase ones interest to invest in the company over and beyond its expected financial returns.

11 A third reason why enhanced evaluations of the companys products may increase an investors interest to invest in the company is the fact that positive affect implicated in ones positive evaluation of a companys 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 peoples collections (such as stamp collections). Collection researchers point to peoples 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 ones 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 companys products may lead the individual to desire to possess the object of affect by way of investing in and owning the companys 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 productevaluative 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 advertisements 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 investors subjective evaluation of the companys 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 investors 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 companys 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 companys earlier marketing efforts in the consumer/product market can lead (or have led) to recognition of the companys 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 companys 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 companys 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 nonrecognizability of the companys 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 companys 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 investors personal, subjective evaluation of the products of the company with high brand likeability, the investors hunch about the overall markets 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 Jacobsons (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 companys 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 investors 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 individuals 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--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 Subrahmanyams (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 companys 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 peoples 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 companys existing brand goodwill in the market. Thus, our alternative hypotheses concerning the interaction are:
Hypothesis H8.1: The influence that an investor advertisements 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 advertisements 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 advertisements emphasis on product-evaluative content has on investment interest is equally great, regardless of the companys 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 studys sample vis--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). ---------------------INSERT TABLE 1 ABOUT HERE ---------------------Design The study employed a 2 (Investor-Ad Emphasis) x 3 (Prior Brand Goodwill) x 2 (Companys 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 companys products , that is, personal relevance of the companys 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 Zeisss 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 companys 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 Companys 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 subjects 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):
Lets 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 respondents 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 COMPANYS 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 firms products/services are in terms of functionality? (0 = very bad 6 = very good) 2. How good do you think or believe that the firms 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 subjects 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 COMPANYS 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 firms 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 Companys 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 companys products/services, what is your view of the companys 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 Companys 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 Companys 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 Companys 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. ---------------------INSERT TABLE 3 ABOUT HERE ---------------------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 Companys Home Country as the factors (see Table 4 for cell means). ---------------------INSERT TABLE 4 ABOUT HERE ---------------------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 (M hiEmph = 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 Companys 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 Krussl 2007; Karlsson and Nordn 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 investors (ad-)enhanced subjective evaluation of the companys 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 COMPANYS 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 productevaluative 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 COMPANYS 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 COMPANYS 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 COMPANYS 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 COMPANYS FINANCIAL RETURNS were to be included. Moreover, hypothesis H3 predicted that optimism would also further mediate the effect of subjective evaluation of the companys products on investment interest. To examine these predictions, a 2 X 3 X 2 ANOVA was first performed with OPTIMISM ABOUT THE COMPANYS
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 COMPANYS 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
COMPANYS FINANCIAL RETURNS itself achieved

high significance (F(1, 119) =55.83, p < .0001).

In addition, the effect of SUBJECTIVE EVALUATION OF THE COMPANYS 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 companys brands and consumeroriented 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 companys products and their optimism about the companys 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 investors subjective evaluation of the companys 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 companys 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 companys financial returns is the investors positive evaluations of a companys 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-Kruter 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 investors subjective evaluation of a companys 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 investors subjective evaluations of the companys products and subjective familiarity with the company. This suggests that not only do investors subjective or personal opinion and

35 information about the companys 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 companys 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 brands products. This is consistent with the notion that investors attend to indicators of market-level perceptions of the companys 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 companys 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 firms 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 companys 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 companys shareholder base in general. Furthermore, the results also imply that product advertising designers and managers should be involved in designing a companys 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 productbuyers and its stockowners (see Schoenbachler, Gordon, and Aurand 2004). Concerning the firms 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 individuals 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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40 GlobeNewswire (2009), "Players Network to Begin Extensive Market Awareness and Branding Campaign," . News Release, October 20, 2009. Available at http://community.investopedia.com/news/GlobeNewswire/1326670175997.aspx Grinblatt, Mark and Matti Keloharju (2000), "The Investment Behavior and Performance of various Investor Types: A Study of Finlands Unique Data Set," Journal of Financial Economics, 55 43-67. ----(2001), "What Makes Investors Trade?" Journal of Finance, 56 589-616. ---- (2009), "Sensation Seeking, Overconfidence, and Trading Activity," Journal of Finance, 64 (04), 549-78. Grullon, Gustavo, George Kanatas, and James P. Weston (2004), "Advertising, Breadth of Ownership, and Liquidity," Review of Financial Studies, 17 439-61. Guiso, L., Haliassos, M., & Jappelli, T. (2003). Household Stockholding in Europe: Where do We Stand And Where Do We Go?. Discussion Paper No. 3694. London: Centre for Economic Policy Research. Hoeffler, Steve and Kevin L. Keller (2003), "The Marketing Advantages of Strong Brands," Journal of Brand Management, 10 (08), 421. Huberman, Gur (2001), "Familiarity Breeds Investment," Review of Financial Studies, 14 65980. ICI & SCA (2002), Equity Ownership in America 2002. Washington, DC and New York, NY: Investment Company Institute and Securities Industry Association. Jacoby, Jacob et al. (2001), "Training Novice Investors to Become More Expert: The Role of Information Accessing Strategy," Journal of Psychology and Financial Markets, 2 69-79. Johnson, Joseph, Gerard J. Tellis, and Deborah J. MacInnis (2005), "Losers, Winners, and

41 Biased Trades," Journal of Consumer Research, 32 324-9. Kahneman, Daniel and Amos Tversky (1979), "Prospect Theory: An Analysis of Decision Under Risk," Econometrica, 47 263-92. Karlsson, Anders and Lars Nordn (2007), "Home Sweet Home: Home Bias and International Diversification among Individual Investors," Journal of Banking & Finance, 31 (2), 317-33. Keller, Kevin L. (1993), "Conceptualizing, Measuring, and Managing Customer-Based Brand Equity," Journal of Marketing, 57 1-22. Kent, Robert J. and Chris T. Allen (1994), "Competitive Interference Effects in Consumer Memory for Advertising: The Role of Brand Familiarity," Journal of Marketing, 58 97-105. Kilka, Michael and Martin Weber (2000), "Home Bias in International Stock Return Expectations," Journal of Psychology and Financial Markets, 1 176-92. Kotler, Philp, Hermawan Kartajaya, and S. D. Young (2004), Attracting Investors: A Marketing Approach to Finding Funds for Your Business. Hoboken, NJ: John Wiley & Sons. Lee, Hyun-Jung et al. (2008), "Disposition Effects and Underlying Mechanisms in E-Trading of Stocks," Journal of Marketing Research, 45 362-78. Lovett, Mitchell J. and Jason B. MacDonald (2005), "How does Financial Performance Affect Marketing? Studying the Marketing-Finance Relationship from a Dynamic Perspective," Journal of the Academy of Marketing Science, 33 476-85. Luo, Xueming (2008), "When Marketing Strategy First Meets Wall Street: Marketing Spendings and Firms' Initial Public Offerings," Journal of Marketing, 72 98-109. Madden, Thomas J., Frank Fehle, and Susan Fournier (2006), "Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value through Branding," Journal of the Academy of Marketing Science, 34 224-35.

42 Marcus, Bruce W. (2005), Competing for Capital: Investor Relations in a Dynamic World. Hoboken, NJ: John Wiley & Sons. McAlister, Ligh, Raji Srinivasan, and MinChung Kim (2007), "Advertising, Research and Development, and Systematic Risk of the Firm," Journal of Marketing: A Quarterly Publication of the American Marketing Association, 71 35-48. McAuley, Tony (2006), "The Sweet Smell of Success," CFO Magazine, March. MacGregor, Donald G, Paul Slovic, David Dreman, and Michael Berry (2000), Imagery, Affect, and Financial Judgment, Journal of Psychology and Financial Markets, 1 104-10. Merton, Robert C. (1987), "A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, 42 483-510. Mizik, Natalie and Robert Jacobson (2004), "Stock Return Response Modeling," in Assessing Marketing Strategy Performance, Christine Moorman and Donald R. Lehmann, eds. Cambridge, MA: Marketing Science Institute, 29-46. Morse, Adair and Sophie Shive (2006), "Patriotism in Your Portfolio," Working Paper. Available at SSRN: Http://ssrn.com/abstract=406200, . Muoz, Sonia (2006), Wealth Effects in Europe: A Tale of Two Countries (Italy and the United Kingdom). Working paper 06/30, International Monetary Fund. O'Keefe, Daniel J. (2003), "Message Properties, Mediating States, and Manipulation Checks: Claims, Evidence, and Data Analysis in Experimental Persuasive Message Effects Research," Communication Theory, 13 251-74. Pearce, Susan M. (Ed.) (1994), Interpreting Objects and Collections. London & New York: Routledge. Raghubir, Priya and Sanjiv R. Das (2010 ), "The Long and Short of it: Why are Stocks with

43 Shorter Runs Preferred?" Journal of Consumer Research (forthcoming) Schoenbachler, Denise D., Geoffrey L. Gordon, and Timothy W. Aurand (2004), "Building Brand Loyalty through Individual Stock Ownership " Journal of Product & Brand Management, 13 488-97. Sercu, Piet M. F. A. and Rosanne Vanpee "Home Bias in International Equity Portfolios: A Review," Working Paper, Available at SSRN: Http://ssrn.com/abstract=1025806 Shefrin, Hersh and Meir Statman (1985), "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, 40 777-90. Smith, Daniel C. and C. W. Park (1992), "The Effects of Brand Extensions on Market Share and Advertising Efficiency," Journal of Marketing Research, 29 (08), 296-313. Srinivasan, Shuba and Dominique M. Hanssens (2009), "Marketing and Firm Value: Metrics, Methods, Findings, and Future Directions," Journal of Marketing Research, 46 293-312. Srinivasan, Shuba et al. (2009), "Product Innovations, Advertising, and Stock Returns," Journal of Marketing, 73 24-43. Statman, Meir (2004), "What do Investors Want?" Journal of Portfolio Management, 30 153-61. Tellis, Gerard J. and Joseph Johnson (2007), The Value of Quality,, Marketing Science, 26 758-73. Toronto Stock Exchange (2004), Canadian Shareowners Study 2004. Toronto, Canada: TSX Group. Tversky, Amos and Daniel Kahneman (1982), "Judgment Under Uncertainty: Heuristics and Biases," in Judgment Under Uncertainty: Heuristics and Biases, Amos Tversky, Paul Slovic, and Daniel Kahneman, eds. 3-22. Vogelheim, Paul, Denise D. Schoenbachler, and Geoffrey L. Gordon (2001), "The Importance of

44 Courting the Individual Investor," Business Horizons, 44 69-76. Wrneryd, Karl-Erik (2001), Stock-Market Psychology: How People Value and Trade Stocks. Cheltenham, UK: Edward Elgar. Zajonc, Robert B. (1980), "Feeling and Thinking: Preferences Need no Inferences," American Psychologist, 35 151-75. 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 (Muoz 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 companys 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 companys products and 6 = This companys products were very familiar to me. An ANOVA was performed on this variable, with Prior Brand Goodwill and Companys Home Country as independent variables. Consistent with the other recognizability manipulation check, the main effect of Prior Brand Goodwill on familiarity with the companys 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 Companys 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 Companys 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 Companys Home Country: (F(1, 125) = 0.44, p > .5).

46 Table 1. Description of the participants of the study: Personal characteristics of the investorrespondents
Present study sample Gender female male Age below 25 2545 4665 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) 1.39 11.3% 9.6% 31.1% 48.0% 15.2% 11.6% 22.9% 50.3% 1.66 55.9% 32.8% 7.9% 1.7% 1.1% 0.6% 6.3% 6.8% 15.9% 24.4% 46.6% 62.2% (less than 50 000) 37.8% (50 000 or more) .20 .24 32.0% 68.0% Comparison sample Chi square 3.57 23.7% 76.3% 2.67 .10 p value

.06

Education (highest) middle/high school vocational school college/bachelor university Yearly income 150 000 50 000100 000 100 001150 000 150 001250 000 250 001500 000 500 0011000 000 Total no. of stocks owned 0 12 stocks 35 stocks 610 stocks over 10 stocks

1.67

.20

23.4% (0-5 stocks) 76.6% (6 or more stocks)

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 Domestic company A1: 10.5%*a Non-domestic a company B1: 7.9 % * high recognizability, mediocre likeability Domestic company A2: 78.9 % *b Non-domestic b company B2: 92.3 %* high recognizability, high likeability Domestic company A3: 95.2 % *b Non-domestic b company B3: 86.7 %*

Did you recognize [company A] by name?

Notes. The figures indicate the proportion of investors who had prior recognition of the companys 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 Domestic company A1: not relevant Non-domestic company B1: not relevant high recognizability, mediocre likeability Domestic N/S company A2: 3.33 Non-domestic N/S company B2: 2.65 high recognizability, high likeability Domestic company A3: 4.07* Non-domestic company B3: 3.49*

Considering the firms products/services, what is your view of the brand or trademark?

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 Low recognizability: Domestic company A1 Non-domestic company B1 High recognizability mediocre product likeability: Domestic company A2 Non-domestic company B2 High recognizability high product likeability Domestic company A3 Non-domestic company B3 Investor-Ad Emphasis = Low product-evaluative content 2.41 (1.77) 2.53 (2.03) Investor-Ad Emphasis = High product-evaluative content 2.73 (1.83) 3.00 (1.77)

1.66 (1.65) 1.79 (1.82)

1.74 (1.54) 2.87 (1.63)

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 companys 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
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.

low level of product-evaluative content

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. Novexels international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

Low recognizability

Prior Brand Goodwill

Novexels 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

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 Specsaverss ads or stores when you have been buying glasses for yourself or for a family member. Specsaverss 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 Zeisss technology. Zeisss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

low level of product-evaluative content

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 Specsaverss ads or stores when you have been buying glasses for yourself or for a family member. Specsaverss 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 Zeisss technology. Zeisss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

High recognizabi lity, mediocre likeability

Prior Brand Goodwill

High recognizabi liy, high likeability

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 investors overall evaluation of a companys product design, the higher is her interest to invest in the company. Second, the greater the personal relevance that an investor associates with a companys 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 companys 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 companys 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 companys 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 companys product design influence their investment decisions towards the companys 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 companys product design have been presented by Andrew Hargadon and Brigitte Borja de Mozota. Hargadons work has concentrated on illustrating often through elaborate case studies such as that of Edisons 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/markets perceptions of the companys 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 Hargadons and Borja de Mozotas 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 companys 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 companys product design influence their willingness to invest in the companys 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 investors positive evaluation of a companys 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 companys financial returns, based on ones evaluation of the companys product design, is consequently likely to increase ones interest to invest in the companys 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 companys product design may increase an investors interest to invest in the company is that according to a common psychological notion, an individuals positive attitude towards (i.e. positive overall evaluation of) an object in this case a company's product design will manifest in the individuals 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 companys 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 investors expectations about the financial returns of the company and should therefore increase ones 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 investors subjective, overall evaluation of the (goodness of the) companys product design has a positive effect on her interest to invest in the companys stock.

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 10200 percentage units within different subperiods (booms, busts) during the overall period of 19932003. 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 investors 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 (attitudebased favoring). In effect, this means that (increased) optimism about the companys 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 companys product design on investment interest will be partially (but not fully) mediated by the investors optimism about the companys financial returns. Furthermore, it may be that an investors investment interest will not only be influenced by her overall evaluation of the companys product design but it may also be influenced by how personally relevant the investor finds the companys product domain to be. With the personal relevance of the companys 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 companys 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 companys 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 companys 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 companys product domain has positive effect on her interest to invest in the companys 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 companys product domain on the investors interest to invest in the companys stock will be partially (but not fully) mediated by the investors optimism about the companys 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 companys 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 companys investment advertisement has a positive effect on investors interest to invest in the companys 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 nonresponse/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 COMPANYS PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANYS 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 companys 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 consumers 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 COMPANYS PRODUCT DESIGN, PERSONAL RELEVANCE OF THE COMPANYS PRODUCT DOMAIN, and, finally, OPTIMISM ABOUT THE COMPANYS 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 companys products (e.g., In other words: even in your own pocket, there might be a product whose functionality is ensured by Zeisss 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 subjects 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):
Lets 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 respondents 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 companys product design, personal relevance of the companys product domain, and optimism about the companys financial returns are detailed in the below Table 1.

Table 1. Measurement items of the covariates

Covariate
OVERALL EVALUATION OF THE COMPANYS PRODUCT DESIGN

Scale type Three-item, reflective scale 1. How good do you think that the firms products/services are in terms of functionality or usability? 0 = very bad 6 = very good 2. How good do you think that the firms products/services are in terms of design? 0 = very unattractive 6 = very attractive 3. Considering the firms products, what is your opinion about the firms product trademark? 0 = I dont like the product trademark at all 6 = I like the product trademark very much 1. Do you feel that the firms 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 firms product domain close to your heart? 0 = not at all close to my heart 6 = highly close to my heart 1. If you were considering to invest in the firm at the moment, what would be your hunch about the attractiveness of the firms business in terms of long-term investment returns? 0=highly unattractive 6 =highly attractive.

Reliability Cronbachs alpha=.85

PERSONAL RELEVANCE OF THE COMPANYS PRODUCT DOMAIN

Two-item, reflective scale

Cronbachs alpha=.80

OPTIMISM ABOUT THE COMPANYS FINANCIAL RETURNS

Single-item scale

N/A (due to single item)

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 companys investment ad (Hypothesis H5). Hypothesis H5 predicted that high product design emphasis in company investment ad would have positive effect on an individuals 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 companys investment advertisement had positive effect on investors general willingness to invest in the companys 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 companys 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 companys investment ad on investors interest to invest in the companys 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)
OVERALL EVALUATION OF THE COMPANYS PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANYS 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 COMPANYS PRODUCT DESIGN (F(1, 150) = 14.99; p = .0002) and PERSONAL RELEVANCE OF THE COMPANYS 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 COMPANYS PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANYS PRODUCT DOMAIN explain investors INTEREST TO INVEST in particular companies to

When the variables

a substantial extent. In other words, both an investors overall evaluation of the companys product design and the personal relevance that an investor attaches (at individual level) to a companys 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 COMPANYS PRODUCT DESIGN (upper panel) and PERSONAL RELEVANCE OF THE COMPANYS 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 nonsignificant (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 COMPANYS PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANYS PRODUCT DOMAIN per company. In other words, to the extent that investors overall investment interest differs by company or companys 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 companys 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 companys investment ad nor the positive effects of OVERALL EVALUATION OF THE COMPANYS PRODUCT DESIGN or PERSONAL RELEVANCE OF THE COMPANYS PRODUCT DOMAIN on INTEREST TO INVEST can be explained by mere differences in investors familiarities with the companies (cf. Frieder & Subrahmanyam 2005).
Interest to invest in the company

Overall evaluation of the companys product design Interest to invest in the company

Personal relevance of the companys product domain 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.

