Can Quality‐Oriented Firms Develop Innovative New Products?

Research suggests that a strong focus on quality improvement can adversely affect exploration and thus the development of innovative new products. The focus on quality improvement including total quality management (TQM) has been termed quality orientation. The literature suggests that one way to reduce the adverse effect of a quality orientation on innovativeness is to adopt ambidextrous or dual organizational forms. However, dual organizational forms are cumbersome and expensive to implement. This paper argues that a less demanding structural arrangement for developing innovative products in quality‐oriented organizations involves the creation of cross‐functional teams that are explicitly encouraged to take risk and granted autonomy. In this model, the two dimensions of innovativeness—namely, novelty and appropriateness— are treated separately because quality orientation and encouragement to take risk can have differential effects on these two dimensions. A survey of 141 new product development projects reveals that quality orientation does not adversely affect product novelty in cross‐functional product development teams. However, encouragement given to cross‐functional teams to take risk leads to more novel products. On the other hand, while a quality orientation improves product appropriateness, encouragement to take risk affects it adversely. Quality orientation is able to mitigate the adverse effect of encouragement to take risk on appropriateness. But encouragement to take risk does not influence the relationship between a quality orientation and novelty. Autonomy improves the positive effect of encouragement to take risk on new product novelty but does not influence the effect of a quality orientation on novelty. Both novelty and appropriateness enhance a new product's performance, and both these dimensions of innovativeness partially mediate the effect of quality orientation and fully mediate the effect of encouragement to take risk on new product performance.