The Form of Relationship between Firm‐Level Product Innovativeness and New Product Performance in Developed and Emerging Markets

This study compares the new product performance outcomes of firm‐level product innovativeness across a developed and emerging market context. In so doing, a model is constructed in which the relationship between firm‐level product innovativeness and new product performance is anticipated to be curvilinear, and in which the nature of this relationship is argued to be dependent on organizational and environmental factors. The model is tested using primary data obtained from chief executive officers and finance managers in 319 firms operating in the United Kingdom, an advanced Western market, and 221 firms from Ghana, an emerging Sub‐Saharan African market. The model is assessed using a structural equation model multigroup analysis approach with LISREL 8.5. In the United Kingdom and Ghana, the basic form of the relationship between firm‐level product innovativeness and business success is inverted U‐shaped, but the strength and/or form of this relationship changes under differing levels of market orientation, access to financial resources, and environmental dynamism. While commonalities are identified across the two countries (market orientation helps firms leverage their product innovativeness), differences are also observed across the samples. In Ghana, access to financial resources enhances the relationship between product innovativeness and new product performance, unlike in the United Kingdom where no moderation is observed. Furthermore, while U.K. firms leverage product innovativeness to their advantage in more dynamic environments, Ghanaian firms do not benefit in this way: here, high levels of innovation activity are less useful when markets are more dynamic. If the study's findings generalize, there are a number of implications for managers of both emerging and developed market businesses. First, managers in both developed and developing market firms should focus on determining and managing an optimal balance of novel and intensive product innovativeness within the context of their unique institutional environments. Second, for emerging market firms, a market orientation capability helps businesses leverage local market intelligence, enabling them to compete with multinational giants flocking to emerging markets, but typical developed market learning approaches may be insufficient for multinational firms when seeking to compete in emerging markets. Third, for emerging market firms, access to finances helps deliver product innovation success (although this is not the case for developed market firms, possibly due to strong financial institutions). Finally, unlike developed market firms, burdened by institutional voids at home, emerging market firms appear to be less capable of competing on an innovation front in more dynamic market conditions. Accordingly, policymakers in emerging markets should consider identifying ways to help businesses raise market orientation levels, and seek to create conditions that enhance access to financial capital (e.g., direct financing, matching grants, tax rebates, or rewarding firms that innovate creatively and intensely). Likewise, since environmental dynamism is likely to be a growing issue for emerging markets, efforts to help firms become more adept at keeping up with more agile developed market counterparts are needed.     

Supportiveness of Organizational Climate, Market Orientation, and New Product Performance in Chinese Firms

Most knowledge development efforts in new product development have focused on Western economies and companies. However, due to its size, rapid growth rate, and market reforms, China has emerged as an important new context for new product development. Unfortunately, current understanding of the factors associated with new product success in China remains limited. We address this knowledge gap using mixed methods. First, we conducted 19 in‐depth interviews with managers involved in new product development in 11 different Chinese firms. The qualitative fieldwork indicated that firm behaviors and employee perceptions consistent with the phenomena of market orientation and the supportiveness of organizational climate both are viewed as important drivers of the new product performance of Chinese firms. Drawing on the marketing, management, and new product development literature this study develops a hypothetical model linking market orientation, supportiveness of organizational climate, and firms' new product performance. Direct relationships are hypothesized between both market orientation and supportiveness of organizational climate and firms' new product performance, as well as a relationship between supportiveness of organizational climate and market orientation. Data to test the hypothetical model were collected via an on‐site administered questionnaire from 110 manufacturing firms in China. The hypothesized relationships are tested using structural equation modeling. Results indicate a positive direct relationship of market orientation on firms' new product performance, with an indirect positive effect of supportiveness of organizational climate via its impact on market orientation. However, no support is found for a direct relationship between the supportiveness of a firm's organizational climate and its new product performance. These findings are consistent with resource‐based view theory propositions in the marketing literature indicating that market orientation is a valuable, nonsubstitutable, and inimitable resource and with similar propositions in the management literature concerning organizational culture. However, this study's findings also indicate that in contrast to a number of organizational culture theory propositions and empirical findings in some consumer service industries, the impact of organizational climate on firm performance in a new product context is indirect via the firm's generation, dissemination, and responsiveness to market intelligence. These results suggest that an effort to improve firms' new product performance by enhancing the flow and utilization of market intelligence is an appropriate allocation of resources. Further, this study's findings indicate that managers should direct at least some of their efforts to enhance a firm's market orientation at improving employee perceptions of the supportiveness of the firm's management and of their peers. This study indicates a need for further research concerning the role of different dimensions of organizational climate in firms' new product processes.     