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 companys financial returns would partially mediate the effects of OVERALL EVALUATION OF THE COMPANYS PRODUCT DESIGN and PERSONAL RELEVANCE OF THE COMPANYS PRODUCT DOMAIN on the dependent variable INTEREST TO INVEST. This was tested by including OPTIMISM ABOUT THE COMPANYS FINANCIAL RETURNS as an additional covariate to the ANCOVA. As expected, OPTIMISM ABOUT THE COMPANYS 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 COMPANYS 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 COMPANYS 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 companys financial returns partially (but not fully) mediates the effects of overall evaluation of the companys product design and of the personal relevance of the companys 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 companys 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 investors overall evaluation of companys product design. This factor reflects the degree to which the investor perceives the companys 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 literatures notion about the marketplace distinction that can be achieved through designed artifacts. In earlier design management research, the goodness and effectiveness of a companys product design have mostly been assumed to influence peoples 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 peoples 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 companys 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 companys 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) investors overall evaluation of or liking for a companys 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 companys financial returns, and generate (B) some willingness to invest in the company over and beyond the companys 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 companys attempts to (1) attract investments from investors who are appealed by the companys 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 companys current or future product design. Attracting investors who are appealed by the companys 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 companys products as personally relevant. Relevant domains may be identified by asking the question: What activities, areas of interest, ideas, or ideals do our companys products support or represent? For instance, if the companys 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 companys 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 companys product domains as personally relevant, but additionally or alternatively also (b) those who have particularly positive overall evaluation or liking for the companys 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 companys 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 companys product domain(s) as personally relevant and the (partly overlapping) investor group that has overall liking for the companys product design, a useful way of promoting the company as an investment target will be to emphasize the companys 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 companys product designers (and product advertisement designers) in designing the companys 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 companys product domain personally relevant and/or have positive evaluation of the companys 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 companys (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 companys current or future products. Specifically, with hybrid business models we mean new business models, whereby corporate managers or entrepreneurs outline simultaneously (or, interdependently) 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 a)

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 peoples 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 literatures extant notion concerning processes and activities of designing at the strategic level of a companys 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 nonresponse 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.

References
Abelson, R P, Aronson, E, McGuire, W J, Newcomb, T M, Rosenberg, M, and Tannenbaum, P (1968) Theories of cognitive consistency: A source book Rand-McNally, Chicago, IL. Aspara, J, Olkkonen, R, Tikkanen, H, Moisander, J, and Parvinen, P (2008) A theory of affective self-affinity: Definitions and application to a company and its business Academy of Marketing
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).
5

Science Review, Vo12 No 3. Aspara, J and Tikkanen, H (2008) Interactions of individuals' company-related attitudes and their buying of the companies' stocks and products, Journal of Behavioral Finance Vol 9 No 2 pp 85-94 Borja de Mozota, B (2002) Design and competitive edge: A model for design management excellence in european SMEs, Design Management Journal, Academic Review Vol 2 pp. 88103 Borja de Mozota, B (2003) Design management: Using design to build brand value and corporate innovation Allworth Press, New York, NY. Borja de Mozota, B (2006) The four powers of design: A value model in design management, Design Management Review Vol 17 No 2 pp. 44-53 Borja de Mozota, B and Clipson, C (1990) Design as a strategic management tool, in Oakley, M, Borja de Mozota, B, and Clipson, C (eds) Design Management: A handbook of issues and methods Basil Blackwell, Oxford, UK, pp. 73-84 Bruce, M, and Bessant, J R (2002) Design in business: Strategic innovation through design Financial Times & Prentice Hall, Harlow, England. Buchanan, R (2008) Introduction: Design and organizational change, Design Issues Vol 24 No 1 pp. 2-9 Festinger, L (1957) A theory of cognitive dissonance Stanford University Press, Stanford, CA. Fishbein, M and Ajzen, I (1975) Belief, attitude, intention, and behaviour: An introduction to theory and research Addison-Wesley, Reading, MA. Frieder, L and Subrahmanyam, A (2005) Brand perceptions and the market for common stock, Journal of Financial and Quantitative Analysis Vol 40 No 1 pp 57-85 Ganzach, Y (2001) Judging risk and return of financial assets, Organizational Behavior and Human Decision Processes Vol 83 pp 353-370 Gigerenzer, G, Todd, P M, & ABC Research Group (eds) (1999) Simple heuristics that make us smart Oxford University Press, Oxford, UK. Grinblatt, M and Keloharju, M (2000) The investment behavior and performance of various investor types: A study of Finlands unique data set, Journal of Financial Economics Vol 55 No 1 pp 43-67 Grinblatt, M and Keloharju, M (2001a) How distance, language, and culture influence stockholdings and trades, Journal of Finance Vol 56 No 3 pp 1053-1073 Grinblatt, M and Keloharju, M (2001b) What makes investors trade?, Journal of Finance, Vol 56 No 2 pp 589-616 Grinblatt, M and Keloharju, M (2009) Sensation seeking, overconfidence, and trading activity, Journal of Finance Vol 64 No 2 pp 549-578 Hargadon, A B and Douglas, Y (2001) When innovations meet institutions: Edison and the design of the electric light, Administrative Science Quarterly Vol 46 No 3 pp 476-501 Hargadon, A (2005) Leading with vision: The design of new ventures, Design Management Review Vol 16 No 1 pp 33-39 Hertenstein, J H and Platt, M B (1997) Developing a strategic design culture, Design Management Journal, Vol 8 No 2 pp 10-19 Heskett, J (2001) Past, present, and future in design for industry, Design Issues Vol 17 No 1 pp 1826 Kahneman, D and Tversky, A. (1979) Prospect theory: An analysis of decision under risk, Econometrica Vol 47 No 2 pp 263-292 Keloharju, M, Nyborg, K G and Rydqvist, K (2005) Strategic behavior and underpricing in uniform price auctions: Evidence from Finnish treasury auctions, Journal of Finance Vol 60 No 4 pp 1865-1902 Kotler, P and Rath, G A (1984) Design: A powerful but neglected strategic tool Journal of Business Strategy Vol 5 No 2 pp 16-21 McIntyre, D. A. Steve jobs is no Robin Hood. 24/7 Wall St [online]. March 5, 2008. Available at:

http://www.247wallst.com/2008/03/apple-aapl-stev.html [Accessed April 5, 2008]. O'Keefe, D J (2003) Message properties, mediating states, and manipulation checks: Claims, evidence, and data analysis in experimental persuasive message effects research Communication Theory Vol 13 No 3 pp 251-274 Olson, E M, Cooper, R and Slater, S F (1998) Design strategy and competitive advantage, Business Horizons Vol 41 No 2 pp 55-61 Phatak, A. and Chandron, R (1989) Design positioning for strategic advantage, Design Management Journal Vol 1 No 1 pp 25-31 Rich, H (2004) Proving the practical power of design, Design Management Journal, Vol 15 No 4 pp 28-34 Schmitt, B H, Simonson, A and Marcus, J (1995) Managing corporate image and identity, Long Range Planning Vol 28 No 5 pp 82-92 Shefrin, H and Statman, M (1985) The disposition to sell winners too early and ride losers too long: Theory and evidence, Journal of Finance Vol 40 No 3 pp 777-790 Shefrin, H and Statman, M (1995) Making sense of beta, size, and book-to-market, Journal of Portfolio Management Vol 21 No 2 pp 26-34 Svengren, L. (1995a). Industrial design as a strategic resource, Proceedings of the European Academy of Design, vol 4. University of Salford, Salford, UK. Svengren, L. (1995b). Industriell design som strategisk resurs: En studie av designprocessens metoder och synstt som del i fretags strategiska utveckling (Doctoral dissertation). Lund University Press, Lund, Sweden. Tversky, A and Kahneman, D (1982) Judgment under uncertainty: Heuristics and biases, in Tversky, A, Slovic, P and Kahneman, D (eds), Judgment under uncertainty: Heuristics and biases Cambridge University Press, Cambridge, UK, pp 3-22 Zajonc, R B (1980) Feeling and thinking: Preferences need no inferences, American Psychologist Vol 35 No 2 pp 151-175

Appendix A. Stimuli presented to the experiment subjects, according to the conditions of the main factors
Product design emphasis in company investment ad high
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

low
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 Specsaverss ads or stores when you have been buying glasses for yourself or for a family member. Specsaverss 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 Zeisss technology. Zeisss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

everyday

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 Specsaverss ads or stores when you have been buying glasses for yourself or for a family member.

Company/ product type

Specsaverss 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,

hightech

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 Zeisss technology. Zeisss 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

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

low
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. Novexels 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 Travelexs services or outlets even yourself, when traveling in Europe or elsewhere in the world. Travelexs international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

medical

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.

Company/ product type

Novexels 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 Travelexs services or outlets even yourself, when traveling in Europe or elsewhere in the world. Travelexs international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

service

Where product design meets investor behavior

How 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 companys products influence their willingness to invest in the companys stock. The focus is on individual investors, and the reported empirical studies include quantitative surveys and an experiment, conducted among Finnish individual investors. The studies show that positive product design evaluations tend to (a) generate optimism about the financial returns of a companys stock and (b) even elicit extra willingness to invest in the company, over and beyond its expected financial returns. Specifically, both optimism about a companys 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 companys products represent or support. Such domains can be various activities or areas of interest (e.g., road traveling, gardening, sport, electronics,aeronautics) or more abstract themes or ideals (e.g., mobility, healthcare, environment-protection). The second influential factor is (2) the investors overall affect or liking for a companys product design. This factor reflects the degree to which the investor perceives the companys products to be pleasant, attractive, good, and likeable overall. The results imply that companies can utilize product designs potential to attract investments from investors who are appealed by the companys products and their design. Also hybrid business models can be created, which are based already at the outset, on certain investors fondness of the companys current or future product design.

www.taik.fi/bookshop

ISBN 978-951-558-304-8 UNIVERSITY OF ART AND DESIGN HELSINKI

Cover design by Niina Turtola

Where product design meets investor behavior

Publication series of the University of Art and Design Helsinki A 99 www.taik.fi/bookshop Helsinki 2009 Jaakko Aspara Graphic design: Niina Turtola ISBN 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 17

2.1 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 24 2.2 Design management and investors 26

3 Theory development: Product design and investors 30

3.1 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 38 3.2 Product design influences on investment behavior 41 3.2.1 Personal relevance of the domains represented by a companys products 42 3.2.2 Overall affect for a companys product design 53 3.2.3 Interdependencies 59 3.2.4 Review of hypotheses 59

4 Methodology of the empirical research 65

4.1 Philosophical-paradigmatic choices 66 4.2 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 72
5.1 Sample and data gathering 73 5.2 Overall study design Studies 1a and 1b 76 5.3 Study 1a 78 5.3.1 Method Model 1a 78 5.3.2 Results Model 1a 91 5.4 Study 1b 96 5.4.1 Method Model 1b 96 5.4.2 Results Model 1b 104

6 Study 2 113
6.1 Method Study 2 114 6.2 Results Study 2 128

7 Discussion 139
7.1 Contributions to research 140 7.1.1 Product design and investors needs 141 7.1.2 Investors and product design In what sense? 148 7.2 Practical implications to design management 154 7.2.1 Attracting investments from investors who are appealed by the companys product design 155 7.2.2 Creating hybrid business models based on appealing product visions 158 7.3 Limitations and further research 161 7.3.1 Limitations of the present studies 161 7.3.2 Avenues for further research 164

References 168 Appendixes (A, B, C) 179 Abstract 185 List of Tables 187 List of Figures 187 List 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-running 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 learning has actually been greater this time: When you are truly interested in the topic, you also tend to learn a lot. This time Ive 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 ClarkMurphy from Edith Cowan University (Joondalup, Australia) and Professor Tore Kristensen from Copenhagen Business School (Copenhagen, Denmark) for acting as the pre-examiners of my dissertation. Likewise, I am highly grateful to Research Director, Dr. Brigitte Borja de Mozota from Parsons 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 supervisor, 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 comments 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 working 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 Mattelmki and Dr. Maarit Mkel, 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. GloStras 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, comments, 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

1 Introduction

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; Heskett, 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 emerging 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 Bessants 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 strategy, 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 Valtonens 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

introduction

(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 strategic perspectives of design management. That is the role and behavior of 1 . investors with respect to a companys products and product design strategy This ignorance is rather surprising, considering that investors are, in the 2 , the ultimate overseers of a companys strategies, as contemporary view well as suppliers of capital needed for implementing the strategies. Moreover, 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 companys stock and/or trading it. The trading at large determines, in turn, the current market valuation of the companys 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 companys (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 firms stock. Shareholder is used to denote

the particular investors who hold a particular firms 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).

10

where product design meets investor behavior

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 investors 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 contributes 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 shareholders 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 peoples subjective evaluations of companies products influence their attraction to companies as investors directly. For instance, Frieder and Subrahmanyam (2005) hypothesize that individual investors may prefer stocks of companies that have highly regarded, high-quality products i.e., peoples 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

introduction

11

Research gap addressed in the present dissertation: Investor psychology/behavior regarding product design

Design Design management management (strategic perspective) (strategic perspective)

Behavioral Behavioral finance finance (investor (investor psychology/ psychology/ behavior) behavior)

Figure 1. Thematic depiction of the research gap

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 theoretical development and empirical evidence related to the issue of how investors relate to a companys product design. This issue, in turn, coincides with the question of whether and how individuals product design evaluations 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 companys product design may attract investors.

12

where product design meets investor behavior

Figure 1 illustrates how this research gap resides in a conjunction whereby design managements 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 influence their decisions to invest in companies stocks. The core research question is: How do investors subjective perceptions and evaluations of a companys product design influence their investment decisions towards the companys 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 3 . management capabilities, processes, or practices as main objects of study The focus is not even on investors perceptions of such capabilities or practices 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).

introduction

13

 nvest some of their money (or savings) in the stock market. This means i that institutional investors and investment intermediaries (such as investment analysts) are outside the primary scope of the present dissertation. Theoretically, I develop hypotheses about the effects that product designrelated perceptions and evaluations have on investors decisions to invest in companies stocks on the basis of (social) psychological theories on productrelated 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 investment decisions, and by presenting supportive findings from extant behavioral 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 peoples 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 investment decisions of a sample of 340 investors. This data consists of investors retrospective self-reports about their decisions to invest in the stocks of particular 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 investing. 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

14

where product design meets investor behavior

factor is (1) the personal relevance or importance that an investor attaches to life domains represented by a companys 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 investors overall affect or liking for a companys product design, reflecting the degree to which the investor perceives the companys 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 companys products as well as (2) his5 overall affect for the companys product design have positive effect on (A) his optimism about the companys 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 investors determination 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 financial 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 pleasurable 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.

introduction

15

& Koskinen, 2005; Clark, Smith, & Yamazaki, 2006; Koskinen, Battarbee, & Mattelmki, 2003; Normann & Ramrez, 1993; Verganti, 2003) especially by demonstrating that product design will not only create strategic distinction 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 companys product design) and creating strategic missions and business models that take into account, already at the outset, certain investors potential fondness of the companys 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 business 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 findings 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.

16

where product design meets investor behavior

2 Literature background

17

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 product 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 DMIs 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 illustrate the benefits of corporate investment in design (Johansson & Svengren, 2003). The project also led to DMIs 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 LBSs 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

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head of LBSs Department of Design Management, Peter Gorb, the discussion 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). Gorbs 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 particularly 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 corporations (i) products, (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 literature. By and large, these themes continue to be in place today and can be identified to deal with (1) strategic relevance of the marketplace distinction that is achievable through designed artifacts, (2) strategic relevance of

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managing the processes and activities of designing, and (3) strategic relevance 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 artifacts
Indeed, 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 artifacts consumer- and user-valued aspects, elements, functions, or characteristics 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

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of design characteristics (i.e., functionality, quality, appearance, ergonomics, 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 demonstrate the distinction that can be achieved through product designs, espe6 inasmuch as the distinction manifests in consumers or buyers cially 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 companies eventual market positions and performances have also been increasingly demonstrated (e.g., Hertenstein, Platt, & Veryzer, 2005; Hertenstein, Platt, & Brown, 2001).

2.1.2 strategic relevance of the processes and activities of designing

While the above theme deals with the ultimate (external) marketplace distinction 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 (inter7 . nal) processes and activities of designing within the company

[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.

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Strategic, management perspectives regarding this second theme evolved from design managements early focus on administration of (internal as well as external/outsourced) designer staff, resources, and projects (see e.g., Gorb, 1990; Topalian, 1980). While the importance of such operational 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 contribute 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, contributing 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, Kristensen 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 8 . knowledge about the management of the overall design process 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, ONeal, McNeal, & Parasuraman, 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; LeonardBarton, 1991, 1992; LeonardBarton & Rayport, 1997).

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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 related 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 organizational 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 & Grnhaug, 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 strategic 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 strategic 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 processes 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 strategic (brand) values and mission to the attributes and style of the tangible products that it develops/designs (e.g., Karjalainen, 2004). An example of the latter is where product design processes, activities, and capabilities and

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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 associated with the latter approach.

