Network-based market knowledge and product innovativeness

An ongoing debate in marketing literature is whether market knowledge facilitates or impedes new product innovativeness. To reconcile inconsistent findings, this study disaggregates market knowledge into breadth and depth dimensions and uncovers their divergent effects on new product innovativeness. Given organizations’ increasing reliance on network contacts for access to market knowledge, we focus on market knowledge derived from external ties. Based on an empirical test of 244 firms in China, this study finds that market knowledge breadth has a U-shaped relationship, whereas market knowledge depth has an inverted U-shaped relationship, with product innovativeness. These findings carry important theoretical and managerial implications.     

The endogenous role of location choice in product innovations

The location choice of product innovations is a prevalent phenomenon one that has received little attention in the literature. This study examines the ways in which comparative industry environment, technology and product characteristics, and entry timing affect the firm's location choice of new product development activities between headquarters and foreign subsidiaries and the implications of location choice for performance. Our findings indicate that: (1) firms are more likely to locate their new product development activities at foreign subsidiaries in mainland China than at headquarters in Taiwan when the industry environment at foreign subsidiaries is more favorable, when technologies and products are more mature, and when the entry to mainland China's market is earlier than that of its competitors; (2) in general, firms locating their new product development activities at headquarters in Taiwan perform better than firms locating their new product development activities at foreign subsidiaries in mainland China after controlling for endogeneity bias; (3) firms locating their new product development activities at headquarters (at foreign subsidiaries) perform better than if they had located their new product development activities at foreign subsidiaries (at headquarters). Managerial implications and future research directions are discussed.     

The function-specific microfoundations of dynamic capabilities in cross-border mergers and acquisitions

In mergers and acquisitions, the acquiring firm must combine two firms’ resources and capabilities so that the outcome yields value. In individual firms, the marketing & sales, and R&D functions have typically developed intertwined and complex relationships over time. These multifaceted dependencies may obscure the integration of the firms and their functions. In order to reveal to what extent cross-functional relationships determine the success or failure of an acquisitions, we have made one of the first attempts to study merging firms’ function-specific capabilities, underlying microfoundations, and their cross-functional relationships during the integration process—instead of focusing on acquisition capabilities as such. We use longitudinal data from two cross-border acquisitions between US and Finnish SMEs. Our results indicate that major differences between merging firms’ cross-functional microfoundations—that is, their structures, processes, routines, and skills—might either enforce or erode the seemingly promising synergies at the product and market levels, depending on managerial awareness of their nature.     

Is market orientation affected by the product life cycle?

Considerable scholarly interest has been shown in the relationship between market orientation and business performance. Although a number of environmental moderators have been postulated to influence the market orientation–performance link, extant findings are inconclusive. This study takes a different approach by conceptualizing product life cycle stages in terms of variations in competitive intensity, market and technological turbulence. Data collected in Hong Kong reveal that Atuahene-Gima's [Atuahene-Gima, K. (1995). An exploratory analysis of the impact of market orientation on new product performance: A contingent approach. Journal of Product Innovation Management, 12: 275–293] product life cycle measure successfully discriminates stages in terms of market and technological turbulence, but fails to capture variation in competitive intensity. Market orientation is also found to be more highly valued by firms in growing and mature markets than firms in introductory and declining markets. Finally, the link between market orientation and firm performance is found to be strongest for firms in the growth stage and weakest for firms in the introductory stage of the product life cycle.     

The Impact of Firm Capabilities and Competitive Advantages on Import Intermediary Performance

ABSTRACT

Import intermediary firms, domestic firms that serve U.S. industries by linking domestic wholesalers/retailers and foreign distributors/manufacturers, handled a whopping U.S. $1.85 trillion of commodity good imports in 2006. This study focused on these important firms by assessing the role of capabilities and competitive advantages as key determinants of import intermediary performance. The empirical results showed that market interpretation, sourcing, and service capabilities, overall, positively affected cost, product, and service competitive advantages. These competitive advantages, in turn, positively affected their relationship performance with business partners. Results, however, also indicated some interesting negative associations among sourcing capabilities, service advantages, and relationship performance with foreign partners, raising questions about extant firm performance theory.     

