The Complementary Roles of Applied and Basic Research: A Knowledge‐Based Perspective*

While a great deal of scholastic effort has gone into discovering the multifaceted relationships between applied research initiatives and subsequent performance, relatively little empirical research addresses the performance impact from firm investments in basic research initiatives. Even less addresses the interactive roles of both types of research. The authors conceptualize and empirically evaluate the interactive relationship between applied and basic research initiatives and firm performance. Applied and basic research projects are knowledge creation activities in a product development domain, and both initiatives enhance the stored knowledge of a firm. Stored knowledge is the fuel that drives the product development engine. Applied research initiatives assimilate and exploit stored knowledge to develop new products. Basic research initiatives contribute to and enhance the stock of knowledge from which the applied initiatives are drawn. This expanded base of stored knowledge has positive ramifications for subsequent applied research initiatives. Results indicate that firms that engage in moderate or higher levels of applied research will see enhanced performance returns from additional investments in basic research. Conversely, firms that engage in relatively lower levels of applied research see no performance enhancement at any level of investment in basic research. Firms that rely on a flow of product innovations to provide a continued income stream must certainly invest in applied research initiatives. However, additional investment in directed basic research initiatives will augment future applied projects and could become the source of sustainable competitive advantage.     

Creating University Spin‐Offs: A Science‐Based Design Perspective*

Academic entrepreneurship by means of university spin‐offs commercializes technological breakthroughs, which may otherwise remain unexploited. However, many universities face difficulties in creating spin‐offs. This article adopts a science‐based design approach to connect scholarly research with the pragmatics of effectively creating university spin‐offs. This approach serves to link the practice of university spin‐off creation, via design principles, to the scholarly knowledge in this area. As such, science‐based design promotes the interplay between emergent and deliberate design processes. This framework is used to develop a set of design principles that are practice based as well as grounded in the existing body of research on university spin‐offs. A case‐study of spin‐off creation at a Dutch university illustrates the interplay between initial processes characterized by emergent design and the subsequent process that was more deliberate in nature. This case study also suggests there are two fundamentally different phases in building capacity for university spin‐off creation. First, an infrastructure for spin‐off creation (including a collaborative network of investors, managers and advisors) is developed that then enables support activities to individual spin‐off ventures. This study concludes that to build and increase capacity for creating spin‐offs, universities should do the following: (1) create university‐wide awareness of entrepreneurship opportunities, stimulate the development of entrepreneurial ideas, and subsequently screen entrepreneurs and ideas by programs targeted at students and academic staff; (2) support start‐up teams in composing and learning the right mix of venturing skills and knowledge by providing access to advice, coaching, and training; (3) help starters in obtaining access to resources and developing their social capital by creating a collaborative network organization of investors, managers, and advisors; (4) set clear and supportive rules and procedures that regulate the university spin‐off process, enhance fair treatment of involved parties, and separate spin‐off processes from academic research and teaching; and (5) shape a university culture that reinforces academic entrepreneurship by creating norms and exemplars that motivate entrepreneurial behavior. These and other results of this study illustrate how science‐based design can connect scholarly research to the pragmatics of actually creating spin‐offs in academic institutions.     

Heterogeneous Firm‐Level Effects of Knowledge Exchanges on Product Innovation: Differences between Dynamic and Lagging Product Innovators*

Product innovation is the result of a constant interaction between the in‐house research and development (R&D) department and knowledge exchanges with the firm's environment. Knowledge exchanges come in different forms. They break down into information gathering applied in new product development, research cooperation on particular innovation projects, and managing information outflows allowing the consequent appropriation of the results of product innovation through specific methods. The way firms handle knowledge exchanges affects their performance. This paper looks at three related indicators of performance: (1) research intensity (a measure of innovative input); (2) the share of revenue realized through innovative product sales (a measure of innovative output); and (3) their impact on the growth in total revenue. The bulk of the econometric literature looking into these matters only allows general statistical statements on the behavior of an “average” firm. This paper takes on another view by using the quantile regression method to stress the heterogeneity of innovative firms in their dealing with knowledge exchange and the effect this has on their performance. A first key finding is that research intensity is positively influenced by knowledge externalities, research cooperation, and appropriability, and it is through this that these variables affect innovative revenue and also the growth in total revenue. By using quantile regression these relationships are further refined to screen for differences in behavior between dynamic and lagging innovators. This refinement indicates that, in the case of research intensity, the knowledge externalities gain in importance in the higher quantiles and are insignificant in the lower ones. Next, research cooperation remains important in all quantiles, but a higher significance is observed in the higher quantiles as well. Finally, appropriability is extremely important for the lower quantiles, but it becomes insignificant in the highest. These findings corroborate the assumptions made in the literature on open innovation: knowledge externalities and research collaboration are vital for those opening up their firm for new ideas and who are, at the same time, reluctant to protect their findings through specific appropriation measures. In the case of innovative revenue all variables on knowledge exchange operate through the research intensity irrespective of the quantile, although the impact of research intensity on this type of revenue is higher in the upper quantiles. As for the growth in revenue, the effect of the innovative revenue is, again, higher in the higher quantiles. This suggests that dynamic product innovators have the most efficient R&D process and the strongest growers are so, especially, because they are successful product innovators.     