2.1.3 strategic relevance of coordination between various designs and coherent corporate identity
A third major strategic theme in design management literature has been that focusing on the coordination and integration of a companys designs and design strategies across the various artifact classes (especially, product design, informational/graphic design, and environmental design). The objective of such coordination would be to make sure that the different corporate designs contribute to a coherent corporate identity (or image), as perceived by different stakeholders or at least that messages conveyed would not be divergent or inconsistent. As noted by many observers (e.g., Johansson & 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 companys entire strategy implemented in the form of the various design objects of the company and through cooperation of the organizations product designers, graphic designers, architects, management development 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 materials, letterheads, vehicles, buildings, etc. (see e.g., Dowling, 1994; Melewar

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& 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; Topalian, 2003). Actually, this time the pendulum of focus shifted from the management 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 corporate identity and image, many contributors were also re-emphasizing the fact that a companys 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 corporate 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 companys 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 innovative products Sonys identity is largely conditioned by its products. (Olins, 1989/1990, cited in Bruce and Bessant, 2002, p. 95).

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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 perspectives to design, is the role or behavior of investors in relation to a companys product design. Now, where rarely occurring in design management literature, references 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 coordinated 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 perspectives to the relation between investors and a companys product design have been presented by Andrew Hargadon and Brigitte Borja de Mozota. Hargadons work has concentrated on depicting often through elaborate case studies 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, 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 play an important role in firms 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

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the way from customers/markets perceptions of the companys 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 Hargadons and Borja de Mozotas 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 (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 so far emerged into the generalizable mechanisms of how a firms product designs potentially attract investors. Particularly, even if we know and can (intuitively) assume 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 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 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 level. The found correlation (Rich, 2004) between a precarious measure of good design such as the number of design awards won by companies 10 tells us, indeed, nothing about the and above-average stock market returns perceptual and evaluative mechanisms involved in investors decision-mak11 . As a matter of fact, these stock return studies and measurements as ing 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

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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 companys product design influence their investment decisions? This is the main question which I aim to examine in this dissertation, theoretically as well as empirically. In the absence of design management theory on the issue, I will develop my theoretical examination by drawing 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 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 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 subjective perceptions and evaluations of companies product design influence their investment decisions. The contributions of my study address various streams of design management. 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 10200 percentage units within different subperiods (booms, busts) during the overall period of 19932003.

[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. 3334).

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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 companys product design can create in the stock market, by studying the product design evaluations of investors. 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 Discussion chapter.

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3 Theory development: Product design and investors

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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 factors affect investment behavior (section 3.2), I will review the specific investment 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 guided 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 companys 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 ones investments has been explored (e.g., Coval & Moskowitz, 1999; Grullon, Kanatas, & Weston, 2004; Huberman, 2001;

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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 rather silent on such aspects, recent behavioral finance research has begun to recognize that expected financial returns and risks may not entirely determine an investors 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 investment 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 theorize 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 confidence
In the present research framework, I do not focus on (measuring) the financial 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 mathematical calculation and forecasting of probabilities but also by ones subjective

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intuition and sentiments (see e.g., Hirshleifer, 2001; Wrneryd, 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 companys 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 companys financial returns and/ 12 . Since expected finanor lower risk that those returns are perceived to bear 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 expectations about the financial returns from stocks. In simple terms, the more optimism an investor has about the financial returns of a companys stock, the more attraction he will have towards the stock and the more likely he will invest in it. This makes an investors optimism about the financial returns of a particular companys 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 unreasonably high or inflated financial return expectations (cf. Hirshleifer, 2001; Wrneryd, 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 investors expectations of a particular stock. Thus, I view an investors 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

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as a simple phenomenon that concerns the overall positivity of his expectations about the stocks financial returns and, hence, attraction to it. Secondly, since it is not only the overall/likeliest level of expected financial returns of a stock (i.e., optimism) that determines, according to finance thinking, ones 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 researchers 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 expectations 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 investors subjective view of the probability distribution (and related standard deviation) concerning how much he expects the financial returns of a stock to deviate from their likeliest mean (or expectancy) value. In contrast, confidence could be understood as the investors (secondorder) belief of the extent to which his subjective view of that probability distribution is correct or precise vs. imprecise or ambiguous (cf. Campbell 13 . & Krussl, 2007; see also Uppal & Wang, 2003) In any case, we can thus assume that the risks that an investor perceives

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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. Therefore, an investors confidence in his expectations about the financial returns of a particular companys 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 unreasonably high confidence in ones own expectations (cf. Daniel, Hirshleifer, & Subrahmanyam, 2001; Wrneryd, 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 investors expectations about a particular stock (cf. Deaves, Lders, & Duo, 2009; Jonsson & Allwood, 2003).

3.1.2 familiarity and consideration

Economics and finance literatures have traditionally assumed that all the worlds stocks and other investment opportunities as well as all relevant information about them are readily available and public for investors (Wrneryd, 2001). Given these assumptions, the mainstream research has not paid much attention to how investors actually end up considering certain 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-Kruter, 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.

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& Sharpe, 2008) has increasingly embraced the idea of viewing stocks as marketed goods or products viewing the processes of ones 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 consideration, 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 investors familiarity with a company 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 & Moskowitz, 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 peoples investment decisions, I choose to present as my first baseline hypothesis the following:

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Hypothesis H0: An investors familiarity with a company has positive effect on his determination to invest in that companys 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 literature. 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 investors familiarity with a company, another relevant construct pertaining to the investment decision process is the more dynamic concept of consideration of alternatives. Specifically, I pay attention, in the present framework, to the degree of consideration that an investor, who ponders whether to invest in a particular company, 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 company) is a construct, or variable of interest, too.

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3.1.3 extra investment willingness, beyond financial returns

As 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 perceived 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 indifferent 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 categorically 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 recognize that the expected financial returns and risks may not entirely determine an investors 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 ones willingness to invest in a certain companys stock is determined by the expected financial return-risk profile of the stock, one may have an additional component of investment willingness 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 ones 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 approximately 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.

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Determination to invest in company As stock when equal financial returns Extra willingness to invest in company As stock, beyond its financial returns

Extra willingness to invest in company Bs stock, beyond its financial returns

Willigness to invest in company As stock, as determined by As expected financial returns

B
Willigness to invest in company Bs stock, as determined by Bs expected financial returns

Note. Assume that a person invests in company As stock.

Figure 2. Illustration of the construct determination to invest in company As stock when it has equal expected financial returns as another stock B.

Preparedness to invest in company As stock with lowered financial returns Extra willingness to invest in company As stock, beyond its financial returns Extra willingness to invest in company Bs stock, beyond its financial returns

Willigness to invest in company As stock, as determined by As expected financial returns

Willigness to invest in company Bs stock, as determined by Bs expected financial returns

Note. Assume that a person invests in company As stock.

Figure 3. Illustration of the construct preparedness to invest in company As stock with lowered financial returns.

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invest in each of them and, hence, indifferent to which to choose. Nevertheless, 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 determination to invest in company As 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 individuals extra willingness to invest in a certain company As stock beyond its financial returns may even manifest in his preparedness to invest in company As stock with lowered financial returns. Clearly, if an individual decides to invest in company As stock even if he expects it to have a bit lower financial returns at a given risk level than company Bs stock, the individual has obviously some extra willingness to invest in company As 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 companys 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 company As stock over another company Bs stock. In Figure 2, the white parts of the two columns represent ones willingness to invest in company As and company Bs 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,

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additionally, extra willingness to invest in both companys stocks, beyond their financial returns. However, the investors extra willingness to invest in company As stock is greater than his extra willingness to invest in company Bs stock. The difference between the sizes of these extra willingness components will, in this case, constitute our variable of interest, determination to invest in company As stock when it has equal expected financial returns as another stock B assuming that the investor ends up investing in company As stock. In Figure 3, in turn, the white parts of the columns represent, again, an investors willingness to invest in the companies stocks, as determined by the stocks expected financial returns. Now, the expected financial returns of company Bs stock are evidently greater than those of company As. However, the investor has extra willingness to invest in company As stock enough to make his total willingness to invest in company As stock (white part + colored part) slightly greater than his total willingness to invest in company Bs stock. The difference between the sizes of these extra willingness components will, in this case, constitute our second variable of interest, preparedness to invest in company As stock with lowered financial returns assuming that the investor ends up investing in company As 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 mechanisms 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

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attaches to a certain domain(s) which the companys products are perceived to represent or support and (2) the investors overall affect for, or affective evaluation of, the companys product design. To be able to follow the theory/hypothesis development more conveniently, the reader can refer to Figure 4 and Figure 5 on pages 6162, 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 potentially have on their investment decisions beyond financial returns expected from companies stocks (i.e., the variables introduced in section 3.1.3: determination to invest in a companys stock rather than in another stock that has similar expected financial returns; preparedness to invest in a companys 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 companys products

In this section, I develop hypotheses concerning how the personal relevance that individuals attach to domains (of life) which a companys products represent will influence their investment behavior, or behavioral tendencies, towards that companys stock. First of all, it is a commonplace notion in product design and develop-

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ment research (e.g., Battarbee & Mattelmki, 2002; Battarbee & Koskinen, 2005; Kreuzbauer & Malter, 2005; Normann & Ramrez, 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 companys products. Notably, personal relevance is a phenomenon to which consumer researchers often refer when studying peoples 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 individuals identity, self-image, or self concept and, therein, his personally important interests, needs, and values (Bloch, 1981; Celsi & Olson, 1988; Zaichkowsky, 1985);

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(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 identification 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) selfexpression. a) information perspective. The first notable aspect of the personal relevance 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 products domain motivates a person to engage in (intentional) ongoing search of information concerning the domain as well as increases ones subjective attention 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 ones 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:

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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 ones familiarity with a certain product or certain products, in turn, likely increases ones 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 companys products is probable. In other words: Hypothesis H2: An investors familiarity with a particular companys 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 company may initially come to catch ones 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 companys products represent a domain which is personally relevant to the investor and which he therefore has (and obtains) lots of knowledge about. For instance, an investor who finds motoring or car-driving as a personally highly relevant domain is likely to be(come) familiar with

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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--vis consideration given to alternative stocks. With respect to this consideration, we might expect based on the extant finance research that ones 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 individuals familiarity with a particular companys 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 companys financial returns (Barber & 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 hypotheses 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 investors familiarity with a particular companys products has negative effect on the consideration that he gives to other companies as alternative investment targets. Hypothesis H4.0a: An investors familiarity with a particular companys products has positive effect on the confidence that he has in his own expectations about the financial returns of the companys stock. Hypothesis H4.0b: The confidence that an individual has in his own expectations about the financial returns of a particular companys

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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 knowledge 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 companys product attributes may allow the individual to formulate more specific questions (to himself) about the company as an investment target, relative to alternative investments targets in the same or other industries. Consequently, the investor may be motivated to exercise more information search and consideration both on the focal company in question and its alternatives (cf. Gursoy & McCleary, 2004). Likewise, relatively wide and heterogeneous prior knowledge of a companys product attributes and the questions it helps to raise may actually decrease the investors confidence in his initial expectations of the companys financial returns. Second, familiarity with a particular companys 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 competing 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 companys products stems from personal relevance of the life domain represented by the products, the individual may be motivated to find out the strengths and weaknesses of possible 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

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following alternative hypotheses to the ones above (H3.0, H4.0a): Hypothesis H3.1: An investors familiarity with a particular companys products has positive effect on the consideration that he gives to other companies as alternative investment targets. Hypothesis H4.1a: An investors familiarity with a particular companys products has negative effect on the confidence that he has in his own expectations about the financial returns of the companys stock. b) self-expression perspective. Beyond the contribution of the perceived relevance of a companys product domain to an investors information processing about investment alternatives, personal relevance may also influence the consideration he gives to the alternatives through self-expressive tendencies of the investor. The underlying theoretical argument is the following. 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 ones self or identity (or have self-affinity for it; see Aspara et al., 2008). What an individuals 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 com15 . It can be pany that designs and produces products that represent the domain 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 support or represent car-driving (such as car companies, tire companies, etc.). Similarly, an investor who finds gardening a personally relevant domain

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can be expected to have willingness to support that domain by investing in a company whose products represent gardening (such as a company designing garden tools). Thus, when an individual is in the course of considering companies for investment purposes, his viewing a particular companys products as being supportive or representative of a domain which he perceives personally selfrelevant 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 targets, 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 persons final investment decision may be determined relatively swiftly in favor of one company that has products expressive of ones 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 ones 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).

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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 companys 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 individuals self(-concept) is likely to manifest in his investment decision(s), as well, as a preference for a company whose products support or represent that domain. The effect of personal, product-related attitudes on investment preferences has earlier been demonstrated by Getzner & Grabner-Kruter (2004) yet only in regards to ones attitude towards green products correlating with ones 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; Nilsson, 2008; Schueth, 2003; Getzner & Grabner-Kruter, 2004). However, these extant pieces of literature have concentrated, again, on ethical investing, 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 individuals investment decision in favor of one company over others that have approximately similar expected financial returns. But it may

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even make an individual satisfied with lower financial returns from the focal companys stock than from others. Namely, insofar as ones perceived personal relevance of a domain leads to the aforementioned willingness to give supportive treatment to a domain (and ones 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 investing 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 financial 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) pleasure, such an investment motivation may also be considered semi-rational (from the investors subjective point of view). Namely, by investing in a companywhose products support or represent a personally valued domain (e.g., a sport), one can aim to participate in advancing the viability and development 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.

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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 companys 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 investors evaluation of how (or the context in which) a company makes its money especially the extent that its product domain is personally relevant 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 companys 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 investors 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-Kruter, 2004; Statman, 2004). Nevertheless, 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 supportive treatment and giving of scarce resources to the companys 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 ones (conscious) willingness to support the company, by investing in its stock. Indeed, including this mediating variable in the analysis enables

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verification of the very premise stemming from the identification and self-affinity theories that the influence of identification on ones behavior occurs partly through ones willingness to give supportive treatment to the object of identification.

3.2.2 overall affect for a companys product design

In this section, I develop hypotheses concerning how investors overall affect for a companys product design will further influence their investment behavior, or behavioral tendencies, towards that companys stock. Here, there are three main ways of potential influence: the role of affect (a) in selection heuristics, (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 companys products, an individual investor may have positive (or negative) overall evaluation of the companys product design. As increasingly acknowledged even by economics and finance literatures (Slovic et al. 2002a, 2002b, 2007), an individuals 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 experienced as a feeling state (with or without consciousness) and demarcating a positive or negative overall quality of the object. As such, the affective evaluation 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 summary evaluation of the object on bipolar dimensions of positive vs. negative impressions, such as goodbad, pleasantunpleasant, likeabledislikeable, attractive-unattractive (Ajzen, 2001). Notably, feelings of goodness, pleasantness, and attractiveness evoked by products (rather than their mere appearance/good-lookingness or

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technical functionality) are also the main evaluative dimensions for products in contemporary design research (e.g., Jordan 2002; Norman, 2004). Nevertheless, instead of being interested in consumers or users evaluations 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 companys product design? How good, pleasant, and attractive does the investor find the companys product design to be overall? In effect, evaluative images, marked by positive and negative affective feelings, guide human judgments and decision making, along with (rational) thinking and reasoning (Damasio, 1994; Slovic et al. 2002a, 2002b, 2007; Zajonc, 1980). Therefore, images and affective evaluations of companies may be a major basis on which individuals make investment decisions, as well (MacGregor et al., 2000). Notably, since an individuals 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 approximations of the return-risk profiles of alternative stocks. During investment considerations, 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 product 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 information 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-

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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 individuals positive affective evaluation of a companys 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 investment decision in favor of the companys 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 alternatives. Thus: Hypothesis H8: An investors positive overall affect for a particular companys product design has negative effect on the consideration that he gives to other companies as alternative investment targets. Hypothesis H9: An investors positive overall affect for a particular companys product design has positive effect on his determination to invest in that companys 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) psychology notion that an individual who has a positive overall attitude (and, thereby, affect) towards an object here, a companys 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 companys product design will not only e.g. talk favorably about the products (and perhaps buy or use them) but also express his positive affect

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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 ones special affect towards something may even lead to outright desire to possess it. This has been suggested by social psychologists and sociologists studying peoples fondness of personal collections. Specifically, 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). Collection researchers also explicitly note the close relationship between ones 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, ones personal belonging (Danet & Katriel, 1989; cf. Tuan, 1984). I extend this theory about possessions to a companys product design by viewing a companys 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 Fords product design, ownership of Ford Motor Companys stock can be partially motivated by such a collection or possession motive. Thus, it may be that having a stronger affective evaluation of a companys product design results in some degree of outright desire to possess the company, by way of investing in and owning the companys 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 companys stock rather than other stocks with equal financial returns (hypothesis H9) but also in the individuals preparedness to invest in the companys stock with lowered financial returns. Thus, my additional hypothesis is:

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Hypothesis H10: An investors positive overall affect for a particular companys product design has positive effect on his preparedness to invest in that companys stock with lower financial returns expected from the stock than from other stocks. Again, this proposition suggests that an investors 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 companys product design (H9 and H10) may, again, be either direct, or channeled 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 investors affective evaluation of a companys product design influence the consideration he gives to alternatives and/or willingness to invest in the companys stock beyond financial returns, but it may also affect his actual expectations of the financial returns from the companys 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 companys

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.

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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 companys 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 companys 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 companys product design are likely to generate optimism about the financial returns of the companys stock and/or (more or less nave) confidence in ones financial expectations. Thus, I hypothesize: Hypothesis H11: An investors positive overall affect for a particular companys product design has positive effect on the optimism in his expectations about the financial returns of the companys stock. Hypothesis H12: An investors positive overall affect for a particular companys product design has positive effect on the confidence he has in his own expectations about the financial returns of the companys stock.

