New Product Development Practices and Early‐Stage Firms: Two In‐Depth Case Studies

New product development practices (NPD) have been well studied for decades in large, established companies. Implementation of best practices such as predevelopment market planning and cross‐functional teams have been positively correlated with product and project success over a variety of measures. However, for small new ventures, field research into ground‐level adoption of NPD practices is lacking. Because of the risks associated with missteps in new product development and the potential for firm failure, understanding NPD within the new venture context is critical. Through in‐depth case research, this paper investigates two successful physical product‐based early‐stage firms' development processes versus large established firm norms. The research focuses on the start‐up adoption of commonly prescribed management processes to improve NPD, such as cross‐functional teams, use of market planning during innovation development, and the use of structured processes to guide the development team. This research has several theoretical implications. The first finding is that in comparing the innovation processes of these firms to large, established firms, the study found several key differences from the large firm paradigm. These differences in development approach from what is prescribed for large, established firms are driven by necessity from a scarcity of resources. These new firms simply did not have the resources (financial or human) to create multi‐ or cross‐functional teams or organizations in the traditional sense for their first product. Use of virtual resources was pervasive. Founders also played multiple roles concurrently in the organization, as opposed to relying on functional departments so common in large firms. The NPD process used by both firms was informal—much more skeletal than commonly recommended structured processes. The data indicated that these firms put less focus on managing the process and more emphasis on managing their goals (the main driver being getting the first product to market). In addition to little or no written procedures being used, development meetings did not run to specific paper‐based deliverables or defined steps. In terms of market and user insight, these activities were primarily performed inside the core team—using methods that again were distinctive in their approach. What drove a project to completion was relying on team experience or a “learn as you go approach.” Again, the driver for this type of truncated market research approach was a lack of resources and need to increase the project's speed‐to‐market. Both firms in our study were highly successful, from not only an NPD efficiency standpoint but also effectiveness. The second broad finding we draw from this work is that there are lessons to be learned from start‐ups for large, established firms seeking ever‐increasing efficiency. We have found that small empowered teams leading projects substantial in scope can be extremely effective when roles are expanded, decision power is ground‐level, and there is little emphasis on defined processes. This exploratory research highlights the unique aspects of NPD within small early‐stage firms, and highlights areas of further research and management implications for both small new ventures and large established firms seeking to increase NPD efficiency and effectiveness.     

Breakeven Time on New Product Launches: An Investigation of the Drivers and Impact on Firm Performance

The ability to break even faster on new product projects is becoming increasingly critical for firms in fast‐moving industries where continually reinvesting in research and development efforts matters greatly for survival. However, most research to date has focused on studying the impact of two primary innovation outcomes: sales and profits. The exclusive emphasis on sales and profit may be warranted for certain types of goods such as durable goods, but when examining the effects of new products in fast‐moving consumer goods or in the entrepreneurial sphere, where cash to cash matters greatly for survival, it is critical for both researchers and practitioners to not only consider the profits and sales generated by the new product but also the time to breakeven. This paper develops a theoretical framework using the competency‐based literature to examine the effects of innovation drivers (customer idea source, speed to market, product quality, and product newness) on breakeven time (BET) and project profits, and their subsequent impact on firm performance. A three‐stage least square estimation method was employed using longitudinal data on 945 new product development projects and launches in the morning (breakfast) foods category. The results clearly pinpoint that for successful product innovation, managers need to consider the time taken to breakeven on new product development. Specifically, the results demonstrate that speed to market and product quality shorten BET, but customer idea source extends BET. Second, the analysis also empirically demonstrates that BET is an equally effective predictor of firm performance as project profits in the short run, but significantly a stronger predictor of firm performance in the long run (t + four years), suggesting that BET should be regarded as a superior leading indicator of firm performance versus product profitability for fast‐moving consumer goods segment. This is an important finding that suggests firms that recoup their cash investments more quickly experience greater short‐term and significantly more long‐term success.     

