R&D Partnerships and Innovation Performance: Can There Be too Much of a Good Thing?

R&D collaboration facilitates the pooling of complementary skills, learning from the partner as well as the sharing of risks and costs. Research therefore stresses the positive relationship between collaborative R&D and innovation performance. Fewer studies address the potential drawbacks of collaborative R&D. Collaborative R&D comes at the cost of coordination and monitoring, requires knowledge disclosure, and involves the risk of opportunistic behavior by the partners. Thus, while for lower collaboration intensities the net gains can be high, costs may start to outweigh benefits if firms perform a higher share of their innovation projects collaboratively. For a sample of 2735 firms located in Germany and active in a broad range of manufacturing and service sectors, this study finds that increasing the share of collaborative R&D projects in total R&D projects is associated with a higher probability of product innovation and with a higher market success of new products. While this confirms previous findings on the gains for innovation performance, the results also show that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. Thus, the relationship between collaboration intensity and innovation follows an inverted‐U shape and, on average, costs start to outweigh benefits if a firm pursues more than about two‐thirds of its R&D projects in collaboration. This result is robust to conditioning market success to the introduction of new products and to accounting for the selection into collaborating. This threshold is, however, contingent on firm characteristics. Smaller and younger as well as resource‐constrained firms benefit from relatively higher collaboration intensities. For firms with higher collaboration complexities in terms of different partners and different stages of the R&D process at which collaboration takes place, returns start to decrease already at lower collaboration intensities.     

Leveraging Social Network Sites in New Product Development: Opportunity or Hype?

Leveraging social network sites is high on the list of priorities for a lot of businesses that are eager to find more effective ways to reach, learn about, and engage customers in new product development (NPD). However, the rapidly changing landscape of social network sites can be difficult to navigate successfully and doubts remain about whether and how they can be used to good effect. In fact, empirical research confirming a positive relationship between the use of social network sites in NPD and business performance is scarce. This paper reports on research examining the use of social network sites for three purposes, namely for market research guiding the development of new products, for getting customers to collaborate in the NPD process, and for new product launch. The results of this research suggest that the benefits expected from using social network sites in NPD are largely not being realized by businesses. Using social network sites to conduct market research leading into the NPD process was not found to contribute to business performance, and in fact was found to have negative relationships with both profitability and market growth. Using social network sites to get customers to collaborate in the NPD process was found to be positively related with innovativeness but not with market growth or profitability. Finally, using social network sites for new product launch was where the most positive indications were seen, since this was found to be positively related with innovativeness, market growth, and profitability. Thus, it appears that while businesses may get good results from using social network sites for product launch, they still have a learning curve to traverse before they can successfully use them for market research or customer collaboration in NPD. While there is currently a great deal of enthusiasm—even hype—about the potential opportunities of using social network sites for NPD, this research suggests that businesses should move carefully and recognize that just jumping on the social network bandwagon will not insure success.     

What Keeps Managers Away from a Losing Course of Action? Go/Stop Decisions in New Product Development

The purpose of this experimental study is to test whether specific approaches can reduce escalation of commitment—namely, decision‐makers' tendency to persist with an innovation project despite negative feedback that the initial investment has not reached its goals. This study focuses on the decision process for 137 research and development managers who must decide whether to abandon previously chosen courses of action or to continue in the face of probable and increasing losses in a stage‐gate system. The results show that visual decision aids and consultant advice reduce managers' decisions to continue funding a losing course of action. The results also show that using both approaches simultaneously has the strongest effect. Finally, the study reveals that the escalation of commitment issue can be reduced more effectively before an innovation project is commercialized while using both approaches.     

FibreDown:New Product Creates New Value

Feather, a thermal insulation material endowed by Mother Nature, is indeed a supply of choice either for an animal to nestle or for human to withstand the cold.In our daily life, feather has, more often than not, been used as wadding to provide warmth. An awful fact is that only the down, a petty part of feather; has largely been used, leaving the greater part of feather not yet fully utilized as restricted by its structural complexity. How to explore its in-depth development and how to exten…     

FibreDown:New Product Creates New Value

Feather, a thermal insulation material endowed by Mother Nature, is indeed a supply of choice either for an animal to nestle or for human to withstand the cold. In our daily life, feather has, more often than not, been used as wadding to provide warmth. An awful fact is that only the down, a petty part of feather; has largely been used, leaving the greater part of feather not yet fully utilized as restricted by its structural complexity. How to explore its in-depth development and how to exte…     

Shouldn't Customers Control Customized Product Development?

