Absorptive capacity and performance: The role of customer relationship and technological capabilities in high-tech SMEs

This study focuses on how the interplay between a firm's absorptive capacity (ACAP), and its technological and customer relationship capability contributes to its overall performance. Using structural equation modeling in a sample of 158 firms (316 questionnaires, two respondents per firm) from South Korea's semiconductor industry, we find that a firm's ACAP leads to better performance in terms of new product development, market performance and profitability when used in combination with the firm's capability to engage state of the art technologies in its new product development program (NPD) (technological capability) as well as cultivate strong customer relationships to gain customer insight in NPD (customer relationship capability). By highlighting the interactive nature of absorptive capacity's antecedents and how these relate to firms' performance, this study contributes to the understanding of the role of ACAP as a mechanism for translating external knowledge into tangible benefits in high-tech SMEs, thus leading to important theoretical and practical implications.     

What we will do versus what we can do: The relative effects of unit‐level NPD motivation and capability

Although a firm's innovation performance has been commonly attributed to its innovative capability, in a study of 102 Chinese automobile assemblers, we find that employees' collective motivation for new product development (NPD) is more important than NPD capability in determining firms' innovation performance. This finding suggests that researchers need to simultaneously consider both unit‐level capability and unit‐level motivation in studying the mechanisms that drive innovation. Furthermore, our results indicate that a firm's strategic orientation focusing on NPD affects its employees' collective NPD motivation and NPD capability through relevant, mediating HRM practices. Copyright © 2013 John Wiley & Sons, Ltd.     

Interaction Orientation and Product Development Performance for Taiwanese Electronics Firms: The Mediating Role of Market‐Relating Capabilities

While academics and practitioners are increasingly aware of the value of including the customer in new product development (NPD), processes for doing so effectively remain unclear. Therefore, this study explores the process through which a firm's interaction orientation (the ability to effectively interact with customers) influences product development performance. Drawing on the resource‐based view, this study develops a research model in which two market‐relating capabilities—market‐linking and marketing capabilities—mediate the effect of interaction orientation on product development performance. The validity of this model is examined by analyzing primary data gathered from 167 Taiwanese electronics companies. The model results provide support for a process link between interaction orientation, market‐relating capabilities, and product development performance, such that a firm's capabilities enable the conversion of customer‐based resources into productive new product outcomes. More specifically, the interaction orientation–product development speed relationship is mediated by both marketing and market‐linking capabilities, while the interaction orientation–product innovativeness relationship is partially mediated by marketing capability. That is, interaction orientation has indirect effects on product innovativeness and product development speed by strengthening both marketing and market‐linking capabilities that in turn improve product development performance. In addition, the results suggest that a firm's interactive rationality moderates the relationship between interaction orientation and marketing capability. Overall, this study enhances our understanding of how firms achieve superior product development performance by developing effective customer interaction. The findings of this study provide important strategic insights into NPD.     

Creating Dynamic Capability: The Role of Intertemporal Integration, Knowledge Retention, and Interpretation

Uncertainty about the ability for technological knowledge to be transformed to meet market demands, lack of complementary technologies, the lack of developed markets for a given technical feature, and other types of uncertainty add significant challenges to organizations as they develop products for future markets. In spite of these significant challenges, some organizations develop a dynamic capability in new product development that becomes a powerful source of competitive advantage and a source of renewal, growth, and adaptation as the environment changes. Many approaches to new product development (e.g., cross‐functional development teams, quality function deployment, early supplier involvement, heavyweight product development teams) address the need to integrate knowledge more rapidly and effectively within projects. These approaches do not address, however, how knowledge is integrated over time or how integration of knowledge from previous new product development efforts influences the firm's new product development performance. This study focuses on providing a greater understanding of the integrative practices that contribute to this capability in new product development. Based on insights from the innovation and learning literatures, this study proposes relationships about the influence of knowledge retention and interpretation activities on the organization's ability to integrate knowledge developed in prior new product development projects and on new product development performance. Data collected from a sample of new product development professionals are employed to test the proposed relationships among knowledge retention, knowledge interpretation, integration of prior knowledge, and new product development performance. The findings suggest that knowledge retention and interpretation activities positively impact a firm's new product development performance. In particular, practices that enable the retention and interpretation of knowledge improve new product development performance indirectly through the firm's enhanced ability to apply knowledge developed in prior product development projects to subsequent projects. Practices that enable the interpretation of knowledge in the firm's current strategic context also improve new product development performance directly. These findings lead to important implications for managing new product development.     

