Managing Supplier Involvement in New Product Development: A Multiple‐Case Study*

Existing studies of supplier involvement in new product development have mainly focused on project‐related short‐term processes and success factors. This study validates and extends an existing exploratory framework, which comprises both long‐term strategic processes and short‐term operational processes that are related to supplier involvement. The empirical validation is based on a multiple‐case study of supplier collaborations at a manufacturer in the copier and printer industry. The analysis of eight cases of supplier involvement reveals that the results of supplier–manufacturer collaborations and the associated issues and problems can best be explained by the patterns in the extent to which the manufacturer manages supplier involvement in the short term and the long term. The results of this study reveal that the initial framework is helpful in understanding why certain collaborations are not effectively managed yet conclude that the existing analytical distinction among four different management areas does not sufficiently reflect empirical reality. This leads to the reconceptualization and further detailing of the framework. Instead of four managerial areas, this study proposes to distinguish between the strategic management arena and the operational management arena. The strategic management arena contains processes that together provide long‐term, strategic direction and operational support for project teams adopting supplier involvement. These processes also contribute to building up a supplier base that can meet current and future technology and capability needs. The operational management arena contains processes that are aimed at planning, managing, and evaluating the actual collaborations in a specific development project. The results of this study suggest that success of involving suppliers in product development is reflected by the firm's ability to capture both short‐ and long‐term benefits. If companies spend most of their time on operational management in development projects, they will fail to use the leverage effect of planning and preparing such involvement through strategic management activities. Also, they will not be sufficiently able to capture possible long‐term technology and learning benefits that may spin off from individual projects. Long‐term collaboration benefits can only be captured if a company can build long‐term relationships with key suppliers, with which it builds learning routines and ensures that the capability sets of both parties are aligned and remain useful for future joint projects.     

The Effects of Occupational Licensing: Evidence from Business‐Level Data

Occupational licensing currently affects more than 1,000 occupations in the United States. I use confidential US Census Bureau business micro‐data to shed light on the effect of occupational licensing in cosmetology on key market outcomes and study its effect on the providers of occupational training. Occupational licensing regulation does not seem to affect the equilibrium number of practitioners or prices of services to consumers, but is associated with significantly lower practitioner entry and exit rates. I further find states with more stringent licensing requirements to have more instructors and a larger median size of training facilities, suggesting possible barriers to entry for the training schools. Instructors, however, do not earn more in such states.     

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.     

Managing External Information in Manufacturing Firms: The Impact on Innovation Performance*

Drawing upon a sample of 206 medium‐sized manufacturing firms, this article investigates the extent to which management of external information is associated with innovation performance. The overall purpose of the article is to examine whether or not those organizations that are better at managing external information are also those that are the better innovators. The research strategy used was a survey, and data were collected by means of mail questionnaires (with a 62.4% response rate). A multiple regression analysis was used for hypothesis testing. The results show that scanning the technological sector of the environment was positively associated with innovation performance, while scanning customers, suppliers, and competitors proved to be negatively correlated with innovation performance. Cross‐functional integration in the form of collaboration also proved significantly correlated with innovation performance, while interaction showed no such relationship. Further, decision‐making based on information from the industry environment correlated significantly with innovation performance. Research and managerial implications of these findings are presented and are discussed.     

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.     

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.     

Interfirm Innovation under Uncertainty: Empirical Evidence for Strategic Knowledge Partitioning*