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3.2.3 interdependencies
Along 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 baseline 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 investment behavior constructs they pertain to. Specifically, Figure 4 focuses on those hypotheses (H1, H3-H5, H8, H11-H12) that address the effects of an investors perceptions and evaluations of a companys product design on his financial expectations about a companys stock (optimism and confidence

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about financial returns) as well as on consideration given to alternative investment targets. Figure 5, in turn, focuses on those hypotheses (H2, H6-H7, H9-H10) that address the effects that an investors product design -related perceptions and evaluations potentially have on his investment decision beyond the financial returns expected from the companys 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 companys product domain and overall affect for the companys 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 investors product design -related perceptions and evaluations. They include an investors overall affect for the companys 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 companys 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 companys 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 present 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, corresponding 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.

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H5:

3
H3.0: / H3.1: + H4.0b: H4.0a: + / H4.1a: H1: +

Consideration given to altenative investment targets (other than company Y)

2.ii
Familiarity with company Ys products Confidence about company Ys financial returns

Figure 4. Summary of hypotheses: The effects of an investors evaluations of a companys product design on his financial expectations about the companys stock and consideration of alternatives (Model 1a). Optimism about company Ys financial returns
H12: + H11: + H8:

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Perception that company Ys products represent/ support domain x

2.i

Personal relevance of domain x

H13: +

Overall affect for company Ys product design

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62

2.ii
Perception that company Ys products represent/support domain x
H1: + H0: + H6: + H7: +

3
Familiarity with company Ys products
H2: +

Familiarity with company Y

2.i
H13: + H9: + H10: +

Personal relevance of domain x

Willingness to support company Y by way of investing

Determination to invest in company Ys stock rather than in other stocks that have approximately equal financial returns

Figure 5. Summary of hypotheses: The effects of an investors evaluations of a companys product design on his extra investment willingness, beyond expected financial returns (Model 1b). Preparedness to invest in company Ys stock with lowered financial returns

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Overall affect for company Ys product design

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 managements tasks). Now, consider that the hypotheses presented thus far suggest rather unanimously that an investors (positive) evaluations of a companys products 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. Taking 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 advertisement (ad) the investors general willingness or interest to invest in the company gets increased. Namely, higher product design emphasis in a companys 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 companys product design (and domains that the products support). An opposite case occurs when an investor does not come to think at all about the companys product and product design when considering the company as an investment target. In such a case, the (potentially positive) product design evaluations naturally would not have much effect on the investors 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. Assuming 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,

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increase peoples willingness to buy the cruise. In a similar vein, the product design -emphasis in a companys investment advertisement can be expected to have positive effect on general willingness to invest in the companys stock among investors. Summarizing the above discussion, my final corollary-like hypothesis is: Hypothesis H14: Product design emphasis in a companys investment advertisement has positive effect on investors general interest to invest in the companys stock.

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4 Methodology of the empirical research

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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 relationships 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 products, 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 cognitive research program, which is common in consumer research (Anderson, 1986). Thus, the empirical studies represented an approach of betweensubjects testing of hypothesized relationships among constructs (e.g.: Will individuals who have greater affect for a companys 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, 20 2007).

[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.

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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 companys 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 & Subrahmanyam, 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; Statman, 2004). Fourth, it was assumed that credible and valid data about both an individuals attitudes and his behaviors can be gathered by asking the individual 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 ones 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 triangulation (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 decisions that the investors had recently made was considered advantageous due to the very fact that the data would pertain to decisions that the investors

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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 21 investment intentions.

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 gathered from the same investors through one and the same survey (questionnaire), while the last study (Study 2) is based on data gathered from different investors at a different instance.

4.2.1 studies 1a and 1b

Studies 1a and 1b are based on the methodological approach of causal modeling of correlational data on latent variables. That is an approach which has in recent decades been used increasingly often in psychological and consumer research to test or confirm hypothesized effects of individuals attitudes 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 measures 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-

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22 ships (Bentler, 1980) . 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 (correlational) 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. 6162). 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 questionnaire) 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-)manipulations 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 implemented (to the attitudinal constructs) before the outcome (behavior) was

[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.

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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 behavior 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 asking them about their investment motivations in general or presenting them with entirely hypothetical investment scenarios. However, the use of retrospective 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). Therefore, 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 2
Besides not relying on retrospective data, Study 2 would, in fact, apply the most traditional and well-accepted methodological approach to studying individuals 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 studies 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

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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 product 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.

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5 Studies 1a and 1b

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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 consumer 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 stockowners 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 considered 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 summer 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

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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 nonresponse/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 nonresponse/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 respectively 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.

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Table 1. Description of the sample of Studies 1a and 1b: Personal characteristics of the investor-respondents
Overall sample Gender female male Age below 15 1525 2640 4160 over 60 Education (highest) middle school high school vocational school college/bachelor university/master Monthly income below 2000 20003999 40005999 over 6000 Total no. of stocks owned 1-2 stocks 3-5 stocks 6-10 stocks over 10 stocks 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% 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% 1.990 .921 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% 8.993 .174 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% 14.865 .021 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% 12.686 .123 23.7% 76.3% 22.5% 77.5% 28.4% 71.7% 18.3% 81.7% 13.022 .111 Company As Company Bs Company Cs Chi square investors investors investors 2.951 P value

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Unfortunately, I am unaware of any studies that would map the current 24 , which means that I am characteristics of average Finnish stock investors unable at this time to compare the characteristics of the sample to the general stock investor population. However, the distribution of investor characteristics in the sample seems to accord to an intuitive notion of individual investors: 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 background variables between investors who had invested in the different companies 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 Cs 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.

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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 expectations 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) investors optimism and confidence about the financial returns from the companys stock as well as consideration he gave to alternative investment opportunities were framed as if the companys stock had been a standalone investment opportunity. In contrast, questions pertaining to dependent variables in Model 1b (Figure 5) investors determination to invest in company As stock when it has equal expected financial returns as another stock B and investors preparedness to invest in company As stock with lowered financial returns were framed as if the investment in the companys 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 technique 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

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(Fornell & Bookstein, 1982). This shows in the fact that some of the constructs were measured with single-item/question scales, while some were measured with multiple items/questions.

5.3 study 1a
5.3.1 method model 1a
Model 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) without framing the questions in a way that would have assumed that the investment had been a choice between two stocks. Specifically, the purpose of Model 1a was to test the hypotheses concerning the following dependent variables: a) optimism about the companys financial returns b) confidence about the companys financial returns c) consideration of alternative stocks The data for this model consisted of each respondents 1. perceptions and attitudes (familiarity, personal relevance, overall affect) related to the product design of the focal (investee) company, prior to his decision to invest in that company (as retrospectively reported by the respondent); and 2. financial expectations/behavior with respect to that company (a-c above), which had led to the investment in question (as retrospectively reported by the respondent).

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Correspondingly, the analysis involved examination, with PLS path modeling, 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 models main predictor variables were: overall affect for the companys product design (balloon 1 in Figure 4, p. 61) personal relevance of the companys 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 As products 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 companys product domain. Besides the dependent and predictor variables listed above, Model 1a contained as an intervening mediating variable ones familiarity with the companys 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 companys products towards optimism about the companys financial returns and from personal relevance of the companys product domain towards optimism about the companys financial returns and confidence about the companys 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 variables and the company dummy variables.

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specifics of the study design concerning personal relevance of the companys product domain. Regarding the explanatory variable personal relevance of the companys product domain, it must be noted that a companys 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 companys 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 Richinss 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 subsequent analysis could concentrate exclusively on analyzing the effects of the (i) degree of personal relevance of those domains on the dependent variables. (For the distinction of these two aspects ii vs. i, see p. 44). In Richinss 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 companys 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 companys products would be perceived to represent a certain random domain by 25 since I individual respondents would not enter the analysis as a variable would presume (and pre-test) this degree to be constant and high (reflecting the public meaning).

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But how to find and select such domains that all (or most) investors would likely perceive a certain focal companys 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 & Mattelmki, 2002). I selected the domains for study accordingly. For instance, a company designing 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) perceive 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 companydomain combinations, the respondents overall agreed (mean>0.0) with statements claiming that the focal companys 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 companys 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 companys 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.

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Table 2. The selected (quasi-manipulated) domain per focal/investee company, in Study 1a

Focal (investee) company A B C Focal companys products tires garden and other domestic free-time tools sports equipment and apparel Domain Which domain the products are supposed to represent? motoring/ car-driving gardening/ visiting summer house 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 A: 1.93***

motoring/ car-driving

The products of [company As product brand] supported/ represented motoring very well. [Company A] was committed to developing products that support/represent motoring.

A: 1.57*** B: 1.53***

gardening/ visiting summer house

The products of [company Bs product brand] supported/ represented gardening (/visiting summer house) very well. [Company B] was committed to developing products that support/represent gardening (/visiting summer house). The products of [company Cs product brand] supported/ represented a certain sport very well. [Company C] was committed to developing products that support/represent a certain sport .

B: 1.60*** C: 1.55***

sport

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

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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 companys 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 companys 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 companys 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 ones 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 companys product domain was satisfactory, as the scale achieved a Cronbachs alpha of .74, average variance extracted (AVE) of .80, and com26 posite reliability of .89. The other latent predictor variable, overall affect for the companys 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 Cronbachs alpha, .5 for AVE, and .8 for composite reliability (see e.g., Netemeyer, Bearden, & Sharma, 2003).

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84

Table 4.

Construct
Scale reliability (for multi-item scales)
1. How relevant a thing was [domain A] to you personally? Cronbachs alpha: .74 0=made no difference6=very important AVE: .80 Composite reliability: .89 2. How well did [domain A] reflect you as a person? 0=not at all 6=very well 1-3 What were [company X]s products like in your opinion? Cronbachs alpha: .90 -3=very unpleasant +3=very pleasant AVE: .66 Composite reliability: .92 -3=very unattractive+3=very attractive -3=very bad +3=very good 4. What was your attitude towards [company X]s products like? -3=highly negative +3=highly positive 5. Did you like [company X]s products? -3=didnt like at all +3=liked very much 6. The products of [company Xs product brand name] were of clearly better design than those of competitors a 0=strongly disagree 6=strongly agree 1. How well did you know the products of [company Xs product brand name]? 0=not at all 6=very well 1. How well did you know the [company X]? 0=not at all 6=very well

Measurement type Measurement

personal relevance of the companys product domain

Reflective, 2-item scale

(each item with 7-point scale)

Items for predictor variables in Study 1a (/b)

overall affect for the companys product design

Reflective, 6-item scale

(each item with 7-point scale)

familiarity with the companys products

Reflective, singleitem scale

(with 7-point scale)

where product design meets investor behavior

familiarity with the company

Reflective, singleitem scale

(with 7-point scale)

a This item was based on the assumption that the affective evaluation of a companys products will be exhibited largely relative to competition.

deal with individuals 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 differential 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 questions probed the investors overall evaluation of the companys 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 respondents overall evaluation of the companys 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= didnt 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 Xs 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 affective evaluation of a companys product design will be conceived largely relative to competition. The eventual measure for overall affect for the companys product design consisted of all the aforementioned six reflective items (three semantic differentials; two direct questions; one agree-disagree question).

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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 companys products, was measured with a single-item scale. The respondent was asked: How well did you know the products of [company Xs 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 companys 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 companies stocks? The responses were recorded on a bipolar 7-point, reversecoded 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

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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 companys stock (optimism about the companys 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 27 rise in the near term.
All the scales were anchored by 0=did not contribute at all to my investment decision and 6=essentially contributed to my investment decision. However, whereas responses on the first three items showed fairly high correlation with each other and satisfactory outer loadings with the latent variable (>.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 companys 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.

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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 expectations about the financial returns of the companys stock (confidence about the companys 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 ones pre-purchase expectations about the returns (see Glaser, Langer, & Weber, 2007). The specific questions were: 1. Has the stock price development of [ focal company] after your investment appeared surprising to you? 2. Has the earnings development of [ focal company] after your 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 analyzing 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 discriminant validity. For instance, the measurement items for personal relevance of the companys product domain should not measure the same thing as the measurement items for overall affect for the companys product design since the model is based on the assumption that these are theoretically distinct constructs. Commonly, discriminant validity is examined by looking into correlations between the variables (Campbell & Fiske, 1959). Table 5 presents correlations between the main variables of Model 1a. In simple terms, the

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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:
rxy rxx ryy

,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 personal relevance of the companys product domain, overall affect for the companys product design, and familiarity with the companys products the results of the formula remain below .6 for all the combinations. 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 unreliable. 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.

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Table 5. Correlations between the main variables of Model 1a

personal relevance of the companys product domain personal relevance of the companys product domain overall affect for the companys product design familiarity with the companys products optimism about the companys financial returns confidence about the companys financial returns consideration of alternatives

0.74

overall affect for the companys 0.29 product design familiarity with the companys products

0.90

0.31

0.56

N/A

optimism about the companys 0.05 financial returns confidence about the companys financial returns consideration of alternatives

0.12

0.09

0.68

0.05

-0.07

-0.04

0.16

0.83

-0.14

-0.18

-0.13

-0.14

-0.24

0.80

Notes: Numbers on the diagonal are Cronbachs alpha scores. N.A. = no alpha score calculated because the construct is measured by single item.

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5.3.2 results model 1a

As results for Model 1a, I list the path coefficients and t-values of the calculated 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 model, the predictor variables explain 20.5 % of consideration of alternative stocks, 10.3 % of optimism about the companys financial returns, and 10.7 % of confidence about the companys financial returns, respectively. Of the predictor-mediator variables overall affect for the companys product design and familiarity with the companys products 33.0 % and 9.0 % are explained, respectively. The hypotheses tested in Model 1a were hypotheses H1, H3H5, H8, and H11H13. First of all, with regard to the variable personal relevance of the companys product domain, there is a significant positive effect by this variable on familiarity with the companys products (coeff.=+.31, p<.001). This finding suggests as proposed in hypothesis H1 from the informationacquisition perspective that the higher personal relevance an investor attaches to a life domain, the more familiar he tends to be with (such a companys) products that represent or support the domain in question. The further paths from familiarity with the companys 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 companys 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 hypothesis H3.1 derived from consumer/user theory, that investors familiarity with a particular companys products actually increases the consideration they give to alternative investment targets prior to investing in that companys stock. At the same time, the finding is in stark contrast with the null hypothesis H3.0 that was derived from the mainstream of behavioral finance theory and expected that investors familiarity with a particular companys

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92

.16* (H5 supp.)

2.ii
+.31*** (H1 supp.) (H4.0a, H4.1a not supp.)
Confidence about company Ys financial returns Familiarity with company Ys products

3
+.17* (H3.1 supp.) .40*** (H4.0b supp.)
Optimism about company Ys financial returns

Consideration given to altenative investment targets (other than company Y)

Perception that company Ys products represent/support domain x

2.i

Personal relevance of domain x

Figure 6. Results, Model 1a: The effects of investors evaluations of a companys product design on their financial expectations about the companys stock (and consideration of alternative investment targets)

+.13** (H13 supp.)

(H12 not supp.)

+.27** (H11 supp.)

.18a (H8 supp.)

where product design meets investor behavior

a

Overall affect for company Ys product design

p < .10; *p < .05; **p < .01; ***p < .001

products would decrease the consideration they gave to alternative investment targets. Moreover, familiarity with the companys products is found to have no significant effect on confidence about the companys 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-support for H3.0. Especially, the finding does not support the idea that an individuals familiarity with a companys products would tend to cause him to be (over)confident about his expectations about the financial returns from the companys stock an idea sometimes implied in the mainstream of behavioral finance (cf. Barber & Odean, 2000, 2001). All in all, while an investors confidence in his own financial expectations about a companys 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 companys financial returns consideration of alternative stocks, coeff.= .40, p<.001), that (over) confidence does not seem to stem from investors familiarity with the companys products. Nevertheless, in regards to the self-expression perspective, personal relevance of the companys product domain is found to have a negative direct effect on consideration of alternative stocks, which is significant (coeff.=.16, p<.05). That is, the higher personal relevance an investor attaches to a life domain that a particular companys products represent, the less consideration he tends to give to alternative investment targets while leaning towards investing in that companys stock. This supports hypothesis H5, derived from the theory that the personal relevance will generate tendency 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 companys product design is found to have a direct negative effect on consideration of alternative stocks (coeff.=.18,

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p<.10), as well. Being marginally significant, this effect hints, as proposed in hypothesis H8, that the more positive an investors overall affect for a companys product design, the less consideration he tends to give to alternative investment targets while investing in that companys stock. The theory behind is that an investor may use his affect for the companys product design as a short-cut (affect heuristic), so as to arrive at an investment decision without all the consideration given to alternatives. Moreover, there is positive direct effect by overall affect for the companys product design on optimism about the companys financial returns, which is highly significant (coeff.=+.27, p<.01). That is, the more positive an investors overall affect for a particular companys product design, the greater optimism the investor has in his expectations about the financial returns from the companys stock. This supports hypothesis H11. However, note that while this optimism is likely to positively influence ones preference and choice to invest in that companys stock, the results do not indicate that it would decrease the consideration that one gives to alternative stocks as investment targets. Namely, the path optimism about the companys financial returns towards consideration of alternative stocks is non-significant. On the other hand, no significant path from overall affect for the companys product design towards confidence about the companys financial returns is found, either. Thus, hypothesis H12, concerned with the issue whether there is direct relationship between product design affect and (nave) confidence in ones 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 companys product domain on overall affect for the companys product design, which is highly significant (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

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particular companys products represent, the more positive is his overall affect for the companys 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 companys products towards optimism about the companys financial returns, nor from personal relevance of the companys product domain towards optimism about the companys financial returns or confidence about the companys 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 companys products on overall affect for the companys product design is, in contrast, positive and highly significant. 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 variables and the relationships between personal relevance of the companys product domain, and overall affect for the companys product design, and familiarity with the companys products, and the dependent variables. This finding suggests that there are likely to be certain company- and/or industry-specific factors unidentified in my model that additionally 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 relationship between familiarity with the companys products and consideration of alternative stocks. This finding may result from the fact that an increase in familiarity with that companys products had even more substantial negative effect on an investors consideration of alternative stocks when it came to that companys stock. The finding might also result from a situation that the respondents overall familiarity with that companys products was on average at higher level than familiarity with other companies brands.