Nowadays, customized product development (CPD) is increasingly prevalent in business‐to‐business settings, which has motivated manufacturers into development approaches wherein the customer plays an active role. When the customer is merely viewed as a passive receiver of the customized product, the manufacturer won't be able to truly empathize with the customer and might lack important suggestions to create and improve the customized product. It is, after all, the customer that holds pertinent development information and/or expertise. Yet, customers are not always motivated to participate and often need to be convinced about the manufacturer's ability to develop customized products in a timely and cost‐effective manner. Prior literature on interorganizational relationships suggests the use of formal control, i.e., process and/or output control, to fashion activities in line with expectations so that development goals can be attained. Thereupon, this study posits that the customer's use of such formal controls may stimulate customer participation in CPD. In addition, this study investigates whether manufacturers can indeed benefit from customer participation in CPD through improved new product performance. To accomplish the research objectives, survey‐based and accounting data are collected on 63 collaborative CPD projects between a plastics manufacturer and its industrial customers. In conjunction with an add‐on experimental study regarding the effect of formal control on customer participation, this study reveals that the customer's use of formal control significantly increases the level of customer participation in CPD. Additionally, this study confirms that customer participation positively impacts new product performance. Together, these results imply that letting the customer use process and/or output control helps the customer to believe more in the pursuit of CPD goals and successful product customization, thereby encouraging the customer to participate more actively in CPD. Besides, the findings imply that increased access to market and customer need‐related information obtained through customer participation is indeed critical for successful CPD.     

Help or Hindrance? Causal Ambiguity and Supplier Involvement in New Product Development Teams

Suppliers are increasingly being involved in interorganizational new product development (NPD) teams. Successful management of this involvement is critical both to the performance of the new product and to meeting the project's goals. Yet the transfer of knowledge between buyer and supplier may be subject to varying degrees of causal ambiguity, potentially limiting the effect of supplier involvement on performance. Understanding the dynamics of causal ambiguity within interorganizational product development is thus an important unanswered empirical question. A theoretical model is developed exploring the effect of supplier involvement practices (supplier involvement orientation, relationship commitment, and involvement depth) on the level of causal ambiguity experienced within interorganizational NPD teams, and the subsequent impact on time to competitor imitation, new product advantage, and project performance. The model also serves as a test of the paradox that causal ambiguity both inhibits imitation by competitors, but adversely affects organizational outcomes. Survey data collected from 119 research and development‐intensive manufacturing firms in the United Kingdom largely support these hypotheses. Results from structural equation modeling show that supplier involvement orientation and long‐term relationship commitment lower causal ambiguity within interorganizational NPD teams. The results also shed light on the causal ambiguity paradox showing that causal ambiguity during interorganizational NPD decreases both product and project performance, but has no significant effect on time to competitor imitation. Instead, competitor imitation is delayed by the extent to which the firm develops a new product advantage within the market. A product development strategy based upon maintaining interfirm causal ambiguity to delay competitor imitation is thus unlikely to result in a sustainable competitive advantage. Instead, managers are encouraged to undertake supplier involvement practices aimed at minimizing the level of knowledge ambiguity in the NPD project, and in doing so, improve product and project‐related performance.     

Universal intellectual property rights: Too much of a good thing?

Developing countries’ incentives to protect intellectual property rights (IPR) are studied in a model of vertical innovation. Enforcing IPR boosts export opportunities to advanced economies but slows down technological transfers and incentives to invest in R&D. Asymmetric protection of IPR, strict in the North and lax in the South, leads in many cases to a higher world level of innovation than universal enforcement. IPR enforcement is U-shaped in the relative size of the export market compared to the domestic one: rich countries and small/poor countries enforce IPR, the former to protect their innovations, the latter to access foreign markets, while large emerging countries free-ride on rich countries’ technology to serve their internal demand.     