Speed to Market for Innovative Products: Blessing or Curse?

The relationships among speed to market, quality, and costs are important to managers as they attempt to best establish incentives and set goals for new product development teams, allocate resources for new product development, or create positional advantage in the market. The existing literature suggests that the economic consequences of being late to the market are significant, including higher development and manufacturing costs, lower profit margins, and lessening of the firm's market value. Therefore, traditional logic has held that new product development managers need to manage the trade‐offs among speed to market, quality, and costs. While both scholars and managers have often acquiesced to performance trade‐offs among “faster, better, and cheaper,” this research attempts to improve understanding of the interrelationships between these objectives, and ultimately profit. Based on a survey of 197 managers, faster speed to market is shown to be related to better quality and lower costs; it is not necessary to sacrifice one of these outcomes. Further, the moderating roles of two dimensions of innovativeness (innovativeness to the firm and to the market) are examined on the relationships between speed and quality, as well as speed and profit. Both dimensions of innovativeness positively moderate the relationship between speed to market and quality. For more innovative products (both to the firm and the market), there is a stronger positive relationship between speed and quality than for less innovative products. Further, innovativeness to the firm negatively moderates the relationship between speed and profit. Thus, speed has a less positive impact on profit for highly innovative‐to‐the‐firm products compared with less innovative‐to‐the‐firm products. By being conscious of the projects’ levels of innovativeness (along with prioritizing various performance measures), managers can more rationally decide when to emphasize speed to market based on this study's findings.     

Corporate Culture and Commitment: Impact on Performance of International New Product Development Programs

To achieve success in today's competitive environment, firms increasingly must develop new products for international markets. To this end, they must leverage and must coordinate broad creative capabilities and resources, which often are diffused across geographical and cultural boundaries. Recent writings in the globalization and in the new product development (NPD) literatures suggest that certain “softer” dimensions that define the behavioral environment of the firm—that is, the firm's organizational culture and management commitment—can have an important impact on the outcome of these complex and risky endeavors. But what comprises these dimensions and what type of behavioral environment scenario is linked to high performance in the international NPD effort of firms has not been articulated clearly. This research focuses on these softer dimensions, with the objective of understanding and idengifying their specific makeup as well as their relationship to the outcome of international NPD programs. Based on an integration of three literatures—organizational, new product development, and globalization—the present study develops a research instrument, comprising 18 behavioral environment measurement items as well as several outcome measures, that is administered to a broad empirical sample of goods and services firms active in NPD for international markets. Using empirical results from 252 international NPD programs, three key dimensions are idengified: (1) the innovation/globalization culture of the firm; (2) the commitment of sufficient resources to the NPD program; and (3) top management involvement in the international NPD effort. These dimensions are used to derive four clusters of firms, where each grouping represents a distinctly different behavioral environment scenario. In a preliminary analysis, it is ascertained that other aspects of the firm such as “degree of internationalization,” location of the respondent to the NPD center, and other company parameters do not form the basis of cluster membership. By linking measures of performance to the four behavioral clusters, findings are developed that clearly support this study's hypothesis that international NPD outcomes are associated with the softer behavioral environment dimensions. Scenario performance ranges from “very high” to “very low” and appears to be linked clearly to the dimensions studied. The lower‐performing firms tended to emphasize positively only one, or sometimes two, of the three dimensions. The “best performers” were found to be firms with a “positive balanced” approach to international NPD, where all three behavioral environment dimensions are supported strongly. In other words, firms in this scenario have an open and innovative global NPD culture, they ensure that sufficient resources are committed to the NPD program, and their senior managers play an active and involved role in the international NPD effort. Given this evidence of a direct link between behavioral environment and international NPD performance, the present study's findings suggest some important messages for managers charged with the development of new products for international markets.     

New Product Strategies of Large, Dominant Product Manufacturing Firms: An Exploratory Analysis

