Product Change Intensity, Product Advantage, and Market Performance: An Empirical Investigation of the PC Industry

Product change decisions, such as the frequency of new product introductions, can impact product performance characteristics, sales, and market share of several generations of products and, therefore, a firm's long‐term survival and growth. The purpose of this study was to explore the impact of a firm's product change frequency, also referred to as product change intensity. A conceptual model linking a firm's product change intensity to its product advantage—and, in turn, to its market performance—with strategic product change orientation and technology competence as moderating effects, was used as a foundation for the study's hypotheses. These were tested using hierarchical and linear regressions, based on survey data collected from 55 U.S. companies in the personal computer (PC) industry. The analysis confirmed that a PC firm's product rate of change is positively associated with its product advantage and that its product advantage, in turn, is positively associated with its market share and growth performance. However, the hypothesized moderating effects were not confirmed. Rather, a firm's product change orientation and its level of technology competence are more likely to have a direct impact on product advantage. The implications of these findings are that, in general, firms that release new products frequently will have them viewed more favorably by the market than products with lower change intensities. Also, firms with higher levels of competence in the product technology domain tend to create products with greater market attraction. Finally, more radical changes to PC product architectures may pay off better than relatively minor changes. These results may not apply to other industries due to the specific design of personal computers and the nature of this fast‐paced market. Neither do the findings necessarily apply to all firms regardless of those firms' specific product and market strategies. More research is necessary to understand how a firm's adopted strategy, and the industry in which it operates, affect the relationships demonstrated in this study.     

Performance implications of the buyer-supplier market orientation fit

Extant research examining the link between market orientation and performance offers few insights into how the interplay between a firm's market orientation (MO) and its key supplier's MO influences the firm's performance. Using archival and survey dyadic data from 876 firms (438 firm-supplier dyads), we explore the impact of MO fit (i.e., fit between the focal firm's MO and its supplier's MO) on the focal firm's performance (ROA). The findings indicate a direct and positive relationship between MO fit and ROA. This highlights the need for firms to focus both on their own MO and their key supplier's MO as sources of competitive advantage in today's business environment. The strength of the relationship between MO fit and ROA increases when the exchanged business volume increases between the focal firm and its supplier and when the respective relationship progresses in age. Furthermore, firms with MO fit perform best, followed by firms with higher supplier MO misfit (firm's MO is lower than its key supplier's MO), while firms with lower supplier MO misfit (firm's MO is higher than its key supplier's MO) are the laggards.     

Surviving the gales of creative destruction: the determinants of product turnover

Innovative industries are often characterized by rapid product turnover. Product longevity may be driven by both a product's position within a market as well as its position within a firm's larger product portfolio. However, we have little understanding of the relative importance of these factors in determining product turnover and how they interact as an industry evolves. Although researchers have invested substantial effort in analyzing firm survival and turnover, there are far fewer studies of the determinants of product survival and turnover. We use hazard rate models and count regression models to describe the behavior of firms and their products with a new and detailed database on the laser printer industry. We show, first, that competition and market structure variables have a large impact on both speeding product exit and delaying product entry. Second, there is some evidence that firms that have maintained a high market share for a number of years keep their products on the market longer than those with lower market share. Finally, firms with high innovative capacity tend to enter markets frequently, but withdraw their products at average rates. Firms with strong brands tend to introduce few products and withdraw their products slowly. With these findings, the paper links product entry and exit decisions to the broader literature on firm strategic and product management. Copyright © 2006 John Wiley & Sons, Ltd.     

Building and leveraging competence exploitation and exploration for firm new product success

We theorize that industry conditions of collaboration intensity and innovation intensity drive the development of competence exploitation and exploration in manufacturer-manufacturer collaborations, and that such competencies can be leveraged to increase firm-level new product sales and market share, contingent on the firm's establishment of non-proprietary knowledge transfer capability. We test our model using a survey of 224 manufacturer-manufacturer collaborations. Our findings indicate that collaboration intensity drives firms to build both competence exploration and exploitation while innovation intensity drives neither. We also find that while non-proprietary knowledge capability enhances the influence of competence exploration on a firm's new product sales and market share, it dampens the firm's ability to leverage competence exploitation for firm-level new product success.     

