Abstract: In today's rapidly changing and highly competitive business environment, it becomes more and more important for firms promoting product and service by gaining and using external knowledge from customers. The customers' participation in product and service innovation is increasingly emphasized both in theory and practice. Therefore, it is necessary to highlight the perception of equity in customer participation (CP) process and develop incentive measures specifically applied to this special group.However, most of the existing literatures research CP incentive measures in equilibrium condition where the degree of jealous equity preference is equal to the degree of sympathetic equity preference. In order to get close to reality, we should further consider the general situation andintroduce both inequity aversion theory and status seeking theory into this paper.
Based on the above discussion, an incentive model of customer participation is built based on equity preference theory (inequity aversion and status seeking), relative performance evaluation and participation cost element from the perspective of innovative customers' participation in team innovation activities. First of all, the effect of the equity preference, incentive intensity and participation cost element on the incentive effect in all kinds of compensation contracts (independent compensation contract, relative performance contract, team compensation contract and perfect team compensation contract) is explored through the model solution and analysis. Secondly, the functional relationship among the risk cost, expected loss from inequity and incentive effect, and obtains the range of optimal incentive intensity andoptimal contract types for innovative customers is discovered. Thirdly, to examine the proposed models, the survey data of 265 users involved in a large software frim's product enhancement project in Guangzhou from March 1st to August 31st in 2017 are collected, which are adopted to carry on the analysis by using Mathematica. Finally, the corresponding management recommendations are put forward according to the research findings.
The results show that:(1) Under the same compensation contract, if innovative customers pay more attention to the input of their effort costs, the more negative effect of the contract will be caused. (2) For innovative customers with a low degree of equity preference, frims can adopt relative performance contracts, such as competitive contracts; (3) For innovative customers with a high degree of equity preference, when their risk aversion degree is high, team compensation contracts can be adopted, and perfect team compensation contract can be adopted when their risk aversion degree is low.
The main innovation points of this paper include-firstly, introduce both inequity aversion and status seeking into the design of CP incentives mechanism can not only further research the influence of equity preference on the optimal contract type of innovative customers and deepen the cognition of innovative customer incentive mechanism theoretically, but also provide the theoretical guidance which has more extensively applicable scope for firms to optimize innovative customer management.Secondly, it can further describe the influence of the participation cost of innovative customers on the incentive mechanism and enrich the connotation of innovative customer incentive theory that consider the actual situation of CP and introduce participation cost element into the model.

Key words: inequity aversion, status seeking, innovative customer, incentive intensity, contract type