Modified Stage‐Gate® Regimes in New Product Development*

The purpose of this research was to explore the nature of the Stage‐Gate^®process in the context of innovative projects that not only vary in new product technology (i.e., radical versus incremental technology) but that also involve significant new product development technology (i.e., new virtual teaming hardware‐software systems). Results indicate that firms modify their formal development regimes to improve the efficiency of this process while not significantly sacrificing product novelty (i.e., the degree to which new technology is incorporated in the new offering). Four hypotheses were developed and probed using 72 automotive engineering managers involved in supervision of the new product development process. There was substantial evidence to creatively replicate results from previous benchmarking studies; for example, 48.6% of respondents say their companies used a traditional Stage‐Gate^®process, and 60% of these new products were considered to be a commercial success. About a third of respondents said their companies are now using a modified Stage‐Gate^®process for new product development. Auto companies that have modified their Stage‐Gate^®procedures are also significantly more likely to report (1) use of virtual teams; (2) adoption of collaborative and virtual new product development software supporting tools; (3) having formalized strategies in place specifically to guide the new product development process; and (4) having adopted structured processes used to guide the new product development process. It was found that the most significant difference in use of phases or gates in the new product development process with radical new technology occurs when informal and formal phasing processes are compared, with normal Stage‐Gate^®usage scoring highest for technology departures in new products. Modified Stage‐Gate^®had a significant, indirect impact on organizational effectiveness. These findings, taken together, suggest companies optimize trade‐offs between cost and quality after they graduate from more typical stage‐process management to modified regimes. Implications for future research and management of this challenging process are discussed. In general, it was found that the long‐standing goal of 50% reduction in product development time without sacrificing other development goals (e.g., quality, novelty) is finally within practical reach of many firms. Innovative firms are not just those with new products but also those that can modify their formal development process to accelerate change.     

How entrepreneurial orientation can leverage innovation project portfolio management

Innovation project portfolio management (IPPM) is a key task in R&D management because this decision‐making process determines which R&D projects should be undertaken and how R&D resources are allocated. Previous research has developed a good understanding of the role of IPPM in R&D strategy implementation and of successful IPPM practices. But the fundamental orientations that drive the strategy formation and implementation process have never been investigated in the context of IPPM, and it is unclear whether successful practices are equally valid for different strategic orientations. This study, therefore, investigates the moderating impact of a firm’s entrepreneurial orientation on the relationship between strategic portfolio management practices and portfolio success. An empirical analysis of 257 firms shows that both innovativeness and risk taking as entrepreneurial orientation’s dimensions positively moderate the relationship between managerial practices and performance. Specifically, we find that firms high in innovativeness profit more from stakeholder engagement compared to firms low in innovativeness. Firms high in risk‐taking profit more from a clearly formulated strategy. With increasing innovativeness and risk‐taking propensity, firms also profit more from business case monitoring and agility in portfolio steering. The results suggest that a firm’s entrepreneurial orientation can leverage the effect of IPPM practices. Vice versa, a lacking entrepreneurial orientation can render these practices ineffective. Strategic orientation and IPPM practices should, therefore, be aligned with each other to enable firms to better implement their strategy and generate competitive advantage.     

The Early Stages of New Product Development in Entrepreneurial High-Tech Firms

This study examines the most valuable sources of new product ideas and the criteria used to screen potential new products in entrepreneurial, high-tech firms. Teresa Pavia explored the practices of 118 small, young, high-tech firms. Her findings complement a variety of existing studies of the new product process in large firms and the few existing studies of the process in entrepreneurial, high-tech firms. The firms participating in this study rely on informal techniques to generate new product ideas. They place heavy reliance on input from their customers and often develop new products in response to problems articulated by these customers. Although the annual strategic plan is not used by most firms as a new product identification tool, it is highly rated by the most successful firms. Successful firms also actively engage in environmental scanning. The majority of the respondents do not use financial measures as a screening criterion, preferring to evaluate new products by "gut feel." However, the firms that have experienced the fastest growth in sales employ financial hurdles for project selection. The educational background of the key GO/NO GO decision-makers was also evaluated. Two thirds of the firms reported having a key decision-maker with an educational background in business. The educational background of the key decision-makers had little impact on the aspects of the new product process studied here.     