Managing Knowledge for Innovation: The Case of Business‐to‐Business Services*

The present study builds a typology of organizational knowledge in business services and empirically examines the effects of knowledge on innovation performance. It is suggested that firms differ with respect to their knowledge creation approaches and that these approaches have implications for firms' innovation activities. A conceptual framework of knowledge assets with degrees of tacitness and collectiveness as the principal axes is used to ground the empirical analysis. The organizational knowledge framework is empirically operationalized using survey data from 167 business service firms and supplementary case study evidence from 16 other firms. It is found that business service improvements and new service introductions are significantly associated with collectively held knowledge, such as codified service solutions or team‐based competences and procedures. In contrast, relying solely on tacit knowledge held by individuals may hamper innovation. The results also suggest that tacit collective knowledge is more closely associated with new service introductions, whereas explicit collective knowledge is associated with service improvements. Tacit collective knowledge is thus conducive. A managerial implication is that new service introductions necessitate team competences and routines, whereas incremental service improvements are more likely if procedures are in place to codify services into explicit solutions or technologies. Thus, the knowledge management approach should depend on the strategic orientation of the service firm toward continuous improvement of existing services or development of completely new services.     

Knowledge‐based resources,entrepreneurial orientation,and the performance of small and medium‐sized businesses

While theory suggests that management has discretion in manipulating resources in order to build competitive advantage, resource‐based research has focused on the characteristics of resources, paying less attention to the relationship between those resources and the way firms are organized. In explaining performance, entrepreneurship scholars have focused on a firm's entrepreneurial strategic orientation (EO), leaving its interrelationship with internal characteristics aside. We argue that EO captures an important aspect of the way a firm is organized. Our findings suggest that knowledge‐based resources (applicable to discovery and exploitation of opportunities) are positively related to firm performance and that EO enhances this relationship. Copyright © 2003 John Wiley & Sons, Ltd.     

Spurring Cross‐Functional Integration for Higher New Product Performance: A Group Effectiveness Perspective*

Spurring integration among functional specialists so they collectively create successful, or high‐performing, new products is a central interest of innovation practitioners and researchers. Firms are increasingly assembling cross‐functional new product development (NPD) teams for this purpose. However, integration of team members' divergent orientations and expertise is notoriously difficult to achieve. Individuals from distinct functions such as design, marketing, manufacturing, and research and development (R&D) are often assigned to NPD teams but have contrasting backgrounds, priorities, and thought worlds. If not well managed, this diversity can yield unproductive conflict and chaos rather than successful new products. Firms are thus looking for avenues of integrating the varied expertise and orientations within these cross‐functional teams. The aim of this study is to address two important and not fully resolved questions: (1) does cross‐functional integration in NPD teams actually improve new product performance; and if so, (2) what are ways to strengthen integration? The study began by developing a model of cross‐functional integration from the perspective of the group effectiveness theory. The theory has been used to explain the performance of a wide range of small, complex work groups; this study is the first application of the theory to NPD teams. The model developed from this theory was then tested by conducting a survey of dual informants in 206 NPD teams in an array of U.S. high‐technology companies. In answer to the first research question, the findings show that cross‐functional integration indeed contributes to new product performance as long conjectured. This finding is important in that it highlights that bringing together the skills, efforts, and knowledge of differing functions in an NPD team has a clear and coveted payoff: high‐performing new products. In answer to the second question, the findings indicate that both intra‐ (or internal) and extra‐ (or external) team factors contribute and codetermine cross‐functional integration. Specifically, social cohesion and superordinate identity as internal team factors and market‐oriented reward system, planning process formalization, and managerial encouragement to take risks as external team factors foster integration. These findings underscore that spurring integration requires addressing the conditions inside as well as outside NPD teams. These specialized work groups operate as organizations within organizations; recognition of this in situ arrangement is the first step toward better managing and ensuring rewards from team integration. Based on these findings, managerial and research implications were drawn for team integration and new product performance.     