Absorptive capacity and performance: The role of customer relationship and technological capabilities in high-tech SMEs

This study focuses on how the interplay between a firm's absorptive capacity (ACAP), and its technological and customer relationship capability contributes to its overall performance. Using structural equation modeling in a sample of 158 firms (316 questionnaires, two respondents per firm) from South Korea's semiconductor industry, we find that a firm's ACAP leads to better performance in terms of new product development, market performance and profitability when used in combination with the firm's capability to engage state of the art technologies in its new product development program (NPD) (technological capability) as well as cultivate strong customer relationships to gain customer insight in NPD (customer relationship capability). By highlighting the interactive nature of absorptive capacity's antecedents and how these relate to firms' performance, this study contributes to the understanding of the role of ACAP as a mechanism for translating external knowledge into tangible benefits in high-tech SMEs, thus leading to important theoretical and practical implications.     

The Role of Resource Access, Market Considerations, and the Nature of Innovation in Pursuit of Standards in the New Product Development Process

Standards influence new product development (NPD) in high‐technology markets. However, existing work on standards has focused exclusively on one aspect of standards—compatibility standards. This article has the following goals. First, we delineate the concept of customer interface standards as distinct from compatibility standards. This distinction is important from a product development and technology adoption perspective. Second, we propose and show that antecedent factors may motivate a firm differently about the emphasis that the firm should put on a type of standard (compatibility or customer interface) that it follows. For example, we propose that appropriability regime affects pursuit of customer interface standards and compatibility standards differently. Finally, we illustrate how resource access and the nature of the innovation also influence a firm's decision to pursue a standard type. Finally, we propose that pursuit of different standards (customer interface or compatibility) affects the NPD process in terms of (1) sourcing and dissemination of technology and (2) the customer utility for the product, which influences adoption. We collected perceptual data from a sample of marketing and technology managers in high‐tech industries in the UK using both formative and reflective scales to measure the constructs. Analysis of the data using LISREL supports our contention that compatibility standards and customer interface standards are distinct constructs and that appropriability regime influences compatibility standards and customer interface standards differently. We also find that pursuit of compatibility standards helps a firm to create direct externalities pursuit of customer interface standards helps firms to develop indirect network externalities and technological advantage in the market. Our findings have the following implications. First, managers need to account explicitly for the difference between compatibility and customer interface standards, as resource allocation decisions during the NPD process will determine where a firm puts more focus. The choices made by the firm—as to whether it pursues compatibility standards or customer interface standards—will determine the type of advantage that it can gain in the market. Given a firm's situation at a point in time, a greater focus on one standard type rather than the other may be the right approach. Such choices will influence resource allocation in the product development process.     

Impact of Knowledge Type and Strategic Orientation on New Product Creativity and Advantage in High‐Technology Firms

As different types of knowledge may have different effects on new product positional advantage, knowledge portfolio management in concert with the firm's strategic orientation is indispensable for new product success. However, previous research has not dealt with the knowledge resources and strategic implementations that affect new product development (NPD). To fill in this gap, the current study focuses on two dimensions of knowledge type (knowledge complexity and knowledge tacitness) and two forms of strategic orientation (technological orientation and market orientation), which influence the positional advantages as determinants of NPD outcomes. Drawing on the resource‐based view, this study explains how these knowledge and strategic orientation variables influence new product creativity, which comprised the novel and meaningful characteristics of new products. Finally, it demonstrates how these two dimensions of new product creativity differentially provide product advantages in terms of customer satisfaction and product differentiation, which lead to superior new product performance. A conceptual framework is developed and the related hypotheses provided to incorporate the study variables and to test their relationships in a sample based on data collected from both marketing and project managers from 100 U.S. high‐technology firms. The model estimation results from path analysis demonstrate that reliance on knowledge of high tacitness harms meaningfulness, while reliance on knowledge of high complexity increases both novelty and meaningfulness of new product. As expected, market orientation and technological orientation improve the meaningfulness and novelty dimensions of the new product, respectively. New product novelty and meaningfulness are shown to enhance new product advantage in terms of product differentiation and customer satisfaction, both of which contribute to new product performance. It is also found that the combinative use of market orientation and knowledge complexity, and technological orientation and knowledge tacitness positively influence both the novelty and meaningfulness of new products. This study, using the product‐level analysis, contributes to the literature by clarifying how the firm's different knowledge properties and strategic orientations both play a role as a source of new product creativity, and how new product creativity, as a valuable and rare resource, enhances new product advantage. The study results suggest that project/product managers should increase the transferability and codifiability of unstructured knowledge by stimulating intraorganizational knowledge sharing among NPD team members, and that they should promote both technology and market‐orientated practices to fully develop creativity of new products.     