The Contribution of In‐house and External Design Activities to Product Market Performance

Design may be seen as one of several key factors contributing to new product development, along with research and development, marketing, manufacturing, purchasing, etc. More and more, creative design comes to the fore, and many companies believe that superior design will be the key to winning customers. It has the ability to create corporate distinctiveness and also possesses the potential to give a product an individual or new look. Furthermore, the model of open innovation suggests that firms can and should use external and internal knowledge flows in order to create valuable ideas, and also internal and external paths to the market. Also, in the design process, a common trend toward external design skills has emerged in recent years. Due to cost and control factors, firms are increasingly outsourcing design activities. By using a sample of Belgian companies, this paper explores the contribution of design activities to product market performance. While there is mounting evidence that design can be seen as a strategic tool to successfully spur sales of new product developments at the firm level, the topic of design innovation has not yet been linked to the open innovation concept. In this paper, it is empirically tested whether design activities conducted in house differ in their contribution to new product sales from externally acquired design. So, do design activities that have been developed only with internal resources lead to a greater success than those that have been carried out with external sources of knowledge? Using a large cross‐section of manufacturing and service firms, the effects on sales of products new to the market and of imitations or significantly improved products of the firm are investigated. At first glance, the findings indicate that externally acquired design is not superior to in‐house design activities: the results show that only design activities that are mainly conducted with internal knowledge sources play a crucial role regarding the product innovation's success with market novelties. Design conducted in collaboration with external partners, however, has no significant influence. This is not the case for imitations, that is, products only new to the firm. Their success is also influenced by design activities developed with external collaborators. This effect is robust for several modifications of the model specification. In contrast to earlier literature on new technological developments, this paper argues that external design may not affect the sales of market novelties as the “market news” may spill over quickly to rivals through common suppliers including external designers.     

Product Innovation Processes in Small Firms: Combining Entrepreneurial Effectuation and Managerial Causation

This article reports a multimethod study of product innovation processes in small manufacturing firms. Prior studies found that small firms do not deploy the formalized processes identified as best practice for the management of new product development (NPD) in large firms. To explicate small firms' product innovation, this study uses effectuation theory, which emerged from entrepreneurship research. Effectuation theory discerns two logics of decision‐making: causation, assuming that means are selected to attain goals; and effectuation, assuming that goals are created based upon available means. The study used a process research approach, investigating product innovation trajectories in five small firms across 352 total events. Quantitative analyses revealed early effectuation logic, which increasingly turned toward causation logic over time. Further qualitative analyses confirmed the use of both logics, with effectual logic rendering product innovation resource‐driven, stepwise, and open‐ended, and with causal logic used especially in later stages to set objectives and to plan activities and invest resources to attain objectives. Because the application of effectuation logic differentiates the small firm approaches from mainstream NPD best practices, this study examined how small firms' product innovation processes deployed effectuation logic in further detail. The small firms: (1) made creative use of existing resources; (2) scoped innovations to be realizable with available resources; (3) used external resources whenever and wherever these became available; (4) prioritized existing business over product innovation projects; (5) used loose project planning; (6) worked in steps toward tangible outcomes; (7) iterated the generation, selection, and modification of goals and ideas; and (8) relied on their own customer knowledge and market probing, rather than early market research. Using effectuation theory thus helps us understand how small firm product innovation both resembles and differs from NPD best practices observed in larger firms. Because the combination of effectual and causal principles leverages small firm characteristics and resources, this article concludes that product innovation research should more explicitly differentiate between firms of different sizes, rather than prescribing large firm best practices to small firms.     