Perspective: The Stage‐Gate® Idea‐to‐Launch Process—Update,What's New,and NexGen Systems*

Stage‐Gate has become a popular system for driving new products to market, and the benefits of using such a robust idea‐to‐launch system have been well documented. However, there are many misconceptions and challenges in using Stage‐Gate. First, Stage‐Gate is briefly outlined, noting how the system should work and the structure of both stages and gates. Next, some of the misconceptions about Stage‐Gate—it is not a linear process, nor is it a rigid system—are debunked, and explanations of what Stage‐Gate is and is not are provided. The challenges faced in employing Stage‐Gate are identified, including governance issues, overbureaucratizing the process, and misapplying cost‐cutting systems such as Six Sigma and Lean Manufacturing to product innovation. Solutions are offered, including better governance methods such as “gates with teeth,” clearly defined gatekeepers, and gatekeeper rules of engagement, as well as ways to deal with bureaucracy, including leaner gates. Next‐generation versions of Stage‐Gate are introduced, notably a scalable system (to handle many different types and sizes of projects), as well as even more flexible and adaptable versions of Stage‐Gate achieved via spiral development and simultaneous execution. Additionally, Stage‐Gate now incorporates better decision‐making practices including scorecards, success criteria, self‐managed gates, electronic and virtual gates, and integration with portfolio management. Improved accountability and continuous improvement are now built into Stage‐Gate via a rigorous postlaunch review. Finally, progressive companies are reinventing Stage‐Gate for use with “open innovation,” whereas others are applying the principles of value stream analysis to yield a leaner version of Stage‐Gate.     

The Determinants of Disciplinary System Effectiveness: A Line-Management Perspective

This study examines how characteristics of an organization and its disciplinary system affect line-management perceptions of disciplinary system effectiveness. Using responses from 418 organizations, we found a curvilinear relationship between disciplinary system restrictiveness and perceptions of disciplinary system effectiveness. Results also indicate that monitoring costs, investment in training, grievance systems, unionization, and pressure to perform are significantly related to perceptions of disciplinary system effectiveness.     

Knowledge Acquisition in University–Industry Alliances: An Empirical Investigation from a Learning Theory Perspective*

A firm's technological knowledge base is the foundation on which internal product and process innovations are generated. However, technological knowledge is not accumulated solely through internal learning processes. Increasingly, firms are turning to external sources in the technology supply chain to acquire the technological knowledge they need to introduce product and process innovations. Thus, the successful structuring and executing of partnerships with external “technology source” organizations is often critical to competitive success in technologically dynamic environments. This study uses situated learning theory as a basis for explaining how factors inherent to the knowledge acquisition context may affect the successful transference of technological knowledge from universities to their industry partners. Data collected via a survey instrument from 104 industry managers were used to explore the effects of various organizational knowledge interface factors on knowledge acquisition success in university–industry alliances. The organizational knowledge interface factors hypothesized to affect knowledge acquisition success in the current research include partner trust, partner familiarity, technology familiarity, alliance experience, formal collaboration teams, and technology experts' communications. Results indicate that partner trust predicts the successful acquisition of tacit knowledge but not explicit knowledge. Both forms of knowledge are predicted by partner familiarity and communications between the partners' technology experts. These findings suggest three principal managerial implications. First, although the development of a trusting relationship between the knowledge source and knowledge‐seeking parties is generally advisable, firms that seek to acquire explicit technological knowledge from their alliance partners may successfully do so without having made significant time and energy investments designed to assure themselves that they can trust those partners. The relative observability and verifiability of explicit knowledge relative to tacit knowledge may enable knowledge‐seeking parties to have greater confidence that knowledge has been acquired when partner trust is in question or has not been deliberately developed. A second implication is that, other things being equal, a knowledge‐seeking party's interests may be best served through repeated exposures to particular alliance partners, particularly if those exposures facilitate mutual understandings on relevant process‐related matters. A third managerial implication is that ongoing, broad‐based communications between the partners' technology experts should be used to effect technology transfer. A key quality of the organizational knowledge interface that promotes the successful acquisition of technological knowledge, both tacit and explicit, is multipoint, real‐time contact between the technology experts of the partner organizations. Such communications potentially enable the knowledge‐seeking party to directly access desired information through the most knowledgeable individuals on an as‐needed basis.     