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5.4 study 1b
5.4.1 method model 1b
While 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 companies 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 concerning the following main dependent variables: a) determination to invest when equal financial returns b) preparedness to invest with lower financial returns 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) companys 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.

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Thus, the data for this model consisted of each respondents 1. perceptions and attitudes (personal relevance, overall affect, 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 2. view to his investment decision as if it had been a choice between 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 conceptually the same as in Model 1a: personal relevance of the companys product domain and overall affect for the companys product designdifference. familiarity with the companys productsdifference However, as implied above, the quasi-manipulative setting (related to personal relevance of the companys product domain) was slightly different for Model 1b than for Model 1a due to the framing of the questions 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 companys product design and familiarity with the companys products, indicated by the subscripts difference. Note that I also included into Model 1b the additional mediating variable, willingness to support the company through investment. The inclusion of this variable reflected the theoretical notion that the hypothesized effects in Model 1b may be direct as well as indirect, i.e., manifest directly and/or through the mediating variable of ones increased (conscious)

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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 companys 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 preparedness 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/propositions 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 companys 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 companys products to represent as for Model 1a. But, Model 1b also involved selecting or quasi-manipulating (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 quasimanipulations. 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

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company. All in all, these quasi-manipulated product domains and comparison 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 subsequent analysis would be able to address the effects of the degree of the personal relevance of a domain which the investee companys products represented 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 subjects willingness to invest in the stock of the focal (investee) company vs. that of the comparison company (as framed in the hypotheses, especially H6H7). In fact, Table 3 concerning Model 1a (p. 82) already presented the successfulness 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 perceived the companys products to represent. What remains to be checked, for Model 1b, is the presumption (II) that the selected comparison companies 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 companys products represented the selected domain. The means differed significantly from the neutral value of 0 at p<.05 level. Thus, the quasimanipulation 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

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Table 6. The selected domains and comparison companies per focal/investee company, in Study 1b Investee Investee company companys products Quasi-manipulated domain X (supposed to be represented by the investee companys products)
motoring & car-driving gardening & visiting summer cottage

Quasimanipulated comparison companies

Quasi-manipulated comparison companies products (supposed to be nonrepresentative of domain X)

fashion/interior decoration; gardening and dom. tools food products; car and other tires fashion/interior decoration; gardening and dom. tools

car and other tires gardening and other domestic tools sports equipment and apparel

D; B E; A D; B

sport

Table 7. Tests for the assumption that the selected domains were domains that the investors perceived the comparison companies not to represent (Study 1b) Quasimanipulated [domain X] Item Quasimanipulated comparison company1: Mean Quasimanipulated comparison company2: Mean
B: -1.06*** B: -1.10***

motoring/ car-driving

1: The products of [comparison company D/B] D: -1.35*** supported/represented motoring very well. 2: [Comparison company D/B] was committed D: -1.19*** to developing products that support/represent motoring. 1: The products of [comparison company E/A] E: -0.38* supported/represented gardening (/visiting summer house) very well. 2: [Comparison company E/A] was committed E: -0.42* to developing products that support/represent gardening (/visiting summer house). 1: The products of [comparison company D/B] D: -2.07*** supported/represented sport very well. 2: [Comparison company D/B] was committed D: -2.11*** to developing products that support/represent sport.

A: -1.09***

gardening/ visiting summer cottage

A: -0.96***

B: -1.69*** B: -1.63***

sport

* 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

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that the investors had towards the companies (investee vs. comparison company) on the dependent variables (hypotheses H9, H10, H0, and H2). Specifically: 1. the subjects overall affect for (and familiarity with) the companys products would be measured for both the investee company and the comparison company, 2. the difference in the affect (and familiarity) measures (i.e., investee company measure minus comparison company measure) would be calculated for each subject, and 3. the effect of this difference on the subjects relative willingness to invest in the focal (investee) companys stock vs. the comparison companys 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 companys product designdifference. familiarity with the companys productsdifference familiarity with the companydifference Note again that for the predictor variable personal relevance of the companys 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 companys 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 respondents) were screened out from the data, in order to ensure similar comparison scenario among all the respondents included in the analyses. This

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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 measurements for Model 1b were based on similar questions as the predictor variable measurements in Model 1a. Yet, as mentioned in the above section, the variable overall affect for the companys product designdifference used in calculating Model 1b was the difference between the respondents (sum) score concerning overall affect for the focal companys product design and his (sum) score concerning overall affect for the comparison companys product design. That is, the variable values consisted of each respondents overall affect for the focal companys product design minus his overall affect for the comparison companys product design. Analogously, also the variables familiarity with the companys 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 variables 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 companys] stock would with absolute certainty be exactly the same as those of the [investee company]s, how would you have invested?

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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 percentage 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

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by investing in its stocks?. The responses were recorded on a 7-point bipolar 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 correlations 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 included in the model. Notably, based on standard finance notion, one might think that all the

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studies 1a and 1b

personal relevance of the companys product domain

overall affect for the companys product designdiff. familiarity with the companys productsdiff. familiarity willingness with the to support companydiff. the company by investing

determination to invest when equal financial returns

preparedness to invest with lower financial returns

personal relevance of the companys product 0.72 domain 0.16 0.18 0.11 0.20 0.30 N/A 0.42 N/A 0.89

overall affect for the companys product designdiff.

familiarity with the companys productsdiff.

Table 8. Correlations between the main variables of Model 1b

familiarity with the companydiff.

willingness to support the company by investing 0.27 0.15 0.16 0.01

N/A

determination to invest when equal financial returns 0.20 0.23 0.22

0.19

0.38

N/A

Notes: Numbers on the diagonal are Cronbachs alpha scores. N.A. = no alpha score calculated because the construct is measured by single item.

preparedness to invest with lower financial 0.05 returns -0.03

0.06

-0.03

0.40

0.46

N/A

105

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 companys 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 dependent variables. Indeed, with regard to determination to invest when equal financial 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) companys 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) companys stock would have made them switch investments. The rest, 83.2 %, exhibited preparedness to invest in the focal companys 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

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30 25 20
% of respondents

15 10 5 0 0 1 2 3 4 5 6

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 companys stock even if the comparison companys stock would have had equal expected financial returns

determination to invest when equal financial returns:

20 15
% of respondents

10 5 0
1% higher 2% higher 5% higher 10 % higher 20 % higher 30 % higher 50 % higher 100 % higher

preparedness to invest with lowered financial returns:

How much higher (risk-free) financial returns from another (comparison) companys stock would the respondent have required so as to switch his investment to that stock?

Figure 7. Respondents willingness to invest in the focal companys stock beyond its expected financial returns/risk (Study 1b)

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relevance of the companys product domain and overall affect for the companys 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 companys 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 companys product design relative to another companys product design the more determined the investor is to invest in that (former) companys stock rather than in the other companys 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 companys 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 companys products represent, the greater is his determination to invest in that companys stock rather than in other another companys stock that has approximately similar expected financial returns/risks. This finding 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.

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3
+.18** (H1 supported) +.29* (H2 supported) +.15** (H0 supported) +.06 a (H6 supported, direct effect) +.25*** (H6 & H7 supp., indirect effect)
Familiarity with company Ys products Familiarity with company Y

Figure 8. Results, Model 1b: The effects of investors evaluations of a companys product design on their extra investment willingness, beyond expected financial returns

studies 1a and 1b

2.ii

Perception that company Ys products represent/support domain x

2.i
Willingness to support company Y by way of investing
+.35**

Personal relevance of domain x

Determination to invest in company Ys stock rather than in other stocks that have approximately equal financial returns

+.09* (H13 supported)

+.43**

+.11* (H9 & H10 supp., indirect effect) +.27*** (H9 supported, direct effect)

Overall affect for company Ys product design

Preparedness to invest in company Ys stock with lowered financial returns

109

1a) overall affect for the companys product designdiff. willingness to support the company by investing (+.11, p<.05) , 1b) personal relevance of the companys 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 companys products as well as in overall affect for the companys 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 companys 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 investors willingness 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 companys product domain and overall affect for the companys product design are non-significant. However, we find, again, the following 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 companys product designdiff. willingness to support the company by investing (+.11, p<.05) , and 1b) personal relevance of the companys product domain willingness to support the company by investing (+.25, p<.001) and

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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 companys products and overall affect for the companys product design increase investors willingness to support the company by investing in its stock which further increases their preparedness to invest in the companys 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 companys 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 companys product design thus effectively generate willingness to invest in the companys stock, even if the investment meant giving up on some financial returns. Furthermore, when it comes to familiarity with the companys 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 suggestion (Frieder & Subrahmanyam, 2005) that familiarity with a companys 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

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some of individuals extra willingness to invest in companies stocks beyond financial returns, and/or strengthen or weaken the impact of the explanatory 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 companys 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.

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6 Study 2

113

Study 2 was designed to address, implicitly, all the hypotheses H0H13 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 product design emphasis in a companys investment advertisement has positive effect on an investors general interest to invest in the companys stock. In essence, Study 2 complements Studies 1a and 1b by utilizing different kind of data prospective (rather than retrospective) and by applying the most traditional and well-accepted methodological approach to studying 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 investors general-level interest to invest in a company (interest to invest). The main explanatory variable was, according to hypothesis H14, the degree to which the companys 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 dissertation (personal relevance of the companys product domain and overall affect for the companys product design) to the analysis, by performing additional analyses of covariance (ANCOVA) where these variables acted as covariates.

6.1 method study 2

subjects. For Study 2, the subjects were recruited at stock exchange evening events of the Finnish Foundation for Share Promotion. This nonprofit 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

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Table 9. Description of the subjects of Study 2: Personal characteristics of the investor-respondents Overall sample Gender female male Age below 25 25 [35] 3645 4655 5665 over 65 Education (highest) middle school high school vocational school college/bachelor university/master licenciate/doctor Yearly income 150000 50001100000 100 001150 000 150 001250 000 250001500000 5000011000 000 Total no. of stocks owned 0 12 stocks 35 stocks 610 stocks 1120 stocks 2130 stocks over 30 stocks Stock following activity daily weekly monthly once in three months once in six months once a year once in two years 32.0% 68.0% 4.0% 9.1% 8.5% 16.5% 39.2% 22.7% 1.7% 9.6% 9.6% 31.1% 40.7% 7.3% 55.9% 32.8% 7.9% 1.7% 1.1% 0.6% 6.3% 6.8% 15.9% 24.4% 30.7% 10.2% 5.7% 14.9% 37.1% 23.4% 9.7% 5.1% 6.3% 3.4%

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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 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 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 investors, 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-respondents 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 Finnish stock investors, which means that we are unable at this time to compare

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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 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 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 characteristics in the samples of Studies 1a/1b and 2 can be considered an indication 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 companys 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-

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117

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 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: 1. everyday consumer products (everyday)

ordinary products designed for consumers daily use: eyeglasses home country England high-technology products designed for and used by both businesses and consumers: lenses and other opti cal products home country Germany medical products designed for and used by both businesses and consumers: pharmaceutical treatment products home country France service products designed for and used by both businesses and consumers: currency exchange services home country England

2. high-tech business/consumer products (high-tech)

3. medical products (medical)

4. business/consumer services (service)

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

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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 general preference for domestic over non-domestic companies (see reviews by e.g., Campbell & Krussl, 2007; Karlsson & Nordn, 2007; Morse & Shive, 2006; Sercu & Vanpe, 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 1,0002,000 kilometers as are their mental distances. Therefore, home bias should not be a serious 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 (everyday; high-tech; medical; service) serving both as between-subjects factors. procedure. In the cover letter distributed with the study material (Appendix C), 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 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 characteristics as an investor. The background questions were followed by the stimuli (company presentation/ad), which was followed by questions pertaining to

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119

the dependent variable (interest to invest). Thereafter, 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 high and low conditions of product design emphasis in company investment ad so that differential 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 companys products (e.g., In other words: even in your own pocket, there might be a product whose functionality is ensured by Zeisss 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 heading 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.

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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 investment 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, featuring 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 Xs product categories] to [company Xs typical customers or customer industries]. This was followed by a sentence describing the use purpose or value of the companys products 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 Zeisss technology). Finally, the last sentence of the company presentation was (regardless of the condition of the product design emphasis... factor): [Company X]s international 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 company ad for subjects in each condition ended with the same sentence a statement 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.

study 2

121

Company/ product type

122

Product design emphasis in company investment ad

high low

Specsavers puts your sight into order.

everyday

Specsavers is an England-based company that develops, manufactures, and sells eyeglass frames to consumers. The company specializes on serving buyers that seek for eyeglasses that are less inexpensive than normal. It has retail outlets in a few countries around Europe, also Finland. In other word: you may also have yourself have encountered Specsaverss ads or stores when you have been buying glasses for yourself or for a family member.

Specsavers is an England-based company that develops, manufactures, and sells eyeglass frames to consumers. The company specializes on serving buyers that seek for eyeglasses that are less inexpensive than normal. It has retail outlets in a few countries around Europe, also Finland. In other word: you may also have yourself have encountered Specsaverss ads or stores when you have been buying glasses for yourself or for a family member. Specsaverss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

Specsaverss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

Table 10. Stimuli presented to the experiment subjects in Study 2, according to the conditions of the main factors

Carl Zeiss premium lenses for the sake of faultless vision

where product design meets investor behavior

hightech

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 Zeisss technology.

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 Zeisss technology. Zeisss international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

Zeisss 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

study 2

Novexel cures for difficult infections.

medical

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 he will be treated with a medical product developed by Novexel.

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 he will be treated with a medical product developed by Novexel. Novexels international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

Novexels 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

service

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 Travelexs services or outlets even yourself, when traveling in Europe or elsewhere in the world

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 Travelexs services or outlets even yourself, when traveling in Europe or elsewhere in the world. Travelexs international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

Travelexs international business has grown fairly quickly in the past years, and its future prospects as a company are promising.

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measures dependent variable. The dependent variable interest to invest was measured, in the present study, after presenting the subjects an investment scenario. The idea was to present the subject a scenario whereby he should imagine having a certain amount of money at hand an amount that he would have supposedly decided to invest in certain stock(s). After presenting the scenario, the subject would reflect his interest in investing the money in question in the stock of the focal company. The amount of money at stake was set to be significant, yet under 10 % of the value of the subjects 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): Lets 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-

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nies (Finnish and Swedish). However, for reasons of simplicity, the analysis in the present study focuses only on one of the companies (the Central European 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 respondents 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
Carl Zeiss premium optics for multiple purposes How interested would you be to invest R euros (or a significant part of it) in Zeiss?

Answering options
0 = not at all interested 6 = extremely interested

Answer (number 0-6)

Figure 9. Presentation of the dependent variable question in the condition: product design emphasis in company investment ad=high (Study 2)

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In the low condition of product design emphasis in company investment ad, the presentation of the question was, in turn, as follows (Figure 10):

Question
How interested would you be to invest R euros (or a significant part of it) in Zeiss?

Answering options
0 = not at all interested 6 = extremely interested

Answer (number 0-6)

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 companys product domain was measured, in the present study, with two items. Both items were measured with 7-point scales. The items were (with their respec31 : tive anchors) 1. Do you feel that the firms product domain is personally important to you? 0 = the product domain is significantly less important to me than to an average person in the street

[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).

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6 = the product domain is significantly more important to me than to an average person in the street

2. Is the firms product domain close to your heart? 0 = not at all close to my heart 6 = highly close to my heart The reliability of the two-item scale was good; the Cronbachs alpha was .80. The final variable value was obtained as a sum of the subjects responses to the two items. The covariate overall affect for the companys product design was measured, in the present study, with a three-item scale, each item measured on 7-point continuum. The three items were (with their respective anchors): 1. How good do you think or believe that the firms products/services are in terms of functionality or usability? 0 = very bad 6 = very good 2. How good do you think or believe that the firms products/services are in terms of design? 0 = very unattractive 6 = very attractive 3. Considering the firms products, what is your opinion about the firms product trademark? 0 = I dont like the product trademark at all 6 = I like the product trademark very much Notably, besides attractiveness (item 2) and overall opinion/likeability (item 3), functionality and usability (item 1) is commonly viewed to

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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 Cronbachs alpha of .85. The final variable value was obtained as a sum of the subjects responses to the three items. The final covariate familiarity with the company meant as a control 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 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 (see OKeefe, 2003). the effect of product design emphasis in companys investment ad (hypothesis h14). Hypothesis H14 predicted that high product design emphasis in company investment ad would have positive effect on an individuals interest to invest in the company. This hypothesis was 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 11 for cell means).

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Table 11. Means (and standard deviations) for interest to invest in the company in Study 2

Company/ product type Everyday High-tech Medical Service

Low product design emphasis in company investment ad 1.79 (1.82) 2.95 (1.93) 2.53 (2.03) 1.14 (1.21)

High product design emphasis in company investment ad 2.87 (1.63) 3.14 (1.71) 3.00 (1.77) 2.08 (1.44)

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.

Interest to invest in the company

0 low high

Product design emphasis in the companys investment advertisement Figure 11. (Least-squares) mean interest to invest in the company (Study 2)

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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 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 companys investment advertisement had positive effect on investors general willingness to invest in the companys stock. 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 companys 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 companys investment ad on investors interest to invest in the companys stock did not differ significantly by company/product type. This finding gives us confidence 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 dissertation. The presumption was that high product design emphasis in a companys 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 companys product domain to him as well as his overall affect with the companys product design. By and large, high

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product design emphasis in a companys investment advertisement should, therefore, have positive effect on ones 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 companys product domain and overall affect for the companys product design as measured subjectively at the time of investment on an individuals 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 relevance of the companys product domain and overall affect for the companys product design as control variables covariates into the earlier 2 (product design emphasis in company investment ad) X 4 (company/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).

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when personal relevance of the companys product domain and overall affect for the companys product design were included as covariates in the ancova. I also included familiarity with the company 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 companys product domain (F(1, 150) = 7.55; p = .007) and overall affect for the companys 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 companys product domain and overall affect for the companys product design explain investors interest to invest in particular companies to a substantial extent. In other words, both the personal relevance that an investor attaches (at individual level) to a companys product domain and investors overall affect for the companys 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 personal relevance of the companys product domain (upper panel) and overall affect for the companys 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 previously 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.

