The roles of online user generated content and the interrelationship between product development and product adoption

Extant studies have been showing that online user generated content (UGC) plays an important role in product adoption. I expand this research by considering the roles of online UGC in both product development and product adoption processes. Moreover, the interrelationship between these two processes is investigated under a theoretical framework of double-sided adverse selection in which both developers and users are uncertain about the future of a product. I model product development and adoption processes over the product lifecycle, capturing the direct and indirect effects of online UGC on both processes. Data for the study are taken from a longitudinal dataset covering 63 months for 11,648 open source projects registered on Sourceforge.net, one of the largest open source software development platforms. The results of this study reveal that online UGC has a positive effect on both the initiation and the completion of product development activities. Moreover, product adoption helps amplify that positive effect. Those results are consistent with the theory that online UGC can provide ideas and solutions for development activities and that developers capitalize on those ideas and solutions to initiate and to complete development activities. In addition, the results also show that product development and product adoption affect each other positively. Those results are consistent with the theory that product development and adoption signal developers' commitment in developing the product and users' interest in the product, respectively. Hence, it is suggested that transparency between developers and users creates a positive feedback loop between product development and product adoption. Since this study investigates the behaviors of both developers and users, it implies applications for users, developers, as well as platform owners who want to design a competitive ecosystem to attract and satisfy both users and developers.