"Managing" Learning by Doing: An Empirical Study in Semiconductor Manufacturing

This article examines the contributions of human resource and organizational practices to the development and supply chain management interface. It addresses this issue in the context of the semiconductor industry by highlighting the importance of these practices for learning‐based improvement in manufacturing. One of the most important factors for competitiveness in the semiconductor industry is the ability to manufacture new process technologies with high yields and low cycle times. The more effective management of new process technologies within the manufacturing facility aids firms in managing production costs, volumes, and inventories. Efficient management of new process development and introduction translates into enhanced internal supply chain management performance by improving the design of internal workflows, manufacturing performance, and the acquisition and installation of new manufacturing processes. Because much of the knowledge that underpins semiconductor manufacturing is idiosyncratic, however, firm‐level differences in human resource and organizational practices are likely to have consequences for performance. The article derives learning curve models of the rate of improvement in manufacturing yield (i.e., the rate of learning) and cycle time (i.e., the speed of production) following the introduction of a new process technology in a manufacturing facility. It then tests the influence of the use by semiconductor manufacturers of teams for problem solving and intrafirm knowledge transfer, the level of internal adoption of information technology (IT), and more extensive and effective workflow and production scheduling systems on manufacturing performance. It finds that the manners in which semiconductor manufacturers allocate engineering resources to problem‐solving activities, utilize information technology in the manufacturing facility, schedule production, and control the “shop floor” influence the levels and rates of improvement in both manufacturing performance measures. The article makes several contributions to the literature on product and process development and, accordingly, to research on the product development/supply chain interface. In particular, the model of organizational‐based learning provides a better understanding of the determinants of learning‐based performance improvement. In particular, better manufacturing performance results not strictly from greater cumulative volume but also from the actions of managers that affect the organization of establishment‐level problem‐solving activities and information exchange. The article also demonstrates that human resource and organizational practices in both the development and the adoption of new process technologies improve manufacturing performance by accelerating new product introduction, improving workflow, and enhancing the efficiency of manufacturing processes.     

Project Suspensions and Failures in New Product Development: Returns for Entrepreneurial Firms in Co‐Development Alliances

Entrepreneurial biotech and large pharmaceutical firms often form alliances to co‐develop new products. Yet, new product development (NPD) is fraught with challenges that often result in project suspensions and failures. Considering this, how can firms increase the chances that their co‐development alliances will create value? To answer this question, the authors build on insights from signaling theory to argue that prior project suspensions provide positive signals leading to an increase in value creation, while project failures have the opposite effect. In addition, drawing on insights from temporal construal theory, this research predicts that the strength of these effects is contingent on the stage along the exploration–exploitation continuum at which the alliance is formed. The authors undertook event study analyses of 248 alliances formed by 104 biotechnology firms from the United States and Europe listed on eight stock exchanges over an 8‐year period between 1996 and 2003. The results confirm that prior NPD project suspensions have a stronger value creation effect (or prior failures have a weaker value destruction effect) in the case of exploration alliances in the upstream of NPD processes than in the case of moderate‐scale exploitation alliances in the downstream of NPD. This study is among the first to examine how both prior NPD project suspensions and failures of firms affect the abnormal returns achieved from co‐development alliances. This research therefore contributes to the innovation literature by honing a better understanding of setbacks and failures in NPD. Moreover, the findings contribute to the literature on strategic alliances by identifying new conditions under which firms can create or preserve value. This research also contributes to signaling theory by providing evidence of the moderation effect caused by the signaling environment. Finally, this study contributes to the entrepreneurial literature on value creation for entrepreneurial firms in alliances following adverse events.     

Orchestrating resources for FMA in coopetitive NPD

The rapid introduction of new products in high‐tech industries is a key competence for firms wanting to benefit from the first‐mover advantage (FMA). Prior studies call for forging links between FMA and the resource‐based view, as the resources at the disposal of a firm tend to influence the likelihood and timing of market entry. Analysing the way firms orchestrate internal and external resources enables a better understanding of this link. More precisely, synchronising the combination of internal and external resources is important in determining the development time of new products. This issue becomes vital when the NPD process regroups competitors due to the short age of the acquired knowledge. An in‐depth case study of the product development strategies of four competitors that collaborated to develop Ethernet solutions identifies three different product introduction strategies based on different resource orchestrations and timing: pioneer, wise and slow. The firms that structured their resources early to make them available for bundling during coopetition were able to introduce products faster than firms that structured their resources during coopetition. Furthermore, our results show that only prepared firms are able to reap benefits from knowledge gained through coopetitive NPD.     

The Influence of Digital Design and IT on Modular Product Architecture

The architecture of a product is the design and specification of inherent subsystems, components, and interfaces between subsystems. Well‐defined interfaces allow the development of standardized subsystems that may be shared across product lines, e.g., technology platforms. Past research shows the benefits of modular product architecture in terms of improving cost of goods through common components and materials as well as improving development time cycles for derivative products. Product architecture does not occur by accident; it must be engineered and implemented. This study explores the impact of digital design and information technology (IT) on the development of modular product architectures. Through an empirical study of 122 firms and follow‐up interviews with several respondents, we study the impact of digital design tools and IT infrastructure on the development of modular product architecture and overall project outcomes. The results indicate that a firm's IT infrastructure has a strong, significant relationship with the development of modular product architecture. The findings also show a strong, positive relationship between the development of modular product architecture and project outcomes. However, in contrast to the common perception that digital design tools enhance R&D productivity and effectiveness, we do not find a significant relationship between digital design tool usage and modular product architecture or overall project outcomes. The findings suggest that digital design tools and their organizational implementation need improvement in up‐front new product development phases.     

