African Journal of Business Management Vol.6 (21), pp. 6401-6414, 30 May, 2012 Available online at http://www.academicjournals.org/AJBM DOI: 10.5897/AJBM11.2392 ISSN 1993-8233 ©2012 Academic Journals Full Length Research Paper A framework to evaluate customer knowledge co- creation capacity for new product development Ali Mohaghar 1 , Ahmad Jafarnejad 1 , Mohammad Mirkazemi Mood 1 and Hossein Rahmany Youshanlouei 2 1 Management Faculty, University of Tehran, Tehran, Iran. 2 Young Research Club, Salmas Branch, Islamic Azad University, Salmas, Iran. Accepted 5 December, 2011 Today more than ever, organizations have realized a strong partner for innovation called customer. In fact, the increasing change in demands of customers and higher competitiveness of the market has made the organizations search for the sources of gaining competitive advantage not in themselves but rather in consumers. Customer knowledge is what the organizations need to be successful in innovation and development of new products and services. But customer knowledge does not exist as a prepared package and organizations need to create the required knowledge through mechanisms in collaboration with customers. This collaboration is a process that is referred to, in literature as, "knowledge co-creation" and by introducing the concept of knowledge co-creation capacity of the organization, the present study is trying to recommend a framework to consolidate the concepts presented regarding collaboration with the customer in creating knowledge and also designing a scale to measure the knowledge co-creation capacity of organizations in collaboration with customers to innovate and develop new products. Key words: Knowledge co-creation, new product development, organizational capability, factor analysis. INTRODUCTION The importance of knowledge in gaining competitive advantage in business is because of its crucial role in innovation and production of new products as one of the indicators of organizational competitiveness (Kohlbacher, 2008). Traditionally, in order to develop new products and innovation, organizations relied on the knowledge created inside the organization; but over the recent decades, organizations are not capable of responding to the changes and have had to expand their knowledge resources beyond their borders (Miller, 2010). By studying the literature of knowledge and innovation, two resources for providing the required knowledge for developing new products by the organizations were identified: creating the required knowledge inside the organization and acquiring knowledge from external *Corresponding author. E-mail: Md.mirkazemi@gmail.com. Tel: +98-912-1505371. sources such as customers, suppliers, partners, competitors and scientific institutions and universities (Laursen and Salter, 2006). External resources of knowledge are often vital for innovation process and organizational capability for utilizing this external knowledge is a determining factor for innovative organizational capabilities (Cohen and Levinthal, 1990). One of the newest concepts in order to use the knowledge resources outside the organization is the concept of knowledge co-creation. This concept refers to organization collaboration with partners, competitors, suppliers, and customers for creating knowledge. An organization which is capable of co-creation of knowledge may use the acquired knowledge in order to gain competitive advantage (Kohlbacher, 2008). Among different players that can help the organization create knowledge, customers undoubtedly have an important place especially in developing new products and services because the customers know what they want, even better than the organization or its competitors or suppliers