Identifying the moderating influences of external environments on new product development process

Technovation 31 (2011) 598–612

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Technovation

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Identifying the moderating influences of external environments on newproduct development process

Keon Bong Lee a,n, Veronica Wong b,c,1

a School of Business Administration, Korea University, Jochiwon-eup, Yeongi-gun, Chungnam 339-700, Republic of Koreab Department of Business and Management, School of Business, Management and Economics, University of Sussex, Brighton BN1 9RF, UKc Audencia Nantes Ecole de Management, Nantes, France

a r t i c l e i n f o

Keywords:

Competitive intensity

Functional-specific sources of advantage

Implementation capabilities

Project-specific sources of advantage

Technological change

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a b s t r a c t

Few studies have attempted to investigate the following: (1) whether the firm’s core capabilities or

resources and routines (e.g., integration among functions) for product development, in the presence of

environmental dynamics, become incumbent inertia or core rigidities? and (2) how environmental

dynamics affect the influence of a project team’s implementation capabilities in the new product

development (NPD) process on new product launch performance? This study approaches these

questions by addressing the three most indispensable NPD process components (i.e., marketing,

technology, and organization) and incorporating new moderators, namely pace of technological change

and competitive intensity, within a single study. It specifically examines the extent to which the latter

two external environmental variables moderate the impact of NPD practices on new product launch

outcome. Data obtained from a survey of NPD projects developed and launched by Korean manufac-

turers suggest that environmental dynamics would reduce the contribution of functional-specific

sources of advantage (resources) and project-specific sources of advantage (e.g., integration among

functions) to organizational implementation capabilities (i.e., a project team’s proficiency in executing

NPD activities). Moreover, the research also shows that market dynamics may increase the contribution

of organizational implementation capabilities to NPD project performance.

& 2011 Published by Elsevier Ltd.

1. Introduction

Dynamic markets characterized by shifting technologies andmarket competition, pose additional challenges for new productdevelopment (NPD) project managers who must remain alert andresponsive to emerging technical and market information over thecourse of a project (Eisenhardt and Tabrizi, 1995). However, exceptfor a few studies (e.g., Bstieler, 2005; Fernandez et al., 2010; Songand Montoya-Weiss, 2001; Song and Parry, 1997b; Song et al.,2005; Souder and Song, 1998), previous investigations have paidrelatively little attention to examining the interactions betweenexternal environmental variables (e.g., competitive intensity andtechnological turbulence) and determinants of NPD project out-come that are more readily controlled by the firm, such asfunctional-specific sources of advantage (i.e., marketing synergyand technology synergy), project-specific sources of advantage (i.e.,coordination routines such as cross-functional integration), andquality of implementation in the NPD process or organizational

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Lee),

implementation capabilities (i.e., the NPD project team’s profi-ciency in conducting marketing and technical activities).

Previous research provides evidence to support the moderatingrole of external environmental variables in determining NPDoutcomes (Song and Montoya-Weiss, 2001; Song et al., 2005;Song and Parry, 1997b). For example, external environmentsweaken the impact of positional advantage on new productsuccess (Song and Montoya-Weiss, 2001; Song and Parry,1997b). However, there is relatively little empirical research thataddresses whether a firm’s core capabilities or resources andorganizational routines become incumbent inertia or core rigid-ities in the presence of market and technological uncertainty.Moreover, implementation capabilities are significant mediatorsof the relationships between functional-specific sources of advan-tage, project-specific sources of advantage, and new productperformance (e.g., Lee and Wong, 2010; Song and Parry, 1997b;Song et al., 1997c). By implication, even the best core resourcesand capabilities will not translate into higher levels of newproduct performance, but, rather, contingent on expediency incompleting process activities. While these prior studies haveexamined mediational roles of internal, NPD project variables ininfluencing NPD project outcomes, empirical testing of the mod-erating role of external environmental forces (e.g., competition) onthe NPD process and project outcomes remain relatively sparse.

