Making Up Is Hard to Do: Knowledge Acquisition Strategies and the Nature of New Product Innovation

Innovation creates significant challenges for firms in high‐technology industries. This article examines how the use of external knowledge acquired from mergers and acquisitions (M&As) and joint ventures (JVs) influence the nature of innovative competence in the global pharmaceutical industry. We create a unique database on never‐before approved products that measure the scientific merit of new, exploratory product innovations, ranging from radical to incremental. We then follow their market success by recording the number of new exploitative product innovations that stem from these product innovations and that are later approved and subsequently marketed. Using a large data set spanning a 15‐year period, we find that firms were able to “make up” for their lack of exploitation or exploration innovative capabilities through the use of M&As and JVs. These external knowledge acquisition strategies were found to overcome internal processes that otherwise could cause firms to overemphasize exploitation over exploration and vice versa. Our findings suggest that acquiring external knowledge via M&As is associated with diminished exploratory product innovation, while assimilating external knowledge sourced from JVs is associated with a reduction in new exploitative product innovation.     

The fit between market learning and organizational capabilities for management innovation

This paper examines how market learning (both explorative and exploitative) interacts with organizational capabilities (technological capabilities and marketing capabilities) to affect management innovation. Drawing upon data from a sample of 272 firms each of which contributed two key informants to the study (resulting in a total of 544 respondents), we find that both exploratory and exploitative market learning have a positive effect on management innovation. The effects of exploratory and exploitative market learning on management innovation are contingent on technological and marketing capabilities. Specifically, technological capabilities enhance the positive effect of exploratory market learning and weaken the positive effect of exploitative market learning on management innovation. Marketing capabilities enhance the positive effect of exploitative market learning and weaken the positive effect of exploratory market learning on management innovation. This study contributes to the literature by integrating organizational learning theory with the absorptive capacity perspective to explain management innovation.     

Achieving Fit between Learning and Market Orientation: Implications for New Product Performance

Drawing on the learning and market orientation literature, this study examines how responsive and proactive market orientations interact with exploitative and exploratory learning to affect new product performance. Despite advancements in understanding the distinctions between the different types of learning and market orientations, little evidence exists regarding which types of market orientation work best with exploitative or exploratory learning to improve new product performance. Using a sample of 216 high‐tech Canadian firms, the authors find that new product performance is elevated only when exploratory learning is bundled with proactive market orientation. New product performance suffered when exploratory learning was complemented with responsive market orientation and when exploitative learning was complemented with proactive market orientation. Implications for marketing theory and practice are discussed.     

Entrepreneurial orientation, exploitative and explorative capabilities, and performance outcomes in export markets: A resource-based approach

Innovation is critical to the growth and success of a firm. In an attempt to renew themselves and compete effectively in the global marketplace, firms must possess both technical and non-technical capabilities. Yet, the extant literature has mainly focused on technology and product development capabilities, disregarding other possible capability domains. This study investigates the role of market-related exploitative and explorative capabilities, together with product development ones, in the context of exporting. Drawing on the resource-based and organization learning theories, we examine the internal process through which entrepreneurial orientation influences performance in export markets and develop a model of entrepreneurial orientation-exploitative and explorative capabilities-advantage-performance relationships. The results indicate that entrepreneurial orientation is a precursor of exploitative and explorative product development and overseas market-related capabilities. The findings also suggest that product development explorative capabilities and overseas market-related exploitative capabilities have a positive effect on new product differentiation, which in turn enhances market effectiveness. Implications for scholars and practitioners are discussed along with suggestions for future research.     

A dynamic capabilities-based framework of organizational sensemaking through combinative capabilities towards exploratory and exploitative product innovation in turbulent environments

This study develops a dynamic capabilities-based framework of organizational sensemaking through combinative capabilities towards exploratory and exploitative product innovation. Organizational sensemaking helps organizations develop cognitive maps of turbulent environments through its construction of shared interpretations of environmental changes. We argue, however, that successful exploratory and exploitative product innovation are not guaranteed by organizational sensemaking alone, but instead depend on how firms' capabilities synergistically combine and transform knowledge resources. Organizational sensemaking and combinative capabilities are together positioned as important dynamic capabilities. The dynamic capabilities-based framework is applied to explain why and how organizational sensemaking determining superior exploratory and exploitative product innovation in turbulent environments is realized by combinative capabilities. Furthermore, the paper examines the differential effects of combinative capabilities on the firm's exploratory versus exploitative product innovation. Firms can better understand how to leverage different type of combinative capabilities for optimal outcomes.     

