R&D,Firm Size and Innovation Outputs: Are Japanese Firms Efficient in Product Development?

Although Japanese firms in various industries enjoyed outstanding success during the 1980s, the recent economic news has been less favorable. Like their American counterparts, Japanese managers have faced difficult decisions regarding plant closures, layoffs, and moving production facilities overseas. Many Japanese business leaders attribute the innovation successes of the 1980s, at least in part, to economies of scale resulting from increases infirm size. If this assertion holds true, the current economic climate in Japan seems certain to result in diminished economies of scale for innovative activities. Ryuhei Wakasugi and Fumihiko Koyata test this assertion in a statistical study of the innovation efficiency of Japanese electrical machinery firms. In other words, their study explores whether the hypothesized economies of scale apply to the innovation inputs and outputs of these firms. They examine the manner in which R&D expenditures, patent applications, and product developments relate to the size of Japanese electrical machinery firms during the late 1980s and early 1990s—a period marked by high levels of innovative activity among these firms. For the Japanese electrical firms in this study, innovation inputs that is, R&D expenditures—increase in greater proportion than firm size. In other words, the larger firms in this study pursued their innovation efforts more aggressively than did the smaller firms in the study. In terms of R&D expenditures, however, the study does not reveal any resulting economies of scale for either patent applications or product developments. Similarly, analysis of the data in this study does not identify any economics of scale for product developments as a result of increases in firm size. In fact, the only economies of scale identified in the study involve firm size and the number of patent applications. In general terms, the statistical evidence in this study does not support the hypothesis that an increase in firm size improves the efficiency of innovation activity. To put this another way, the study does not provide evidence to support the hypothesis of economies of scale in product development.     

A Longitudinal Study of the Impact of R&D,Patents, and Product Innovation on Firm Performance

Because of increasing levels of competition and decreasing product life cycles, a firm's ability to generate a continuous stream of innovations may be more important than ever in allowing a firm to improve profitability and maintain competitive advantage This paper investigates several issues that are central to an examination of the innovation productivity in a firm. First, the relationship between a firm's commitment to research and development and its innovative outcomes is examined. Two innovative outcomes are analyzed: (1) invention, which focuses on the development of new ideas; and (2) innovation, the development of commercially viable products or services from creative ideas. Invention is measured by the number of patents granted, and innovation is assessed by the number of new product announcements. Second, because many inventions ultimately result in marketable innovations and because patents may provide protection for new products, the relationship between patents and product announcements is also investigated. Finally, the ability of a firm to benefit from its inventions and innovations is studied by examining their separate effects on firm performance, measured as return on assets (ROA) and sales growth. Drawing from a sample of 272 firms in 35 industries over 19 years, the results from a model of simultaneous equations provided support for some of the hypotheses, but several other surprising findings were found. As expected, R&D spending was positively related to patents. This finding is consistent with others who argue that internal research capabilities, particularly those with a strong basic research component, is key to enabling a firm to generate creative outputs. More surprising was the finding of increasing returns to scale to R&D spending. While this contradicts much of the existing research, it is consistent with economic arguments for the advantages of scale in innovation. Also interesting is the finding that, while a significant curvilinear relationship exists between R&D spending and product announcements, it is not the predicted inverse‐U but instead a U‐shaped relationship. Consistent with previous work, product announcements were found to be positively related to both performance measures. A negative relationship was found between patents and both ROA and sales growth. While these findings were unexpected, they are intriguing and call into question the value of patents as protection mechanisms. In addition, these results may be resulting from the rise of strategic patenting, where an increasing number of firms are using patents as strategic weapons. As expected, a positive relationship was found between patents and new product announcements.     

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.     

Product Innovation,Process Innovation,and Size

We test the hypothesis that large firms devote a higher proportion of their research and development (R & D) expenditure on process innovation thansmaller firms. According to the estimates, process- and product R & D expenditure rise less than in proportion to size. The size effect is somewhat stronger for process R & D but the difference to product R & D is in no way dramatic. This difference with regard to size elasticity of process- and product R & D is somewhat more pronounced when accounting for possible interrelationships between expenditure on process- and product R & D but remains statistically non-significant.     