Although researchers have expended considerable effort exploring the links between new product strategy and firm-level performance, most studies of this subject focus on small- to medium-sized firms. Compared to smaller firms, however, large companies typically maintain broader portfolios of products and have easier access to capital markets. Such fundamental differences suggest the need for closer examination of the relationship between new product strategy and the performance of large firms. Based on a study of 459 new products introduced during a 5-year period, Richard W. Firth and V. K. Narayanan profile the new product strategies of 18 large companies. They examine the methods used to acquire new products (internal development or external sources) as well as three dimensions of each firm's new product introductions: newness of embodied technology, newness of market application, and innovativeness in the market. In other words, these profiles identify the degree to which a firm's new product introductions involve core technologies and markets that are new to the firm, as well as the degree to which the market views these products as innovative. Because new product strategy is an investment decision, the study also examines the relationship between these strategic profiles and two facets of firm-level performance: risk and return. The study identifies five archetypes of new product strategy: Innovators, who produce innovative products by using their existing resources; Investors in Technology, who focus on expanding their technological base. Searching for New Markets, firms that venture into unfamiliar markets by introducing products closely aligned with those in their existing portfolios; Business as Usual, firms that rely on existing technologies and products to serve existing markets; and Middle-of-the-Road, firms content to introduce new products rated as low to moderate along all three dimensions of the strategic profile. For new products closely aligned with their core markets and technologies, the firms in this study typically rely on internal development. To introduce products involving new technologies or market applications, they turn to acquisition from external sources. Firms that emphasized market innovativeness in their new product introductions enjoyed higher returns than less innovative firms. And contrary to conventional wisdom, they gained this advantage without an accompanying increase in risk. In other words, continual innovation might provide a large firm with the means for achieving higher returns without higher risk.     

New Product Development in Rapidly Changing Markets: An Exploratory Study

Rapid technological change can be both a blessing and a curse. For example, investors and firms of all sizes hope to reap the rewards that may arise from the apparent convergence of the computer, telecommunications, and entertainment industries. With the high level of uncertainty inherent to such rapidly changing markets, however, those potentially dazzling returns are counterbalanced by a daunting level of risk. John Mullins and Daniel Sutherland suggest that firms operating in such markets require NPD practices that can mitigate risk, manage uncertainty, and, of course, increase the likelihood of new product success. To gain insight into the NPD practices that can meet those challenges, they conducted in-depth interviews with managers who were directly involved in NPD projects at US WEST, Inc., a large, multinational firm in the telecommunications industry. The study focused on identifying practices that help the firm bring new products into rapidly changing markets quickly, efficiently, and effectively. A key objective of their study was to go beyond the basics—for example, the use of cross-functional teams—to identify specific practices that allow the firm to address the various levels of uncertainty that characterize its markets. They identify three levels of uncertainty that confront firms operating in rapidly changing markets. First, potential customers cannot easily articulate needs that a new technology may fulfill. Consequently, NPD managers are uncertain about the market opportunities that a new technology offers. Second, NPD managers are uncertain about how to turn the new technologies into products that meet customer needs. This uncertainty arises, not only from customers' inability to articulate their needs, but also from managers' difficulties in translating technological advancements into product features and benefits. Finally, senior management faces uncertainty about how much capital to invest in pursuit of rapidly changing markets as well as when to invest. The study identifies six practices that help the firm address the uncertainty and risk inherent in its rapidly changing markets. For example, market research in this firm's NPD process focuses more on probing than it does on measuring. Involvement of prospective customers in idea generation and the use of prototypes early in the NPD process help the firm uncover customer needs and market opportunities. Large-scale, quantitative market research focuses primarily on determining market size and price points.     

Heading for new shores: Do service and hybrid innovations outperform product innovations in industrial companies?

This study investigates the financial outcomes of product, service, and hybrid innovations in industrial markets. To date, empirical research has focused on product innovations, yet industrial firms are increasingly competing with innovative services to maintain their competitive edge. This study assesses the financial impact of service and hybrid innovations compared with more traditional product innovations. We develop a unique data set that combines information on companies' innovation activities with objective financial data. From a sample of 348 German industrial firms, the analysis reveals that service innovations do not outperform product innovations in industrial markets. A focus on service innovations only pays off in highly price-conscious markets. In contrast, hybrid innovations, referring to the simultaneous market introduction of new products and services, have a positive effect on firm performance above and beyond pure product innovations. This effect is particularly pronounced in competitive markets and under conditions of high customer concentration. In sum, this study demonstrates that hybrid innovations outperform both, pure product and service innovations in industrial markets.     