Design Inertia: Designing for Life‐Cycle Flexibility in Internet‐Based Services*

Managing innovation in rapidly moving environments, such as Internet‐based services, is a major challenge in theory and in practice. Most of the existing literature focuses on the development process as the main area in which innovation takes place. However, in environments where the pace of change of technology and market needs is extremely high, managing service innovations means not only being able to design a good service but also, more importantly, continuously redesigning and adapting the service in order to deal with frequent exogenous changes and opportunities. A high number of innovations therefore must be introduced throughout the entire life cycle of a service. This capability of introducing incremental and radical innovations during the service life cycle (i.e., to adapt a service to contextual changes and opportunities after it has been first released onto the market) at low costs and in the shortest possible time is what is defined here as service life‐cycle flexibility. This process of service adaptation and upgrading implies significant challenges that can be traced back to when a service is first conceived and designed. In fact, many decisions made during the first design process (i.e., the choice of a given database environment) involve a low reversibility rate and may reduce the possibility of taking advantage of future unpredictable opportunities, creating what is called inertia toward innovation. In other words, service life‐cycle flexibility largely depends on how a service has been first designed. This article analyzes two in‐depth case studies of Italian online newspapers and identifies five possible inertia factors that may influence service life‐cycle flexibility, namely (1) technological inertia; (2) internal organizational inertia; (3) external organizational inertia; (4) customer inertia toward changes in the service package; and (5) customer inertia toward changes in the service interaction design. These inertia factors are traced back to the service development process in order to suggest design practices that may increase the service life‐cycle flexibility.     

Perspective: Economic Conditions,Entrepreneurship, First‐Product Development,and New Venture Success*

Entrepreneurial ventures have a significant impact on new job creation and economic growth, but existing evidence indicates that most entrepreneurial ventures fail. This paper reports key insights from VENSURV, a new database that tracks the success and failure of ventures founded since 1998. Based on an analysis of 539 new ventures founded during the years 1991–2001, the following conclusions are reached. First, consistent with prior research, less than half of the 539 ventures survived more than two years. Second, economic downturns lead to higher failure rates for new ventures. Third, new venture success is highly correlated with first‐product success. Fourth, first‐product success is enhanced when those products are introduced into markets with emerging market needs but with established industry standards. Finally, first‐product and venture performance are significantly higher for products based on ideas that came from the founders. In addition, the most successful first products are based on ideas that reflect both technology development and an analysis of customer needs.     

Determinants of New Product Development Team Performance: A Meta‐analytic Review

New product development (NPD) has become a critical determinant of firm performance. There is a considerable body of research examining the factors that influence a firm's ability to successfully develop and introduce new products. Vital to this success is the creation and management of NPD teams. While the evidence for the use of NPD teams and the factors that determine their success is accumulating, there is still a lack of clarity on the team‐level variables that are most impactful on NPD success. This meta‐analytic study examines the effects of NPD team characteristics on three different measures of success: effectiveness (market success), efficiency (meeting budgets and schedules), and speed‐to‐market, requiring incorporation of a broader set of team variables than previous studies in order to capture more factors explaining NPD outcomes. Unlike a typical empirical study that considered no more than two team variables to predict NPD performance, this study combines research spanning eight team variables including team input variables (team tenure, functional diversity, team ability, and team leadership) and team process variables (internal and external team communication, group cohesiveness, and goal clarity). Results from 38 studies were aggregated to estimate the meta‐analytic effect sizes for each of the variables. Using the meta‐analytic results, a path analytic model of NPD success was estimated to isolate the unique effects of team characteristics on NPD effectiveness and efficiency. Results indicate that team leadership, team ability, external communication, goal clarity, and group cohesiveness are the critical determinants of NPD team performance. NPD teams with considerable experience and led by a transformational leader are more successful at developing new products. Effective boundary spanning within and outside the organization and a shared understanding of project objectives are paramount to success. Group cohesiveness is also an important predictor of NPD outcomes confirming the importance of esprit de corps within the team. The findings provide product development managers with a blueprint for creating high‐performance NPD teams.     