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Interest to invest in the company 6.0

4.5

3.0

1.5

0.0 0 3 6 9 12 Personal relevance of the companys product domain

Interest to invest in the company 6.0

4.5

3.0

1.5

0.0 0 5 10 15 20

Overall affect for the companys product design

Note. The height of the bars are equal to double the standard deviation of observations.

Figure 12. Observed means and standard deviations for interest to invest, at different levels of the main covariates (personal relevance of the companys product domain and overall affect for the companys product design) of Study 2

study 2

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(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 relevance of the companys product domain and overall affect for the companys product design per company. In other words, to the extent that investors overall investment interest differs by company or companys 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 emphasis in company investment ad the previously reported effect for investment 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 companys product domain and overall affect for the companys product design at the time of the investment decision34, the product design emphasis in company 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 companys product domain and overall affect for the companys product design. An ANOVA with personal relevance of the companys product domain as the dependent variable revealed no significant effect by product design emphasis in companys

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 companys products represent is unaffected by product design emphasis in a single company (investment) advertisement. An ANOVA with overall affect for the companys 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 investors affect for the companys product design may, actually, be enhanced by high product design appeal in the firms investment advertisement.

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to invest. One more analysis concerning this issue is performed in the section below. Note, finally, that familiarity with the company did not achieve significance in the ancova (F(1, 150) = .23, p = .63). This confirms the prediction that neither the effect of product design emphasis in the companys investment ad nor the positive effects of personal relevance of the companys product domain or overall affect for the companys 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 companys investment ad has direct effect on investors optimism about the financial returns of the com36 . I examined pany (corresponding to the expectation of hypothesis H11) 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 attenuate 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 companys 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 companys 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 firms 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.

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variablerevealed, 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 companys financial 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 additional 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 companys product domain, overall affect for the companys product design, and familiarity with the company. As suspected, optimism about the companys 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 companys 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 companys 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 companys investment advertisement has direct effect on investors optimism about the financial returns of the company. On the other hand, the analyses suggest that optimism about a companys financial returns partly (but not fully) mediates the effects of the personal relevance of the companys product domain and overall affect for the companys product design on investors interest to invest in the company. This is consistent 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 support they received from Studies 1a/1b and 2 is provided in Table 12.

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Hypothesis
H0: Positive effect supported (Study 1b)

Alternative hypothesis (if available)

Results

Table 12. Summary of the hypotheses of the dissertation and the support they received in Studies 1a/1b and 2.

study 2

H0: An investors familiarity with a company has positive effect on his determination to invest in that companys stock rather than other companies stocks (that have approximately similar expected financial returns/risks). H1: Positive effect supported (Study 1a; Study 1b) H2: Positive effect supported (Study 1b) H3.1: An investors familiarity with a particular companys products has positive effect on the consideration that he gives to other companies as alternative investment targets. H4.1a: An investors familiarity with a particular companys products has negative effect on the confidence that he has in his own expectations about the financial returns from the companys stock. H3.1: Positive effect supported (Study 1a) H3.0: Negative effect not supported (Study 1a) H4.0a: Positive effect not supported (Study 1a) H4.1a: Negative effect not supported (Study 1a) H4.0b: Negative effect supported (Study 1a)

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.

H2: An investors familiarity with a particular companys products has positive effect on his familiarity with the company.

H3.0: An investors familiarity with a particular companys products has negative effect on the consideration that he gives to other companies as alternative investment targets.

H4.0a: An investors familiarity with a particular companys products has positive effect on the confidence that he has in his own expectations about the financial returns from the companys stock.

H4.0b: The confidence that an individual has in his own expectations about the financial returns from a particular companys stock has negative effect on the consideration that he gives to other companies as alternative investment targets.

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.

H5: Negative effect supported (Study 1a)

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 companys stock rather than other companies stocks which have approximately similar expected financial returns/risks.

H6: Positive indirect effect supported, through willingness to support the company (Study 1b) H6: Positive direct effect marginally supported (Study 1b) H6: Positive effect supported (Study 2, covariate effect)

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Hypothesis
H7: Positive indirect effect supported, through willingness to support the company (Study 1b) H7: Positive direct effect not supported (Study 1b) H8: Negative effect marginally supported (Study 1a) H9: Positive indirect effect supported, through willingness to support the company (Study 1b) H9: Positive direct effect supported (Study 1b) H9: Positive effect supported (Study 2, covariate effect) H10: Positive indirect effect supported, through willingness to support the company (Study 1b) H10: Positive direct effect not supported (Study 1b) H11: Positive effect supported (Study 1a) H11: Positive effect supported (Study 2, covariate effect) H12: Positive effect not supported (Study 1a) H13: Positive effect supported (Study 1a; Study 1b)

Alternative hypothesis (if available)

Results

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 companys stock even with lower financial returns expected from the stock than from other companies stocks.

H8: An investors positive overall affect for a particular companys product design has negative effect on the consideration that he gives to other companies as alternative investment targets.

H9: An investors positive overall affect for a particular companys product design has positive effect on his determination to invest in that companys stock rather than other companies stocks which have approximately similar expected financial returns/risks.

H10: An investors positive overall affect for a particular companys product design has positive effect on his preparedness to invest in that companys stock with lower financial returns expected from the stock than from other stocks.

H11: An investors positive overall affect for a particular companys product design has positive effect on the optimism in his expectations about the financial returns from the companys stock.

H12: An investors positive overall affect for a particular companys product design has positive effect on the confidence he has in his own expectations about the financial returns from the companys stock.

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.

where product design meets investor behavior

H14: Product design emphasis in a companys investment advertisement has positive effect on investors general interest to invest in the companys stock.

H14: Positive effect supported (Study 2, experimental effect)

7 Discussion

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7.1 contributions to research

While design management research has marginally referred to the relation between investors and a companys product design or product design strategy (e.g., Borja de Mozota, 2003; 2006; Hargadon, 2005), it has lacked closer psychological and behavioral examinations of the mechanisms by which a companys 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 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 concerning companies stocks. The first factor is (1) the personal relevance or importance that an investor attaches to life domains represented by a companys 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 investors overall affect or liking for a companys product design. This factor reflects the degree to which the investor perceives the companys products to be pleasant, attractive, good, and likeable overall. At the general level, the identification and evidence of these factors adds an important dimension to design management literatures notion about strategic relevance of the marketplace distinction achievable through designed artifacts (see section 2.1.1). In earlier design management research, the goodness and effectiveness of a companys product design implicating the fact that the companys product artifacts are subjectively appealing to users/ consumers have mostly been assumed to influence peoples 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,

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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 peoples or individual investors willingness to invest in the company. In other words, the present research identifies and finds evidence 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, & Mattelmki, 2003; Normann & Ramrez, 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 peoples product design evaluations may spill over to their investment decisions. All in all, the contributions of the dissertation to the fields of design management as well as behavioral finance are summarized in Table 13 (p. 150-151) and further discussed below.

7.1.1 product design and investors needs

Especially, the present results can be considered to explicate the specific ways in which a companys 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 companys product design may address: (A) financial needs and (B) self-expressive/emotional needs that go beyond the financial needs. Based on the results, the (1) personal relevance or importance

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that an investor attaches to life domains represented by a companys products and the (2) investors overall affect or liking for a companys 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 companys products and product design determine much of a companys 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 investors special 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 ones investment willingness, as found by the present and earlier studies (e.g., Ackert & Church, 2009; Coval & Moskowitz, 1999; Frieder & Subrahmanyam, 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 readily even with the company itself from among investors who find the life domains that the companys 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 management nor behavioral finance research has recognized before. For instance,

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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 familiarity effects (cf. Frieder & Subrahmanyam, 2005). Concerning investors financial needs, the present results show especially that an investors overall affect or liking for a companys product design (A) has influence on the investors expectations of the financial returns of a companys 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 ones liking for a companys product design (in the form of affective evaluation of the design) has direct positive effect on ones optimism concerning the companys financial returns when the company is considered as an investment target. This effect makes ones liking for a companys product design logically a factor that increases an investors investment willingness. The finding is consistent with the recent notion of behavioral finance that ones overall affect for a company will correlate with ones perceptions of the financial prospects of a company (MacGregor et al. 2000; Statman, Fisher, & Anginer, 2008; Aspara & Tikkanen, 2008, forthcoming) and that individual investors often presume that good companies37 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 ones affect for a companys products, in particular, and

[37] good in terms of good overall corporate reputation, good current financial standing/soundness, or good management team

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ones perceptions of the financial prospects of a company. In other words, we have new evidence of the fact that investors tend to perceive that companies 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, & Anginer, 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, forthcoming) 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 investors affect for a companys product design, in particular beyond the role of ones 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 companys 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 investors affect or liking for a companys product design caused excessive (over)optimism about the company as an investment target. While the present study cannot definitely overrule this possibility, 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 investors liking for a companys 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

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investor to make a particular investment (cf. Branzei & Zietsma, 2003) the investors positive affect towards or liking for a companys product design may contribute such needed optimism. Notably, what also speaks against the interpretation that an investors affect for a companys product design would automatically lead to overly biased financial expectations is the finding that an investors liking for a companys product design did not increase investors (over)confidence about his assessments about the companys financial returns. Relatedly, recall also that familiarity with a companys 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) financial 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 companies product design will potentially address those needs, too. Specifically, my finding was that both the design-related factors personal relevance that an investor attaches to life domains represented by the company products as well as an investors overall affect or liking for a companys product design have, first of all, positive effect on (i) the investors willingness to invest in the companys 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 companys 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 investors 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

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(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 productsrepresent gardening (such as a company designing garden tools). With respect to overall affect for the companys 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 products/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 ones 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 Apples product design, investment in Apple Corporation can be partially motivated by a motive to get that companys design, in a way, into ones 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 mentioned 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 investors self-expressive needs (besides financial) may occur in socially responsible, ethical, or green investing (e.g., Beal, Goyen, & Phillips, 2005; Cullis, Lewis, & Winnett, 1992; Getzner & Grabner-Kruter, 2004) and sometimes in home-country investing (Statman, 2004), present research makes an extension by demonstrating that no connection to responsibility, ethical, or

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green issues (or home-country) is needed. Indeed, investors seem to pursue satisfaction of self-expressive and emotional needs and obtain self-expressive 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-expressive 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 personal relevance to life domains represented by the companys products and the degree of the investors overall affect for a companys product design are major determinants of the degree to which the company can address the investors self-expressive/emotional needs. From a companys 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 companys product design and/or who find the life domains that the companys 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 companys 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-Kruter, 2004).

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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 potential personal relevance of a companys product domain to an investor, as well as an investors overall affect for the companys product design, influence the investors 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 companys 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 themselves (subjectively) understand or mean by the term product design? Notably, this interpretivist question was not a central question under examination 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 companys products versus an overall impression of the companys product design. This shows especially in the high correlations between investors evaluations of the goodness/attractiveness of a companys products and goodness/attractiveness of the companys product design. Thus, investors thinking and behavior seem to reflect the idea that since a companys (end) products essentially and inevitably embody its product design(s), there isnt (or cannot be) much difference between ones impression of the companys products and ones impression of its product design. Moreover, since investors evaluations of companies products in the senses of (good) functionality/usability, good design, good design relative to competitors, and (general) goodness, attractiveness, and pleasantness correlated highly,

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it seems that investors idea of good design is corresponding to quite a global evaluation of the companys 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 (functionality/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 product quality in investors minds not even though investors evaluations of these aspects correlated highly. Also, it must be noted that the words corresponding 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 (hyv muotoilua). Moreover, it is also possible that an investors impression of a companys 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 examination 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 investors view (good) design to be about (good) product design capabilities, processes, and practices in contrast to mere (good) end products discussed 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 understand by the word (good) design insofar as we can make predictions about their investment behavior by asking them to evaluate companys products

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150

Table 13.

Research field

The present research contributes to/extends the research on

by

Design management (DM)

strategic/marketplace distinction that can be achieved through designed artifacts (= general DM research theme, see section 2.1.1) strategic benefits of (designing) pleasurable products to which people can attach personal meanings and emotions (e.g., Battarbee, 2004; Battarbee & Koskinen, 2005; Clark, Smith, & Yamazaki, 2006; Koskinen, Battarbee, & Mattelmki, 2003; Normann & Ramrez, 1993; Verganti, 2003)

showing that product design -related factors influence peoples or individual investors willingness to invest in the company i.e., product design may not only create strategic distinction and competitive advantage for the company in the product markets, but also in the stock markets.

Research contributions of the dissertation

product design as addressing investors needs (among those of other stakeholders) (cf. Hargadon, 2005)

where product design meets investor behavior

identifying two broad types of investor needs which product design -related factors may address, i.e., (A) financial needs and (B) self-expressive/emotional needs identifying two product design -factors that influence investors pursuit for satisfying both needs i.e.: 1. personal relevance or importance that an investor attaches to life domains represented by a companys products 2. investors overall affect or liking for a companys product design showing how the two product -design factors (1 and 2) influence (A. financial needs:) optimism and confidence about the companys financial returns; familiarity with the company; consideration of alternative stocks (B. self-expressive/emotional needs:) (i) determination to invest in the company in case another company has appr. similar expected financial returns; (ii) preparedness to invest in the company even if it offers somewhat lower financial returns than another stock explicating the role of an investors familiarity with a companys products and with the company itself showing how product design emphasis (with personal appeal) in companies investment advertisements will increase investors interest to invest in the companies

Research field
identifying and providing empirical evidence on the aforementioned effects of product design -related factors on investment decisions (see 1, 2, A and B above) explicating and providing empirical evidence that the found effects are not merely due to familiarity effects identifying and providing empirical evidence on how affect for a companys product design, especially, can influence investment decisions (A.) optimism and confidence about the companys financial returns; familiarity with the company; consideration of alternative stocks (B.) (i) determination to invest in the company in case another company has appr. similar expected financial returns; (ii) preparedness to invest in the company even if it offers somewhat lower financial returns than another stock showing how product design emphasis (with personal appeal) in companies investment advertisements will increase investors interest to invest in the companies

The present research contributes to/extends the research on

by

Behavioral finance

how product (market) evaluations may spill over to and affect investors investment decisions (Frieder & Subrahmanyam, 2005)

discussion

how company-related affect may influence an investors investment decisions (e.g., Finucane et al., 2000; MacGregor et al., 2000; Slovic et al., 2002a, 2002b, 2007; Statman, Fisher, & Anginer, 2008)

investor preferences that go beyond expected financial returns and risk (e.g., Fisher & Statman, 1997; Hoffmann, von Eije, & Jager, 2006) emotional or experiential utility (e.g., Beal, Goyen, & Phillips, 2005; Cullis, Lewis, & Winnett, 1992; Fama & French, 2007; Fama & French, 2004) and self-expressive benefits (Statman, 2004) that investors may obtain from stock investments

151

identifying and providing empirical evidence the effects of product design -related factors 1 and 2 (see above) on (B. self-expressive/emotional needs:) (i) determination to invest in the company in case another company has appr. similar expected financial returns; (ii) preparedness to invest in the company even if it offers somewhat lower financial returns than another stock showing how product design emphasis (with personal appeal) in companies investment ads will increase investors interest to invest in the companies demonstrating that no connection to responsibility, ethical, or green issues (or home-country) is needed for self-expressive/ emotional investing: Investors can obtain self-expressive 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.

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/evaluation) and which was found to influence investment willingness. That is, the personal relevance of the life domain(s) that the companys products represent or support. Now, the extent to which a companys products support 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 companys 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 support 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 companys 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; environmentprotection) seeking a job or career where one can cherish a personally relevant domain (e.g., education; chemistry) donating ones 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)

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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 company; 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 investing in a construction company that specializes on avant-garde architecture designs (even if construction companies in general represented mediocre architecture); environment-protection by investing in a company that specializes on hybrid car designs (even if cars in general were bad to environment); 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 companys product design might, in some cases, also mean to investors in a profound sense is the extent to which the companys products support or represent life domains that they find personally relevant, and which they can correspondingly support by way of investing in the company.

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7.2 practical implications to design management

As mentioned, the theoretical development and empirical evidence of this dissertation contribute primarily to design management literatures 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 firms 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 companys 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) relationships, as forecast by Borja de Mozota (2003, p. 113) in the design management context. Specifically, product design may, based on the results, play a role (1) in attracting investments from investors who are appealed by the companys product domains and product design, as well as (2) in defining hybrid strategies or business models that take, already at the outset, into account certain investors special attraction to the companys current or future product design.

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7.2.1 attracting investments from investors who are appealed by the companys product design
The general finding of the present dissertation that investors will be attracted by product design -related factors emphasizes and elucidates to managers that a companys products and product design are central in determining an (attractive) corporate identity not only for the companys 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 companys products as personally relevant. Relevant domains may be identified by asking the question: What activities, areas of interest, ideas, or ideals do our companys products support or represent? For instance, if the companys 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 companys products are specialized heart-related drugs, the answers to the question might include healthcare, fight against illnesses, and well-being generally or cardiovascular

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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 relevance of a domain actually increases the probability that the individuals will be familiar with the companys 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 companys product domain(s) as personally relevant, but additionally or alternatively also (2) those who have particularly positive overall affect or liking for the companys 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 companys 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., Fiskars, 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 companys

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product domain(s) as personally relevant and the (partly overlapping) investor group that has overall liking for the companys product design, a useful way of promoting the company as an investment target will be to emphasize the companys 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 companys product designers (and product advertisement designers) in designing the companys 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 wants to appeal to investors, as well, with its product design. In sum, the present results indicate that such investors who find a companys product domain personally relevant and/or have particular affect for the companys 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 communicating with the selected investors, the communication should logically be designed to address both financial and self-expressive needs of the investors. 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 reinforcing 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

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to express ones identification and affection towards particular product domains and product design of the company.

