Two Sides of the Same Coin: How Do Different Dimensions of Product Program Innovativeness Affect Customer Loyalty?

Conventional wisdom holds that innovativeness has essentially positive performance implications. However, empirical research reveals mixed findings regarding customer‐related responses to innovation, as distinct dimensions—such as product newness and meaningfulness—may generate responses in different manners. This study introduces a multidimensional conceptualization of innovativeness at the program level, thereby enlarging the customary perspective by considering both positive and negative customer responses to innovativeness. Drawing on information economics, this study suggests that product program meaningfulness fosters customer loyalty, whereas product program newness undermines customer loyalty. In addition, the study examines mechanisms that might buffer the negative newness–loyalty relationship and explores enablers of the positive meaningfulness–loyalty effect by considering a brand's association with innovativeness and customer integration. Empirical support for the proposed effects comes from a multi‐industry sample with 180 triadic cases from business‐to‐business companies, which includes assessments from marketing, and research and development managers as well as customers. Moderated regression analysis was applied to test the hypotheses. The results indicate a negative effect of product program newness on customer loyalty and a positive effect of product program meaningfulness. Further, a brand's close association with innovativeness reduces the negative effect of product newness, and integrating customers into the value‐creating process fosters the loyalty effect of product meaningfulness. This study offers a potential explanation for the ambiguity created by equivocal empirical results regarding customer responses to innovativeness. The study also shows that offering more innovations does not necessarily make customers loyal. Instead, managers should mitigate the negative effects of product program newness.     

Understanding the trade-off between familiarity and newness in product innovation

Studying the trade-off between developing new products that exploit a focal firm's familiar current knowledge resources and developing new products that explore knowledge resources that are new to the firm, we show that new products perform better when the new products are neither too familiar nor new to the firm, in contrast to the findings reported in prior research indicating that both types of new products are positively related to new product performance. The results were consistent for the familiarity and newness of both technological and market knowledge. In addition, the study revealed that while focal firms' inter-organizational network ties involving their supplier firms attenuated the potential negative impacts of technological familiarity and newness, their inter-organizational network ties involving their buyer firms lessened the potential negative impacts of the familiarity and newness of market knowledge that their new products required.     

Seeking the Ideal Level of Design Newness: Consumer Response to Radical and Incremental Product Design

To develop successful new products, new product development managers need to have a thorough understanding of the consumer adoption process, specifically in how consumers evaluate new products. This research examines the value of product design for consumers' evaluation of radical and incremental innovations. The primary goal was to empirically test how design newness affects consumer response to product innovations. Design newness (also referred to as novelty or atypicality) is defined as the deviation in a product design from the current design state of a certain product category. Although prior research has suggested that higher levels of design newness may have a positive effect on consumers' evaluations of new products, higher levels of design newness may also have negative consequences for consumer response to radical innovations. An experimental context (n = 130) using systematically designed products for three product categories was used to test how consumers respond to high and low levels of design newness for both radical and incremental innovations. The findings show that for radical innovations, embodying the product in a design with a low (versus high) level of design newness led to more positive evaluations and less learning‐cost inferences. Because the functional attributes of a radical innovation are incongruent to existing products, consumers find it difficult to access the relevant product category schema in order to transfer knowledge to the new product. Because of this poor knowledge transfer, consumers may feel that they lack the ability to make effective use of the radical innovation, resulting in greater learning costs. In this case, a product design with a low level of design newness can provide consumers with a frame of reference for understanding the radical innovation. Contrasting this result, no difference was found between a low and a high level of design newness for incremental innovations. For incremental innovations, by definition the functional attributes characteristic to the innovation are highly comparable with those products that are already stored in consumers' memory. Thus, there is no need for an additional reconfirmation of the preexisting schema through product design, and consumers are able to access the relevant schema regardless of the level of design newness inherent in the product. These findings are integrated into a discussion of the managerial implications and the potential avenues for future research.     

The nature of NPD and role flexibility of R&D/marketing in a fast growing high‐tech setting

This study investigated the mutual learning process between marketing and R&D in the context of the information and communications technology industry. The relationship between product newness and role flexibility of R&D/marketing was examined via correlation analysis and multiple regression against a stratified sample of 171 new products. The results showed that different aspects of product newness are associated in a different way to role flexibility of R&D/marketing. Management should therefore be aware of such differences when planning their product development portfolio so that effective integration between R&D and marketing can be achieved.     