Supporting new product commercialization through managerial social ties and market knowledge development in an emerging economy

While it has been advocated that the generation and application of market knowledge shape marketing capabilities to commercialize new products, the weak institutional environment makes access to critical market knowledge challenging in emerging economies. Critically, managerial social ties with business and political institutions may complement the firm’s market orientation (MO) to obtain market knowledge that is not available in the open market in emerging economies. This study draws attention to the differential roles of business and political ties in complementing or inhibiting the effects of market orientation on exploratory and exploitative marketing capabilities in one of the “Next Eleven” emerging economies, Iran. The results help firms operating in emerging economies to identify the conditions under which business and political ties help to overcome institutional limitations, complement market-oriented efforts, and successfully commercialize new products.     

Leveraging the benefits of exploratory learning and exploitative learning in NPD: the role of innovation field orientation

Scholars have increasingly noted that firm-level capabilities may be crucial for resolving the dilemmas resulting from either high exploratory or high exploitative learning. However, our current understanding of this issue remains limited. Innovation field orientation is a firm-level capability to strategically structure dispersed innovation efforts and reconfigure resources on them, and may help a firm leverage the benefits of distinctive learning strategies. Based on this idea, this paper investigates innovation field orientation and examines how its capacities (the specification, establishment of focus areas, and stimulation of synergies) influence the performance of high exploratory/exploitative learning. Our findings suggest that the capacities of innovation field orientation moderate the effects of exploratory and exploitative learning on new product program performance, and clarify how innovation field orientation enables organization to leverage the benefits of high exploratory/exploitative learning and address their disadvantages.     

Using Exploratory and Exploitative Market Learning for New Product Development*

While the need for research on the market‐learning efforts of a firm in relation to its new product development is continuously emphasized, the empirical results on this issue reported so far have been mixed. The current study contends that the inconclusive nature of the empirical evidence is mostly due to the existence of different dimensions of organizational market learning—exploratory and exploitative—and to possible different routes by which these learning dimensions are linked to new product performance. More specifically, this study argues that exploratory market learning contributes to the differentiation of the new product because it involves the firm's learning about uncertain and new opportunities through the acquisition of knowledge distant from existing organizational skills and experiences. By contrast, this study posits that exploitative market learning enhances cost efficiency in developing new products as it aims to best use the currently available market information that is closely related to existing organizational experience. This study provides empirical support for this two‐dimensional scheme of organizational market learning and its consequent effects on two components of new product advantage: new product differentiation and cost efficiency. Further, given that the effectiveness of firms' strategic efforts is contingent upon the nature of the market environment, the current study examines the moderating effects of environmental dynamism and market competitiveness for this market learning—new product advantage relationship. This study is based on survey data from 157 manufacturing firms in China that encompass various industries. The empirical findings support the two‐dimensional market learning efforts that increase new product differentiation and cost efficiency, respectively. The study confirms that exploratory market learning becomes more effective under a turbulent market environment and that exploitative market learning is more contributive when competitive intensity is high. It also suggests that because of their differential direct and moderating effects on new product advantage either exploratory or exploitative market learning may not be used exclusively, but the two should be implemented in parallel. Such learning implementations will help to secure both the feature and cost‐based new product advantage components and will consequently lead to the new product success. The current study attempts to contribute to greater clarity and better understanding of how market learning influences new product success as it theoretically identifies and empirically validates the two forms of new product advantage as the conceptual mediator between market learning and new product performance.     

Capabilities as marketable assets: A proposal for a functional categorization

While it is through creating and marketing products that firms achieve success, there are also significant opportunities for them to create value by exploiting the capabilities they utilize in creating products. However, seeing capabilities in this light demands new ways of thinking about product markets and marketing policies.     

Market Orientation and the New Product Paradox

The extant literature shows that the strength of the market orientation–performance relationship decays as the terminal measure of performance shifts from new product success to profitability to market share. As Day (1999) concluded, a broader nomological inquiry is needed to more fully understand the nature and limits of market orientation's effects. This suggests that a broader nomological inquiry is needed to fully understand the nature and limits of market orientation's effects.
Utilizing a national sample of marketing executives, the present study's purpose is to build a fuller understanding of the effects of market orientation on firm performance. Its structural equations model includes measures of new product success, profitability, and market share.
The research reinforces a strong positive relationship between market orientation and new product success. The expanded nomological network under study, however, implies barriers to market orientation's effectiveness. First, market-orientation-inspired increases in the priority firms place on "breakthrough" learning without commensurate increases in the priority placed on "breakthrough" innovation capabilities can boomerang and negatively impact new product success. Second, market-orientation-inspired new product development programs that are unable to increase market share can negatively impact profitability. These gatekeepers to the success of market orientation underscore the need for firms to coordinate a strong market orientation with resources and capabilities that increase the effectiveness of the marketing function. Without such coordination, the positive effect of market orientation on new product success may be limited to incremental innovations, and the overall effect of successful new products on profitability may be limited.     

