Product Development Strategy, Product Innovation Performance, and the Mediating Role of Knowledge Utilization: Evidence from Subsidiaries in China
Published 6/1/2009
Author: Junfeng Zhang, C. Anthony Di Benedetto, and Scott Hoenig
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Executive Summary
Recent decades have witnessed the increasingly prominent role of subsidiaries in multinational companies’ innovation activities as well as in their knowledge networks. However, only limited research has explored knowledge assimilation and innovation
activities in subsidiaries. In this limited research stream, subsidiary new product development is largely overlooked, and the impact of a subsidiary’s strategic initiatives as well as their interplay with knowledge utilization is still underresearched, particularly in the emerging market contexts. Zhang, Di Benedetto, and Hoenig provide some insights by examining the interplay of product development strategy, knowledge utilization, and product innovation performance in the context of Chinese subsidiaries of multinational companies.
The study involved a survey of 103 subsidiaries that took on new product development responsibilities. The findings show that a subsidiary’s resource allocation decisions in connection with its three product development strategic focuses differentially affect its subsequent product innovation performance (i.e., market rewards of new products). When firms strived to develop highly innovative products (breakthrough focus), the amount of resources allocated had a U-shaped relationship to subsequent product innovation performance. When the aim of product development activity was to reinforce and maintain moderately innovative products (platform focus), increased resource allocation showed a positive relationship to product innovation performance. However, the amount of resources allocated to minor revisions (incremental focus) showed no significant relationship to product innovation performance. In addition, knowledge utilization was an important predictor of the benefits of developing highly and moderately innovative products. More important, it helps mitigate the drawbacks of a breakthrough focus and strengthens the positive impact of a platform focus.
The findings of this study confirm the importance of knowledge utilization. Furthermore, this study reveals the potential role of knowledge utilization as an underlying mechanism that transforms the impact of some resource allocation decisions (i.e., strategic focus decisions) into market rewards from new products in the context of subsidiary product innovation in China. Zhang, Di Benedetto, and Hoenig suggest that management take advantage of knowledge from its network sources and strategically deploy resources among projects with different levels of innovativeness to obtain better rewards from new products in this specific context.
Biography
Junfeng Zhang is Assistant Professor of Marketing, Department of Marketing, Hong Kong Baptist University. Her research interests include marketing management, new product development, and international marketing.
C. Anthony Di Benedetto is Professor of Marketing and Senior Washburn Research Fellow, Department of Marketing, Fox School of Business, Temple University, and Visiting Professor of International Entrepreneurship, Technische Universiteit Eindhoven, The Netherlands. He is Editor-in-Chief of Journal of Product Innovation Management; author of numerous articles on product development, marketing, and strategic management; and a New Product Development Professional (NPDP).
Scott Hoenig is Associate Professor and Head of the Marketing Division in the School of Economic and Business Sciences, University of the Witwatersrand, Johannesburg. His current primary research and consulting interests are in modeling the broad set of organizational and strategic factors that most directly enhance the financial performance of firms. These include innovation and various forms of strategic and organizational configurations. Another interest area involves the profiling of materialistic tendencies in a developing country setting.
J International Marketing, Volume 17, Number 2, June 2009
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