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K.B. Lee, V. Wong / Technovation 31 (2011) 598–612 599

Therefore, the present study refocuses attention on the moder-ating influences of external forces and sheds further light on themechanisms by which these variables impact the relationshipsamong functional-specific and project-specific sources of advantage,organizational implementation capabilities, and new product launchperformance. A fuller understanding of these mechanisms shouldprovide a useful benchmark for NPD managerial decisions concern-ing the optimum ways of allocating resources to the NPD processand expected outcomes. Importantly, it will yield deeper insightsinto how, and the extent to which, a firm’s response to externalforces might control the translation of core marketing and technicalresources, and project routines into resultant implementation cap-abilities and launch performance.

Our study seeks to strengthen understanding of the effects ofexternal environmental forces on NPD activities and performance,and to contribute to the NPD literature by focusing on twoquestions that are relatively neglected in previous work: (1) dothe firm’s resources and routines (e.g., integration among func-tions) for product development, in the presence of environmentaldynamics, become incumbent inertia or core rigidities? and(2) how do environmental dynamics affect the influence of aproject team’s implementation capabilities in the NPD process onnew product launch performance?

The above questions address the notion that NPD processoutcomes may be contingent on external environmental forces,which can be regarded as presenting both a constraint on, and anopportunity for, leveraging the firm’s internal processes (Song andParry, 1997a,b). However, we more specifically examine core NPDcapabilities at a project level and extend Song et al.’s study (2005)that investigated the role of technology turbulence in determin-ing the impacts of technology-related capabilities, marketing-related capabilities, and their interaction (marketing-related cap-abilities x technology-related capabilities) effects on firm perfor-mance (i.e., profit, sales, and ROI) relative to joint ventureobjectives. We propose the impacts of both types of externalenvironmental dynamics (technology and competition) within asingle model to clarify the flows from NPD project resources/routines, to implementation capabilities, and outcomes.

H1 ~ H3, H5 ~ H7

Marketing Synergy

Cross-functionalIntegration

Technology Synergy

Marketing P

Technical P

External En

• Competitiv

• Technolog

Fig. 1. Conceptua

This paper makes three primary contributions to the NPDliterature. First, this paper suggests that environmental dynamicswould reduce the contributions of resources and routines to aproject team’s implementation capabilities in product develop-ment. Second, the research also shows that market dynamics mayincrease the contribution of the project team’s implementationcapabilities in the NPD process to organizational performance (interms of project performance). Third, the present study willexamine the aforementioned influences of environmentaldynamics on NPD resources, routines, implementation capabil-ities, and new product project outcome in a sample of SouthKorean manufacturers. In doing so, we add to the limited dataconcerning NPD undertaken by firms in non-western, emergingeconomies. A few studies addressing NPD practices in Koreansample settings (e.g., Song et al., 1997c; Song and Noh, 2006;Thieme et al., 2003), have focused on the determinants of newproduct performance (e.g., skills and resources, marketing activityproficiency, project environment, project leadership, strategic fit,process, product positioning strategies, project manager style andskills, senior management support, cross-functional integration,and planning proficiency), but have not incorporated externalenvironments as moderator variables.

2. Conceptual model

Fig. 1 presents the proposed conceptual framework of antece-dents of NPD outcome and the moderating roles of externalenvironmental variables on the relationships between proposedantecedents and launch outcome. We draw upon Song and hiscolleagues’ works (Song and Parry, 1997a,b; Song and Montoya-Weiss, 2001) in developing our conceptual model of the potentialimpacts of antecedent variables (i.e., the level of marketing andtechnical synergies, cross-functional integration, and developmentproficiencies) on new product outcomes, because marketing, tech-nology, and organization are the three most indispensable NPDprocess components (Mu et al., 2009). In addition, we extend thework of Song and Parry (1997a,b) and Song and Montoya-Weiss

roficiency

roficiency

New Product Launch Success

vironments

e Intensity

y Change

Control Variables

• Firm Size

• Industry Type

H4a, H4b, H8a, H8b

l framework.