The contingent value of exploratory and exploitative learning for new product development performance

This study endeavors to extend research on organizational learning by investigating the complicated effects between exploratory — exploitative learning and new product performance in a single new product project. Specifically, premised on contingency theory the authors investigate the negative nonlinear and interaction effects of project-level exploratory and exploitative learning behaviors on product development performance, and examine internal organizational and external environmental factors to recognize their differential moderating effects between the two learning behaviors and new product performance. Most of the hypotheses are supported based on questionnaire survey results of 253 new product projects. The results indicate that the two type of learning have curvilinear (inverted U-shaped) effects on new product performance, and suggest that product development performance will be enhanced when one learning is at higher level and the other is at lower level. Furthermore, the authors discover that process-based reward, encouragement to take risk, and environment dynamics strengthened the benefits of exploratory on new product performance. On the other hand, the advantages of exploitative learning on new product performance is further enhanced when output-based reward, project development formalization, and environment competitiveness is high. Finally, this study suggests that project managers should pay careful attention to employ the two learning behaviors during new product development.     

The impact of marketing capability, operations capability and diversification strategy on performance: A resource-based view

Using resource-based view (RBV) of the firm as a theoretical backdrop; we aim to find out the relative impact of a firm's functional capabilities (namely, marketing and operations) and diversification strategies (product/service and international diversification) on financial performance. We hypothesize that this linkage depends on the firm's relative efficiency to integrate its resource-capabilities-performance triad. Using archival data of 102 UK based logistics companies, we find marketing capability is the key determinant for superior financial performance. This study highlights that a market-driven firm is likely to have better business performance than a firm focusing solely on operational capabilities. Also, firms are better off when they focus on a narrow portfolio of products/services for the clients and concentrate on a diverse geographical market. Our findings provide a new perspective to model a firm's functional capabilities and diversification strategy on its financial performance and offer a benchmarking tool to improve resource allocation decisions.     

Creating superior customer value for B2B firms through supplier firm capabilities

In a dynamic global business-to-business (B2B) environment, innovation and marketing appear crucial to providing supplier firms' positional advantage through the ability to create value for customers. Our examination is grounded in seeking to address the research question: To what extent is the creation of superior performance, relationship, and co-creation value driven by market orientation, product innovation and marketing capabilities in B2B firms? The results of a survey of 155 large B2B firms show product innovation capability and marketing capability partially mediates the relationship between a firms' market orientation and its ability to create value (performance and co-creation), except for the role of marketing capability which we found acted as a full mediator of the relationship between market orientation and relationship value.     

Marketing capabilities: Antecedents and implications for B2B SME performance

The study provides a new perspective on SME marketing strategies in the B2B context. Using a resource-based view of the firm, the study develops a structural model linking marketing capabilities and marketing performance. A study of 367 SME Australian firms reveals that two key marketing capabilities, namely branding and innovation, have major performance outcomes in the SME B2B context. This is the first SME study to evaluate concurrently the contribution of innovation and branding marketing capabilities, with innovation capability the strongest determinant of SME performance. The study also finds market orientation and management capability act as enabling mechanisms for building marketing capabilities. Disaggregation tests indicate that the same findings apply to three size categories denoting micro firms (less than 20 staff), small firms (20-99 staff) and medium-sized firms (100-499 staff).     

Effects of collaborative communication on the development of market-relating capabilities and relational performance metrics in industrial markets

Research in marketing suggests that collaborative communication is important for firms to sustain competitive advantage, especially in industrial markets. This study integrates relational and resource-based views to articulate how collaborative communication influences different relational performance metrics. Based on a survey of 167 marketing executives in Taiwan's electronics industry, empirical findings indicate that market-relating capabilities (i.e., market-linking and marketing capabilities) completely mediate the collaborative communication–financial performance relationship, while market-relating capabilities partially mediate the collaborative communication–customer-focused performance relationship. In addition, collaborative communication directly influences customer cooperation performance instead of indirectly affecting it through the development of market-relating capabilities. The results of this study provide new insights into the role of collaborative communication as well as important theoretical and managerial implications.     