Developing Sustainable New Products in the Textile and Upholstered Furniture Industries: Role of External Integrative Capabilities

Environmental sustainability has become one of the key issues for strategy, marketing, and innovation. In particular, significant attention is being paid by companies, customers, media, and regulators to development and consumption of green products. It is argued that through the efficient use of resources, low carbon impacts, and risks to the environment, green products can be essential to help society toward the environmental sustainability targets. The number of green product introductions is rapidly increasing, as demonstrated by the growing number of companies obtaining eco‐labels or third party certifications for their environmentally friendly products. Hundreds of companies representing most of the industries, such as Intel, SC Johnson, Clorox, Wal‐Mart, and Hewlett–Packard, have recently introduced new green products, underlining the need to develop products that create both economic and environmental values for the firm and customers. A review of the literature shows that academic research on green product development has grown in interest. However, to date, only a few empirical studies have addressed the challenge of integrating environmental issues into new product development (NPD). Previous empirical works have mainly focused on a set of activities for the green product development process at the project level. After years of paying no or marginal attention to environmental sustainability issues, most of the companies now generally realize that it would require knowledge and competencies to develop green products on a regular basis. These knowledge and competencies can be varied, such as R&D, environmental know‐how, clean technology/manufacturing process, building knowledge on measuring environmental performance of products, etc., that may be developed internally or can be integrated through external networks. Adopting a resource‐based view of the firm, this article aims at (1) investigating the role of capabilities useful for companies to integrate knowledge and competencies from outside of the firm on green product development in terms of both manufacturing process and product design and (2) understanding whether green product development opens new product, market, and technology opportunities, as well as leads to better financial performance of NPD programs. To this end, a survey was conducted in two Italian manufacturing industries in which environmental issues are becoming increasingly important, namely textiles and upholstered furniture. A questionnaire was sent to 700 firms, and 102 useable questionnaires were returned. Results show that (1) companies engage in developing external integrative capabilities through the creation of collaborative networks with actors along the supply chain, the acquisition of technical know‐how, and the creation of external knowledge links with actors outside the supply chain; (2) external knowledge links play a key role in the integration of environmental sustainability issues into the manufacturing process, whereas capabilities such as the acquisition of technical know‐how and the creation of collaborative networks prove to be more important for integrating environmental issues into product design; and (3) the integration of environmental sustainability issues into NPD programs in terms of product design leads to the creation of new opportunities for firms, such as opening new markets, technologies, and product arenas, though not necessarily leading to improved financial performance of the NPD programs.     

Synergies among Producer Firms,Lead Users,and User Communities: The Case of the LEGO Producer–User Ecosystem

While many firms today proactively involve users in their new product development efforts using a wide variety of methods such as the lead user method, firm‐hosted user communities, or mass customization toolkits, some pioneering firms are experimenting with the creation of sustainable producer–user ecosystems designed for the continuous exploration and exploitation of business opportunities. In this paper, the functioning of such ecosystems is studied with particular emphasis on the synergies they can yield. Based on an explorative and longitudinal multiple case study design, the producer–user ecosystem of the firm LEGO is analyzed, and three main actors in the ecosystem are identified: entrepreneurial lead users who aim to start their own businesses, a vibrant user community, and the LEGO company as the focal producer firm and facilitator for multiple user‐to‐user and user‐to‐producer interactions. Our study reveals three kinds of synergies: (1) reduced risk for entrepreneurial lead users and the focal producer firm, (2) the extension of the design space of the focal producer firm's products, and (3) the creation of buzz within the user community. Finally, the theoretical and managerial implications of our findings for innovation researchers and practitioners are discussed.     