Do We Have to Get Along to Innovate? The Influence of Multilevel Social Cohesion on New Product and New Service Development

In this study, based on the Comparative Performance Assessment Study survey conducted by the Product Development Management Association, the authors develop and test a model which considers the antecedents and performance outcomes of social cohesion, a seemingly critical organizational factor in new product development (NPD). Using a sample of over 450 innovation and product development professionals from North America, Europe, and Asia, social cohesion is conceptualized and tested across three levels—within team cohesion, between team cohesion, and between firm cohesion. The results of a structural equation model indicate several differences between the antecedents of the varying forms of social cohesion. A post hoc exploration of the difference between goods‐ versus service‐dominant firms provides a clearer picture of cohesion's influence on innovation outcomes. Specifically, within team and between team cohesion are positively associated with new services performance, while for traditional goods‐based NPD, within team, between team, and between firm cohesion all appear to be positively related to performance. The findings suggest that high social cohesion is not always optimal and that managers should focus on specific types or levels of social cohesion as opposed to thinking about social cohesion as a one‐dimensional construct. The findings also suggest that goods‐ and service‐centric firms can use different tactics or strategies to drive social cohesion and, ultimately, new product performance, and that innovation managers may need to allocate resources differently depending on the nature of the market offering being developed. The paper also presents several implications for theory and practice, as well as future research directions related to the various levels of social cohesion and their influence on new product and new service performance.     

Too Much Information Sharing? Welfare Effects of Sharing Acquired Cost Information in Oligopoly

By using general information structures and precision criteria based on the dispersion of conditional expectations, we study how oligopolists’ information acquisition decisions may change the effects of information sharing on the consumer surplus. Sharing information about individual cost parameters gives the following trade-off in Cournot oligopoly. On the one hand, it decreases the expected consumer surplus for a given information precision, as the literature shows. On the other hand, information sharing increases the firms’ incentives to acquire information, and the consumer surplus increases in the precision of the firms’ information. Interestingly, the latter effect may dominate the former effect.     

The (Unknown) Providers to Other Firms' New Product Development: What's in It for Them?

For every inbound activity by a firm in open innovation, a reciprocal outbound activity by another firm must be generated. The reciprocal outbound activities range from transferring of knowledge and ideas to solutions delivered to other firms' new product development projects. This paper names the firms that produce the reciprocal outbound activity for “providers,” and is the first to empirically investigate such providers of ideas, solutions, and technologies for other firms' open innovation activities. The literature review shows a surprising shortage of research on who the providers are, how they engage with other firms, and not least what potential benefits can be achieved from supporting other firms' innovation activities. The paper uses a quantitative survey on Danish small and medium‐sized enterprises (SMEs) carried out in 2010 to identify the providers, the role they take on, and the main benefits the providers gain. This paper finds that firms that are providers are indeed an under‐researched and important phenomenon for firms' innovation activities. Compared to receivers of knowledge, the providers are younger, have a higher R&D intensity, adopt more open innovation practices, have higher absorptive capacity, and fewer barriers toward knowledge sharing as demonstrated by the NIH and NSH syndromes. Finally, although only tentatively, the paper finds that the provider firms are more product innovative compared to nonproviders. The paper further finds that more projects, more embedded relationships, and mutual rather than one‐way exchange relationships significantly raise the probability that a firm experiences a substantial benefit from providing to other firms' new product development projects. The overall ambition of the paper at this point is to inspire other researchers to pursue the agenda on the provider perspective for future research. To support such research, the paper suggests a broadening of the research perspectives from the receiver of knowledge, in the literature on interorganizational relationships and open innovation, to include the provider, and even suggests some preliminary ideas for such research. Hence, the contribution of this paper lies not only in opening a new research topic but also in identifying some first characteristics of the phenomenon adding a substantial perspective to the literature on open innovation and interorganizational relationships. The paper formulates three indicative recommendations for managers that consider becoming a provider to other firms' NPD.     

Behavioral Reasons for New Product Failure: Does Overconfidence Induce Overforecasts?

