The relationship of compatibility with perceived behavioral control,

investment intention

Next, the conceptual background of compatibility will be discussed.

Subsequently, expected investment value, expected sacrifices and perceived behavioral control will be discussed as the antecedents of compatibility. The discussion leads us to the sixth, seventh and eight research hypotheses. Thereafter the relationship between compatibility and investment intention will be discussed, which leads us to the ninth and final research model hypothesis.

2.7.1 Conceptual background of compatibility

In the theory of diffusion of innovations (DOI), Rogers (1995, 224) defines compatibility as the degree to which an innovation is perceived to be consistent with the individual’s prevailing needs, values, and past experience. Moore and Benbasat (1991) then again excluded the “needs”

as it was considered to overlap with the construct of relative advantage in the DOI-model, as there cannot be an advantage that would not reflect the consumer’s needs. Karahanna et al. (2006, 781) then again divided compatibility into four separate aspects: “compatibility with preferred work style, compatibility with existing work practices, compatibility with prior experience and compatibility with values.” Tornatzky and Klein (1982) reasoned that that compatibility should be divided into normative/ cognitive compatibility and practical/operational compatibility. Whereas the first refers to the compatibility with what people think about the product, the second refers to compatibility with what they do (ibid). This research adopts the commonly accepted definition of Rogers (1995).

2.7.2 The effect of perceived behavioral control on compatibility Perceived behavioral control is determined by the set of control beliefs regarding the factors that might enable or prevent one to perform the behavior in question (Ajzen 2006), and thus we hypothesize that behavioral control has an effect on consumer’s perception of the compatibility of the investment. After all, when behaviors are volitional, people attempt to reduce cognitive dissonance and align their behavior with preferences that reflect their self-identity (Karahanna et al. 2006).

Since compatibility also refers to past behavior and existing practices (Rogers 1995), and preferences are the driving force of behavior (Karahanna et al. 2006), we argue that the more the consumer feels he or she has control over the behavior the greater the compatibility is. And vice versa, if one believes there is a factor controlling his or her behavior, in this case, if he or she considers his or her financial resources to be insufficient for investing in stocks or funds, it is unlikely that he or she perceives the investment alternative to be compatible with his current situation. Thus, the following hypothesis is drawn:

H6: Perceived behavioral control has a direct and positive effect on compatibility.

2.7.3 The effect of expected investment value on compatibility

According to Karahanna et al. (2006) compatibility with values and preferred work style rests on the individual’s belief that the product offers positive value, helps promote deeply held values and achieve the self-concept of the way the individual would like to work. Thus, we propose that consumer’s perception of compatibility is greater as the expectation of the investment’s economic, functional, emotional, and symbolic value is higher. Accordingly, one’s perception of the investment’s compatibility with his or her current situation and needs is anticipated to increase as one expects the monetary gains of investing to be greater. Also, the more convenient, fun and exciting, and self-esteem enhancing one considers

investing in stocks or investment funds to be, the greater he or she also perceives the compatibility with his or needs and lifestyle. After all consumers’ perception of value is connected with their perception of the extent to which the product would satisfy their needs (Bowman & Faulkner 1997). Yet, we want to underscore the theorized causality. Even though some researchers define compatibility as an antecedent of perceived value (e.g. Lai 1995; Kleijnen et al. 2007), we argue that a consumer first forms an expectation of the investment’s value, after which he or she is able to assess the investment product’s compatibility with his or her needs, values and lifestyle. Consequently, we hypothesize:

H7: Expected investment value has a direct and positive effect on compatibility.

2.7.4 The effect of expected sacrifices on compatibility

As consumers feel that using the product would not require a lot of learning or change in their current behavior, their perception of the compatibility of the product is higher (Chakravarty & Dubinsky 2005).

Accordingly, the less effort and changes in one’s working methods investing necessitates, the higher the compatibility is (adapted from Karahanna et al. 2006). Thus, we hypothesize that the less investment related sacrifices one expects, the better he or she considers the investment product to suit his or her lifestyle, present circumstances and needs. Thus the next hypothesis is:

H8: Expected sacrifice has a direct and negative effect on compatibility.

2.7.5 The effect of compatibility on investment intention

Among diffusion research there is plenty of evidence that compatibility affects and individual’s adoption (i.e. purchase/use) of a product or a

service (see e.g. a review by Rogers 1995). Moore and Benbasat (1996) found that usage was significantly affected by consumer’s perceptions of the products usefulness, ease of use and compatibility. Tornatzky and Klein (1982) conducted a meta-analysis of 100 innovation research papers and concluded that relative advantage, compatibility and complexity were the three major determinants behind consumer utilization decisions.

Moreover, compatibility has been found to affect consumer intentions in several other studies (e.g. Taylor & Todd 1995; Agarwal & Prasad 1997).

All this said, in this thesis it is predicted that consumer’s intention to invest (i.e. purchase investment products) is also affected by his or her perception of the degree to which the investment alternative fits his or her life. After all, as compatibility is perceived to be higher, using or purchasing the product is perceived to require only little learning or change in behavior (Chakravarty & Dubinsky 2005). Hence, if the consumer feels that there exists an option for wealth allocation that is more compatible with his or her current needs or situation (e.g. investment time) and which requires less change in one’s existing habits, then he or she is more likely to invest in that particular investment/saving alternative. This causes consumers to become locked-in to certain products (Murray & Häubl 2007). For example, if consumers consider that keeping their assets on a bank account requires the least amount change in behavior, they perceive bank accounts more compatible than stocks or investment funds. After all, consumers tend to follow habits and are prone to choosing solutions that require the least amount of effort (Collan 2007; Collan & Tetard 2007;

2009). This discussion leads us to the conclusion that if investment and saving decisions are similar to other consumption choices, compatibility should have a positive relationship with an individual’s intention to invest and consequently the following hypothesis is drawn:

H9: Compatibility has a direct and positive effect on investment intention.

2.8 Differences between consumers with and without prior