International R&D partnerships and intrafirm R&D–marketing–production integration of manufacturing firms in emerging economies

Although cross-functional integration is important for research and development (R&D), research about implications of cross-functional integration has been rather sparse. In new product development (NPD), no study to date has examined intrafirm as well as interfirm integration of key functions such as intrafirm R&D–marketing–production together with interfirm integration of host R&D–partner R&D. Such marketing and operations interface contributes to a better understanding of how operational and marketing activities impact on competitiveness and firm performance. This study collected data from 202 electronics manufacturing firms operating in an emerging economy, mainland China and Hong Kong with international R&D partnerships. The findings indicate that a high level of R&D integration between firms improved NPD performance when cross-functional integration is based on existing rather than new product configurations and key technologies. Interestingly, in high distance situations, cross-functional integration in the production validation stage generated NPD success. The findings show that high environmental uncertainties lead to a high level of host and partner firms R&D integration. However, product newness has no significant effects on R&D integration in any of the NPD stages.     

Sources of capabilities,integration and technology commercialization

In recent years, companies have increased their use of internal and external sources in pursuit of a competitive advantage through the effective and timely commercialization of new technology. Grounded in the resource‐based view of the firm, this study examines the effect of a company's use of internal and external sources on multiple dimensions of successful technology commercialization (TC). The study also explores the moderating role of formal vs. informal integration mechanisms on these relationships. Applying a longitudinal design and data from 119 companies, the results show that internal human and technology‐based manufacturing sources are positively associated with successful TC. Formal and informal integration mechanisms also significantly moderate the relationships observed between capability sources and TC. Copyright © 2002 John Wiley & Sons, Ltd.     

Complex adaptive system mechanisms,adaptive management practices,and firm product innovativeness

As a fascinating concept, the mechanisms of complex adaptive system (CAS) attracted many researchers from a variety of disciplines. Nevertheless, how the mechanism‐related variables, such as strategic resonance, accreting nodes, pattern forming, and catalytic behavior of organization, impact the firm product innovativeness is rarely addressed empirically in the new product development (NPD) literature. Also, there exist limited studies on the antecedents of the mechanisms of CAS in the NPD literature. In this respect, we identified and operationalized the adaptive management practices, which involve bonding, nonlinear, and attractor behaviors of management, as antecedents of mechanisms and firm product innovativeness. By studying 235 firms, we found that (1) strategic resonance and accreting nodes are positively related to firm product innovativeness, (2) bonding, nonlinear, and attractor behaviors of management positively influence the mechanism variables, and (3) market and technology turbulence impact the adaptive management practices. We also found that mechanisms of CAS partially mediate the relationship between adaptive management practices and firm product innovativeness.     

The effectiveness of different mechanisms for integrating marketing and R&D

The integration of marketing and R&D is a major concern for companies that want to improve their new product performance (NPP). For this integration, companies are using mechanisms such as physical proximity, cross-functional teams, and job rotation. This study examines the effectiveness of these mechanisms by developing a model that distinguishes between indirect effects of mechanisms on NPP (i.e., through a higher level of integration) and direct effects. The model is tested with data collected from 148 pharmaceutical companies. We were able to measure and compare the effectiveness of seven different integration mechanisms, which produced insights that are interesting and relevant for theory as well as practice.
We found that housing marketing and R&D closer to each other and using an influential cross-functional phase review board are the most effective mechanisms to foster integration. Equal remuneration and career opportunities for marketing and R&D and cross-functional teams are somewhat less effective, whereas personnel movement and informal social group events contribute little. ICT appears to be a very effective tool for enhancing NPP. ICT not only fosters integration between marketing and R&D, but it also has an independent direct positive effect on NPP. Through ICT the day-to-day communication between the different parties in the companies becomes much easier, and we think that this fosters the knowledge creation process within marketing and R&D. For cross-functional phase review boards we found a negative direct effect on NPP. Notwithstanding its strong positive effect on integration, a price is paid in terms of NPP. This may be related to the amount of formalization and complexity accompanying this mechanism.     

The role of design method and process technology in stable outsourcing equilibria

We analyze a model of vertical (dis)integration between manufacturing and design in a monopolistically competitive market. Specialized input manufacturers can serve multiple design firms and the manufacturer-designer pairs negotiate a non-binding contract to share input customization cost and production surplus. Hand-collected data on 387 product lines from 118 semiconductor firms are used to predict the firm’s decision to outsource manufacturing. We find that, for instance, the use of design tools that facilitate collaboration and process technologies that facilitate learning are both positively associated with outsourcing, consistent with the model’s prediction.     