Investigating the Drivers of Innovation and New Product Success: A Comparison of Strategic Orientations*

The notion of producing innovations and achieving new product success has received a great deal of attention. Though many have investigated these effects in marketing and various fields within management, there has been little cross‐fertilization between fields of study to explain the basis for this superior performance. Though research has examined the resource‐based view (RBV) and market orientation individually, none has evaluated and compared their effect on firm innovation and new product success in one study. Furthermore, although empirical work has been conducted between market orientation and organizational learning, comparatively less research has been conducted to evaluate the relationship between organizational learning and the RBV to examine their combined effects on a firm's ability to innovate and succeed. Subsequently, the purpose of the present article is to investigate whether a focus on the customer (i.e., market orientation) or the firm (i.e., RBV) will drive the ability to (1) innovate within the firm and (2) succeed in terms of new product success, financial performance, market share, and customer value. The present article examines the relationship between organizational learning and the RBV and market orientation. It presents an empirically testable framework that investigates the relationship that RBV and market orientation have with performance outcomes. Data were collected from 249 senior executives. LISREL was applied to evaluate the relationships. Confirmatory factor analysis and related techniques were applied to assess the robustness of the measures used. Findings show that organizational learning is strongly associated with market orientation, which in turn impacts various performance outcomes including customer value. The RBV had a significant relationship with new product success. These results suggest that managers seeking innovation and new product success should focus less on the provision of customer value. Instead they should look toward developing their resources within the firm, including investing in human resources, to ultimately provide value to the firm. Findings indicate that this unique offering—innovations—will have an indirect effect on customer value and financial performance. In contrast, those in pursuit of positive financial performance and customer value should focus on the development of market orientation. Even though this will not necessarily lead to the development of innovative processes and new product success according to the present study, this approach may lead to a greater market share in the long term. This article reviews theoretical and managerial implications in more depth, providing an impetus for further research.     

Uses of Agent‐Based Modeling in Innovation/New Product Development Research*

Little has been written in the new product development literature about the simulation technique agent‐based modeling, which is a by‐product of recent explorations into complex adaptive systems in other disciplines. Agent‐based models (ABM) are commonly used in other social sciences to represent individual actors (or groups) in a dynamic adaptive system. The social system may be a marketplace, an organization, or any type of system that acts as a collective of individuals. Agents represent autonomous decision‐making entities that interact with each other and/or with their environment based on a set of rules. These rules dictate the behavioral choices of the agents. In these simulation models, heterogeneous agents interact with each other in a repetitive process. It is from the interactions between agents that aggregate macroscale behaviors or trends emerge. The simulated environment can be thought of as a “virtual” society in which actions taken by one agent may have an effect on the resulting actions of another agent. This article is an introduction to the ABM methodology and its possible uses for innovation and new product development researchers. It explores the benefits and issues with modeling dynamic systems using this methodology. Benefits of ABMs found in sociology and management studies have found that as the heterogeneity of individuals increase in a system or as network effects become more important in a system, the effectiveness of ABMs as a methodology increases. Additionally, the more adaptive a system or the more the system evolves over time, the greater the opportunity to learn more about the adaptive system using ABMs. Limitations to using this methodology include some knowledge of computer‐programming techniques. Three potential areas of research are introduced: diffusion of innovations, organizational strategy, and knowledge and information flows. A common use of ABMs in the extant literature has been the modeling of the diffusion process between networked heterogeneous agents. ABMs easily allow the modeling of different types of networks and the impact of these networks on the diffusion process. A demonstrative example of an agent‐based model to address the research question of how should manufacturers allocate resources to research (exploration) and development (exploitation) projects is provided. Future courses of study using ABMs also are explored.     

产品化要从研发抓起——再论用科学发展观指导产品体系建设

一、现有航天器产品的不足 产品是企业的基础与根本,为用户和市场提供产品是企业的第一要务。以研制生产航天器为主业的航天企业为把自己铸造成世界一流的宇航公司,第一个条件就是能向用户和市场提供一流的航天器产品。     

Learning to Reduce Interorganizational Learning: An Analysis of Architectural Product Innovation in Strategic Alliances*