How to improve acquisition performance: The role of a dedicated M&A function,M&A learning process,and M&A capability

How to improve the performance of mergers & acquisitions (M&A) continues to be a confounding issue. We show that a dedicated M&A function is a new phenomenon that is positively related to a firm's M&A performance and M&A learning process. Moreover, we find that an M&A learning process (involving articulation, codification, sharing, and internalization) helps build up an M&A capability, which in turn is positively related to a firm's overall M&A performance. We use survey data from a sample drawn from the M&A activities of German firms to test our arguments. Ltd. Copyright © 2015 John Wiley & Sons, Ltd.     

Heterogeneous social motives and interactions: The three predictable paths of capability development

Research summary : Limited attention has been paid to the crucial role of individuals' motivation and social interactions in capability development. Building on literature in social psychology and behavioral economics that links heterogeneity in individual social motives to social interactions, we explain how the variation, selection, and retention processes underlying a group's deliberate capability development are affected by the composition of the group in terms of individuals' social motives in interplay with the organizational‐level motivational levers designed by managers. Our multilevel theoretical model suggests that individual‐level heterogeneity leads to the development of capabilities along different paths. For practice, this implies that, according to the composition of the group in terms of social motives, capabilities are more or less technically and evolutionary adequate and a source of business process performance. Managerial summary :We propose that when a group of employees engages in developing one of the firm's capabilities, capability development will follow a different path according to what motivates most of the employees composing the group. We identify and discuss three paths. Two of these paths (convergence and congruence) can help improve business process performance in a stable environment, the third one (open‐ended) in a dynamic environment. Our work invites managers to not only think in terms of more or less capability development, but also in terms of capability development path(s): the path(s) in which groups in the firm are currently engaged and the one(s) that are desirable given the firm's objectives and the nature of the environment(s) the firm faces in deploying its business processes. © 2016 The Authors. Strategic Management Journal published by John Wiley & Sons, Ltd.     

Performance implications of the buyer-supplier market orientation fit

Extant research examining the link between market orientation and performance offers few insights into how the interplay between a firm's market orientation (MO) and its key supplier's MO influences the firm's performance. Using archival and survey dyadic data from 876 firms (438 firm-supplier dyads), we explore the impact of MO fit (i.e., fit between the focal firm's MO and its supplier's MO) on the focal firm's performance (ROA). The findings indicate a direct and positive relationship between MO fit and ROA. This highlights the need for firms to focus both on their own MO and their key supplier's MO as sources of competitive advantage in today's business environment. The strength of the relationship between MO fit and ROA increases when the exchanged business volume increases between the focal firm and its supplier and when the respective relationship progresses in age. Furthermore, firms with MO fit perform best, followed by firms with higher supplier MO misfit (firm's MO is lower than its key supplier's MO), while firms with lower supplier MO misfit (firm's MO is higher than its key supplier's MO) are the laggards.     

Inbound open innovation for enhanced performance: Enablers and opportunities

Open innovation, defined as a firm's purposive pursuit and integration of external inputs for new product development, offers an alternative perspective on innovation. Drawing on resource-based and capability theories, this study identifies key factors that enable inbound open innovation and increase its efficacy in a business-to-business context. Because open innovation relies on external connections, relational capability—that is, the firm's ability to make and manage relationships with other firms—should enhance the effects of inbound open innovation on firm performance. Two key resources may further enhance the moderating effects of relational capability: network spillovers that indicate knowledge-rich surroundings, and flexibility that allows for responsiveness and adaptability. The authors test these relationships with data from managers in 204 business-to-business high-tech firms, as well as secondary data pertaining to firm performance and flexibility. The results support the expectations that the ability to build interfirm relationships in a knowledge-rich environment increase the efficacy of inbound open innovation for gaining superior financial performance. Interestingly, additional analyses suggest an unexpected nonlinear interaction effect with flexibility. When firms possess strong relational capabilities and adopt an open innovation approach, they achieve higher financial performance if they have a low or a high level of flexibility. The theoretical and managerial implications of these findings are discussed.     