Do resource differences between manufacturers and suppliers help or hinder product innovation of manufacturers? The moderating role of trust and contracts

It is a common practice of manufacturers to involve suppliers in new product development (NPD). Extant literature indicates that supplier integration has mixed effects on manufacturers' NPD and the contradicting findings result from either the external contingent factors or the tactical integration practices. We argue instead that the mixed effects are rooted in resource differences between manufacturers and suppliers. Further, we examine the functions of trust and contracts as the resource integration and coordination mechanisms to manage the effects of resource differences on product innovation of manufacturers. Based on a survey among 189 manufacturing firms, our research shows that resource differences follow an inverted U-shaped effect on product innovation of manufacturers and that trust strengthens while contract complexity attenuates the curvilinear relationship. As such, our research extends the existing body of literature to account for the divergent outcomes of supplier integration from the perspective of resource differences. Moreover, it demonstrates the double-edged effects of trust and contracts as devices of resource integration and coordination. Our research offers useful research and managerial implications.     

The importance of customer input in the development of very new products

This research explores the acquisition of customer input and its importance in the development of very new products. Data were gathered on 55 product development projects from the computer telephony integration industry – a new industry experiencing rapid technological change. The data were used to test hypotheses concerning the relationships between product newness, the importance of customer input in the development process, and the use of customer intensive market research methods. We found that the importance of customer input increases with market newness of a product up to a point and then drops off for very new products, whereas the importance of customer input increases with technological newness of a product without dropping off. We also found that the importance of customer input significantly increases the use of customer intensive market research methods; whereas, neither market nor technological product newness in themselves had much direct effect on research methods.     

Short and long run movements in U.S. merger activity

This paper uses the NPV approach to merger decisions to select variables which are expected to explain changes in the aggregate number of mergers of US manufacturing and mining firms over time. We test for and estimate a cointegrating relationship between such variables. We find that in the long run the number of mergers and acquisitions is positively related both to the level of manufacturing production and to the level of the nominal bond yield. A short run dynamic model is also presented. Annual changes in merger and acquisition activity were found to be positively related to current changes in Tobin's Q and changes in Q lagged one, two and four years; positively related to changes in the current bond yield but negatively related to changes in the yield in the previous year; and finally that changes in merger activity were related to the degree to which the number of mergers differed from the long run or equilibrium value in the previous year.     

Linking Innovation to Design: Consumer Responses to Visual Product Newness

In recent years, researchers have begun to recognize the central role that visual design plays in successful marketing efforts. However, little research has effectively bridged the gap between product innovation and visual design. Before consumers can judge the competitive newness of a product based on its functionality, they first encounter its visual form. Therefore, both innovation researchers and product managers need to be aware of the impact that visual design can have in communicating product newness. In the present work, two studies are described that examine consumers' responses to visual product newness. The first study explores the ability of consumers to recognize and assess product newness using visual design cues and then examines the basis on which these evaluations are made. The second study examines the cognitive and affective reactions that are engendered by exposure to products that are high in visual product newness.     

The Influence of CEOs' Visionary Innovation Leadership on the Performance of High‐Technology Ventures: The Mediating Roles of Connectivity and Knowledge Integration

Senior leaders play an essential role in facilitating knowledge creation processes and driving firms' innovation performance. However, little is known about the underlying relational mechanisms by which CEOs help build knowledge integration capability and drive firm innovation. We developed and tested a conceptual model about the ways in which CEOs shape a context conducive for knowledge creation processes and drive multiple innovation performance. A field, survey‐based, study among small‐ to medium‐sized technological ventures (SMVs) showed that CEO visionary innovation leadership (manifested by both vision for innovation and enactment of the vision through specific leadership behaviors) was positively related to a context of connectivity. Connectivity was related to firm knowledge integration capacity, which in turn resulted in enhanced firm innovation (new product quality, development speed, and product innovation). The findings also indicate direct links between CEO visionary innovation leadership and knowledge integration, and between connectivity and product innovation. Implications for theory and practice are discussed.     

Product newness and product performance in new ventures: Contingent roles of market knowledge breadth and tacitness

Although knowledge has been built around how product newness affects product performance in the context of established firms, such an effect in new ventures remains to be explored. Building on the knowledge-based view, the open innovation literature, and observations of the liability of newness, this study examines the differential effects of technological and market newness on product performance and tests how market knowledge breadth and tacitness moderate these effects in distinctive ways. Results obtained using data from new high-tech ventures in China show that market newness has a stronger positive effect on product performance than technological newness. Market knowledge breadth enhances the effect of technological newness on product performance, whereas market knowledge tacitness appears to be a double-edged sword: it weakens the effect of technological newness but enhances the effect of market newness on new product performance. These findings provide novel insights into how distinct dimensions of product newness have differential effects on product performance and a more nuanced view of how market knowledge characteristics function as boundaries in the product newness–performance link in new ventures.     