7.2.2 creating hybrid business models based on appealing product visions

Beyond attracting investments from investors to whom the companys (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 companys current or future products. Specifically, with hybrid business models I 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: 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).

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of the business model by assuming that investors are only interested in the financial returns that the business is likely to yield, the hybrid business 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 personally 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 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 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 realization 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

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gardening robot, which facilitates old peoples 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 literatures extant notion concerning processes and activities of designing (cf. section 2.1.2) at the strategic level of a companys 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). 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 companys overall mission definition. This integrated conceptualization should as a whole appeal to the envisioned investors. The implementation of the outlined business model, then, requires further 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 strategic 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-

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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 companys 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 companys business strategy and vision through understanding functionality, 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 companys 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 nonresponse/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 respondents. 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.

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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 constructed to some extent at the time of answering rather than purely corresponding 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 postrationalize 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 regarding 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 company 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 retrospective self-reports. Note also that Study 2 was essentially designed, in the spirit of data triangulation, 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

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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 companys 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. Especially, 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. Moreover, 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 countries 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 empirical data of the studies focused on addressing the effects of positive affect for a companys 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 investors highly negative affect for a companys 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

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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 variables (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 companys 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 investors expectations of the (likely) financial returns of a stock and confidence as the investors belief of the precision of his subjective information/view of the financial returns probability distribution of the stock a priori (and, therefore, ones felt surprise of the realized returns, a posteriori) 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 carefulness in translating the items.

7.3.2 avenues for further research

Evidently, 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

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theories and research techniques in studying individuals investment preferences (Clark-Murphy & Soutar, 2004, 2005; Fama & French, 2004; Statman, 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 considered further. It is worth noting that in additional analyses that I have conducted 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)

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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 somewhat 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 dissertation 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 companys product design. One way to study this issue would be to examine whether product advertising campaigns or trade shows wherein the companys product design is prominently presented result in increased number of investors buying the companys 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 companys 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.

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increasing volume39. Another way to study the issue would be to examine the effects that product design illustrations incorporated in companies reallife 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 companys 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 companys 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 business models proposed, which integrate at the outset such investors to a companys business model, to whom the companys 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 models 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 companys products in mind, but also the companys investors and shareholders.

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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 Economics. 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 corporations headquarters as well as at the Finnish Central Securities Depository. From [company D]s shareholder register, we have randomly chosen appr. 250 shareholders 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 masters 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 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 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 Economics e-mail: n.n@student.hse.fi

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Effect of

On

Pathcoeff. t-value Hypothesis

Hypothesized paths Familiarity with the companys products Consideration of alternative stocks Overall affect for the companys product design Confidence about the companys financial returns Consideration of alternative stocks Consideration of alternative stocks Optimism about the companys financial returns Confidence about the companys financial returns Consideration of alternative stocks Optimism about the companys financial returns Consideration of alternative stocks Confidence about the companys financial returns Optimism about the companys financial returns Overall affect for the companys product design Confidence about the companys financial returns Confidence about the companys financial returns Optimism about the companys financial returns Optimism about the companys financial returns Consideration of alternative stocks Consideration of alternative stocks Consideration of alternative stocks -0.053 0.071 0.088 -0.021 0.521 -0.280 0.231 -0.214 0.015 1.192 -0.108 0.183 -0.404 4.19*** 0.73 0.62 1.00 0.21 10.29*** 0.66 0.57 0.54 0.04 1.86* 0.27 1.33 a -0.175 0.270 0.101 1.60a 2.44** 0.83 0.170 2.03* 0.308 -0.162 0.131 -0.080 6.19*** 2.03* 2.61** 0.83

appendix b / Table B1.

Personal relevance of the companys product domain Personal relevance of the companys product domain Personal relevance of the companys product domain Familiarity with the companys products

Familiarity with the companys products

Overall affect for the companys product design Overall affect for the companys product design Overall affect for the companys product design

H1 supported H5 supported H13 supported H4.0a/4.1a not supported H3.1 supported H3.0 not supp. H8 marg. supp. H11 supported H12 not supported H4.0b supported

Confidence about the companys financial returns

Controls

Familiarity with the companys products Optimism about the companys financial returns Personal relevance of the companys product domain Personal relevance of the companys product domain Familiarity with the companys products

Company dummy controls

Focal/investee company B Focal/investee company C Focal/investee company B Focal/investee company C Focal/investee company B Focal/investee company C

Company dummy interactions

Results, Model 1a: The effects of investors evaluations of a companys product design on their financial expectations about the companys stock (as well as consideration of alternatives)

Focal/investee company B X Personal relevance of the companys product domain

Effect of
Consideration of alternative stocks Confidence about the companys financial returns Confidence about the companys financial returns Optimism about the companys financial returns Optimism about the companys financial returns Confidence about the companys financial returns Confidence about the companys financial returns Optimism about the companys financial returns Optimism about the companys financial returns Consideration of alternative stocks Consideration of alternative stocks Confidence about the companys financial returns Confidence about the companys financial returns Optimism about the companys financial returns Optimism about the companys financial returns Consideration of alternative stocks Consideration of alternative stocks Consideration of alternative stocks Consideration of alternative stocks Consideration of alternative stocks Consideration of alternative stocks -0.070 -1.114 -0.397 -0.136 -0.569 -0.713 -0.104 -0.086 0.345 0.297 0.238 -0.369 -0.022 0.457 -0.013 0.06 1.35 a 0.39 3.11*** 2.31* 0.28 1.22 1.63 a 0.27 0.14 1.00 2.03* 2.29* 1.01 0.08 0.065 0.22 -0.049 0.33 0.192 0.93 0.122 0.67 -0.004 0.03 0.194 1.65*

On

Pathcoeff. t-value Hypothesis

X Personal relevance of the com-

X Personal relevance of the com-

X Personal relevance of the com-

X Personal relevance of the com-

X Personal relevance of the com-

X Familiarity with the companys

X Familiarity with the companys

X Familiarity with the companys

X Familiarity with the companys

X Familiarity with the companys

X Familiarity with the companys

X Overall affect for the companys

X Overall affect for the companys

X Overall affect for the companys

X Overall affect for the companys

X Overall affect for the companys

X Overall affect for the companys

X Confidence about the companys

X Confidence about the companys

X Optimism about the companys

Focal/investee company C panys product domain Focal/investee company B panys product domain Focal/investee company C panys product domain Focal/investee company B panys product domain Focal/investee company C panys product domain Focal/investee company B products Focal/investee company C products Focal/investee company B products Focal/investee company C products Focal/investee company B products Focal/investee company C products Focal/investee company B product design Focal/investee company C product design Focal/investee company B product design Focal/investee company C product design Focal/investee company B product design Focal/investee company C product design Focal/investee company B financial returns Focal/investee company C financial returns Focal/investee company B financial returns Focal/investee company C financial returns
a p < .10 (one-sided); *p < .05 (one-sided); **p < .01 (one-sided); *** p <.001 (one-sided). Notes: The t-values were calculated through a bootstrapping routine with 340 cases and 500 samples.

X Optimism about the companys

181

182

Effect of
Familiarity with the companys products Determination to invest when equal financial returns
a

On
0.177 0.061 -0.043 0.090 0.273 0.049 0.289 0.148 2.37** 2.01* 0.89 H2 supported H0 supported 3.57*** 2.04* 1.06 H13 supported H9 supported 1.25 H6 marg. supported 2.69** H1 supported

Path coeff. t-value Hypothesis

Hypothesized direct paths Personal relevance of the companys product domain Preparedness to invest with lower financial returns Overall affect for the companys product design Determination to invest when equal financial returns Preparedness to invest with lower financial returns Familiarity with the company Determination to invest when equal financial returns

Personal relevance of the companys product domain

Personal relevance of the companys product domain

appendix b / Table B2.

Personal relevance of the companys product domain

Overall affect for the companys product design

Overall affect for the companys product design

Familiarity with the companys products

Familiarity with the company

Hypothesized paths through mediator (Willingness to support) Personal relevance of the companys product domain Willingness to support the company by investing Willingness to support the company by investing Determination to invest when equal financial returns Preparedness to invest with lower financial returns Preparedness to invest with lower financial returns Determination to invest when equal financial returns Preparedness to invest with lower financial returns 0.251 0.110 0.352 0.425 -0.029 -0.042 -0.163

4.59*** 1.99* 6.14*** 7.78*** 0.69 0.97 2.65**

H6, H7, H9, H10 supported partial mediation

Overall affect for the companys product design

Willingness to support the company by investing

Willingness to support the company by investing

Controls

Familiarity with the company

Company dummy controls

Comparison company D

Results, Model 1b: The effects of investors evaluations of a companys product design on their investment decisions, beyond financial returns

Comparison company D

Effect of
Overall affect for the companys product design Familiarity with the companys products Familiarity with the company Determination to invest when equal financial returns Preparedness to invest with lower financial returns Overall affect for the companys product design Familiarity with the companys products Familiarity with the company Determination to invest when equal financial returns Preparedness to invest with lower financial returns Overall affect for the companys product design Familiarity with the companys products Familiarity with the company Determination to invest when equal financial returns Preparedness to invest with lower financial returns Overall affect for the companys product design Familiarity with the companys products Familiarity with the company 0.033 -0.029 -0.072 -0.175 -0.025 -0.212 -0.210 0.807 0.190 0.093 -0.146 0.79 0.74 1.62 a 2.75** 0.78 2.26* 2.28* 16.96*** 2.90** 1.41 a
a p < .10 (one-sided); *p < .05 (one-sided); **p < .01 (one-sided); *** p <.001 (one-sided). Notes: The t-values were calculated through a bootstrapping routine with 292 cases and 500 samples.

On
0.206 0.061 -0.041 0.024 -0.087 -0.174 -0.009 0.24 2.06* 3.29*** 1.68 0.58 1.03 1.22 4.54***

Path coeff. t-value Hypothesis

Comparison company D

Comparison company D

Comparison company D

Comparison company A

Comparison company A

Comparison company A

Comparison company A

Comparison company A

Focal/investee company C

Focal/investee company C

Focal/investee company C

Focal/investee company C

Focal/investee company C

Focal/investee company B

Focal/investee company B

Focal/investee company B

Focal/investee company B

Focal/investee company B

183

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 invest 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 purposes. 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 matter 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 advancement of important scientific research. As mentioned, your participation is also very important 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 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 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 participate 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.N Helsinki School of Economics e-mail: n.n@hse.fi; puh. xxx xxxx xxx (N.N)

184

abstract
Design management research has increasingly advocated strategic perspectives 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 companys 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 companys product design influence their investment decisions towards the companys stock? My theory and hypothesis development concerning 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 individual/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 (n300), analyzed with causal (path) modeling. The third study was a conventional randomized experiment (n190). 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 companys products represent or support. Such life domains can be various activities or areas of interests (e.g., road traveling, gardening, sport) or more abstract themes or ideas (e.g., healthcare, mobility, environment-protection). The second factor is (2) the investors overall affect or liking for a companys product design. This factor reflects the degree to which the investor perceives the companys products to be pleasant, attractive, good, and likeable overall. The results show, first of all, how these two product design -related factors have positive effect on an investors optimism about the companys financial returns and negative effect on the consideration that he/she gives to alternative investment targets. Moreover, 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

185

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 companys product domain is to an investor and/or the more overall liking the investor has for the companys product design the greater is the investors 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 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 companys product design) as well as creating hybrid business models (that take into account, already at the outset, certain investors potential fondness of the companys current or future product design).

186

list of tables
Table 1. Description of the sample of Studies 1a and 1b: Personal characteristics of the investorrespondents 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 investorrespondents 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 companys product design on their financial expectations about the companys stock (as well as consideration of alternatives) 180-181 Table B2. Results, Model 1b: The effects of investors evaluations of a companys product design on their investment decisions, beyond financial returns 182-183

list of figures
Figure 1. Thematic depiction of the research gap 12 Figure 2. Illustration of the construct determination to invest in company As stock when it has equal expected financial returns as another stock B. 39 Figure 3. Illustration of the construct preparedness to invest in company As stock with lowered financial returns. 39 Figure 4. Summary of hypotheses: The effects of an investors evaluations of a companys product design on his financial expectations about the companys stock and consideration of alternatives (Model 1a). 61 Figure 5. Summary of hypotheses: The effects of an investors evaluations of a companys 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 companys product design on their financial expectations about the companys stock (and consideration of alternative investment targets) 92 Figure 7. Respondents willingness to in the focal companys stock beyond its expected financial returns/risk (Study 1b) 107

187

Figure 8. Results, Model 1b: The effects of investors evaluations of a companys 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 companys product domain and overall affect for the companys product design) of Study 2 133

list of appendixes
Appendix 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

188

Itse tutkimus Yksityissijoittajatutkimus

Esitys Veraventuren kk-palaverissa Kuopiossa 26.6.2009

Myynnin tila

Assistant professor Jaakko ASPARA Helsinki School of Economics TOP MANAGEMENT FORUM/080214/PP/AMS

Yksityissijoittajatutkimus: Toteutus
Tutkimus oli kyselytutkimus
| Kohteena yksityissijoittajaverkoston sijoittajat | Lomake jaettiin 107 sijoittajalle.
+ 32 jaettiin Veraventuren tilaisuudessa 27.1.2009 henkilkohtaisesti verkoston sijoittajille. + 73 postitettiin tammikuun 2009 lopulla verkoston sijoittajille. + 2 jaettiin Veraventuren tilaisuudessa 17.3.2009 henkilkohtaisesti verkoston sijoittajille.

| 35 lomaketta saatiin takaisin

vastausprosentti kohtuullinen 33%

Yksityissijoittajatutkimus: Tavoitteet
Tutkimuksessa pyrittiin
1. kuvailemaan sijoittajia ja heidn sijoituskyttytymistn:
a. henkilkohtaiset piirteet
taustatekijt (demografiat, koulutus- ja tytausta, yrittjhenkisyys) sijoittamiseen keskeisesti liittyvt tekijt (tulot, varallisuus)

b. piirteet pomasijoittajana
kokemus, tehdyt sijoitukset, nykyinen salkku, hallitusjsenyydet

c. viime vuosien (20072008) pomasijoitukset

arvo ja mr (tehdyt uudet, jatkosijoitukset, luovutetut) uusien sijoitusten deal flow : tietoon tulleet sijoituskohteet, harkitut, sijoitukset yleinen deal flow sijoittajan 3 parhaiten tuntemaan toimialaan liittyv deal flow

d. aiotut pomasijoitukset seuraavan 3 vuoden aikana (20092011)

yleisesti liittyen sijoittajan 3 parhaiten tuntemaan toimialaan (mys: mitk toimialat)
3

Yksityissijoittajatutkimus: Tavoitteet
Tutkimuksessa pyrittiin

2. laskemaan (1-kohdan perusteella) verkoston sijoittajien yhteis/kokonaismreit

+ varallisuus + viime vuosina tehdyt sijoitukset + aiotut sijoitukset

3.

hakemaan sikli kun mahdollista (huom. pieni n=35) tiettyj selitystekijit yksittisen sijoittajan sijoituskyttytymisen
+ esim. deal flown selittminen toimialan tuntemisella

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 tehdyist ja yli kolme vuotta pidetyist pomasijoituksista saisi X% huojennuksen luovutusvoittoverosta? puolella vastaajista X-prosenttiluku oli 50% ja puolella 100%

5.

selvittmn sijoittajien mielipiteit koskien SijoittajaExtran kehittmist

+ + ominaisuuksien hydyllisyys/tarpeellisuus kiinnostus sijoittaa uuteen rahastoon

Tutkimuksen tuloksia
1.a) Sijoituskyttytyminen: Henkilkohtaiset piirteet

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan koulutustausta
Kytnnss kaikilla enkeleill on kaupallinen ja/tai insinrikoulutus. Erityisesti kaupallinen koulutus antanee hyvt valmiudet sijoittamiseen. Toisaalta: miten muun koulutustaustan henkilit saisi houkuteltua vahvemmin mukaan sijoitustoimintaan?

7
Helsinki School of Economics HSE (Jaakko Aspara)

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan koulutustausta
Kaupallisesti koulutetuista enkeleist (yllttvn) monella on erityisalana markkinointi ja/tai strateginen johtaminen. (yllttvn) harvalla on erityisalana rahoitus.

8
Helsinki School of Economics HSE (Jaakko Aspara)

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan tmnhetkinen ty/positio
Suurin osa enkeleist ei ole tyss kyvi. J aikaa ja tarmoa enkelisijoitustoimintaan. Toisaalta: miten tysskyvi saisi houkuteltua vahvemmin mukaan sijoitustoimintaan?

9
Helsinki School of Economics HSE (Jaakko Aspara)

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan aiemmat tyt/positiot
Suurin osa enkeleist on ollut tiss yritysmaailmassa. Yritysmaailman kokemus antanee hyvt valmiudet. Toisaalta: miten julkisen sektorin asiantuntijoita saisi mys sijoittamaan?

10
Helsinki School of Economics HSE (Jaakko Aspara)

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan oma yrittjkokemus
Yli puolet enkeleist on toiminut joskus yrittjn. Yrittjkokemus antaa valmiudet ja innon enkelisijoittamiseen. Toisaalta: miten ei-yrittji saisi harjoitt(el)amaan sijoitustoimintaa?

11
Helsinki School of Economics HSE (Jaakko Aspara)

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan tuntemat (menestyksekkt) yrittjt
Nelj viidesosaa sijoittajista tuntee yli 5 menestyksekst yrittj. Esimerkkej ja uskallusta olla yritteliss sijoitustoiminnassa mukana. Toisaalta: miten yrittji tuntemattomatkin saataisiin sijoittamaan?

12
Helsinki School of Economics HSE (Jaakko Aspara)

1a) Henkilkohtaiset piirteet Taustatekijit

| Sijoittajan yrittjhenkisyys
Lhes kaikki sijoittajista ovat ainakin jokseenkin yrittjhenkisi. Uskallusta olla yritteliss sijoitustoiminnassa mukana. Toisaalta: miten epyrittjhenkisetkin saataisiin sijoittamaan?