Exploring the Nonlinear Impact of Organizational Integration on New Product Market Success

This article explores the nonlinear relationship between organizational integration and new product market success (NPMS). The concept of organizational integration was measured by assessing the degree of integration among various groups of people involved in the development of new products including new product development (NPD) teams that are typically the focal points of NPD efforts. New product market success was measured by examining four often‐used measures of NPD success. The mail survey research approach was used to gather empirical data from NPD managers in three major industries. The data gathered from this survey process were used as the basis from which to extract information to address this study's major research questions, which include: (1) How is the degree of new product market success related to the nonlinear degree to which groups of people (including NPD teams) integrate during NPD processes? and (2) How is the degree of new product market success related to the nonlinear degree to which separate groups of people (e.g., customers, suppliers, and functional departments) integrate during NPD processes? This study found that high levels of organizational integration (overall organizational integration and supplier organizational integration) during NPD processes are associated with high levels of new product market success. Additionally, this study found that the relationship between new product market success and organizational integration (customer organizational integration and functional organization integration) during NPD processes exhibit nonlinear, U‐shaped relationships. Therefore, the first important finding of this study confirms that various forms of organizational integration impact in a positive way the market success of new products. This suggests that management responsible for all NPD projects should consciously integrate important groups of people to support such developments. This study's findings also confirm and imply that new product developers in the studied industries should integrate marketing and research and development (R&D) over the duration of the NPD process. This suggests that new product managers must be proactive to assure that members of NPD teams are actively engaged with groups of supporting people within and outside new‐product–producing organizations. Unlike prior research, a major finding of this study suggests that the association between organizational integration and new product market success does not form inverted U‐shaped relationships. Data from this research imply that new product market success is linearly influenced by overall and supplier organizational integration. However, this study's data suggest that new product market success is nonlinearly influenced by customer and functional organizational integration. This study's data suggest that when customer organizational integration and/or functional organizational integration is increased, new product market success can be increased at a rate which is greater than a linear rate.     

The Impact of Product Portfolio Strategy on Financial Performance: The Roles of Product Development and Market Entry Decisions

Innovation is one of the most important issues facing business today. The major difficulty in managing innovation is that managers must do so against a constantly shifting backdrop as technologies, competitors, and markets constantly evolve. Managers determine the product portfolio through key decisions about product development and market entry. Key strategic questions are what portfolio strategies provide the greatest reward. The purpose of this study is to understand the relative financial values of each component of a product portfolio. Specifically, the paper examines the short‐term and long‐term financial impacts of product development strategy and market entry strategy. These strategies reflect two critical tensions that must be balanced in product portfolio decision making and essentially determine a firm's product portfolio. In doing so, the paper also investigates how a firm's capabilities drive each component of a product portfolio. From the empirical analyses in the context of the biomedical device industry, the paper found important insights regarding product portfolio strategies. First, a large product portfolio helps a firm's financial performance. In particular, the pioneering new products have strongest impacts on short‐term performances, and nonpioneering mature products do not provide significant contribution. Second, the results indicate a persistent first‐mover advantage. The first‐to‐market new products yield not only an immediate effect, but also persistent long‐term effects, suggesting that it is important to be first in the market even though there may be short‐term losses. Third, the results suggest the need to balance between “mature” and “new” products. Also, firms need to balance “first‐to‐market” and “late‐entered” products. Because a new or pioneering product requires more resource, it may hurt other products in the portfolio. Thus, without support from mature or follower products, new products and pioneering products alone may not increase firm sales or profit. Fourth, from a long‐term perspective, the paper found that the financial market only rewards a firm's overall capability to deliver new products first in the marketplace. Thus, short‐term performance is mainly driven by product‐level innovativeness, whereas firm‐level innovativeness enhances forward‐looking long‐term performance. Fifth, the paper also found that pioneering new products are driven by integrating both primary and complementary technological capabilities. And nonpioneering new products are mainly driven by the capabilities in primary technology domain. These results provide important insight into the relative value and timing of return on investment in radical versus incremental innovation and alternative market entry strategies. By understanding the performance trade‐offs of these different factors in the short and long term, one can develop better guidelines for optimizing innovation strategies, and their dependence on both external and internal environmental conditions.     

Analyses of U.S. and Japanese Management Processes Associated with New Product Success and Failure in High and Low Familiarity Markets

As detailed in the pages of JPIM and other publications, considerable research effort has been devoted to identifying the preconditions for new product success. Studies of Japanese and U.S. new product development (NPD) practices have shown that such factors as sales and marketing expertise, technical expertise, decentralized decision making, R&D/marketing integration, project manager competency, and support from senior management can play key roles in influencing new product success. As William Souder and X. Michael Song point out, however, previous studies have not examined Japanese management practices across a range of environments. They also suggest that the similarities and differences between U.S. and Japanese NPD practices require more in-depth exploration. To help address these issues, they describe the results of a study involving 15 U.S. firms and 15 Japanese firms. Each participating firm provided information about two successful products and two unsuccessful products. Their conceptual model groups the various factors that influence new product success into three general classes: NPD climate, expertise, and management functions. In this model, a firm's level of familiarity with its target market moderates these influences. For example, greater expertise may be necessary to succeed in an unfamiliar market. Each participating firm in the study provided information about one successful product and one failure targeted for high familiarity markets; the other two products from each firm were targeted for low familiarity markets. The U.S. and Japanese models developed in this study exhibit some marked differences from one another. In a familiar market, the U.S. model emphasizes sales and marketing expertise and competent project managers. Under conditions of low market familiarity, this basic model is supplemented with high degrees of R&D/marketing integration, senior management involvement, and decentralization. In this way, the U.S. models reflect a degree of flexibility in adapting the approach to match the prevailing market conditions. In contrast, the two Japanese models of new product success (under low and high familiarity) point to a more invariant system. In other words, the findings from this study reinforce the notion that successful management of NPD requires careful consideration of the firm's environment. Practices that have been proven successful in a particular culture and market environment may not be directly transferable to another setting.     