New product adoption and sales performance from the importer perspective

From an international business setting, this paper investigates how importers determine new product adoptions and how exporters diffuse new products to offshore markets through importers. Using the technology–environment–organization framework, we examine the effect of innovative characteristics of selected new products, importer-specific organizational capability, and exporter-specific environmental factors, on the adoption of new products by importers. Our sample included 585 new products from 152 local import firms nested in 34 foreign export firms. The results indicate that product meaningfulness, product superiority, and customer familiarity facilitate importer success in new product adoption. Importer host-market experience enhances new product adoption and moderates the relationship between adoption and sales performance. Exporter influence of market reputation in the host market and product-innovation capability is beneficial in promoting new products for enhanced sales performance. Instead of a single focus on new product adoption, we used a cross-level model to test the factors that foster new product adoption by importers.     

Examining Proactive Strategic Decision‐Making Flexibility in New Product Development

While strategic flexibility is widely accepted as a prerequisite for a firm's success, its application in strategic decision making to a firm's new product development (NPD) activities is limited to only a few studies. Furthermore, many organizations still have difficulties creating proactive strategic flexibility in their decision‐making processes. Past research studies have largely ignored the relationship between strategic decision‐making flexibility and firms' resources and/or capabilities and success in the context of NPD. This study advances strategic flexibility by adopting the proactive approach of NPD decision‐making flexibility and by examining its role in translating organizational resources and capabilities into NPD success. This study draws upon the resources, capabilities (i.e., flexibility), and performance framework to show how proactive strategic decision‐making flexibility plays a crucial role in developing new products that can create new opportunities and comply with market needs. Therefore, this research aims to (1) develop an operational definition of strategic decision‐making flexibility and (2) propose a framework to understand the drivers and the subsequent new product performance outcomes of strategic decision‐making flexibility. This study adopts the proactive perspective of strategic decision‐making flexibility and defines it as a capability that enables firms to develop NPD strategies to respond to future changes in the environment. The analysis, based on data collected from 103 European firms, shows that that the effects of long‐term orientation, strategic planning, internal commitment, and innovative climate on proactive strategic decision‐making flexibility are significant. The findings indicate specifically the roles of both champions and gatekeepers, who infuse a firm's knowledge with a clear understanding of its resources, constraints, and market needs, thereby enhancing decision makers' motivation to behave proactively to precipitate transformation. The results also reveal a positive association between proactive strategic decision‐making flexibility and NPD performance outcomes. As such, strategic flexibility provides firms with an ability to adapt to changing environments and to create new market opportunities, product, and technological arenas, and to deliver successful new products. When firms open new market, technological, and product arenas, they can easily foresee their new demands and changes and successfully deliver new products, meeting customer needs/demands, and offering benefits such as quality, cost, and timeliness. This study therefore provides a valuable reference point for future research in strategic decision‐making flexibility in NPD.     

New Product Management Practices of Small High Technology Firms

Various methods exist for managing the planning, cost estimating, scheduling and statusing of new product development projects. David Boag and Brenda Rinholm investigate whether the use of formal management procedures and structured frameworks are the most effective methods for achieving control over new product development activities. This article describes the new product development management practices of 33 small and medium-sized high technology companies. The authors employ a judgmental procedure to group the firms into three stages of development for their management of new products. Findings indicate that success at new product development is greater for more formalized companies than for companies which are less formalized or which use informal methods.     

Technological capability, social capital and the launch strategy for innovative products

The Launch strategy for innovative products is a crucial strategic typology adopted by many high tech firms, and which has been identified in prior research focusing on new product introduction to the market. However, the nexus between launch strategies and firm resources has gained little research attention. This article therefore aims to investigate the influence of technological capability and social capital, two key resources for innovation in high tech firms, on the adoption of a launch strategy for innovative products. Furthermore, prior research has revealed that market characteristics play a moderating role on the relationship between firm resources and company strategies; thus, this study also examines the moderating effect of market characteristics. This study takes Taiwan's integrated circuit design firms as the analytical sample. Based on a sample of ninety companies, two interesting findings have been found. First, both technological capability and social capital are associated positively with the launch strategy for innovative products. Second, while the market growth rates increase, the positive relationship between technological capability and the launch strategy for innovative products becomes weaker.     