The development and diffusion of customer relationship management (CRM) intelligence in business-to-business environments

CRM data is among the most important and comprehensive information available to management in many organizations. This is particularly the case in business-to-business marketing, where the firm's extended working relationship with its customers is frequently crucial for the maintenance of a healthy business. However, in many instances management has treated CRM data as highly specific to its client relationships and has therefore neglected to analyze this information across market segments, customer categories, and customer–firm relationship forms in order to draw meaningful conclusions for driving business decisions.     

The role of horizontal and vertical new product alliances in responsive and proactive market orientations and performance of industrial manufacturing firms

This study examines different roles of new product alliance partners in enhancing responsive market orientation (RMO) and proactive market orientation (PMO) of industrial manufacturing firms in the context of learning in business-to-business (B2B) relationships. A survey of 146 firms shows that horizontal new product alliances with competitors provide access to similar industrial knowledge and know-how and thus help improve a manufacturing firm's RMO through exploitative learning. Although vertical new product alliances with suppliers may grant access to similar domains of knowledge, the findings of this study do not provide any support for their effect on a manufacturing firm's RMO. In contrast, the study shows that vertical new product alliances with research institutions provide access to a broader knowledge base and greater know-how with higher levels of non-redundancy and thus help improve a PMO through explorative learning. In addition, the results suggest that both RMO and PMO developed in different types of new product alliances enable a manufacturing firm to improve its new product performance and eventually its overall performance.     

Gaining from scientific knowledge: the role of knowledge accumulation and knowledge combination

This study investigates the performance effect of scientific knowledge in the context of highly science‐dependent industry. Given the popularity of sourcing scientific knowledge from science community, the purpose of this study is to investigate which firms gain greater benefits from scientific knowledge. From the perspective of absorptive capacity and combinative capability, we argue that both knowledge accumulation and knowledge combination moderate a firm's ability to capture value from scientific knowledge. Empirical data come from paper and patent citations and financial information in biotechnology and pharmaceutical firms. Results show that scientific knowledge alone has a positive effect on firms' financial performance. A firm's tendency to combination familiar and older technological knowledge amplifies the positive effect of scientific knowledge. However, knowledge accumulation, including R&D investment and patent stock, does not boost the positive effect.     

Firm growth,adaptive capability,and entrepreneurial orientation

Research summary: This paper posits adaptive capability as a mechanism through which a firm's prior growth influences the exhibition of future entrepreneurial action. Defined as the firm's proficiency in altering its understanding of market expectations, increased adaptive capability is a consequence of the new resource combinations that result from expanding organizational boundaries. Increased adaptive capability in turn corresponds to expansion of entrepreneurial activity, as firms increase their entrepreneurial orientation as the strategic mechanism to capitalize on their improved understanding of market conditions. We find support for our research model in a two‐study series conducted in South Korea and the United Kingdom. Managerial summary: Most would agree that entrepreneurially oriented firms—being innovative, entering new markets, and taking risk—grow faster. But how a firm becomes entrepreneurial is a complicated question. In this study, we flipped the growth relationship around and found support for growth contributing to a firm's entrepreneurial orientation. But between growth and being more entrepreneurial is the firm's ability to recognize changes in market expectations. We argue that as a firm grows, it acquires new resources and new knowledge of how to use those resources. These new resource combinations increase its ability to recognize changes in market expectations—its adaptive capability. This capability uncovers new entrepreneurial opportunities for value creation. To capture this potential value, firms expand their entrepreneurial orientation. Copyright © 2016 John Wiley & Sons, Ltd.     

