Academic journal article Entrepreneurship: Theory and Practice

New Product Innovation in Established Companies: Associations with Industry and Strategy Variables

Academic journal article Entrepreneurship: Theory and Practice

New Product Innovation in Established Companies: Associations with Industry and Strategy Variables

Article excerpt

As concern over the competitiveness of the U.S. persists, attention is given to understanding the factors associated with product innovation. To date, the bulk of research has focused on the organizational variables (e.g., formal structure) that spur or impede a company's new product development and introduction efforts. The present study extends the literature by examining the relationship of a firm's industry characteristics and the content of its competitive strategy, and the number and timing of new product introductions. Data from 134 established manufacturing companies (i.e., firms that have been in existence for more than eight years) show that a firm's industry characteristics and competitive strategy explain a significant portion of variance in both the number and early introduction of new products. The implications of the results for managerial action and future research are also discussed.

A distinguishing characteristic of an entrepreneurial company is its strong commitment to creating and introducing new products to the market, usually well before the competition (Covin & Slevin, 1991; Jennings & Young, 1990). Miller (1983, p. 771) observes that "An entrepreneurial firm is one that engages in product-market innovation, undertakes risky ventures, and is first to come up with proactive innovations, beating competitors to the punch." Such a company uses new products to achieve growth and profitability (Cooper, 1987; Kanter & Richardson, 1991; Zahra, 1993) by seizing opportunities in its industry, attracting new customers and venturing into new markets (Porter, 1980). Products introduced first to the market can also help a company to acquire a significant market share, sometimes 50% of the market (Duffy & Kelly, 1989). This allows the company to charge higher prices than later entrants (Neven, Summe, & Uttal, 1990) and gives it an opportunity to establish industry standards (Stalk & Hout, 1990). By introducing new products to the market, companies can simultaneously retain their entrepreneurial spirit and protect their market position.

Today, new product development is generally considered important for understanding a firm's entrepreneurial activities (Brazeal, 1993; Covin & Slvin, 1991; Guth & Ginsberg, 1990; Jennings & Lumpkin, 1989; Lawless & Fisher, 1990; Manning, Birley, & Norburn, 1989). Therefore, identification of the factors that influence product innovation helps to increase our understanding of one of the richest sources of firm-level entrepreneurship (Nonaka & Yamanouchi, 1989). Mounting evidence also suggests that U.S. companies lag behind their foreign rivals in the speedy development and introduction of innovative products to the market (Spencer, 1990). Unfortunately, this "laggard" status applies to many old and young industries (Gupta & Wilemon, 1990). Even some eminent U.S. firms are discovering that speedy product development and innovation is challenging. Companies such as Xerox, AT&T, IBM, and Microsoft have reported difficulties in this regard. As these and other companies struggle with the issue, understanding the forces that shape decisions on product innovation, especially their number and timing, becomes an important issue in the study of entrepreneurship (Jennings & Young, 1990).

There is an impressive body of literature on the managerial and organizational aspects of new product development and introduction (Anthony & McKay, 1992; Dwyer, 1990; Karagozoglu & Brown, 1993; Starr, 1990). It suggests that timely development and introduction of new products requires maintaining a flexible organizational structure (Bart, 1986), frequent communication (Ancona & Caldwell, 1992), the use of multifunctional teams (Cordero, 1991), the leadership style of new product teams (McDonough & Barczak, 1991), top management support and involvement (Zirger & Maidique, 1990), interface with customers (Bentley, 1990), and the use of effective controls (Bart, 1993). …

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