There is wide agreement in analyses of strategic alliances that, regardless of the purpose of the alliance, members of the partner organizations should engage in intensive mutual learning to make the alliance a success. In contrast to this view, the present article shows that in strategic alliances aimed at product innovations by recombining partners' extant technologies, learning between specialists can be reduced considerably without jeopardizing success. This is made possible through four interconnected mechanisms integrated into the concept of transactive organizational learning (TOL): (1) modularization, which allows specialists of different domains to develop modules to a large extent independently of each other and to concentrate communication between themselves on the design of interfaces between modules; (2) storing of knowledge in artifacts instead of in organizational members' memories; (3) localization of knowledge not present in the project team but for which a need has arisen through transactive memory; and (4) knowledge integration by prototyping (i.e., by repeated testing of modules and of interactions between modules until a satisfactorily working end product is achieved). Although these four mechanisms reduce the need for cross‐learning between specialists of different domains, some common knowledge and some cross‐learning between the partners' specialists is still required. Case studies on four of SAP's strategic alliances for product innovation with different partners lend empirical support to this study's concept. The article concludes with implications for practice: Companies should find out whether the TOL mechanisms that reduce time to market are present, to what extent their potential is exploited, and how well they work together.     

Fostering Innovation in Complex Product Development Settings: The Role of Team Member Identity and Interteam Interdependence*

Much of the existing research on innovation has concentrated on the study of individuals in small group settings. However, projects marked by multiple teams, high task interdependence, long duration, and large scale have become increasingly common in practice. Very little is known about how extant research findings related to innovation may generalize to such complex settings. Taking a multilevel theoretical approach, individuals' propensity to innovate is hypothesized as the product of individuals' relationship with their work team (team member identification) and their team's relationship to other teams within the organizational system (interteam interdependence). A large, diversified manufacturing firm engaged in a multibillion dollar project that involved the development of a technologically intense, highly innovative, new product served as the research site. Based on archival and survey data (n=118), five hypotheses were tested. The findings indicate that individuals' strong team identification and their perceptions of high interteam interdependence each had positive main effects on individuals' intentions to innovate. However, these two variables also interacted negatively to significantly decrease innovation intentions. Therefore, high identification with team may lead individuals to view interdependence with another team as a threat deflecting attention from innovation. The finding related to the role of identity, although consistent with work linking identity to other team behaviors, usefully broadens the reach of identification theories to demonstrate their impact on innovation. Additionally, this study is the first to demonstrate the impact of interteam interdependence on innovation. The alternative operationalizations of interdependence used in this paper highlight the fact that it must be strongly perceived and experienced by individuals to affect their innovation attitudes. The findings of this study also have implications for managerial practice in complex project settings. Since team identification has a direct effect on innovation, managers might employ strategies related to the creation of social bonds to complement task related connections among team members. Further, managers should configure staffing and incentive mechanisms to reinforce team identification. Finally, the results suggest that managers need to carefully attend to individuals' perceptions of each team's interdependence with other teams. Although perceptual interdependence can be an enabler of innovation, it can also be a disabler, through its interaction with team identification. Recognizing this potential for negative effects, managers might emphasize the benefits that can come from cooperating across teams, thus encouraging team members to identify not only at the team level but at the overall project level as well. Such actions might deflect negative identity threats that can derail positive innovation intentions.     

Creativity Workshops in Product Innovation

The process of creative thinking has long been a concern of both researchers and managers alike. Recently, the business press has begun to address a variety of approaches being taken to enhance creativity. One of the current structures which incorporates the use of a variety of specific techniques is the Creativity Workshop. It structures a collective group effort designed to solve a complex problem. Horst Geshka has led a number of Creativity Workshops and has summarized his experiences for the growing number of managers who recognize the importance of giving special attention to the process of creative thinking.     

Product Innovation Management in Spain

In line with the latest studies of product innovation management, Angel Martinez Sanchez and Luis Navarro Elola report results from their study of 56 industrial firms in Spain. The results reveal a systematic process of new products development with little consideration given to innovation, but with a contrasting preoccupation with market activities.     

The Role of Value‐Informed Pricing in Market‐Oriented Product Innovation Management*