Determinants of integrated product development diffusion

Integrated product development (IPD) is an approach for developing new products focused on the early and active involvement of design, manufacturing, marketing and other key new product development (NPD) stakeholders in order to achieve cross-functional integration and concurrent execution of various NPD activities. The benefits of IPD are well known in both the academic literature and popular press, including significant reductions in NPD cycle time and costs. However, in spite of these benefits, for the majority of manufacturing organizations, IPD is not used on 100% of NPD projects. This research develops a model of the organizational contextual factors influencing the diffusion of IPD in organizations. Results of surveying 269 NPD managers indicate that the complexity of certain IPD practices and support for IPD directly influence IPD diffusion, while an innovative organizational climate and the complexity of the organization's NPD activities indirectly influence IPD diffusion through IPD support.     

Product and Process Modularity's Effects on Manufacturing Agility and Firm Growth Performance

Modularity in product design has been hailed as a way to speed new product development (NPD), to reduce NPD cost, and to enhance customization possibilities for consumers. Modularity in process design may speed new product manufacturing setup times, reduce costs, and enhance the profitability of the lower volumes that customization often entails. However, empirical evidence is scarce that either product or process modularity—individually, jointly, or sequentially—actually produce these or other proposed benefits (e.g., performance growth). This study builds on general modular systems theory (GMST) by examining the theoretical relationship between product and process modularity and the effects of each on firm growth performance. Using structural equation modeling, partial versus complete mediation by manufacturing agility is also scrutinized. In one pair of models, product modularity and process modularity are separate direct antecedents to manufacturing agility, which is modeled to affect firm growth performance; in a second pair of models, product and process modularity are related antecedents to manufacturing agility, with product modularity preceding process modularity. Results from the best‐fitting model show that product modularity directly and positively affects process modularity, manufacturing agility, and firm growth performance. Process modularity was unrelated to manufacturing agility, and neither process modularity nor manufacturing agility predicted growth performance. Consistent with GMST, the study provides empirical evidence of the power of one element of a modular system to orchestrate a fit between a firm's product and manufacturing strategies and to directly drive system performance. Thus, modularity in product design is revealed as the key to understanding GMST effects concerning how changes in one system generate changes in other systems.     

Newness and heritage in business networks: Case analysis of university spin-offs

The paper's main purpose is to analyse newness and heritage, and what form it may take, in the context of university spin-offs (USOs). The empirical research is based on two cases of USOs generated from an Italian university. The case analysis provides an in-depth investigation of the conditions under which newness can be considered an asset rather than a liability, and sheds light on the role of heritage and how it is related to newness in spin-offs originating in an academic setting. The paper contributes to the literature on whether newness is to be considered a liability or an asset and enhances our understanding of heritage in the context of USOs. The study is also relevant to industrial marketing literature, as it addresses newness and heritage in business networks and affords the potential to better understand the two concepts and how they are linked. The paper demonstrates the existence of an interplay between heritage and newness that is manifest in the mitigating effects of the dimensions of heritage on those of newness: when the degree of heritage (in its various dimensions) is significant, the effects of newness are limited in terms of changes to the existing network, and vice versa.     

Innovation Aesthetics: The Relationship between Category Cues,Categorization Certainty,and Newness Perceptions

Recent research notes a disconnect between what marketers deem new and innovative versus what consumers actually perceive. Many factors may contribute to this; however, the factor that has significant potential to first attract a consumer to a new product, visual aesthetic design, is investigated in this research. Findings from four studies indicate that if a consumer cannot affix a category label to a new product with certainty, as can happen with innovative aesthetics, a product's newness will be underappreciated and product evaluations will suffer. By utilizing a categorization framework and specifically accounting for the role of categorization certainty, insight into the effects of innovative visual aesthetics and why newness perceptions are inherently subjective, and therefore, potentially hazardous to new product adoption, is provided.     

THE GOVERNANCE AND CONTROL OF VOLUNTARY CORPORATE SPIN-OFFS

We investigate the role that a voluntary corporate restructuring can play in the design of efficient internal corporate control mechanisms. To this end, we examine the post-restructuring internal control practices in 78 voluntary corporate spin-offs that were completed between 1972 and 1987. We find that the selection of the new CEOs, the design of their compensation contracts, and the staffing of the boards of directors and their compensation committees in the spun-off firms can be seen as ex ante efficient. These governance and control practices, however, are not strongly related to the observed positive market reactions to the spin-off announcements. The results indicate that equity reorganizations facilitate the implementation of efficient internal governance and control practices, but that other factors must influence the share price reactions to the announcement of such voluntary corporate restructurings.