Auditing product innovation activities in manufacturing firms

Increasing numbers of large firms are splitting themselves into self-standing businesses for the purpose of targeting opportunities more accurately. Based on the findings of an empirical study of product development procedures in leading UK and US manufacturing firms this article provides R&D and other managers with a checklist of the processes involved in developing products speedily and efficiently. Businesses which use product innovation successfully as a competitive weapon are shown to approach development work in a way which is far more comprehensive than aiming only at efficient technical project management. In such businesses supportive top management and efficient interfunctional teamwork emerge as key factors concerned with running a total business both now and in the future.     

Managing 'green' product innovation in small firms

The growing social and regulatory concern for the environment is leading an increasing number of companies to considering 'green' issues as a major source of strategic change. In particular, this trend has major and complex implications on the technological strategy of a company and on its product innovations. Indeed, most authors acknowledge that eco‐efficiency will be one of the major challenges for R&D practice and theory in the next decade. Unfortunately, studies usually focus on large corporations. There is a debate as to whether this factor will affect R&D practices and product innovation in small and medium enterprises (SMEs). A superficial glimpse at the problem could lead one to think that SMEs will not be major green innovators, especially as far as product technologies are concerned, and that they will simply try to comply with environmental regulations (mainly on production processes).
This paper shows that 'green' product innovation may occur and may also have strategic implications in SMEs. Starting from the analysis of four selected case studies and using a Precursors Events methodology, this paper illustrates why 'green' product innovation cannot be considered a marginal issue for most SMEs, even for those that are not directly affected by environmental regulations. Hence, the paper suggests a contingent framework to support SMEs in the analysis of the drivers of 'green' product innovation and in the choice of a proper R&D strategy that explicitly accounts for the eco‐efficiency of product technologies.     

Vertical integration and product differentiation

We study a new channel of downstream rent extraction through vertical integration: competition for integration. Innovative downstream firms create value and profit opportunities through product differentiation, which however affects an upstream monopolist’s incentive to vertically integrate. By playing the downstream firms against each other for integration, the upstream firm can extract even more than the additional profits generated by the downstream firms’ differentiation activities. To preempt rent extraction, the downstream firms may then reduce differentiation, which reduces social welfare. We show that this social cost of vertical integration is more likely to arise in innovative and competitive industries, and that the competition for integration channel of downstream rent extraction is robust to upstream competition.     

The effect of new product development techniques on new product success in Spanish firms

The rate of market and technological changes has accelerated in the last years. This turbulent environment requires new methods and techniques to bring successful new products to the marketplace. Much attention has focused on new development techniques, but little empirical research has been conducted to validate these techniques. In this study, the relationship between popular new development techniques and new product success is examined. Our findings suggest that only a subset of these popular techniques is significantly related with new product success in Spanish firms. The study also identifies the main contributors to new product development (NPD) effectiveness in Spanish firms.     

Services,industry evolution,and the competitive strategies of product firms

Services of different types have become increasingly important for product firms. While these firms mainly focus on products, managers and researchers lack a comprehensive framework to understand when to make significant investments in particular kinds of services. We identify three categories of product‐related services from a product firm—smoothing and adapting services, which complement products, and substitution services, which enable customers to pay for the use of a product without buying the product itself. We develop propositions about the relative level of these different kinds of services vis‐a‐vis industry evolution, as well as suggest how these services affect industry structure. We draw upon various literatures, though we conclude that the relationship between products and services is more complex and richer than any one literature suggests. Copyright © 2014 John Wiley & Sons, Ltd.     

Intellectual capital drivers of product and managerial innovation in high-tech and low-tech firms

There is widespread understanding that intellectual capital (IC), consisting of the valuable knowledge resources of an organization, is a key enabler of innovation activities; however, little is known about the more specific contingencies impacting the relationship between IC and innovation. Thus, this article examines firm technology level and innovation type as contingency variables. It was argued that because high-tech and low-tech firms differ in terms of several knowledge characteristics (complexity, tacitness and pace of renovation), it is likely that their innovation performance is supported by different combinations of IC components. Furthermore, differences between product/service and managerial innovation could also lead to changes in the degree of relevance of various IC components. To test these contingency hypotheses, a survey dataset collected from 180 Spanish companies is analysed using structural equation modelling. The results demonstrate that both firm's technology level and type of innovation affect how IC influences innovation performance. The findings contribute to a knowledge-based perspective on innovation and pave the way for a more context-sensitive and contingency-mindful approach to understanding innovation and knowledge-based value creation.     