Exploring the Appeal of Product Design: A Grounded,Value‐Based Model of Key Design Elements and Relationships*

Product design is increasingly being recognized as an important source of sustainable competitive advantage. Until recently, the domain of design has been loosely categorized as “form and function” issues. However, as this paper will explore, product design deals with a much richer range of issues, many of which have not been considered in the marketing literature. To explore the domain and elements of design, the paper begins with two major goals: (1) to elicit the key dimensions of design and to develop an enriched language for the understanding and study of design; and (2) to integrate the design dimensions within a broader model that ties initial design goals to eventual psychological and behavioral responses from consumers. To achieve these ends, grounded theory development is used by conducting an extensive literature review, in‐depth interviews, and an interactive object elicitation technique. Drawing from this rich source of qualitative information as well as diverse literature fields, a framework is proposed for the creation of design value in consumer products. This framework not only explores the domain of design but also highlights the important elements of design that go well beyond the clichéd form and function issues. The resulting model reflects specific marketplace and organizational constraints that may help or impede the conversion of designer goals to so‐called design levers. These levers are used to convey three types of values to consumers: rational, kinesthetic, and emotional. The framework then explains how and when these different values may be perceived by the consumer. Within this framework, testable research propositions and specific directions for future design‐based research are also offered. Beyond its potential to spur marketing and new product development (NPD) management thought, the framework offered here represents a significant contribution to the field of design, which has historically been represented as a highly fragmented body of knowledge. Formalizing this framework should help overcome perhaps the largest obstacle to date to marketing‐related and NPD‐related research in this area—the lack of a detailed and consistent nomological view of the scope of design dimensions including testable linkages. Design has become an important tool that can be used by managers to develop dominant brands with lasting advantages. This research lends the NPD manager and the marketing manager better insights in into how this increasingly popular focus can be used to influence consumer behavior and firm success. “Design may be our top unexploited competitive edge.” Tom Peters, 2004 (cover review of Norman, 2004 ) “We don't have a good language to talk about [design]. In most people's vocabularies, design means veneer.… But to me, nothing could be further from the meaning of design. Design is the fundamental soul of a man‐made creation.” Steve Jobs, Apple Computers     

Innovation Management Practices Compared: The Example of Project‐Based Firms*

The importance of project‐based firms is increasing, as they fulfill the growing demands for complex integrated systems and knowledge‐intensive services. While project‐based firms are generally strong in innovating their clients' systems and processes, they seem to be less successful in innovating their own products or services. The reasons behind this are the focus of this paper. The characteristics of project‐based firms are investigated, how these affect management practices for innovation projects, and the influence of these practices on project performance. Using survey data of 203 Dutch firms in the construction, engineering, information technology, and related industries, differences in characteristics between project‐based and nonproject‐based firms are identified. Project‐based firms are distinguished from nonproject‐based firms on the basis of organizational configuration, the complexity of the operational process, and the project management capabilities of the firm. Project‐based firms also differ with regard to their level of collaboration and their innovation strategy, but not in the level of autonomy. A comparison of 135 innovation projects in 96 of the firms shows that project‐based firms do not manage their innovation projects different from other firms. However, the effects of specific management practices on project performance are different, particularly the effects of planning, multidisciplinary teams and heavyweight project leaders. Differences in firm characteristics provide an explanation for the findings. The implication for the innovation management literature is that “best” practices for innovation management are firm dependent.     

Lump-Sum Payments and Retail Services: A Relational Contracting Perspective*

How should manufacturers motivate their retailers to provide customer services? The vertical restraints literature tells us that retail competition distorts service incentives in the short run. We consider how repeated interaction mitigates this problem, and particularly how a manufacturer can provide service incentives with discretionary lump-sum payments. We find that these payments may allow the manufacturer to sustain optimal service levels even if retailers are very impatient. We also show that banning reverse lump-sum payments may deprive consumers of the chance to enjoy high-quality services, and thereby reduce their welfare.     