The Interplay of Customer and Product Innovation Dynamics: An Exploratory Study

The challenges of successfully developing radical or really new products have received considerable attention from a variety of marketing, strategic, and organizational perspectives. Previous research has stressed the importance of a market‐driven customer orientation, the resolution of market and technological uncertainty, and organizational processes such as cross‐functional teams and organizational learning. However, several fundamental issues have not been addressed. From a customer's perspective, a more innovative product tends to have uncertain benefits and requires customers to learn new behaviors. Customer preferences can, therefore, change as product experience and learning increase. From a firm's perspective, it is unclear how to be customer‐oriented under such dynamic preferences, and product strategies using evolving technologies will tend to interact with how customers learn about an innovation. This research focuses on identifying unresolved issues about these customer and product innovation dynamics. A conceptual framework and series of propositions are presented that relate both changing technology and customer learning to a firm's strategic decisions in developing and launching really new products. The framework is based on in‐depth interviews with high‐tech product managers across several sectors, focusing on the business‐to‐business context. The propositions resulting from the framework highlight the need to consider relevant customer dynamics as integral to a firm's product innovation process. Successful innovation strategies and future research challenges are discussed, and applications to better understanding customer needs and theories of disruptive innovation are examined. Several key insights for innovation success hinge on a broad, downstream orientation to customer needs and product innovation dynamics. To be effective innovators, firms must know their customers' customers and competitors as well as or better than their immediate customers do. Market research must extend downstream for a comprehensive understanding of customer needs dynamics. In the context of disruptive innovation, new dimensions of customer needs may become more valuable based on perceived downstream customer trends. Firms may also innovate on secondary needs because mainstream customers do not always give firms the design freedom to radically innovate on primary features. Understanding customer commitments and how they develop under evolving needs can help firms focus resources on innovative efforts more likely to be accepted by customers.     

Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals

Research summary : We examine why a firm takes specific competitive action in nonmarket and resource‐market spaces, particularly when it perceives threats from informal and foreign competitor groups, respectively. We address this question by combining insights from competitive rivalry, strategic groups, and nonmarket strategy literatures in an emerging economy context. Specifically, we theorize how threats from informal and foreign rival firms in an emerging market influence a firm's engagement in corruption activities and its investments in HR training, respectively. We also argue that the likelihoods of such focal firm actions against competitor group threats differ, contingent on the focal firm's market and resource profiles. Results from the empirical analyses, with survey data from the Indian IT industry, provide broad support to our hypotheses. Managerial summary : Based on a World Bank dataset on the Indian IT industry, this study finds that corruption and HR training are pursued by firms in emerging economies as mindful strategies against specific types of rivals—informal and foreign firm rivals, respectively, and are not pursued simply as culturally‐based practices. Multinational companies may need to understand that domestic firms in emerging countries will engage in corruption strategically to reduce their costs and time to market of their products/services. Therefore, multinational firms may need to devise suitable strategies other than corruption to reduce their costs and time to market if they wish to compete with firms in emerging economies for customers who don't care about ethical issues and will buy a cheaper product/service that is delivered quickly. Copyright © 2015 John Wiley & Sons, Ltd.     

Technological diversity,related diversification,and firm performance

Previous findings that related diversification creates value have been called into question over concerns about methodology and measures. Reviewing existing theory to consider how a firm's knowledge base interacts with its product market activity, I address several of these concerns by creating a measure of technological diversity based on citation‐weighted patents. The measure indicates a firm's opportunity for corporate diversification based on economies of scope in valuable knowledge assets, is defined for both single‐ and multibusiness firms, and is not correlated with more fundamental aspects of diversification, such as the number of businesses in the corporate portfolio. Evidence from a large sample of firms shows the positive relationship between diversification based on technological diversity and market‐based measures of performance, controlling for R&D intensity and capital intensity as further indicators of the type of assets underlying diversification. Results hold when controlling for the endogeneity of diversification and performance in a cross‐sectional sample or when controlling for unobserved factors using panel data. Copyright © 2006 John Wiley & Sons, Ltd.     