Application and performance impact of stage–gate systems – the role services in the firm’s business focus

Although service innovation is important, knowledge of new product and service development, including the positive effect of stage‐and‐gate‐type systems, has been derived almost exclusively from studies in the manufacturing sector. In the present paper, we address two important questions: How do differences in the firm’s business focus, which describes whether a firm puts more emphasis on products or services in its business activities, influence the usage of such formal innovation processes? Is stage‐and‐gate‐type systems’ impact on innovation program performance contingent on the firm’s business focus? Unlike previous studies, we not only differentiate service and manufacturing by industry classification codes but also apply a continuous measure to take into account the blurring of boundaries between the manufacturing and service businesses. Based on a comprehensive discussion of service‐specific characteristics and their implications for innovation management and using a cross‐industry, multi‐informant sample of innovation programs from 272 firms with 1,985 informants, we find empirical support for firms with a stronger focus on the service business being less likely to use stage‐and‐gate‐type systems. Furthermore, the use of stage‐and‐gate‐type systems fosters innovation program performance, and this effect becomes stronger as the business focus shifts toward services. This result implies that service‐based firms can benefit from stage‐and‐gate‐type systems to a greater extent than product‐based firms. Our research also demonstrates the gap between the desired level of innovation process formalization and its current usage in practice, especially for firms with a dominating service business.     

Seeking Simplicity in Complexity: The Relative Value of Ease of Use (EOU)‐Based Product Differentiation

Models of category acceptance and diffusion, including Davis's technological acceptance model (TAM), have established that ease of use (EOU) is a significant determinant of technological product adoption. This supports user‐centered design philosophies, where aspects of cognitive attractiveness (e.g., logical to use) and emotional attractiveness (e.g., lack of frustration in use) are essential, and contrasts traditional design practices where physical attractiveness dominates concern. These studies consider the impact of EOU on category (primary) demand. It is unclear whether firms should incorporate EOU into design and positioning strategies to differentiate their products from others in the same category that perform better on functional features. A random utility theory‐based choice model is used to measure the relative value of EOU. In a new product category (DVD recorders; n = 496) and one that is more established (cell phones; n = 202), consumers were found to forgo functional features in preference for products better rated on EOU. With implications for segmentation, those seeking simplicity were older, female, educated, and with less product knowledge, while those already owning a complex phone made replacement decisions with less concern for EOU. The findings support EOU‐based differentiation strategies as a legitimate alternative to other forms of differentiation.     

Strategic Suppliers' Technical Contributions to New Product Advantage: Substitution and Configuration Options

Current theory lacks clarity on how different kinds of resources contribute to new product advantage, or how firms can combine different resources to achieve a new product advantage. While several studies have identified different firm‐specific resources that influence new product advantage, comparatively little research has explored the contribution of strategic supplier resources. Combining resource‐based and relational perspectives, this study develops a theoretical model investigating how a strategic supplier's technical capabilities impact focal firm new product advantage and how firms combine different resources to gain this advantage. The model is tested using detailed survey data collected from 153 interorganizational new product development projects in the United Kingdom within which a strategic supplier had been extensively involved. Empirical results support our research hypotheses. First, supplier technical performance is shown to have a significant positive impact on new product advantage. Next, we show that while supplier technical capabilities have a positive influence on supplier technical performance, the a priori nature of the supplier's task moderates the relationship. Finally, our data support our hypotheses related to the positive relationship between relationship‐specific absorptive capacity and new product advantage, and the proposed negative moderation of supplier technical capabilities on this relationship. Based upon these findings, we encourage managers to recognize that strategic suppliers' with greater technical capabilities perform better regardless of the degree of creativity required by their task; but that strategic suppliers with lower technical capabilities may partially compensate (substitute) for their lack of technical capabilities, if they are able to respond to high problem‐solving task requirements. Furthermore, we suggest that the firm's development of relationship‐specific absorptive capacity is much more important when a strategic supplier is less technically capable. A buying firm's relationship‐specific absorptive capacity can, according to our data, substitute for low supplier technical capabilities. On the other hand, where the supplier has strong technical capabilities, investments in relationship‐specific absorptive capacity have no effect on new product advantage. Our findings reinforce recent calls for research on how firms can combine different resources and capabilities to achieve superior performance.