International R&D partnerships and intrafirm R&D–marketing–production integration of manufacturing firms in emerging economies

Although cross-functional integration is important for research and development (R&D), research about implications of cross-functional integration has been rather sparse. In new product development (NPD), no study to date has examined intrafirm as well as interfirm integration of key functions such as intrafirm R&D–marketing–production together with interfirm integration of host R&D–partner R&D. Such marketing and operations interface contributes to a better understanding of how operational and marketing activities impact on competitiveness and firm performance. This study collected data from 202 electronics manufacturing firms operating in an emerging economy, mainland China and Hong Kong with international R&D partnerships. The findings indicate that a high level of R&D integration between firms improved NPD performance when cross-functional integration is based on existing rather than new product configurations and key technologies. Interestingly, in high distance situations, cross-functional integration in the production validation stage generated NPD success. The findings show that high environmental uncertainties lead to a high level of host and partner firms R&D integration. However, product newness has no significant effects on R&D integration in any of the NPD stages.     

Effects of entrepreneurial marketing on new ventures' exploitative and exploratory innovation: The moderating role of competitive intensity and firm size

EM is a strategic orientation that draws on seven elements: proactiveness, opportunity-focus, risk-taking orientation, innovation orientation, customer satisfaction orientation, value creation and resource leveraging. These elements reinforce each other in a synergistic manner. We investigate how EM affects a new venture's exploitative and exploratory innovation activities. To identify conditions under which EM is more or less effective, we analyze the relationship between EM and exploitative and exploratory innovation under conditions of high and low environmental competitiveness and high and low levels of firm size. Based on survey data from 146 German new ventures up to ten years old in the B2B sector, our results provide evidence of a significant and positive effect of EM on exploitative and exploratory innovation. We find, further, that under conditions of high competitive intensity, the effects of EM on exploratory innovation strengthen, while low levels of competitive intensity do not affect the relationship between EM and exploratory innovation. Our results also show that for larger firms, the positive effects of EM on exploitative innovation are weaker, while for smaller firms, those effects are stronger.     

What Separates Japanese New Product Winners from Losers

Operating in the upper echelons of highly competitive, global markets, numerous Japanese firms enjoy well-deserved reputations for excellence in new product development. Despite this success, however, almost no research has been conducted to explore the keys to successful new product development in Japanese companies. For the most part, research in this area has focused on North American and European firms. X. Michael Song and Mark E. Parry address this gap with a study of 404 Japanese firms and 788 new product introductions. Their research explores the links between new product success and 10 factors: product advantage; marketing synergy; technological synergy; market potential; market competitiveness; market and technical understanding; senior management support; proficiency in the predevelopment planning process and in concept development and evaluation; proficiency in market research, market pretesting, and market launch; and technical proficiency. To avoid any cultural bias, development of the survey was preceded by in-depth case studies and focus group interviews with Japanese and American new product development teams. Although time-consuming and expensive, these preliminary steps were necessary for ensuring the validity of the survey contents and procedures. Notwithstanding the obvious cultural differences, the findings from this study suggest that Japanese new products professionals view the keys to success in much the same way as their North American counterparts. For the survey respondents, the most important success factor is product advantage. Other important success factors include predevelopment proficiency (that is, proficiency in the predevelopment planning process as well as in concept definition and evaluation) and marketing and technological synergy. Consistent with previous research on North American firms, market competitiveness was found to be the least important success factor. For managers who are trying to predict whether a project will result in a product advantage, several survey items may be useful as a checklist for assessing potential product advantage. In particular, these managers should consider whether the product offers potential for reducing consumer costs and expanding consumer capabilities, as well as the likelihood that the product offers improved quality, superior technical performance, and a superior benefit-to-cost ratio.     

Customers' participation in product development through crowdsourcing: Issues and implications

This paper focuses on customers' participation in a product development process through crowdsourcing practices. Results from five case studies of consumer goods companies suggest that the implementation of crowdsourcing operations affects the components of an existing business model and requires rethinking the marketing function. Moreover, despite some organizational constraints and fears, crowdsourcing generates a win–win relationship, creating value for both firms and customers. However, the findings reveal two negative consumer reactions to crowdsourcing practices, i.e., feelings of exploitation and being cheated, that may jeopardize their success. The results suggest the need to establish an open business model based on crowdsourcing.