Leveraging internal resources and external business networks for new product success: A dynamic capabilities perspective

Internal resources such as technological and human capital, together with a firm's business network, are vital sources of knowledge for new product development. Previous studies largely assume that a firm's internal resources and its external resources embedded in a business network are complementary in new product development. This study draws on the dynamic capabilities perspective to take the existing literature one step further. Our hypotheses were tested using a sample of 130 Chinese manufacturing firms in high-technology industries. Interestingly, the findings reveal a more complex picture of resource interplay between internal resources and external resources embedded in a firm's business network. More specifically, the findings show that a firm's power in its business network influences the effect of its internal resources on its ability to sense and seize opportunities, a vital dynamic capability. More importantly, the findings suggest that such dynamic capability plays a pivotal role in translating the benefits of resource-interplay into new product success.     

Product Change Intensity, Product Advantage, and Market Performance: An Empirical Investigation of the PC Industry

Product change decisions, such as the frequency of new product introductions, can impact product performance characteristics, sales, and market share of several generations of products and, therefore, a firm's long‐term survival and growth. The purpose of this study was to explore the impact of a firm's product change frequency, also referred to as product change intensity. A conceptual model linking a firm's product change intensity to its product advantage—and, in turn, to its market performance—with strategic product change orientation and technology competence as moderating effects, was used as a foundation for the study's hypotheses. These were tested using hierarchical and linear regressions, based on survey data collected from 55 U.S. companies in the personal computer (PC) industry. The analysis confirmed that a PC firm's product rate of change is positively associated with its product advantage and that its product advantage, in turn, is positively associated with its market share and growth performance. However, the hypothesized moderating effects were not confirmed. Rather, a firm's product change orientation and its level of technology competence are more likely to have a direct impact on product advantage. The implications of these findings are that, in general, firms that release new products frequently will have them viewed more favorably by the market than products with lower change intensities. Also, firms with higher levels of competence in the product technology domain tend to create products with greater market attraction. Finally, more radical changes to PC product architectures may pay off better than relatively minor changes. These results may not apply to other industries due to the specific design of personal computers and the nature of this fast‐paced market. Neither do the findings necessarily apply to all firms regardless of those firms' specific product and market strategies. More research is necessary to understand how a firm's adopted strategy, and the industry in which it operates, affect the relationships demonstrated in this study.     

Partners' centrality diversity and firm innovation performance: Evidence from China

While most studies of firm innovation with a social network perspective have focused on the focal firm's network structure, we explore the value of second-order social capital by examining partners' network structure to better understand firm innovation. Specifically, we examine how centrality diversity of the focal firm's network partners affects its innovation performance. A longitudinal study of Chinese publicly listed manufacturing firms from 2000 to 2016 indicates that partners' centrality diversity in a firm's board interlock network is positively related to that firm's innovation performance. We also find that the focal firm's knowledge breadth weakens the effect of partners' centrality diversity on innovation performance for the focal firm, while the proportion of non-independent ties between the focal firm and its network partners strengthens the effect.     

Emerging Market Firms' Internationalization: How Do Firms' Inward Activities Affect Their Outward Activities?

Research summary : In this study we examine how an emerging market firm's inward international activities (“inward activities”) are related to its outward international activities (“outward activities”) by focusing on the role of the firm's gain from its inward activities. On the one hand, drawing upon the organizational learning perspective, we propose that a firm's gain from inward activities may facilitate its outward activities through improving its resource fungibility. On the other hand, we draw upon the prospect theory to propose that a firm's gain from inward activities may hinder its outward activities by discouraging the firm's top managers from taking risks that are inherent in outward activities. With detailed data from a sample of manufacturing firms in China, we find empirical support for both lines of arguments . Managerial summary : Are emerging market firms with higher inward gain more likely to engage in outward internationalization activities? We argue that it depends upon how a firm uses its gain from inward activities. If the firm can improve its resource fungibility (particularly organizational resource fungibility) from its inward gain, it is more likely to engage in outward activities. If the firm cannot improve its resource fungiblity, the answer is no. Our findings suggest that for emerging market firms, internationalization is not just a path toward new markets; instead, it reflects how these firms exploit and explore what they have learned from their interactions with foreign firms at home in foreign markets. Therefore, managers must think more strategically on developing (organizational) resource fungibility from their inward activities . Copyright © 2017 John Wiley & Sons, Ltd.     