Contingent Product Design and Marketing Strategies Influencing New Product Success and Failure in U.S. and Japanese Electronics Firms

The commercial success or failure of a product doesn't rest solely on the whims of the marketplace. The myriad, often interdependent, strategic trade-offs made throughout the product development process go a long way toward determining whether a product succeeds or fails. The key to success often rests in finding the right combination of product design and market choice decisions. Toward that end, William E. Souder and X. Michael Song examine the relationship between product success and several product design and market choice strategies. In particular, they explore the possibility that the correct strategy combination differs depending on a firm's perception of market uncertainty, which they measure in terms of the respondents' perceived familiarity with the market for a product, perceived understanding of customer needs, and perceived capability to translate those needs into product performance specifications. Recognizing that the correct combination of strategic choices may also depend on firm size, industry, and culture, the study focuses on small U.S. suppliers of electronics components. Fortune 500 producers of electronics final products, and Japanese producers of electronics final products. For the small U.S. firms in the study, an emphasis on performance superiority, technical superiority, or radically new products provides a recipe for failure under low market uncertainty. Even under high market uncertainty, these characteristics do not equate to success for the small U.S. firms in this study. The findings suggest that these firms should focus on design compatibility with a purchaser's installed base. The responses from Fortune 500 firms and Japanese companies indicate that under low market uncertainty these larger organizations should consider emphasizing compatibility and avoiding radical designs. For markets that the larger firms perceive to be highly uncertain, the results suggest that these companies should emphasize performance superiority, technical superiority, and radical designs. The findings related to market choice strategies also support the notion that the correct combination of strategic decisions depends on firm size, culture, and the perceived level of market uncertainty. However, the guidelines presented in this study should not be construed as hard-and-fast rules for formulating product strategy. Instead, the results presented here will be helpful for challenging assumptions and guiding actions, as one element in the effort to shape an effective product strategy.     

Stock Market Response to Strategic Technical Alliances between Drug and Biotechnology Firms

Traditionally, firms in the pharmaceutical industry have depended on their internal research and development (R&D) capabilities to maintain a productive new product pipeline. During the past two decades, however, the industry's pipeline productivity has decreased compromising the industry's ability to meet shareholder expectations. As a strategy to invigorate pipeline productivity, and impact financial performance, pharmaceutical firms have increased utilization of strategic technical alliances. Earlier research shows that the degree of financial impact resulting from strategic technical alliances varies in terms of partnership type and differences between client and partner firms. This research studies strategic technical alliances between pharmaceutical and biotechnology firms from 1985 to 2012. Event study methodology is used to determine the relationship between stock market response to alliance announcements, measured as cumulative abnormal returns, and factors representing the absorptive capacity of the pharmaceutical firms in the sample. Then, variables indicating the development stage of the drugs included in the alliances are added to assess the effect of project risk on the market response. The study finds that, in general, the stock market responds in a positive manner to strategic technical alliances in the pharmaceutical industry reflecting the market's immediate response, and expectations of future firm value, resulting from the alliance. The degree of the market's response varies in terms of the client firms’ absorptive capacity with new product introductions being the strongest driver. The market responds similarly to alliances across different drug development stages, however, a stronger response is observed in preclinical and extension stages.     

