Academic journal article Journal of Managerial Issues

The Impact of Organizational Capabilities on the Development of Radical and Incremental Product Innovation and Product Innovation Performance

Academic journal article Journal of Managerial Issues

The Impact of Organizational Capabilities on the Development of Radical and Incremental Product Innovation and Product Innovation Performance

Article excerpt

Academics and practitioners acknowledge the importance of product innovation to increasing quality of life, increasing firms' marketing and financial performance (Govindarajan and Kopalle, 2006; Henard and Szymanski, 2001; Sivadas and Dwyer, 2000), and sustaining firms' business in the market (Bharadwaj et al., 1993; Day and Wensley, 1988). Product innovation is one of the factors that help firms to cope with several kinds of competitive pressure, such as shortened product life-cycles, demand uncertainty, and technological turbulence (Godener and Soderquist, 2004; Ziamou and Ratneshwar, 2003).

Organization capabilities play a crucial role in successfully developing new products (Brentani and Kleinschmidt, 2004). Firms must therefore define a pattern of organization which matches the type of new products they wish to develop (Damanpour, 1991; Jansen et al., 2006). Many studies investigate the organizational capabilities that affect the development of new products (Wind and Mahajan, 1997). However, a large proportion of those studies focus on radically new products, i.e., products that offer new benefits or attributes previously unknown to the market (Sorescu et al., 2003). Fewer studies focus on incrementally new products, i.e., products that are developed based on existing products or add some features to existing products.

This paper investigates the impact of organizational capabilities on the development of radical and incremental product innovation. This paper empirically and simultaneously compares antecedents (organizational factors), mediators (product innovation), and consequences (performance) of the development of radical and incremental product innovation. Further, this paper examines the impact of product innovation on the performance of firms. Finally, conceptual models explaining the relationships among these factors are proposed.

The findings will help academics and practitioners to better understand the role of organizational capabilities on the development of each type of product innovation. In addition, the importance of product innovation on firm performance is presented. Contributions, limitations, and future research are also discussed.

LITERATURE REVIEW

Definition of Product Innovation

There are many definitions of product innovation. The popular terms used to classify the degree of new product innovation are radical and incremental product innovation (Atuahene-Gima, 2005; Gatignon et al., 2002). However, these terms have diverse definitions. For example, Gatignon and Xuereb (1997) and Kristina and Dean (2005) consider product innovation in terms of technology; Cooper (2000) and Govindarajan and Kopalle, (2006), define product innovation in terms of customer's opinion.

Kristina and Dean (2005) propose that product innovation may be evaluated in terms of the differentiated technological characteristics of the product. The two criteria for the evaluation are: (1) novelty, which is the need to be dissimilar from prior technologies and (2) uniqueness, which is the need to be dissimilar from current technology. Anderson and Tushman (1991: 27) define product innovation only in terms of radical innovation. They define product innovation as "technological discontinuities that advance by an order of magnitude the technological state-of-the-art which characterizes an industry" (Anderson and Tushman, 1991). Anderson and Tushman (1991) explain product discontinuities as technological breakthroughs which produce fundamentally different product forms that possessed a decisive cost, performance, or quality advantage over prior product forms. Product discontinuities also represent a new way of making something, i.e., novel product architecture. Radical products are the result of technological discontinuities.

From the customer's perspective, Christensen (1997) classifies disruptive product innovation as involving the creation of new products that bring a very different value proposition in a market than product created using previously available technologies. …

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