Augmenting innovation project portfolio management performance: the mediating effect of management perception and satisfaction

Firms face the challenge of efficiently and effectively investing scarce resources in innovation projects in order to sustain or develop a firm's long‐term competitive advantage and sustainable growth. Innovation project portfolio management (IPPM) describes a firm's dynamic capability to assess the challenge of evaluating, selecting, and prioritizing innovation projects. The particular impacts of method usage, criteria usage, IPPM design, information availability, and internal interactions on management perception and satisfaction as well as on IPPM performance and innovativeness are hypothesized and tested. We found that methods and criteria play a negligible role in the IPPM context. IPPM design elements, like transparency and formality, are key drivers of high IPPM performance. Information availability is a key construct in driving IPPM performance, as well as management perception and satisfaction. Relevance of IPPM is supported by revealing IPPM performance's positive impact on firm performance, innovation project performance, and firm's innovativeness.     

On the duality of political and economic stakeholder influence on firm innovation performance: Theory and evidence from Chinese firms

Research Summary

In this study, we propose and test a multi‐stakeholder perspective to address variation in innovation performance across firms. Specifically, we analyze how a focal firm's innovation performance is shaped by its political stakeholders (local and central governments) and economic stakeholders (suppliers, buyers, and competitors). Using a data set consisting of over 26,400 Chinese firms, we first find support for our predictions that a focal firm's innovation performance will be enhanced by both its government connections and the innovativeness of its economic stakeholders. We then analyze whether the interdependent effect of these political and economic stakeholders is more likely to be synergistic versus antagonistic, and find evidence consistent with the antagonistic view.

Managerial Summary

We show how a firm's innovativeness is influenced strongly by its relationships to external stakeholders. Specifically, we examine the potentially dual‐edged role of political stakeholders (local and central governments) and economic stakeholders (suppliers, buyers, and competitors). Using extensive data on Chinese firms, we find: (a) that the higher the level of government connections, the greater a firm's innovativeness; (b) that firms located in proximity with more innovative economic stakeholders also tend to have higher innovation performance. We also look beyond these independent positive effects to examine the joint effect of these two forms of stakeholder influence, and here we see that more influence is not always better. Specifically, we find that the innovation benefit that typically accrues to firms in proximity to more innovative economic stakeholders is weakened when those firms also have higher‐level government connections.     

Intra‐industry diversification and firm performance

We study how intra‐industry product diversity affects firm performance by analyzing the implications of expanding a firm's product line within its core business. We conjecture that increases in product diversity initially undermine performance because of negative transfer effects but then improve it due to economies of scope. We further theorize that this U‐shaped effect of product diversity becomes more pronounced as the firm increases the intensity of its technology investment, yet is likely to be attenuated by the firm's accumulated experience with intra‐industry diversification. Data on 156 U.S.‐based software firms operating from 1990 to 2001 furnish support for these conjectures. Our study advances emerging research on intra‐industry diversification by underscoring some of its contingent performance effects. Copyright © 2013 John Wiley & Sons, Ltd.     

Building firm capabilities through learning: the role of the alliance learning process in alliance capability and firm‐level alliance success

In recent years, academics and managers have been very interested in understanding how firms develop alliance capability and have greater alliance success. In this paper, we show that an alliance learning process that involves articulation, codification, sharing, and internalization of alliance management know‐how is positively related to a firm's overall alliance success. Prior research has found that firms with a dedicated alliance function, which oversees and coordinates a firm's overall alliance activity, have greater alliance success. In this paper we suggest that such an alliance function is also positively related to a firm's alliance learning process, and that process partly mediates the relationship between the alliance function and alliance success observed in prior work. This implies that the alliance learning process acts as one of the main mechanisms through which the alliance function leads to greater alliance success. Our paper extends prior alliance research by taking a first step in opening up the ‘black box’ between the alliance function and a firm's alliance success. We use survey data from a large sample of U.S.‐based firms and their alliances to test our theoretical arguments. Although we only examine the alliance learning process and its relationship with firm‐level alliance success, we also make an important contribution to research on the knowledge‐based view of the firm and dynamic capabilities of firms in general by conceptualizing this learning process and its key aspects, and by empirically validating its impact on performance. Copyright © 2007 John Wiley & Sons, Ltd.