13
Helsinki School of Economics HSE (Jaakko Aspara)

1b) Henkilkohtaiset piirteet Sijoittamiseen liittyvi tekijit

| Nettovarallisuus

Suurella osalla sijoittajista varallisuus vlill 1M - 5M. On varaa sijoittaa (ja riskeerata). Toisaalta: miten vhemmn varakkaita saisi kiinnostumaan enkelisijoittamisesta? Erityisesti vlin 0.5M - 1M sijoittajat ovat yllttvn vhiss.

14
Helsinki School of Economics HSE (Jaakko Aspara)

2. Yhteis-/kokonaismreet: Nettovarallisuus
| Tutkittujen 34 sijoittajan kokonaisnettovarallisuus oli yhteens: 33 M 117 M

| Veraventuren verkostossa olevien 100+ (?) sijoittajan kokonaisnettovarallisuus olisi (kertoimella 3): 99 M 351 M

15

Helsinki School of Economics HSE (Jaakko Aspara)

Tutkimuksen tuloksia
1.a) Sijoituskyttytyminen piirteet pomasijoittajana

1b) Piirteet pomasijoittajana

| Milloin ensimminen pomasijoitus?
Pomasijoitusuran pituuden keskiarvo jos ei-sijoittaneet mukana: 3.35.4 vuotta jos ei-sijoittaneet ei mukana: 4.16.7 vuotta

Suuri osa enkeleist tehnyt sijoituksia melko vhn aikaa (alle 6 vuotta). Viidesosa tehnyt sijoituksia yli 10 vuotta.

17
Helsinki School of Economics HSE (Jaakko Aspara)

1b) Piirteet pomasijoittajana

| Uran aikana tehdyt pomasijoitukset yhteens
Suuri osa enkeleist on tehnyt 3-5 pomasijoitusta. Lhes kukaan ei ole tehnyt yli 10 pomasijoitusta.

18
Helsinki School of Economics HSE (Jaakko Aspara)

1b) Piirteet pomasijoittajana

| Mit varoja sijoittaja sijoittaa?
Melkein kaikki enkelit sijoittavat henkilkohtaisia varojaan. 11 % sijoittaa sek henkilkohtaisia ett perheen/suvun varoja. (Tosin pelkki perheen/suvun tai muiden varoja sijoittavat ovat saattaneet jtt vastaamatta useammin.)

19
Helsinki School of Economics HSE (Jaakko Aspara)

1b) Piirteet pomasijoittajana

| Kuinka monta pomasijoitusta salkussa tll hetkell?
Useimmilla salkussa 25 pomasijoitusta. Hyvin harvoilla 6 tai enemp.

20
Helsinki School of Economics HSE (Jaakko Aspara)

10

1b) Piirteet pomasijoittajana

| Kuinka paljon sijoitettu varoja salkussa oleviin kohteisiin?
Useimmilla sijoitettuna 100 k 500 k varoja. Neljsosalla ei tll hetkell sijoituksia salkussa.

21
Helsinki School of Economics HSE (Jaakko Aspara)

2. Yhteis-/kokonaismreet Kohteisiin sijoitetut varat

| Tutkittujen 35 sijoittajan salkussa oleviin pomasijoituskohteisiin sijoittamat varat olivat yhteens: 4.1M 15.3 M

| Veraventuren verkostossa olevien 100+ (?) sijoittajan pomasijoituskohteisiin sijoittamat varat olisivat (kertoimella 3): 12.3 M 45.9 M

22

Helsinki School of Economics HSE (Jaakko Aspara)

11

1b) Piirteet pomasijoittajana

| Arvio salkussa olevien kohteiden arvosta tll hetkell (suhteessa sij. rahamrn) Hieman yli puolet sijoittajista
[(32%+6%+6%)/76%) arvioi sijoitustensa arvon olevan plussalla. Joka kuudennella [(12%+6%)/76%) sijoitusten arvo on tippunut alle puoleen.

23
Helsinki School of Economics HSE (Jaakko Aspara)

Tutkimuksen tuloksia
1.c) Sijoituskyttytyminen Viime vuosien pomasijoitukset

12

1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Uudet pomasijoitukset vuosina 2007-2008,
Puolet sijoittajista sijoitti ainakin 50 000 vuosina 20072008. Neljsosa sijoittajista ei tehnyt yhtn pomasijoitusta vuosina 2007-2008.

25
Helsinki School of Economics HSE (Jaakko Aspara)

2. Yhteis-/kokonaismreet Kohteisiin sijoitetut varat vuosina 07-08

| Tutkittujen 35 sijoittajan vuosina 2007-2008 tekemt pomasijoitukset olivat arvoltaan yhteens: 2.3 M 11 M

| Veraventuren verkostossa olevien 100+ (?) sijoittajan tekemt pomasijoitukset olisivat arvoltaan yhteens (kertoimella 3): 6.9 M 33 M

26

Helsinki School of Economics HSE (Jaakko Aspara)

13

1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Uudet tehdyt sijoitukset vuosina 2007-2008, kpl
Yli kaksi kolmasosaa sijoittajista teki ainakin yhden uuden sijoituksen vuosina 2007-2008. Kolmasosa sijoittajista teki 2 tai useamman uuden sijoituksen.

27
Helsinki School of Economics HSE (Jaakko Aspara)

2. Yhteis-/kokonaismreet Kohteisiin sijoitetut varat vuosina 07-08

| Tutkittujen 35 sijoittajan vuosina 2007-2008 uudet pomasijoituskohteet olivat lukumrltn yhteens: n. 50 kpl

| Veraventuren verkostossa olevien 100+ (?) sijoittajan uudet pomasijoituskohteet olisivat lukumrltn yhteens (kertoimella 3): n. 150 kpl

28

Helsinki School of Economics HSE (Jaakko Aspara)

14

1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Jatkosijoituksia aiempiin kohteisiin vuosina 2007-2008, kpl
Jopa puolet sijoittajista teki jatkosijoituksen kohteeseen, johon oli sijoittanut aiemmin.

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Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Muiden yksityissijoittajien mukanaolo vuosina 2007-2008
Melko harva sijoittaa uuteen kohteeseen, jos kohteeseen ei sijoita muita yksityissijoittajia.

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1c) Viime vuosien pomasijoitukset Arvot ja mrt

| VC-yhtiiden mukanaolo sijoituksissa vuosina 2007-2008
Puolella sijoittajista on ollut VC-yhti samanaikaisena sijoittajana vuosina 0708.

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Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Merkittvt varojen lhteet pomasijoituksille 2007-2008
Melko harva sijoittaja ottaa rahat pomasijoituksiinsa aiempien pomasijoitusten irtautumisista.

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1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Realisoidut voitot/tappiot pomasijoituksista 2007-2008
Kukaan ei realisoinut tappioita pomasijoituksistaan vuosina 07-08? Puolet ei realisoinut voittoja eik tappioita (mutta realisoiminen ilmeisesti epmrinen ksite, vrt. seuraava kalvo)

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Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Arvot ja mrt

| Irtautumiset pomasijoituksista 2007-2008
Kolme neljsosaa ei irtautunut yhdestkn pomasijoituksesta 07-08.

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1c) Viime vuosien pomasijoitukset Deal flow

| Tietoon tulleet suomalaiset pomasijoituskohteet 2007-2008
Vaihtelu tietoon tulleiden kohteiden mrss on suurta. Puolet sijoittajista saa tietoonsa 2 vuodessa alle 15 kohdetta.

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Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Deal flow

| Veraventuren kautta tietoon tulleet suomalaiset pomasijoituskohteet 2007-2008
Vaihtelu tietoon tulleiden kohteiden mrss on taas suurta. Puolet sijoittajista saa tietoonsa 2 vuodessa alle 5 kohdetta Veraventuren kautta.

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1c) Viime vuosien pomasijoitukset Deal flow

| Vakavasti harkitut suomalaiset pomasijoituskohteet vuosina 2007-2008
Suurin osa sijoittajista harkitsi vakavasti alle 6 kohdetta 2 vuoden aikana.

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Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Deal flow

| Uudet tehdyt sijoitukset vuosina 2007-2008, kpl
Yli kaksi kolmasosaa sijoittajista teki ainakin yhden uuden sijoituksen vuosina 2007-2008. Kolmasosa sijoittajista teki 2 tai useamman uuden sijoituksen.

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1c) Viime vuosien pomasijoitukset Deal flow

| Seuraavilla kalvoilla esiintyvt 3 tutuinta toimialaa ovat toimialat, jotka kukin sijoittaja nimesi itselleen tutuimmiksi.
+ Merkitse merkinnt T1, T2, T3 kolmen sellaisen toimialan kohdalle, jotka ovat olleet sinulle toimialoina erityisen tuttuja jo ainakin 5 vuoden ajan.

| Tutuimpia toimialoja koskevista mrist on kuitenkin karsittu pois deal flow toimialoilta, jotka olivat tulleet sijoittajille tutuiksi juuri sen takia, ett he olivat harkinneet toimialoja sijoituskohteina

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Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Deal flow

| Eli tutuimpia toimialoja koskevat mrt koskevat toimialoja, jotka olivat tulleet sijoittajille tutuiksi esim. sen takia, ett
+ sijoittaja tyskenteli (tai tyskenteli edelleen) ko. toimialan yrityksess + sijoittaja konsultoi (tai konsultoi edelleen) ko. toimialan yrityksi + yritys, jossa sijoittaja tyskenteli (tai tyskentelee edelleen), myi tuotteitaan tai palveluitaan ko. toimialalla toimiville yrityksille + yritys, jossa sijoittaja tyskenteli (tai tyskentelee edelleen), osti tuotteitaan tai palveluitaan toimialalla toimivilta yrityksilt + sijoittaja oli/on itse toimialan tuotteiden melko innokas kyttj + sijoittaja oli/on yleisesti kiinnostunut toimialasta
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1c) Viime vuosien pomasijoitukset Deal flow

| Listatut toimialat
+ + + + + + + + + + + + +
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Maatalous Kemikaalit ja materiaalit Teolliset ja B2B-tuotteet Teolliset ja B2B-palvelut Rakentaminen Kuljetus Kuluttajatuotteet ja vhittiskauppa Kuluttajapalvelut Energia ja ymprist Rahoituspalvelut Kiinteistt Kommunikaatio Tietokone- ja kuluttajaelektroniikka Biotieteet, Life sciences
Helsinki School of Economics HSE (Jaakko Aspara)

1c) Viime vuosien pomasijoitukset Deal flow

| Kohteet tutuilta toimialoilta deal flowssa 2007-2008
Voi (melko turvallisesti) todeta, ett ainakin puolet tietoon tulleista kohteista tulee tutuimmilta toimialoilta ainakin kolmasosa vakavasti harkituista kohteista on tutuimmilta toimialoilta noin kaksi kolmasosaa tehdyist sijoituksista on tutuimmille toimialoille
vliarvio

vliarvio

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Helsinki School of Economics HSE (Jaakko Aspara)

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3) Selitystekijt sijoituskyttytymiseen
| Noin kaksi kolmasosaa (63 %) sijoittajien tekemist sijoituksista (2007-2008) suuntautui toimialoille, jotka olivat 3 tutuimman joukossa (kullekin sijoittajalle) | Johtuu posin siit, ett tietoon tulleista sijoituskohteista vhintn noin puolet kohdistuu tutuimmille toimialoille.
Ne sijoituskohteet, jotka tulevat sijoittajien tietoon ja/tai joihin he kiinnittvt huomiota ovat vahvasti painottuneet tutuimpiin toimialoihin. Tietoisuus- /harkintajoukko (awareness/consideration set) on vahvasti painottunut tuttuihin toimialoihin.

| Sek tutuilta ett ei-tutuilta toimialoilta sijoitus tehdn 5-9 prosenttiin tietoon tulleista kohteista.
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Helsinki School of Economics HSE (Jaakko Aspara)

3) Selitystekijt sijoituskyttytymiseen
Suhteellisesti useampi kohde hyltn tutuilta toimialoilta ilman vakavaa harkintaa.
vakavasti harkitut kohteet tietoon tulleet kohteet X100%

huonot kohteet tunnistetaan suoralta kdelt, toimialakohtaisen kokemuksen perusteella?

sijoitetut kohteet vakavasti harkitut kohteet

X100%

sijoitetut kohteet tietoon tulleet kohteet

X100%

Mutta suhteellisesti useampaan vakavasti harkittuun kohteeseen sijoitetaan ennalta tunnetuilla toimialoilla. Ei-tutulla toimialalla arkajalkaillaan lopullisen sijoitusptksen kanssa?
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3) Selitystekijt sijoituskyttytymiseen
| Miksi toimialat, jotka olivat tuttuja ja joille sijoitettiin, olivat tuttuja?
Suurin osa tutuista toimialoista, joille sijoittajat ovat taipuvaisia sijoittamaan, on tuttuja, koska sijoittajat ovat tyskennelleet aiemmin toimialalla. Yritykset saavat toimialakohtaista kokemusta, ja sijoittajan kokema riski on pienempi toimialakohtaisen tuntemuksen takia. Mutta miten sijoittajat saataisiin kiinnittmn huomiota mys muuta kautta tuntemiensa toimialojen yrityksiin?

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Helsinki School of Economics HSE (Jaakko Aspara)

Tutkimuksen tuloksia
1.d) Sijoituskyttytyminen Aiotut pomasijoitukset

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1d) Aiotut pomasijoitukset

| Kuinka monta sijoitusta olisi ideaalisalkussa?
Harva sijoittaja olisi valmis ottamaan salkkuunsa yli 5 pomasijoituskohdetta.

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Helsinki School of Economics HSE (Jaakko Aspara)

1d) Aiotut pomasijoitukset

| Kuinka paljon sijoittaja arvioi sijoittavansa uusia varoja pomasijoituskohteisiin seuraavan 3 vuoden aikana (09-11)?
Suurin osa sijoittajista aikoo sijoittaa 50 k 500 k

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2. Yhteis-/kokonaismreet Sijoitusaikomukset
| Varat, jotka tutkitut 35 sijoittajaa aikovat sijoittaa uusiin pomasijoituskohteisiin 2009-2011 olivat yhteens: 3.5 M 11.2 M

| Varat, jotka Veraventuren verkostossa olevat 100+ (?) sijoittajaa aikovat sijoittaa olisivat (kertoimella 3): 10.5 M 33.6 M

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Helsinki School of Economics HSE (Jaakko Aspara)

1d) Aiotut pomasijoitukset

| Toimialat sijoittajan kolmen tutuimman alan joukossa
ICT-alat (kommunikaatio sek tietokoneet ja kuluttajaelektroniikka) ovat yleisimmin tutut alat. Kuluttajapalvelut erittin harvalle tuttu ala. Melko harvalle tuttuja aloja mys energia&ymprist, materiaalit ja biotieteet.

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1d) Aiotut pomasijoitukset

| Kokonaissijoituskiinnostus eri toimialojen pomasijoituskohteisiin seuraavien 3 vuoden aikana (2009-2011)
Ympyrn koko on kertolaskun tulos = niiden sijoittajien mr, joille toimiala on 3 tutuimman joukossa * keskimrinen sijoitushalukkuus niden sijoittajien joukossa

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Tutkimuksen tuloksia
4) Verohuojennusskenaarion vaikutukset

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Kokeellinen asetelma
| Asetelma
+ miten sijoitusaikomukseesi seuraavan 3 vuoden aikana (2009-2011) vaikuttaisi se, jos alle kuusi vuotta vanhoihin innovatiivisiin yrityksiin tehdyist ja yli kolme vuotta pidetyist pomasijoituksista saisi X% huojennuksen luovutusvoittoverosta? puolella vastaajista X-prosenttiluku oli 50% ja puolella 100%

Vastausvaihtoehdot
+ + + + + + + + + sijoittaisin vhemmn kuin tilanteessa, jossa verolainsdnt silyy nykyisen sijoittaisin saman verran kuin tilanteessa, jossa verolainsdnt silyy nykyisen sijoittaisin 0 10 % enemmn sijoittaisin 10 25% enemmn sijoittaisin 25 50% enemmn sijoittaisin 50 100 % enemmn sijoittaisin kaksin-kolminkertaisesti sijoittaisin yli kolmin-viisinkertaisesti sijoittaisin yli viisinkertaisesti
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4) Verohuojennusskenaarion vaikutukset
| Aikomus list pomasijoituksia seuraavien 3 vuoden aikana (2009-2011) 100%:n verohuojennusskenaariossa yleisin
lisysaikomus on +25..50% 50%:n verohuojennusskenaariossa useamman sijoittajan lisysaikomus on +010% Kenenkn sijoittajan sijoitusaikomus ei kaksinkertaistu.

100% verohuojennusskenaariossa muutamat sijoittajat vhentisivt sijoituksiaan. 54 ko. sijoittajat sijoittavat sijoitusyhtin kautta

Helsinki School of Economics HSE (Jaakko Aspara)

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4) Verohuojennusskenaarion vaikutukset
| Aikomus list pomasijoituksia seuraavien 3 vuoden aikana (2009-2011): Keskiarvot verohuojennusprosentin mukaan
Sijoitusaikomuksen lisntymiseen ei nyttisi vaikuttavan merkitsevsti se, onko verohuojennusprosentti 50% vai 100%. Kummassakin skenaariossa sijoittajien sijoitusaikomus nousee 20-30%
Keskiarvot laskettu vastaushaarukoiden yl- ja alareunan keskilukujen perusteella. Poislukien ne, jotka aikovat vhent sijoituksiaan

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Helsinki School of Economics HSE (Jaakko Aspara)

4) Verohuojennusskenaarion vaikutukset
| Aikomus list pomasijoituksia seuraavien 3 vuoden aikana (2009-2011): Keskiarvot verohuojennusprosentin mukaan
Jossain mrin nytt silt, ett (suurempi) verohuojennus lisisi sijoitusaikomusta enemmn varakkailla sijoittajilla. Otos on kuitenkin liian pieni vedenpitvn johtoptksen tekemiseksi.

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