Efforts to organize and integrate research findings on new product performance determinants have lagged since the last significant overview paper appeared over a decade ago. Importantly, this literature has not considered entire categories of factors that are known to affect managerial decisions and behavior, namely those that pertain to decision‐makers' cognitive limitations and incentive structures. This research empirically investigates one specific cognitive distortion heretofore neglected in studies of new product commercialization—overconfidence, commonly defined in the literature as excessive belief in one's own abilities to generate superior performance. To lay the groundwork for subsequent exploration, the paper first introduces a behavioral model that both organizes well‐understood new product performance determinants and illuminates others heretofore not studied, namely incentive alignment and cognitive limitations and biases. The model summarizes extant research and allows development of research hypotheses related to overconfidence. The hypotheses and empirical investigation motivated by the model address two questions about the impact of overconfidence on new product commercialization activities. First, the study explores whether overconfidence is associated with overforecasting new product demand. Second, it evaluates two complementary mechanisms that may account for overconfidence‐induced overforecasts. The empirical findings are based on data generated in the course of management simulation workshops conducted among graduate students at three leading business schools in India. Three hundred thirty participants played individually four rounds of a computer‐based simulation game that involved decisions pertaining to new product development (including product formulation) and commercialization strategies. The decisions were captured and analyzed using statistical techniques. The results reveal that decision‐makers' overconfidence is associated with a higher likelihood of overforecasting new product sales. The observed effect is fully mediated by flawed tactical decisions that dampen demand, namely elevated product pricing. Sensitivity analyses show that these results are robust to a number of alternative explanations. However, the study finds no evidence implicating overconfident individuals as poor “innovators”—overconfident and nonoverconfident decision‐makers experienced comparable market demand for their new products. The paper concludes with a discussion of the results and provides specific recommendations for practice.     

The Value of Crowdsourcing: Can Users Really Compete with Professionals in Generating New Product Ideas?

Generating ideas for new products used to be the exclusive domain of marketers, engineers, and/or designers. Users have only recently been recognized as an alternative source of new product ideas. Whereas some have attributed great potential to outsourcing idea generation to the “crowd” of users (“crowdsourcing”), others have clearly been more skeptical. The authors join this debate by presenting a real‐world comparison of ideas actually generated by a firm's professionals with those generated by users in the course of an idea generation contest. Both professionals and users provided ideas to solve an effective and relevant problem in the consumer goods market for baby products. Executives from the underlying company evaluated all ideas (blind to their source) in terms of key quality dimensions including novelty, customer benefit, and feasibility. The study reveals that the crowdsourcing process generated user ideas that score significantly higher in terms of novelty and customer benefit, and somewhat lower in terms of feasibility. However, the average values for feasibility—in sharp contrast to novelty and customer benefit—tended to be relatively high overall, meaning that feasibility did not constitute a narrow bottleneck in this study. Even more interestingly, it is found that user ideas are placed more frequently than expected among the very best in terms of novelty and customer benefit. These findings, which are quite counterintuitive from the perspective of classic new product development (NPD) literature, suggest that, at least under certain conditions, crowdsourcing might constitute a promising method to gather user ideas that can complement those of a firm's professionals at the idea generation stage in NPD.     

In Chains? An Empirical Study of Antecedents of Supplier Product Development Activity in the Automotive Industry*

In the literature on interorganizational collaboration in product development, considerable attention is given to supplier role classifications. Such classifications often link to a supplier's position in the overall supply chain, but the claim that this position has a substantial impact on its product development activities has seldom been empirically validated. The results from the present survey among Swedish automotive suppliers demonstrate that supplier product development activity is significantly affected by the position of the supplier in the supply chain and the supplier's strategic focus on innovation. While the latter has a stronger impact on product development activities, there is also an interaction effect implying that the effects of a supplier's innovation strategy are contingent on its supply chain position. Contrary to expectations, customer development commitment does not have any significant direct effect on supplier product development activities. Instead, this relation is fully mediated by supplier innovation strategy. These findings imply that, in contrast to conventional wisdom, product development activities are not strictly organized in “chains.” Although supply chains can be useful metaphors for understanding the distribution of regular production activities between firms, they arguably apply less to the distribution of product development activities.     

Product innovation with vertical differentiation: Is a monopolist's incentive weaker?

This paper compares the incentives for product innovation across different market structures when the new product is vertically differentiated and of lower quality, a common case empirically. We show that innovation incentive rankings across market structures can differ substantially when the new product is of lower rather than higher quality. In particular, the incentive to add the new product can be greater for a monopolist over the old product than for a firm that would face any degree of competition from the old product. This incentive ranking cannot occur when, instead, the new product is of higher quality as has been analyzed in previous work. Moreover, in that case, the incentive ranking is the same whether the market is covered or not covered, whereas in our setting the ranking can differ. With the market covered, our setting provides another environment where the monopolist can have the greatest incentive to innovate, as previously shown when the new product is horizontally differentiated. Together, both settings show that Arrow's famous result—a secure monopolist gains less from a nondrastic process innovation than would a competitive firm—does not always extend to nondrastic product innovations. However, in all the cases analyzed here, consumer welfare (though not total welfare) is always lower under monopoly, even when only the monopolist would add the new product.     