Although the positive effect of a market orientation on new product success is widely accepted and the market orientation literature has increased its understanding of how a market orientation leads to performance, the extant literature has overlooked the role of value‐informed pricing in the relationship. Value‐informed pricing is a pricing practice in which the decision makers base the price of the new product on the customers' perceptions of the benefits that the product offers and how these benefits are traded by customers against the price (that has yet to be determined). Considering that pricing mistakes may hit hard on the profitability of product innovations, it is important to firms to have a good understanding of its role. This study develops a framework in which value‐informed pricing is integrated in the relationship between market orientation and new product performance. A distinction is made between customer and competitor orientations, and relative product advantage is also included in the conceptual model. The model is tested on data obtained from managers based on a cross sectional sample of 144 firms. The respondents were involved in a decision‐making process of the pricing of a new product. The model is tested using structural equations modeling. The results show that value‐informed pricing has a strong effect on new product performance. It also reveals that each component of a market orientation fulfills a specific role in a market‐oriented organization. Value‐informed pricing is found to have important mediating effects in the market orientation–new product performance relationship. Results show that firms with a strong customer orientation engage in value‐informed pricing and develop superior benefits to customers in an advantageous product. In turn, both value‐informed pricing and relative product advantage positively affect new product market performance. However, no significant effect of competitor orientation on value‐informed pricing is found. Combined with the finding that competitor orientation negatively affects relative product advantage, this suggests that competitor orientation may hurt new product performance when this orientation is not balanced with a strong customer orientation. The results also portray that value‐informed pricing leads to higher product advantage. Interestingly, this relation is contingent on the degree of interfunctional coordination within the firm. This suggests that the relationship between market orientation and new product performance is strongest if firms integrate value‐informed pricing in the new product development process. In this sense, a market‐oriented firm mirrors the customer value perception that makes a trade‐off between benefits and price.     

Interfirm Modularity and Its Implications for Product Development*

Industries characterized by interfirm modularity, in which the component products of different firms work together to create a system, are becoming increasingly widespread. In such industries, the existence of a common architecture enables consumers to mix and match the products of different firms. Industries ranging from stereos, cameras, and bicycles to computers, printing, and wireless services are now characterized by interfirm modularity. While the increasing presence of this context has been documented, the implications for the product development process remain underdeveloped. For the present study, in‐depth field‐based case studies of seven firms experiencing an environment of interfirm modularity were conducted in order to deepen understanding of this important phenomenon. What unique challenges did this context pose and why? What solutions did firms experiment with, and which seemed to work? Based on an inductive process of data analysis from these case studies, three primary categories of challenges raised by this environment were identified. First, firms were frustrated at their lack of control over the definition of their own products. The set of features and functions in products were constrained to a great extent by an architecture that the firm did not control. Second, while an environment of interfirm modularity should in theory eliminate interdependencies among firms since interfaces between products are defined ex‐ante, the present study found, ironically, that interdependencies were ubiquitous. Interdependencies continually emerged throughout the product development process, despite efforts to limit them. Third, firms found that the quantity and variegated nature of external relationships made their management exceedingly difficult. The sheer complexity was daunting, given both the size of the external network as well as the number of ties per external collaborator. Partners with whom control over the architecture was shared often had divergent interests—or at least not fully convergent interests. The solutions to these challenges were creative and in many cases counter to established wisdom. For instance, research has suggested many ways for a firm to influence architectural standards. While the firms in the present sample followed some of this advice, they also focused on a more neglected aspect of architecture—the compliance and testing standards that accompany modules and interfaces. By concentrating their efforts in a different area, even smaller firms in this sample were able to have some influence. Instead of focusing on the elimination of interdependencies, it was found that firms benefited from concentrating on the management of interdependencies as they emerged. Finally, while layers of management and “bureaucracy” are often viewed as unproductive, these firms found that adding structure, through positions such as Relationship Manager, was highly beneficial in handling the coordination and control of a wide range of external relationships.     

硅谷产品研发模式的制度安排与相关解释

随着科技进步与产业升级，相对于传统的产品研发模式，硅谷产品研发模式呈现了一些全新的制度安排，尤其是传统的企业内研发部门被硅谷企业间研发的市场组织所替代，使硅谷的产品研发模式不仅涉及到独特的治理结构，而且具有了跨域（金融域，企业组织域）捆绑的制度特征。     