Success Factors in New Ventures: A Meta‐analysis*

Technology entrepreneurship is key to economic development. New technology ventures (NTVs) can have positive effects on employment and could rejuvenate industries with disruptive technologies. However, NTVs have a limited survival rate. In our most recent empirical study of 11,259 NTVs established between 1991 and 2000 in the United States, we found that after four years only 36 percent, or 4,062, of companies with more than five full‐time employees, had survived. After five years, the survival rate fell to 21.9 percent, leaving only 2,471 firms still in operation with more than five full‐time employees. Thus, it is important to examine how new technology ventures can better survive. In the academic literature, a number of studies focus on success factors for NTVs. Unfortunately, empirical results are often controversial and fragmented. To get a more integrated picture of what factors lead to the success or failure of new technology ventures, we conducted a meta‐analysis to examine the success factors in NTVs. We culled the academic literature to collect data from existing empirical studies. Using Pearson correlations as effect size statistics, we conducted a meta‐analysis to analyze the findings of 31 studies and identified the 24 most widely researched success factors for NTVs. After correcting for artifacts and sample size effects, we found that among the 24 possible success factors identified in the literature, 8 are homogeneous significant success factors for NTVs (i.e., they are homogeneous positive significant metafactors that are correlated to venture performance): (1) supply chain integration; (2) market scope; (3) firm age; (4) size of founding team; (5) financial resources; (6) founders' marketing experience; (7) founders' industry experience; and (8) existence of patent protection. Of the original 24 success factors, 5 were not significant: (1) founders' research and development (R&D) experience; (2) founders' experience with start‐ups; (3) environmental dynamism; (4) environmental heterogeneity; and (5) competition intensity. The remaining 11 success factors are heterogeneous. For those heterogeneous success factors, we conducted a moderator analysis. Of this set, three appeared to be success factors, and two were failure factors for subgroups within the NTVs' population. To facilitate the development of a body of knowledge in technology entrepreneurship, this study also identifies high‐quality measurement scales for future research. The article concludes with future research directions.     

Learning from Postproject Reviews: A Cross‐Case Analysis*

Every new product development (NPD) project should not only deliver a successful new product but also should generate learning for the organization. Postproject reviews (PPRs) are recognized by both practitioners and academics as an appropriate mechanism to stimulate and capture learning in NPD teams. However, relatively few companies use PPRs, and those that do use them often fail to do so effectively. Although they are widely perceived to be a useful tool, empirical research on how PPRs are typically organized and the learning that results is limited. The present article addresses this gap in the extant knowledge and describes five in‐depth case studies, which were conducted at leading companies in Germany. A detailed investigation was made of how PPRs are conducted and of the type of learning that can result. Three main sources of data were used for each case: company documentation, in‐depth interviews with managers responsible for NPD, and observation of an actual PPR. The different data sources enabled extensive triangulation of data to be conducted and a high degree of reliability and validity to be achieved. The analysis enabled a number of key characteristics of the way PPRs are managed to be identified. Various characteristics of PPRs influence their utility, such as the time at which they take place and the way discussions are moderated. In addition, the data show that participants in the discussions at PPRs often use metaphors and stories, which indicates that PPRs have the potential to generate tacit knowledge. Interestingly, the data also show that there are various different ways in which metaphors and stories appear to stimulate discussions on NPD projects. Based on the cross‐case analysis, a wide range of implications are identified. Researchers need to investigate PPRs further to identify how they can generate tacit and explicit knowledge and support project‐to‐project learning. The generation of tacit knowledge in NPD is a topic that particularly needs further investigation. The research also led to a range of recommendations for practitioners. Companies need to strongly communicate the purpose and value of PPRs, to run them effectively to stimulate the maximum possible learning, and to disseminate the findings widely. PPRs have the potential to create and transfer knowledge amongst NPD professionals, but, as they are seldom currently used, many companies are missing an important opportunity.     

The Determinants of Seller‐Buyer Interactions during New Product Development in Technology‐Based Industrial Markets

A growing body of literature indicates that the new product development (NPD) process in technology‐based, industrial markets is characterized by collaborative seller‐buyer relationships. Unfortunately, the extant literature is deficient in some significant ways. For example, there is no theoretical framework that explicates the content of these relationships. Also, there is little empirical research on the antecedents or consequences of these relationships. Therefore, managers seeking guidance on how to manage their NPD relationships have lacked appropriate insights. Not surprisingly, ineffective relationship management is a major contributor to new product failure in such settings. Against this background, this study develops and tests a model of seller‐buyer interactions during NPD. The model is based on the relationship marketing literature and is rooted in Transaction Cost Analysis (TCA). It was tested using data from 296 small to mid‐sized firms in a variety of technology‐based, industrial markets. It specifies product co‐development, education, and post‐installation product knowledge generation as three key behavioral dimensions that characterize seller‐buyer interactions during NPD. Our results indicate that the intensity with which these dimensions are undertaken vary with buyer‐related (i.e., perceived buyer knowledge and prior relationship history) and innovation‐related (i.e., product customization and innovation discontinuity) characteristics. For example, perceived buyer knowledge has a positive impact on product co‐development while innovation discontinuity has a positive impact on education. Further, we find that a seller's satisfaction with undertaking these behaviors is moderated by the technological uncertainty in the seller's industry. As a case in point, satisfaction with undertaking product co‐development is reduced when technological uncertainty is high. Collectively, the overall support we find for our model can help NPD managers optimize their relationships with buyers during NPD.