Rolling Out New Products Across Country Markets: An Empirical Study of Causes of Delays

Faced with the challenge of launching a new product into numerous countries, managers may view a sequential rollout as the prudent course of action. Rather than launching the product simultaneously in diverse countries, they may believe they can reduce risk by launching first in one or two countries, and then in others. However, this strategy overlooks the interplay between timeliness in international new product rollouts (INPR) and product success. George M. Chryssochoidis and Veronica Wong explore these issues in a study of 30 high-tech products launched into multiple European markets. Their study has three objectives: examining the incidence of timeliness and delays in simultaneous and sequential INPR; exploring the causes of delays in INPR; and assessing the effects that INPR timeliness and delays have on new product outcomes. They define timeliness in INPR as the availability of the new product to the firm's multiple target markets within the time frame planned by the company's managers. In other words, timeliness in this study reflects a company's capability for adhering to the schedule that management has established. Contrary to expectations, the results of this study do not reveal direct effects on timeliness in INPR from such sources as diversity of target markets or the firm's external environment. These results suggest that firms can achieve on-time, multicountry rollout of new products notwithstanding the legal, technological, and competitive environment. For the firms in this study, timeliness in INPR depends on such factors as sufficiency of marketing and technological resources (for example, to train sales staff, provide after-sales service, and adapt the product for multiple markets), proficiency in executing new product development activities, and effective communication between a company's headquarters and its business units and customers in different countries. Among the 22 product launches categorized as sequential rollouts in this study, 15 experienced delays. All eight of the simultaneous launches were timely. The results of this study indicate a positive relationship between timeliness in INPR and new-product success. Conversely, for the firms in this study, delays in INPR resulted in lower-than-expected product sales and profitability. In other words, the seemingly less risky sequential launch strategy may actually increase the risk of new product failure by delaying product rollout in multiple markets.     

An Exploratory Analysis of the Impact of Market Orientation on New Product Performance

For many firms, emphasizing the importance of market orientation has taken on a mantra-like quality. Mission statements and memos, policies, and procedures all highlight the importance of staying in touch with the customer. It is also widely assumed that the relationship between market orientation and new product performance depends on environmental conditions and product characteristics. To date, however, little empirical evidence has been presented to support the assumption that market orientation influences new product performance. Kwaku Atuahene-Gima addresses this research need in a study of 275 Australian firms. In addition to exploring the relationship between market orientation and new product development activities and performance, his study examines the effects of environmental conditions and product characteristics. Specifically, the study investigates whether the relationship between market orientation and new product performance depends on the degree of product newness to customers and the firm; the intensity of market competition and the hostility of the industry environment; and the stage of the product life cycle at which the new product was introduced. The survey results provide strong support for the basic proposition that market orientation influences new product performance and development activities. The results show a strong positive relationship between market orientation and a new product's market performance. Market orientation is also shown to have a strong positive effect on proficiency of predevelopment activity, proficiency of launch activity, service quality, product advantage, marketing synergy, and teamwork. Although market orientation is generally found to be an important factor in the success of new products, its influence varies depending on the type of new product—that is, radical versus incremental. Market orientation appears to have greater influence on new product performance when the product represents an incremental change to both the customers and the firm. However, this does not mean that a market-oriented approach is unnecessary in the development of radically hew products. Market orientation also has a greater effect when the perceived intensity of market competition and industry hostility are high, and during the early stage of the product life cycle. Because market competition and industry hostility typically intensify as the product life cycle progresses, these findings suggest that the effects of market orientation are pervasive. In other words, managers should not limit their expectations of market orientation to specific projects or specific stages of the development process and product life cycle.     

Should Firms Consider Employee Input in Reward System Design? The Effect of Participation on Market Orientation and New Product Performance

Will increasing employee participation in reward decisions increase new product performance by first increasing a firm's level of market orientation? Literature offers limited insight to the effects of listening to employees regarding reward system design and whether this may influence market orientation implementation and new product performance. This paper provides research to fill the gap by examining the relationship between participation‐based reward systems, market orientation, and new product performance. Based on expectancy theory, a conceptual model was developed suggesting that participation‐based rewards will increase market orientation by considering employees' desires regarding performance rewards. To test the model, a mixed method was used to collect data. First, in‐depth interviews were conducted with managers from 11 different firms to verify the proposed model. Then a multi‐industry sample of managers from 290 firms was surveyed to maximize generalizability of the results. Data were analyzed using structural equation modeling techniques to simultaneously fit the measurement and structural models. The findings show that market orientation significantly impacts objective new product performance and mediates the relationship between participation‐based rewards and objective new product performance. Participation‐based rewards positively affect market orientation but surprisingly affect new product performance negatively, while positively moderating the relationship between market orientation and new product performance. The results suggest that managers should include employee input in designing reward systems. However, managers should also be careful of how much input they allow employees in determining their rewards and goals as more input will improve market orientation or responding to information collected by, and disseminated throughout the firm, and that, in turn, will improve some types of new product performance. However, the direct effect of employee input can decrease new product performance suggesting that there may be a trade‐off between various success measures of new products developed and introduced by the firm.     