Microfoundations of dynamic new venture partnering capabilities

Managing relationships with new venture suppliers require the adaptation of supplier management practices and routines. This research builds upon the dynamic capabilities perspective to explicate the ability to partner effectively with new venture suppliers as a dynamic capability. We argue that new venture partnering capability (NVPC) encompasses sensing, seizing, and transforming capabilities. Firms with sensing capabilities can interpret new ventures' value propositions and then match them to the needs of their business units. Seizing capabilities allow firms to coordinate and develop the relationship with a new venture supplier to capture value. Transforming capabilities enable firms to adapt resources and reconfigure their sensing and seizing capabilities. Our findings suggest that firms accelerate the transformation and strengthen dynamic NVPCs by applying entrepreneurial behavior through high-quality and regular interactions with new venture suppliers and embedding a dedicated new venture function. We also find that dynamic NVPCs can reside at different levels and that entrepreneurial managers can stimulate the development of organizational NVPCs. In general, we provide further empirical evidence on how buying firms can more effectively leverage the potential of new venture suppliers.     

The timing of version releases: A dynamic duopoly model

In many R&D-intensive consumer product categories, firms deliver value to consumers through the quality enhancements provided by new and improved versions of existing products. Therefore, important marketing decisions relate to a firm’s strategy for developing quality enhancements and releasing new versions. This paper explores this type of product development using a dynamic duopoly model that endogenizes each firm’s decisions over how much to invest in R&D and when to release new versions. Specifically, I explore how two key industry fundamentals—the degree of horizontal differentiation and the cost of releasing a new version—affect firms’ product development strategies and, accordingly, the evolution of industry structure. I find that varying the degree of horizontal differentiation gives rise to three distinctly different types of competitive dynamics: preemption races when the degree of horizontal differentiation is low; phases of accommodation when it is moderate; and asymmetric R&D wars when it is high. Furthermore, I find that an increase in the cost of releasing a new version can induce firms to compete more aggressively for the lead and, in doing so, release new versions more frequently despite the higher cost.     

Does advertising indicate product quality? Evidence from prelaunch and postlaunch advertising in the movie industry

Literature on the informative role of advertising indicates that advertising quantity can serve as an indicator of product quality. As product life cycles grow shorter, firms in many industries spend significant amounts on advertising during the prelaunch period to create large initial demand. Thus, the role of prelaunch advertising may differ from that of postlaunch advertising, and a proper understanding of these differences is important. This study provides an empirical investigation of whether advertising is a reliable indicator of quality before and after product launches, using the data from the movie industry. Analyses of 1078 movies released during 2003–2011 show that postlaunch advertising is a reliable quality indicator and increases revenues, whereas prelaunch advertising is not a reliable quality indicator, even if it leads to higher revenues.     

How Knowledge Management Capabilities Help Leverage Knowledge Resources and Strategic Orientation for New Product Advantages in B-to-B High-Technology Firms

ABSTRACT

Purpose: Current understanding of how new product development (NPD) teams use knowledge management capabilities to acquire, disseminate, and apply knowledge resources to achieve competitive advantages is limited by a lack of compelling theory supported by empirical evidence. This study provides a theoretical framework and empirical validation for how an NPD team manages knowledge resources and strategic orientation to enhance its knowledge management capabilities, which, in turn, lead to business-to-busienss (B-to-B) new product advantages.

Methodology/approach: A total of 100 sets of data was collected from B-to-B firms in U.S. high-tech industries. In order to validate the proposed hypotheses, we estimated the main effects using path analysis in AMOS, and tested for interaction effects using interaction term regressions.