This paper analyzes how uncertainty and life‐cycle effects condition the knowledge boundary between assemblers and suppliers in interfirm product development. Patents associated with automotive emission control technologies for both assemblers and suppliers are categorized as architectural or component innovations, and technology‐forcing regulations imposed by the government on the auto industry from 1970 to 1998 are used to define periods of high and low uncertainty. Results confirm that suppliers dominate component innovation whereas assemblers lead on architectural innovation. More importantly, when facing uncertainty firms adjust their knowledge boundary by increasing the knowledge overlap with their supply‐chain collaborators. Suppliers clearly expand their knowledge base relatively more into architectural knowledge during such periods. But assemblers' greater emphasis on component innovation in periods of greater uncertainty is only true as a relative deviation from an overall trend toward increasing component innovation over time. This trend results from an observed life‐cycle effect, whereby architectural innovation dominates before the emergence of a dominant design, with component innovation taking the lead afterward. Thus, for assemblers life‐cycle effects may dominate over task uncertainty in determining relative effort in component versus architectural innovation. This work extends research on strategic interfirm knowledge partitioning as well as on the information‐processing view of product development. First, it provides a large‐scale empirical justification for the claim that firms' knowledge boundaries need to extend beyond their task boundaries. Further, it implies that overlaps in knowledge domains between an assembler and suppliers are particularly important for projects involving new technologies. Second, it offers a dynamic view of knowledge partitioning, showing how architectural knowledge prevails in the early phase of the product life cycle whereas component knowledge dominates the later stages. Yet the importance of life‐cycle effects versus task uncertainty in conditioning knowledge boundaries is different for assemblers and suppliers, with the former dominating for assemblers and the latter more influential for suppliers. Finally, it supports the idea that architectural and component knowledge are critical elements in the alignment of cognitive frameworks between assemblers and suppliers and thus are key for information‐exchange effectiveness and resolution of task uncertainties in interfirm innovation.     

Knowledge Sharing through Face‐to‐Face Communication and Labour Productivity: Evidence from British Workplaces

We investigate whether the adoption by workplaces of human resources management (HRM) practices that enhance face‐to‐face communication (FTFC) among employees is associated with productivity gains. The analysis is based on a nationally representative sample of over 500 British trading establishments drawn from the linked 2004 Workplace Employment Relations Survey and Annual Business Inquiry, for which objective measures of labour productivity (value added per employee) are available. We find a positive association between productivity and FTFC in problem‐solving groups, teams and meetings of senior or line managers and employees, provided that FTFC is adopted on a continuous basis. Our finding suggests that British workplaces in the trading sector could increase their productivity by implementing HRM practices in such a way as to enhance knowledge sharing through employees' personal interactions.     

Managing Innovation Champions: The Impact of Project Characteristics on the Direct Manager Role*

A key challenge for organizations seeking to improve the management of innovation lies in determining when to lend direct managerial support, and how much support, to those championing such projects. This research provides insights into the connection between project characteristics and the type and frequency of direct manager involvement. As such, it addresses the following research question: how does the level of project innovativeness, strategic relatedness, and resource requirements impact the level of empowerment of innovation champions and the sponsor or supervisor role played by managers? The research method involves a survey of 89 project champions from four divisions of large, multinational Korean companies. The results show that when innovativeness was high but projects were strategically related, there was greater project champion empowerment but also a more frequent managerial sponsor role. This suggests it may be best to allow innovators, who are close to the project's markets, technologies, and industry conditions, to have greater freedom over objectives and decisions. Yet they may also need the advice and support of their managers to function optimally under the highly uncertain conditions that characterize innovative projects. This combination of empowerment and a sponsor role, though appropriate for highly innovative projects, may also require high strategic relatedness, however. On the other hand, when projects are less strategically related and when resource requirements are high, the analysis suggests managers are more likely to exert control. Managers may therefore need to become more closely involved in decision making for costly ventures representing new strategic directions for their organizations. Overall, this research suggests that both empowerment and manager roles are relevant to the management of innovation. These results offer academic value in recognizing the nature of the direct manager role under different innovation project conditions. It further reveals a need for academics to recognize both the supervisor and sponsor roles in the management of innovation. For managers, the findings suggest that for organizations to effectively develop and commercialize innovations managers need to recognize when certain projects call for different levels and types of involvement.     

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.     

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.     

Global Innovation in MNCs: The Effects of Subsidiary Self‐Determination and Teamwork*