The influence of competition from informal firms on new product development

Research summary : Existing research describes a broad range of determinants of new product development (NPD), a fundamental competitive activity of firms. A considerable share of this work has occurred in the context of developed economies, raising a concern that some important determinants may remain unexamined. We suggest that one such determinant is competition from informal (unregistered) firms. Drawing from the attention‐based view, we investigate the effects of informal competition on NPD in a large sample of firms located across Eastern Europe and Central Asia. We examine not only the direct effect but also how this effect is moderated by characteristics of the competitive and institutional context. Managerial summary : The purpose of this research is to examine the relationship between competition from informal (unregistered) firms and new product development (NPD) by formal firms. We argue that NPD is an effective response to differentiate from informal firms, and our analyses of over 9,000 firms located in emerging economies across Eastern Europe and Central Asia indicate that NPD activities are more likely in formal firms who rate informal competition as a greater obstacle. The strength of this direct relationship depends on aspects of the competitive and institutional environment: it is weakened when levels of competition from other formal firms are higher, when alternative responses such as corruption are more available, and when managers are more optimistic about the regulatory environment. Copyright © 2016 John Wiley & Sons, Ltd.     

Service growth in product firms: Past,present, and future

Service growth in product firms is one of the most active service research domains and is open to a variety of conceptualizations. This article provides a critical inquiry into the past, present, and future of the research domain. The evolution of the research on service growth is discussed in two phases: (1) setting the boundaries of the research domain, and (2) emergence of the conceptual foundation. We find that while research in this area has a well-established tradition in terms of output, theoretically it is still largely in a ‘nascent’ phase. Next, we highlight the contributions of the papers in this special section, emphasizing their challenges to prevailing assumptions in the research domain. We conclude by identifying, from the contributions to this special section, suggested themes for further research on service growth: the assessment of empirical evidence of the impact of service growth on firm performance, the role of merger & acquisitions in the service growth strategy, the exploration of single/multiple positions along the transition line, the process of adding or removing services, and expanding the context of service growth beyond product manufacturing firms.     

Lessons in product innovation: A case study of biotechnology firms

Firms that are able more quickly than others to add value through product development will be the winners in technology-based industries. This paper examines value-added progress by contrasting four agricultural biotechnology firms that have managed to create value with one that failed to do so. Lessons were induced for new firms struggling to develop products in emerging industries such as biotechnology. The following findings emerged from manager interviews and secondary data. In contrast to the ‘progressive’ firms, the failed firm neglected to develop a clear product-market focus, complementary skills outside its core technology, and relationships with universities and government. These contrasts seemed to stem from differences in the financing arrangements and the level of organizational politics. The failed firm received a generous one-time funding and had a relatively high level of politics, whereas the funding of the progressive companies was tied to performance milestones and little politicking took place. The reasons for organizational politics are discussed.     

Geographic scope,product diversification,and the corporate performance of Japanese firms

The study extends research on the geographic scope, product diversification, and performance relationship by exploring both the antecedents and consequences of geographic scope. In so doing, it addresses a fundamental criticism of the geographic scope–performance relationship; namely, that the observed positive relationship between geographic scope and performance is spurious because it is the possession of proprietary assets that is the foundation of superior performance, not expansion into international markets per se. We tested the research model with data on the corporate performance of 399 Japanese manufacturing firms. In the partial least squares analyses used to examine the study’s six main hypotheses, we demonstrate that geographic scope was positively associated with firm profitability, even when the competing effect of proprietary assets on firm performance was considered. Further, we find that performance was not related to the extent of product diversification, although investment levels in rent‐generating, proprietary assets were related to the extent of product diversification. Copyright © 1999 John Wiley & Sons, Ltd.     

Scientific foundation,patents, and new product introductions of biotechnology and pharmaceutical firms

Absorptive capacity (ACAP) has long been used in the research of technology firms as an indication of knowledge acquisition. This paper links knowledge input using new product introductions (NPI), to commercial output, addressing one of the key criticisms of research and development expenditures as a measure of an organization's effort. We propose that firms with a strong basic science foundation such as biology and chemistry seek to advance their scientific knowledge in addition to developing and selling innovative products. In contrast, corporations with a more applied focus forego fundamental scientific advancement and concentrate their actions on the development of innovative products. Results from a sample of 487 firms over a 10‐year period indicated that firms with an applied science foundation had greater numbers of NPIs, both breakthrough and innovative, suggesting that a solutions‐based approach had greater value in terms of innovative output. The pursuit of science may build knowledge, but a clear link between increased ACAP and innovative output was not found. Our results also suggest that basic science firms have a positive relationship with both breakthrough and incremental NPIs using merger and acquisition activities. Applied science firms found university alliances useful in generating NPIs.     