Determinants of IT Usage and New Product Performance*

Explosive growth of information technologies (IT) has prompted interest in examining the role of IT in new product development (NPD). Through desktop software and Web‐based tools, IT has been used to aid idea generation and product testing as well as for NPD activities such as process and portfolio management. Recent research suggests, however, that a gap exists between IT availability and usage. Given the importance of IT in creating business value through the development of new products and services, the present study seeks to identify factors that affect IT usage. Further, anecdotal evidence and conceptual studies intimate that the usage of IT tools for NPD can shorten time to market, can improve product quality, and can increase productivity. However, empirical substantiation of this impact is mostly nonexistent. The current study investigates the relationship between IT usage and two measures of new product performance: speed to market and market performance. Employing a mail‐survey methodology, the study uses data from a sample of practitioner members from the Product Development & Management Association to examine the effect of project risk, existence of a champion, autonomy, innovative climate, IT infrastructure, and IT embeddedness on the extent of IT usage. These data are also used to explore the impact of IT usage on speed to market and market performance. The results indicate that project risk, existence of a champion, and IT embeddedness positively affect the extent of IT usage for NPD. Additionally, IT usage positively and significantly influences the performance of the new product in the marketplace. Surprisingly, and contrary to popular belief, IT usage does not have any impact on speed to market. An important implication of this study is that IT usage influences performance but not in the way managers expect. Specifically, IT usage does not seem to affect speed to market but rather positively impacts the performance of the new product in the marketplace. This result suggests that IT usage in NPD provides far more value to firms than previously thought and provides evidence to support greater investments in IT for product development efforts. Other implications of the study are that unless IT is embedded into the NPD process and champions for IT tools exist, chances are that IT will not be used and its benefits will not be realized.     

Embodied Cognition and New Product Design: Changing Product Form to Influence Brand Categorization*

This article explains how embodied cognition and perceptual symbol systems enable product designers to influence consumers by communicating key perceptual features through subtle changes in product design elements. In this way, managers can change perceptual design elements to support line extension strategies. More specifically, design changes can be used as a tool to help evolve consumer perceptions of a product's uses and brand category membership. The role of perceptual symbols in product design is illustrated by a well‐known off‐road motorbike brand that planned to extend into the street motorbike segment. In order to facilitate consumer acceptance of a street motorbike from this off‐road brand, the firm gradually introduced models containing an increasing number of elements of street motorbikes over a period of several years. The authors use this example to show how typical design elements of the target product category can be effectively integrated with design elements of the current product category by simply modifying key characteristics of product‐shape attributes. This process is further tested in an experiment, where motorbike models differing slightly in key product features (e.g., product shape) were rated on their resemblance to street or off‐road motorbikes. The results show a strong effect of these design changes on brand‐category membership. Managerial implications of this approach and future research directions are discussed.     

Exploring New Product Development Project Review Practices*

Most organizations use new product development (NPD) processes that consist of activities and review points. Activities basically solve problems and gather and produce information about the viability of successfully completing the project. Interspersed between the development activities are review points where project information is reviewed and a decision is made to either go on to the next stage of the process, stop it prior to completion, or hold it until more information is gathered and a better decision can be made. The review points are for controlling risk, prioritizing projects, and allocating resources, and the review team typically is cross‐disciplinary, comprising senior managers from marketing, finance, research and development (R&D), or manufacturing. Over the past four decades, research has greatly advanced knowledge with respect to NPD activities; however, much less is known about review practices. For this reason, the present paper reports findings of a study on NPD project review practices from 425 Product Development & Management Association (PDMA) members. The focus is on three decision points in the NPD process common across organizations (i.e., initial screen, prior to development and testing, and prior to commercialization). In this paper, the number of (1) review points used, (2) review criteria, (3) decision makers on review committees and the proficiency with which various evaluation criteria are used are compared across incremental and radical projects and across functional areas (i.e., marketing, technical, financial). Furthermore, the associations between these NPD review practices and new product performance are examined. Selected results show that more review points are used for radical NPD projects than incremental ones, and this is related to a relatively lower rate of survival for radical projects. The findings also show that the number of criteria used to evaluate NPD projects increases as NPD projects progress and that the number of review team members grows over the stages, too. Surprisingly, the results reveal that more criteria are used to evaluate incremental NPD projects than radical ones. As expected, managers appear to more proficiently use evaluation criteria when making project continuation/termination decisions for incremental projects; they use these criteria less proficiently during the development of radical projects, precisely when proficiency is most critical. At each review point, technical criteria were found to be the most frequently used type for incremental projects, and financial criteria were the most commonly used type for radical ones. Importantly, only review proficiency is significantly associated with performance; the number of review points, review team size, and number of review criteria are not associated with new product performance. Furthermore, only the coefficient for proficiently using marketing criteria was significantly related to new product program performance; the proficiency of using financial and technical information has no association with performance. Finally, across the three focal review points of the NPD process in this study, only the coefficient for proficiency at the first review point, (i.e., the initial screen) is significantly greater than zero. The results are discussed with respect to research and managerial practice, and future research directions are offered.