Findings: Our findings show that the two dimensions of NPD knowledge management capabilities—acquisition and application—are important but differential drivers of product quality superiority and product differentiation. In testing whether NPD management capabilities matter for two product advantage constructs, we confirmed that product quality superiority can be enhanced by both NPD knowledge acquisition and application capabilities, whereas product differentiation can be increased strongly by NPD knowledge acquisition capabilities.

Research implications: Our research confirms the importance of strategic orientation as a driver of NPD knowledge management capabilities, which enhances understanding of how strategic factors operate under a resource-based view. Our results further provide direct empirical support for the knowledge-based view of firms, in that an NPD team’s abilities to manage and deploy knowledge-based resources by acquiring and applying NPD knowledge lead to competitive advantages, for outcomes of quality superiority and differentiation.

Practical implications: Our findings have relevance for managers in three ways. First, NPD knowledge acquisition and application capabilities have differential impacts on product quality superiority and differentiation. Second, in exploring NPD resource factors as antecedents, managers should manage levels of NPD market intelligence, resource tacitness, and NPD resource deployment differentially to directly improve NPD teams’ acquisition and application capabilities. Third, managers should not underestimate the importance of market and technological orientations in enhancing NPD knowledge management capabilities. Market orientation drives both NPD knowledge acquisition and application capabilities; technological orientation drives NPD knowledge application capabilities. Originality/value/contribution of the paper: An NPD team’s knowledge management capabilities generally, but differentially, mediate the relationships of knowledge resources and strategic orientation factors with new product competitive advantage. However, simply enhancing NPD knowledge management capabilities is not a panacea for developing product competitive advantage in B-to-B settings, because of their differential effects.     

Linking new product alliances to stock returns and risk

Although firms widely engage in new product alliances, prior research has paid limited attention to their financial impact, especially, both stock returns and risk. In addition to the direct impact of product alliances, I have assessed how firm and alliance characteristics can moderate such effects. I have examined firm size and alliance type as moderators to the product alliance and stock performance relationship. Using a large database of 506 firms and 3714 new product alliances over 21 years, I estimate a random effects model. My findings are that new product alliances demonstrate an increase in stock returns and a decrease in stock risk. In addition, these effects are heterogeneous across firm size and alliance type. This research has implications for both new product alliances and marketing-finance interface literature.     

Strategic Implications of Keeping Product Value Secret from Competitor’s Customers

Customers can sometimes learn unanticipated or hidden use value of a firm’s product whereas the non-customers remain uninformed about that extra value. A monopolist will increase its profit by informing the non-customers of its product’s hidden value. However, our analysis reveals that this may not be true when the firm faces competition in the market—the firm may actually make a higher profit if it keeps its hidden value secret from its competitor’s customers even if advertising to inform those customers is costless. This is because no advertising leads to information heterogeneity among consumers about the existence of the firm’s hidden value, which gives an incentive for both firms to continue targeting their own existing customers rather than poaching each other’s customers, alleviating price competition and increasing firms’ profits. This beneficial strategic effect of keeping some product value secret from the competitor’s customers can persist even when the firms anticipate the hidden value and compete more aggressively for customers in the early period. Our research suggests that firms can benefit from an “under-promise and over-deliver” strategy if they refrain from communicating their extra value to the competitor’s customers. Moreover, positive word of mouth about a firm’s product will not necessarily benefit the firm and can in fact make all firms worse off.     

Cannibalization vs. competition: An empirical study of the impact of product durability on automobile demand

Many durable product categories have well developed and organized secondary markets that make it easy for consumers to purchase used versions in lieu of new ones. Manufacturers in these categories therefore face a dilemma in deciding on how much durability to build into their new products. High durability levels increase the risk that future new product sales are lost to used versions (the cannibalization effect), but can also help the firm take sales from new and used versions produced by its rivals (the competition effect). However, there has been no empirical research to determine the relative sizes of these two effects.Our research seeks to fill this gap in the literature via an empirical study of the demand for new and used vehicles in the US automobile market. We analyze two datasets; the first from the mid-sized sedan segment in the Indianapolis DMA during 2004–2006 and the second from the Entry Sports Utility segment in the Los Angeles DMA during the period 2003–2005. We propose and implement a durability metric that is based on the over-time trajectory of used car prices and estimate a structural model of differentiated product demand with heterogeneous consumers who choose among new and used vehicles and consider durability in their choice decisions. Both datasets reveal that durability significantly impacts the demand for new and used vehicles with mean durability elasticities estimated to be about 1.7. Both datasets also show that the competition effect (85%) is significantly greater the cannibalization effect (15%). While the prior theoretical literature generally recommends that firms avoid cannibalization by reducing product durability, our findings imply that manufacturers who increase the durability of their products may see net sales gains as a result.     

