Academic journal article Social Behavior and Personality: an international journal

A Model of Factors Moderating the Relationship between New Product Development and Company Performance

Academic journal article Social Behavior and Personality: an international journal

A Model of Factors Moderating the Relationship between New Product Development and Company Performance

Article excerpt

In 2003, Apple introduced the iPod with iTunes storage facility, revolutionizing portable entertainment, creating a new market, and transforming the company. In just three years, the iPod/iTunes combination became a nearly $10 billion product, accounting for almost 50% of Apple's revenue. Apple's market capitalization catapulted from around $1 billion in early 2003 to over $150 billion by late 2007 (Johnson, Christensen, & Kagermann, 2008).

This success story is well-known; what is less known is that Apple was neither the first to provide an online music-trading platform nor the first to bring digital music players to market. Napster created an online music file-sharing service using Peer-to-Peer (P2P) in 1999. Diamond Multimedia introduced the Rio in 1998. Another company, Best Data, introduced the Cabo64 in 2000. In common with Apple, these companies all engaged in innovation activities aggressively. So why did the iPod/iTunes, rather than the P2P, Rio, or Cabo64, succeed?

The sustainable development and market introduction of new products or services are important determinants of sustained company performance (Wolff & Pett, 2006). Although new products open up new opportunities for companies, the substantial risk associated with these new products must not be ignored. Many companies strive to change their products, service, or technology, but experience very high failure rates. It is obvious, therefore, that scholars and managers are highly interested in learning about those factors which impact on the success of innovation activities.

In our study our aim was to focus on the degree of involvement of the companies in new product development (NPD), one of the various innovation activities, in order to find out which factors moderate the relationship between innovation and company's performance. Therefore, the question we posed in this study was "Which factors influence the relationship between innovation and performance?" The purpose of this study was to enhance understanding of the success factors of innovation in NPD. This study underpins our propositions and the conceptual model with discussion of a relative theory and the conclusions of previous research.

LITERATURE REVIEW

Researchers of management and managers themselves, especially in the strategic management field, have spent their careers trying to understand how to create and sustain a company's competitive advantage. As Hitt and Hoskisson (1991) argue, the ability of a company to develop new technologies is at the heart of strategic competitiveness. Therefore, the only way for a company to sustain a competitive advantage is to constantly upgrade its facilities and activities through innovation (Drew, 1997; Porter, 1990).

In fact, scholars in two different schools of innovation study base their research on two distinct areas. First, the researchers in areas such as marketing are primarily interested in understanding the causes of consumers' innovative behavior in order to identify the characteristics of these innovative consumers. So the effectiveness of marketing strategies may be enhanced by focusing marketing efforts on these innovative consumers. The second type of research is focused on areas such as organizational theory and strategic management and researchers are interested in the organizational characteristics of innovative organizations and the effect of the adoption of innovations on organizational performance in order to understand what galvanizes the organization's adoption of innovation and leads to better organizational performance (Subramanian & Nilakanta, 1996).

Although it is not surprising that NPD study has retained a high level of popularity over the last 30 years, those managers using the results of NPD study have made vain attempts to improve NPD activities in their respective companies. As a result, there are some factors influencing the success result of new product that are being ignored. …

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