The ability of multinational corporations (MNCs) to leverage their innovation competencies across globally dispersed subsidiaries is an increasingly valuable source of competitive advantage. As multinational enterprises turn to foreign subsidiaries for research and development (R&D) and product development, questions arise regarding the most effective organizational structures for global innovation. Although organizational conditions that satisfy the needs for self‐determination and teamwork have long been considered intrinsic motivators, past research has not analyzed the consequences of intrinsic motivators on global innovation. The basic research question is this: In globally dispersed subsidiary R&D units, what organizational conditions and motivators are associated with the highest knowledge output? A sample of 275 globally dispersed R&D subsidiaries were studied from 1995 to 2002. Data were collected from a postal survey, field and telephone interviews, and secondary sources. Subsidiary self‐determination and teamwork were found to have a significant effect on knowledge output, as objectively measured by patent citations. Subsidiary self‐determination on inputs such as sourcing and hiring, and self‐determination on outputs such as marketing and product development, emerged as positive determinants of knowledge generation in R&D subsidiaries. In addition, interteam cooperation and intrateam cooperation were significant determinants of knowledge generation by subsidiaries. These findings highlight the importance of self‐determination, teamwork, and cooperation to knowledge creation and innovations. Managers face the tough challenge of how to motivate globally dispersed knowledge workers to conduct research that will generate knowledge and will strengthen firm performance. The results provide theoretical and practical insights on how MNCs can leverage their innovation competencies across foreign R&D subsidiaries.     

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.     

Legitimacy‐Seeking Mechanisms in Product Innovation: A Qualitative Study*

Product innovation research adopts a rational choice perspective to examine resource allocation decisions for product innovation. This research emphasizes strategic alignment between the innovation and the organization as the key factor shaping these decisions. In contrast, organizational research suggests that to access resources, product innovations have to be perceived as legitimate by corporate sponsors. Legitimacy is rooted in alignment with the prevalent corporate norms, beliefs, and cultural model. Adopting an institutional perspective and relying on an in‐depth case study of three product innovations, this study explores legitimacy‐seeking behavior in product innovation. The findings indicate that the rational perspective emphasized in most product innovation research is complemented by efforts to seek both moral and cognitive legitimacy to resource product innovation. The study clarifies the critical role that the organizational context plays in triggering legitimacy‐seeking behavior. The analysis unpacks legitimacy‐seeking behavior, revealing patterns of legitimating mechanisms (lobbying, relationship building, and gathering feedback) that are deployed as part of legitimacy strategies (conforming, selecting, and manipulating) to achieve a range of legitimacy outcomes (pragmatic, moral, and cognitive). The analysis reveals the existence of a hierarchy of legitimacy outcomes as actors prioritize one type of legitimacy versus another. The study also finds interdependencies between mechanisms and strategies to reinforce particular outcomes as legitimacy‐seeking behavior evolves over time.     

Determinants of the Level of Knowledge Application: A Knowledge‐Based and Information‐Processing Perspective*

Knowledge application is of key importance in the development of successful new products. Knowledge application refers to an organization's timely response to technological change by utilizing the knowledge and technology generated into new products and processes. This study uses the knowledge‐based theory of the firm and considers its roots in the information‐processing approach to organization theory to identify and structure potential antecedents of knowledge application. This study develops four hypotheses concerning antecedents of knowledge application. The hypotheses are tested using data collected from 277 high‐technology firms. Empirical results indicate that a long‐term orientation supported by a research and development (R&D) budget, formal rewards, and information technology directly increases the level of knowledge application, while R&D co‐location indirectly increases the level of knowledge application. It is surprising to find that an increase in the level of organizational redundancy reduces the level of knowledge application. The findings also suggest that information technologies, lead‐user, and supplier networks do not appear to significantly influence organizational redundancy.     

The Effects of Competition in Short Product Life‐Cycle Markets: The Case of Motion Pictures*

It is critically important to understand the relationship between new product launch strategies and their interaction with the competitive environment, which results in the successful introduction of new products. Deciding when to launch new products is among the most significant issues facing managers when formulating new products strategy, especially for products with short product life cycles. However, little extant research has focused on the interaction of product launch timing and the competitive market environment. This study explores the effects of four types of competitive threats on the market performance of short product life‐cycle products. Threats from new products and incumbents are possible. Also, products in the same category and those in related product categories exert competitive pressures. In this paper, a framework of competitive threats is developed, and research questions are constructed and empirically tested using the motion pictures industry as the focus of this research. A set of simultaneous equations was estimated using a sample of 2,948 movies introduced in the U.S. market between 1997 and 2004. The results show that all competition types have negative direct, indirect (as mediated by distribution intensity), and total effects on the performance of a new product. For a focal product, incumbent products exert a greater negative impact on performance than new entrants. Surprisingly, products in different, but related, categories are more harmful to the performance of products than products in the same category. The results have important implications for launch timing and new product performance.