Does the sequencing of related and unrelated export diversification matter? Evidence from Colombian exporters

How does related or unrelated geographic diversification affect future related or unrelated product diversification of exporting firms, and vice-versa? This question addresses an unresolved debate, and it is important for firms in developing countries that seek to expand their product and geographical markets. Our study contributes to a current debate by highlighting the relevance of the temporal sequence and the relatedness of international diversification. Expanding the classic transaction costs and the resource-based explanations, we argue that organizational learning as well as organizational and sales (in-)efficiencies (notably through resource and product cannibalization, negative transfer and coordination costs) affect the interrelationships between product and geographic diversification. Using a panel dataset of over 14,000 firm-year observations from exporters based in Colombia, we find that (1) related geographic diversification tends to increase future product diversification; (2) related product diversification tends to decrease future geographic diversification; and (3) unrelated product diversification tends to increase future geographic diversification.     

Unleashing the dynamics of product-market ambidexterity in the pursuit of international opportunities: Insights from emerging market firms

Extending the current debate surrounding ambidexterity, this study examines how emerging market firms pursue international opportunities by leveraging the dynamics of strategic ambidexterity in product and market domains. The investigation draws on longitudinal and multiple sources of data from four Chinese multinational firms. Two follow traditional or incremental internationalization pathways, whilst the other two pursue rapid or accelerated internationalization. The study offers a more dynamic perspective to help understand the evolving nature of ambidexterity with respect to the routes of strategic product and market development options. In particularly, the findings reveal that incremental internationalization is characterized by structural ambidexterity combining product exploitation with market exploration at the initial stages, whereas accelerated internationalization is best explained by market exploration and exploitation (or market ambidexterity) when first entering foreign markets. Moreover, firms were found to maintain strategic priorities through structural and punctuated ambidexterity across product and market domains at later stages of internationalization. This study contributes to the dynamic perspective of strategic ambidexterity for seizing international opportunities among emerging market firms.     

企业国际化研究新视角 ——战略控制力

本文针对现有企业国际化理论缺乏战略因素综合考虑的研究现状,从战略控制力的视角对企业国际化问题进行研究,剖析了企业国际化战略控制力的内涵与特征,并提出了国际化战略控制力五要素,指出国际化战略控制力是维持企业国际化持续发展和优胜地位的根源,同时对中国大企业国际化战略控制力的构建问题进行了有益探讨。     

Benchmarking buyer behavior towards new brands

New brand launches are risky endeavors for marketers, as many fail to attract a sustainable customer base. This research examines the buying behavior of customers acquired by a new brand and revisits the theoretical norms of the NBD-Dirichlet model benchmarks. Investigating 40 new brand launches in the UK, across a wide range of brand and category conditions, we find that in the first 12 months, new launches have more, but less loyal buyers than expected from NBD-Dirichlet benchmarks, irrespective of type, price point, or the sales gained by the new launch. Further we find exploratory evidence that new buyers of brands have weaker associations than existing buyers. We propose that the combination of the new experience that lacks distinctiveness in encoding means that the experience of buying the new brand creates weaker memory traces in new buyers and that these buyers need additional marketing reinforcement to consolidate the memory of buying the brand to establish the brand in their ongoing repertoire.     