An Ecological Perspective on New Product Failure: The Effects of Competitive Overcrowding

Practitioners and researchers have carefully explored the causes of new product failures. Studies have been conducted, results analyzed, and recommendations offered. Yet despite these efforts, new product failure rates have not decreased. In fact, they appear to be increasing in some product categories. Are we missing something? Noting that most research on new product failures has focused on a firm's activities in specific projects, William H. Redmond proposes that new product outcomes might also be influenced by macro-level or environmental factors. By focusing on environmental factors rather than a firm's activities in specific projects, we might better understand why competent firms in one industry consistently experience higher failure rates than those of firms that are no more competent, but operate in a different industry. For example, failure rates for new food products are consistently higher than those for new industrial products. With no evidence that product development professionals in industrial firms are simply superior to their counterparts in the food industry, Dr. Redmond suggests that we need to look beyond specific product development projects and consider the effects of the market in which these products are introduced. Encouraged by past successes, many firms in the food manufacturing business seek sales growth through the development and introduction of additional new products. Over time, this creates a market in which customer demand is fragmented into increasingly small niches and distribution channels are flooded with product choices. As a result, the failure of a new product is more likely than it might have been under less crowded conditions. In much the same way that the population of deer on an island is limited by the available food and physical space, food products are apparently faced with the market equivalent of natural selection. In the absence of available market niches and a clear competitive advantage, a new product's chances for success are meager. In a market that is overcrowded by existing products and new product introductions, it becomes increasingly difficult and uneconomical to identify opportunities for meaningful differentiation. On the other hand, industrial products face a much different set of environmental conditions. Compared to the food manufacturing business, relatively few new industrial products are introduced, and those introductions are typically successful. In most cases, the new products are simply replacements for inefficient or obsolete products. In such an environment, failed introductions are probably the result of errors in the product development process.     

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.     

Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry

This study reveals the multifaceted contribution of alliance portfolios to firms' market performance. Extending prior research that has stressed the value‐creation effect of network resources, it uncovers how prominent partners may undermine a firm's capacity to appropriate value from its alliance portfolio. Analysis of a comprehensive panel dataset of 367 software firms and their 20,779 alliances suggests that the contribution of network resources to value creation varies with the complementarity of those resources. Furthermore, the relative bargaining power of partners in the alliance portfolio constrains the firm's appropriation capacity, especially when many of these partners compete in the focal firm's industry. In turn, the firm's market performance improves with the intensity of competition among partners in its alliance portfolio. These findings advance network research by highlighting the trade‐offs that alliance portfolios impose on firms that seek to manage and leverage their alliances. Copyright © 2007 John Wiley & Sons, Ltd.     

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.     

Pawn to Save a Chariot,or Drawbridge Into the Fort? Firms' Disclosure During Standard Setting and Complementary Technologies Within Ecosystems

Research summary: W ithin an ecosystem, standard setting coordinates development of complementary technologies across firms. But each firm can itself own multiple of these complementary technologies. We study how a firm's own complementary technologies influence its disclosure inclination during standard setting. We identify a tradeoff: disclosure increases value‐creation of the firm's non‐disclosed complementary technologies, but also heightens expropriation risk. Using data on the U.S. communications equipment industry 1991–2008, we show that the firm's complementary technologies increase its disclosure inclination when its technological areas are less crowded, but decrease such inclination when there are SSO members with strong expropriation abilities. Findings stress that disclosure involves but a piece of the firm's portfolio; a systemic perspective of the entire portfolio provides a more comprehensive picture of value‐creation during standard setting . Managerial summary: W hy should a firm disclose its key technology to participate in standard setting within an ecosystem? We urge managers to think beyond “disclosing to ensure compatibility with other firms' complementary technologies within the ecosystem” as a motivation, to also consider how disclosure affects the firm's own complementary technologies within its portfolio. Disclosure in one technological area makes the firm's nondisclosed complementary technologies in other areas more valuable to itself, especially with fewer rivals competing in these other areas. But disclosure also renders the firm susceptible to losing these complementary technologies to rivals, especially when rivals have strong expropriation abilities. Analyzing disclosure decisions by communication equipment firms, we show that this tradeoff is indeed a relevant consideration in managers' strategic calculations when participating in standard setting . Copyright © 2017 John Wiley & Sons, Ltd.     

Market-shaping strategies: A conceptual framework for generating market outcomes

We identify four market-shaping strategies and their related activities that enable a focal market actor to work towards specific market outcomes. The conceptual framework provides firms with a tool for choosing specific market-shaping strategies depending on their market-shaping intention (offensive/defensive) and perception of a market's stability (stable/unstable). Accordingly, and in line with market-shaping literature, the four market-shaping strategies enable a firm to widen, reduce, maintain, or disrupt a market. Whereas previous market-strategy conceptualizations emphasized firm-level outcomes, the four identified market-shaping strategies focus on market outcomes and encompass a more comprehensive understanding of the impact of a firm's strategic actions on a market. Thereby, this study offers new perspectives on the implementation of market strategies in the context of markets as complex adaptive systems. By exemplifying the four market-shaping strategies using four industry cases, we illustrate how market-shaping strategies can appear in practice and demonstrate how firms can strategically leverage and steer market processes to their advantage.     