Why a New Journal?

Speaking both personally and officially, I am delighted to salute the appearance of this first issue of Industrial Relations: A Journal of Economy and Society. Since my service as the first Director of the Institute of Industrial Relations at Berkeley, I have retained a close personal attachment to the Institute and a sense of pride in its growing record of accomplishment. And because I am a student in the industrial relations field, I can speak with some personal conviction of the great need for this type of publication. As President of the University of California, I am pleased to see this new venture undertaken by the Institute of Industrial Relations, one of the University’s many important research and service organizations. The publication of new knowledge, insight, and scholarly speculation is an essential part of the advancement of learning. The free marketplace of ideas cannot operate effectively without the avenues of communication provided by the scholarly journals which serve every field of research. I am sure that Industrial Relations will prove a stimulating vehicle for the exchange and development of ideas about a highly significant segment of modern industrial society.     

Are Virtual Markets Efficient Predictors of New Product Success? The Case of the Hollywood Stock Exchange*

Defining effective methods for determining consumer preferences for products prior to their launch has been a mainstay of marketing and management literature for decades. Virtual Stock Markets (VSMs) is an emerging method in new product forecasting that has been shown to produce reliable new product sales estimates by combining individual preferences via market‐based aggregation mechanisms. Due to the emerging popularity of VSMs among practitioners, this cross‐disciplinary study (combining insights from finance, marketing, and new product development fields) uses the example of the Hollywood Stock Exchange (HSX) and examines its predictive validity and potential systematic biases in its predictions to help think about the general applicability of these forecasting methods to other product areas, or how forecasts in other product areas may need to be modified to be more precise. This study finds evidence of overestimating the sales potential associated with products on the low end of the revenue expectation spectrum, which could be linked to the fact that in artificial exchanges, where no money changes hands, people tend to gamble hoping to make excessive returns. However, this explanation is weakened by the introduction of additional variables linked to the negative influence of information search costs (harder to utilize information is not fully reflected in the stock prices) and over‐utilization of highly visible/conspicuous information. Practical implications for managers considering using VSMs for new product forecasting in creative gestalt‐like settings are discussed.     

What Makes a Good Export Channel Relationship?

Within international business, distribution channel management is a key concern. Relationships between exporting firms and other members of the international distribution channel can significantly impede or enhance performance in export markets. This study adopts an inductive research approach to examine what makes a good relationship in distribution channels in Southeast Asian markets (Singapore, Malaysia, Indonesia). An extensive range of relationship elements are identified. The relationship between the two key elements of trust and mutual benefit is found to be reciprocal in nature and dynamic. Necessary conditions for, and influences on, development of trust and mutual benefit are identified.     

Paths to Success: How Do Market Orientation and Entrepreneurship Orientation Produce New Product Success?

The purpose of this paper is to examine the relationship between strategic orientation and the performance of new products. In this paper, we develop a conceptual model that explores the roles of market orientation (MO) and entrepreneurship orientation (EO) on new product performance and seek to understand the mediating roles of process and product characteristics. Based on a survey of 471 small and medium‐sized enterprises in Korea, we found that MO and EO positively affect new product performance. The main impact of MO is through new product development proficiency and product meaningfulness and that of EO is through proficient intellectual property management and product novelty. Academic and managerial implications are also discussed.     

Product specification under a threat of entry: Evidence from Airlines’ departure times

I examine how incumbent airlines adjust their departure times in response to the threat of entry by Southwest Airlines. I find that incumbents space their flights more evenly throughout the day when faced with potential entry. This reaction depends strongly on the level of the incumbent’s market share and hub status at the endpoint airports of a market. The evidence suggests that incumbents’ actions are designed to deter, rather than accommodate, entry. I do not find effects on flight frequency, suggesting that incumbents may rely more on the strategic choice of product attributes than on product proliferation to deter entry.