How foreign knowledge spillovers by returnee managers occur at domestic firms: An institutional theory perspective

Instead of treating the spillover process as a black box, this paper conducts a qualitative study of foreign knowledge spillovers by returnee managers at Chinese firms. Unlike mainstream spillover studies which adopt economics approaches, this paper uses an institutional theory perspective and regards returnee managers as boundary spanners. Results show that returnee managers' boundary-spanning activities in the form of social interaction, including building relationships with colleagues and transforming their identities from outsiders to insiders, help gain legitimacy for their new roles. Their boundary-spanning activities in the form of grafting foreign knowledge, including understanding existing knowledge resources, introducing foreign knowledge to colleagues, and integrating foreign knowledge with domestic firms, help gain legitimacy for foreign knowledge. Foreign knowledge' contributions in new product development at product, process, and cultural perspective levels reinforce its institutionalization at domestic firms. Absorptive barriers include domestic firms' administrative heritage and returnee managers' arduous relationship with others.     

A model of rapid knowledge development: The smaller born-global firm

Existing models of the internationalization process have not captured the important phenomenon of accelerated international growth of born-global firms, which led Johanson and Vahlne (2003) to revise their model. However, the revised network model falls short of explaining rapid internationalization of firms. While they indicate a “specific relationship development process” used by born-global managers, Johanson and Vahlne (2003) still suggest the existence of an incremental learning and “responsive” model, which is based on pre-existing relationships. We extend current theory in arguing that born-global managers can use both pre-existing and newly formed relationships, to quickly and proactively develop new knowledge for rapid commercialization of their products. Proactive, advanced relationship-building capability is based around locating partners with technological knowledge with a view to ensuring ease of sharing knowledge. We explore the development of trust and inter-firm partnerships in established and newly formed networks and how these lead to tacit knowledge, absorptive capacity and new knowledge generation. While Johanson and Vahlne (2003) emphasize “market specific experience and operation experience” we emphasize “technological experience”. The reason that knowledge sharing is able to proceed quickly is that the shared “technological knowledge” allows rapid transfer and development of new knowledge and the drive to commercialize a product before a competitor, promotes the “mutual need” (co-dependency) to act quickly, characteristic of technology-based industries, which face rapid change. As an outcome of the born-global manager's ability to locate new partners through existing networks, new international links may be quickly developed, with internationalization being an outcome, but not necessarily a driver of behaviour in smaller born-global supply chains.     

The interplay of human and social capital in shaping entrepreneurial performance: the case of Vietnam

This study investigates the effects of human capital, social capital and their interaction on the performance of 1,398 Vietnamese new-born firms. Operating profit is used as the measure of success. Human capital is captured by individual-level professional education, start-up experience, and learning. Whereas the first two dimensions of human capital are measured with traditional indicators, we define learning as the ability to accumulate knowledge to conduct innovation activities (new product introduction, product innovation and process innovation). Social capital is measured as benefits obtained from personal strong-tie and weak-tie networks. Key findings are threefold: (i) human capital strongly predicts firm success, with learning exhibiting a statistically significant positive association with operating profit, (ii) benefits from weak ties outweigh those from strong ties, (iii) interaction of human capital and social capital displays a statistically significant positive effect on new-firm performance.     

Managerial routines in professional service firms: transforming knowledge into competitive advantages

This paper is about managerial routines in professional service firms (PSFs) and takes a resource-based perspective. It describes how managerial routines can be used to transform capabilities into competitive advantages. The empirical data explore three PSFs facing dilemmas concerning the management of their human resources and their professionals, and show how new managerial routines have been established. It further shows that PSFs' innovations are routine and are mainly reactive. Most routines are directed towards exploration, which is caused by the need to focus on projects for clients who in the daily routines supersede the need for developing HRM routines. Due to the importance of the projects and the markets the PSFs operate in, we will also look at the relations between PSFs and their markets. The concept of managerial routines is seen in relation to exploration and exploitation, which are subsequently used in an empirical analysis. In doing this, the analysis reveals a conflict between external demands from the clients and the internal utilization of the capabilities within the firms.