How Do Interaction Activities among Customers and between Customers and Firms Influence Market Performance and Continuous Product Innovation? An Empirical Investigation of the Mobile Application Market

Mobile application markets (MAMs) significantly differ from other existing marketplaces at least in two aspects. First, customers (app users) and firms (app providers) frequently interact with each other in real time, which is not common in the conventional marketplaces. Second, many app providers incorporate customers’ opinions or suggestions into their software upgrades, representing one of the most unique and interesting aspects of MAMs. Therefore, it has become critical to understand the impact of interaction activities not only among customers, but also between customers and firms on the market performances of new products in MAMs. One of the most significant issues firms face is whether firms reflect on customers’ postpurchase interaction activities, and the next interesting question is how firms respond to them. This study explores the effects of customer‐to‐customer (C2C), customer‐to‐firm, and firm‐to‐customer interaction activities on market performance. In addition, this study investigates how communication activities influence a firm's tendency to pursue continuous product innovation through research and development (R&D). Using data obtained from a major MAM, T store, three models that are respectively related to product sales, product lifetime, and a firm's R&D activity for product upgrades, are applied to empirically test hypotheses concerning the effects of interaction activities. In our analyses of market performance, a hierarchical log regression model with 10,840 weekly transactions data set related to product sales (model A) and 291 aggregate transactions related to product lifetime (model B) is used. Results indicate that C2C and customer‐to‐firm communication activities have a positive impact on sales, but little relationship with product lifetime. However, a firm's continuous product R&D has a positive impact on both sales and lifetime performance. Our analysis of a firm's R&D (model C) shows that C2C and customer–firm communication increases a firm's R&D activity. Taken together, these results have important implications for customer–firm interactions, market performance, and R&D strategies.     

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.     

Performance effects of imitative entry

This article examines how waiting to imitate a product affects the performance of the imitator compared to the innovator. Specifically, we address two research questions. Under what conditions does imitation erode the advantage of the innovator? What strategies of imitators help overcome the innovator's advantage? Our main argument is that the increasing availability of information on the innovator's product increases the imitator's returns to waiting. With this increasing availability of information, imitators' products transition from those that are horizontally differentiated (products are similar in quality but differ in their attributes) to those that are vertically differentiated (products differ in quality). Thus, we hypothesize that shifts in the nature of competition over time from horizontal differentiation to vertical differentiation account for why the innovator's advantage is not preserved. Imitation timing simply reflects the uncertainty inherent in imitation efforts. One such uncertainty is the extent of product differentiation that the imitator can achieve. We develop several hypotheses that elaborate this basic intuition. We obtained detailed data on innovator‐imitator competition in the branded drug industry to test the hypotheses. All our hypotheses are supported. The main contribution of the article is in showing that the nature of product differentiation in product categories is endogenous to the imitative entry decisions of firms. Copyright © 2008 John Wiley & Sons, Ltd.     

Interaction Orientation and Product Development Performance for Taiwanese Electronics Firms: The Mediating Role of Market‐Relating Capabilities

While academics and practitioners are increasingly aware of the value of including the customer in new product development (NPD), processes for doing so effectively remain unclear. Therefore, this study explores the process through which a firm's interaction orientation (the ability to effectively interact with customers) influences product development performance. Drawing on the resource‐based view, this study develops a research model in which two market‐relating capabilities—market‐linking and marketing capabilities—mediate the effect of interaction orientation on product development performance. The validity of this model is examined by analyzing primary data gathered from 167 Taiwanese electronics companies. The model results provide support for a process link between interaction orientation, market‐relating capabilities, and product development performance, such that a firm's capabilities enable the conversion of customer‐based resources into productive new product outcomes. More specifically, the interaction orientation–product development speed relationship is mediated by both marketing and market‐linking capabilities, while the interaction orientation–product innovativeness relationship is partially mediated by marketing capability. That is, interaction orientation has indirect effects on product innovativeness and product development speed by strengthening both marketing and market‐linking capabilities that in turn improve product development performance. In addition, the results suggest that a firm's interactive rationality moderates the relationship between interaction orientation and marketing capability. Overall, this study enhances our understanding of how firms achieve superior product development performance by developing effective customer interaction. The findings of this study provide important strategic insights into NPD.