Postponed product differentiation with demand information update

This paper studies the problem of how to coordinate postponed product differentiation and forecast update to improve manufacturing efficiency. We consider a two-stage model of multiple products with a common component. In stage 1, the manager obtains a prior demand distribution of each product and decides the production quantity of the common component. In stage 2, the demand forecast is updated and the common component is differentiated into various final products. Then the final demand of each product is realized and inventory leftover (shortage) is assessed. We use stochastic programming to model this problem, and propose an optimal bundle-type algorithm to solve it. Furthermore, we develop some simple and effective approximation algorithms for several special cases. Extensive numerical experiments are conducted to show the effectiveness of the approximation algorithms, to compare the performance between the traditional production model and the postponement production model, and to examine the impact of parameters on the performances of the two systems.     

Cooperative R&D and vertical product differentiation

A partial equilibrium model with vertical product differentiation, Coumot competition and quality determined by R&D expenses is analysed. Cooperative agreements on R&D entail higher levels of R&D, quality, output and welfare than at the non-cooperative equilibrium, under well denned conditions on spillover rates. This confirms, in a new setting, a well-known outcome of models with cost reducing R&D. Further, cooperation in R&D allows a larger number of firms to operate in the industry than in the non-cooperative case. Via a reduction in prices, a new source of social gains from cooperative research is identified.     

Behavior based price personalization under vertical product differentiation

We study price personalization in a two period duopoly with vertically differentiated products. In the second period, a firm not only knows the purchase history of all customers, as in standard Behavior Based Price Discrimination models, but it also collects detailed information on its old customers, using it to engage in price personalization. The analysis reveals that there exists a natural market for each firm, defined as the set of customers that cannot be poached by the rival in the second period. The equilibrium is unique, except when firms are ex-ante almost identical. In equilibrium, only the firm with the largest natural market poaches customers from the rival. This firm has highest profits but not necessarily the largest market share. Aggregate profits are lower than under uniform pricing. All consumers gain, total welfare is higher herein than under uniform pricing if firms’ natural markets are sufficiently asymmetric. The low quality firm chooses the minimal quality level and a quality differential arises, though the exact choice for the high quality depends upon the cost specification.     

Vertical product differentiation,network externalities,and compatibility decisions

We analyse the subgame perfect equilibrium of a four-stage game in a model of vertical product differentiation, where the consumer’s evaluation of a product depends on its inherent quality and on its network’s size. First, two firms choose their product’s inherent quality. Then they may mutually agree on providing an adapter before competing in prices. Finally, consumers buy. We find that, despite the high quality firm’s preference for incompatibility, an adapter is always provided in equilibrium. Social welfare is greater than without an adapter and can be improved by regulating compatibility only in those cases where qualities are differentiated too much.     

Complementarity in product,process, and organizational innovation decisions: evidence from European firms

This work uses a sample of firm-level data from seven EU countries to explore the possible roles of simultaneity and heterogeneity in determining firms' decisions to engage in three types of innovation. Process, product, and organizational innovations are considered jointly, by applying a multivariate probit specification. The results support the hypothesis that the three innovation decisions are interdependent. This has straightforward implications for the practice of R&D managers. In order to gain advantages from an innovation, innovation managers need to jointly exploit these different types of innovation activities and their potential synergies. Given that the innovative firms in the sample, desire additional credit which actually they do not obtain, R&D managers should also be concerned with the financing sources firms have access to. Finally, from the analysis it also emerges that public support boost all the three forms of innovation.     

The contribution of external service inputs to the product development efforts of small manufacturing firms

This paper examines the contribution of external inputs to the innovation performance of small manufacturing firms (SMFs) in New York State. Survey data from a 4-sector sample of SMFs is presented. Particular attention is given to recent patterns of external spending on technological, management, and information services. The results suggest that innovation performance is enhanced by external sources of scientific, technical, and professional support. SMFs with well developed internal technical skills are found to exhibit above average spending on external help. Elaborate patterns of external knowledge acquisition are found to be particularly prevalent among innovative firms that derive a substantial proportion of their current sales from new or significantly improved products. The empirical results are compared with the findings reported by other North American and European studies. The paper concludes with a discussion of the implication of the survey results for regional development agencies and R&D managers.     

Horizontal product differentiation,prices and quantity selection of a multi-product monopolist

A monopolist which serves a market in which tastes are uniformly spread along a circumference of a circle selects an optimal set of product varieties. The cost of installing an additional variety increases with the difference from the ‘main product’. It is shown that variety prices decrease and the degree of differentiation between any two varieties increases as products get more differentiated.