How New Product Introductions Affect Sales Management Strategy: The Impact of Type of "Newness" of the New Product

How do firms adjust sales management strategy for new product launch? Does sales management strategy change more radically for different types of new products such as new‐to‐the‐world products versus product revisions? Because firms introducing a new product rely considerably on their sales force in the product launch effort, the types and degree of changes made in managing the selling effort are important issues. Past studies have demonstrated that firms make substantial adjustments in their sales management strategy when they introduce a new product. This study expands on previous investigations by examining whether sales management strategy changes are conditioned by the type of newness of the new product to the market and to the firm. Australian sales managers were asked to respond to a mail questionnaire concerning pre‐ and post‐new product launch sales management activities. Three groups of firms were compared: (1) those with new‐to‐the‐market and new‐to‐the‐firm products (i.e., new‐to‐the‐world products); (2) those with products new to the firm but not new to the market; and (3) those with products that are revisions to the firm and not new to the market. The study finds that firms do not make the most adjustments for products with the greatest degree of market newness—the new‐to‐the‐world types of products—except in the sales management strategy categories of compensation and supervision. In the other sales management strategy categories defined for study—organization, training, quotas and goals, and sales support as well as for all categories in the aggregate—sales management strategy changes were greatest in incidence, as measured both by the percent of firms making changes and the average number of changes per firm, when the new product was new to the firm but not new to the market. These results suggest that, because different types of new products face different competitive environments, there may be greater incentive for a not‐new‐to‐the‐market new‐to‐the‐firm product to make changes in sales strategy. Uncertainties about market size and customer location with new‐to‐the‐world products may limit the understanding of what changes to make in the strategy categories of quotas and territories. Similarly, uncertainties about product use and customer acceptance of new‐to‐the‐world products may limit the development of training and sales support materials by these firms. Instead, these firms may rely more on compensation and supervision to direct sales efforts for new‐to‐the‐world products. However, observing the market experience and performance of the first‐to‐market product can benefit firms launching a not‐new‐to‐market and new‐to‐the‐firm product, allowing them to rely more on strategy changes in training, sales support materials, organizational adjustments such as redeployments, and quotas.     

Impact of Strategic Type on Success Measures for Product Development Projects*

Does the strategic type of firm affect which success measures should be used for product development (PD) projects? This paper theorizes that it should and finds that it does because the PD projects undertaken are usually an expression of the strategic type of the firm. The purpose of this research is to affirm a 1996 survey of members of the Product Development & Management Association (PDMA) that proposes that firms' PD performance measures should vary by their strategic type. Thus, for example, prospectors, the strategic type most likely to introduce new products to new markets, should place greater importance on PD success measures consistent with their characteristic strategies of changing product lines and early market entry. In contrast, defenders, the strategic type most likely to maintain stable product lines for existing markets, should place greater importance on PD success measures consistent with their characteristic strategies of stable product lines and market penetration. Analyzers, a hybrid type between prospectors and defenders, should prefer measures consistent with their characteristic strategies for improving products and being early followers in newer markets. To relate strategic types to specific success measures for PD projects, this paper proposes a model of the relationship based on the degree of project newness to the firm and then catalogs measures of PD project success and groups them according to degree of project newness. The research findings are based on survey responses from 222 individuals who are employed by financial service providers, who identified their firms by strategic type and rated the importance of PD success measures to their firms. The importance of 21 performance measures is compared by strategic type to find significant differences among prospectors, analyzers, and defenders. This research finds several significant relationships. prospectors, for example, attach greater importance to customer satisfaction, launch timeliness, and product return on investment, all of which may be characterized as relating to a higher degree of project newness to the firm. defenders and analyzers, on the other hand, attach more importance than prospectors to measures of unit volume, cost reduction, and margin goals, all of which relate to a lower degree of project newness to the firm. In short, because prospectors seek to introduce new products to new markets, they consider important those measures, which accord with greater product and market newness. The major conclusion of this paper is that strategic type affects the importance of project performance measures and that all firms should not use the same success measures. Firms should contextualize their success in PD projects based on their strategic type. This conclusion resonates with previous findings that strategy is a key determinant of PD success, though it is infrequently included in PD success studies. This paper, therefore, challenges the implicit assumption in the mainstream of PD success literature that success can be determined without regard to firm strategy.     

Breakeven Time on New Product Launches: An Investigation of the Drivers and Impact on Firm Performance

The ability to break even faster on new product projects is becoming increasingly critical for firms in fast‐moving industries where continually reinvesting in research and development efforts matters greatly for survival. However, most research to date has focused on studying the impact of two primary innovation outcomes: sales and profits. The exclusive emphasis on sales and profit may be warranted for certain types of goods such as durable goods, but when examining the effects of new products in fast‐moving consumer goods or in the entrepreneurial sphere, where cash to cash matters greatly for survival, it is critical for both researchers and practitioners to not only consider the profits and sales generated by the new product but also the time to breakeven. This paper develops a theoretical framework using the competency‐based literature to examine the effects of innovation drivers (customer idea source, speed to market, product quality, and product newness) on breakeven time (BET) and project profits, and their subsequent impact on firm performance. A three‐stage least square estimation method was employed using longitudinal data on 945 new product development projects and launches in the morning (breakfast) foods category. The results clearly pinpoint that for successful product innovation, managers need to consider the time taken to breakeven on new product development. Specifically, the results demonstrate that speed to market and product quality shorten BET, but customer idea source extends BET. Second, the analysis also empirically demonstrates that BET is an equally effective predictor of firm performance as project profits in the short run, but significantly a stronger predictor of firm performance in the long run (t + four years), suggesting that BET should be regarded as a superior leading indicator of firm performance versus product profitability for fast‐moving consumer goods segment. This is an important finding that suggests firms that recoup their cash investments more quickly experience greater short‐term and significantly more long‐term success.     

Implementing the lead user method in a high technology firm: A longitudinal study of intentions versus actions

The customer or user's role in the new product development process is limited or nonexistent in many high technology firms, despite evidence that suggests customers are frequently an excellent source for new product ideas with great market potential. This article examines the implementation of the Lead User method for gathering new product ideas from leading edge customers by an IT firm that had not previously done much customer research during their new product development efforts. This case study follows the decision‐makers of the firm through the process, where the end result is the generation of a number of useful product concepts. Besides the ideas generated, management at the firm is also impressed with the way the method makes their new product development process more cross‐functional and they plan to make it a part of their future new product development practices. Approximately one year later the firm is revisited to find out if the Lead User method has become a permanent part of their new product development process. The authors find, however, that the firm has abandoned research on the customer despite the fact that several of the lead‐user derived product concepts had been successfully implemented. Management explanations for their return to a technology push process for developing new products include personnel turnover and lack of time. Using organizational learning theory to examine the case, the authors suggest that the nontechnology specific product concepts generated by the lead users were seen as ambiguous and hence overly simplistic and less valuable by the new product development personnel. The technical language spoken by the new product personnel also increased the inertia of old technology push development process by making it more prestigious and comfortable to plan new products with their technology suppliers. The fact that the firm was doing well throughout this process also decreased the pressure to change from their established new product development routine. The implications for these finding are that: 1) it is necessary to pressure or reward personnel in order to make permanent changes to established routines, and 2) researchers should be careful at taking managers at their word when asking them about their future intentions.     

Critical Development Activities for Really New versus Incremental Products

Does the development of really new products require a different approach from that of incremental new products? Current research and management practice seem to suggest that any successful new product development (NPD) process comprises a set of key activities, regardless of a product's innovativeness. It seems almost foolhardy to suggest that NPD could proceed without proficiency in all of the following tasks: strategic planning, idea development and screening, business and market opportunity analysis, technical development, product testing, and product commercialization. Suggesting that the difference may be in the details, X. Michael Song and Mitzi Montoya-Weiss present the results of a study that examines the development of 163 really new products and 169 incremental new products. The study's objective is to compare the NPD processes and performance outcomes of really new and incremental products. In other words, the study examines the interplay between a product's innovativeness, the NPD process, and the product's performance in the marketplace. For the firms in the study, four sets of NPD activities—strategic planning, market analysis, technical development, and product commercialization—are key determinants of new product success for both really new products and incremental products. However, strategic planning and business and market opportunity analysis activities play contrasting roles for the two types of products. Working to improve proficiency in business and market opportunity analysis may be counterproductive for really new products, but it can increase the profitability of incremental products. Conversely, improving the proficiency of strategic planning activities has a positive effect on the profitability of the really new products, but it has a negative effect for the incremental products. Overall, the really new products in the study surpass the incremental products in meeting profit objectives. Comparing current practice to best practice, the firms in the study have room for improvement. For both really new and incremental products, the firms in the study do not place sufficient emphasis on product commercialization activities. The participants also need to reassess the relative emphasis they place on strategic planning activities. The projects involving really new products do not place sufficient emphasis on strategic planning, while the incremental projects exhibit a relatively high level of proficiency in this area—exactly the opposite of the order that this study recommends.