K.B. Lee, V. Wong / Technovation 31 (2011) 598–612600

(2001) by incorporating new moderators, namely pace of techno-logical change and competitive intensity, respectively, within asingle study, to identify the underlying mechanisms by whichenvironmental dynamics impact the relationships between func-tional-specific sources of advantage (resources), project-specificsources of advantage (routines), quality of implementation in theNPD process (implementation capabilities), and new productlaunch performance. It is envisaged that not only might the impactsof antecedent variables on new product outcomes be conditionedby the level of environmental dynamics, the underlying mechan-isms of the phenomena may vary.

While a number of studies have examined the role of modera-tors, a majority of these, as shown in Table 1, represent firm- andproduct-related factors, not external environmental dynamics.Therefore, there remains a gap in understanding of the role ofexternal environmental dynamics in translating NPD projectresources, routines, and implementation capabilities into successfulNPD outcomes. Specifically, we adopt Song and Parry’s (1997a)causal model that suggests that key determinants such as the firm’sinternal environment (i.e., marketing synergy, technology synergy,and cross-functional integration) and the NPD process (i.e., market-ing proficiency and technical proficiency) affect new productperformance. We include one moderator (i.e., competitive intensity)from the Song and Parry’s (1997b) model, which was shown tomoderate the influences of product differentiation on productperformance. We also incorporate another moderator (i.e., technol-ogy change) from Song and Montoya-Weiss’s model (2001) showingthat technology uncertainty moderates the relationships betweenmarketing and technology synergies, cross-functional integration,development process proficiency, and new product performance.

2.1. External environments as moderators

External environmental forces such as competitive intensityand technology change have been conceptualized as moderators inprior work in the strategy/strategic management research (e.g.,Appiah-Adu, 1997; Bhuian, 1998; Diamantopolous and Hart, 1993;Greenley, 1995; Grewal and Tansuhaj, 2001; Harris, 2001), as wellas in NPD research (e.g., Bstieler, 2005; Song and Montoya-Weiss,2001; Song and Parry, 1997b). Hence, this supports our concep-tualization of competitive intensity and technology change as twoof the salient moderators in our proposed model. In addition, wereiterate the observation that prior research in the NPD field hastended to examine the direct or indirect (moderating) properties offirm-or internal- factors (i.e., strategic type) (Song et al., 2007), orproduct (e.g., level of product innovativeness) (Song and Montoya-Weiss, 1998; Song and Parry, 1999), project (i.e., interfunctionalconflict-resolution styles) (Montoya-Weiss et al., 2001; Xie et al.,1998), and managerial factors (i.e., management’s degree of marketfamiliarity) (Souder and Song, 1998). Again, there has beenrelatively little focus on examining the moderating influences ofexternal forces, with a few exceptions as noted above. Our studydiffers from prior work in examining, within a single model, if andhow the impacts of both technology change and competitiveintensity contribute to the NPD process, starting with projectresources and routines, which influence NPD project implementa-tion capabilities, which in turn, impact NPD project outcome.

2.2. Functional-specific sources of advantage

The saliency of, and distinction between, a firm’s resources andcapabilities in the NPD context, is consistent with strategic marketingliterature, which advocates that superior technical and marketingresources and superior skills, or the distinctive capabilities ofpersonnel that set them apart from those of competing firms, enablethe firm to do better than its competitors (Day and Wensley, 1988).

Marketing resources encompass a range of assets, including thefirm’s available market research resource (e.g., staff and budget),sales force size, distribution coverage, brand name, and advertisingand promotion resources (Song and Parry, 1996, 1997a; Song andMontoya-Weiss, 2001). Technology resources depict the quantityand quality of R&D, engineering and production personnel and fundsto develop or adapt product hardware and software for the com-pany’s target markets (Cooper, 1994). Marketing skills are a firm’sexisting competencies in doing market research, selling, distribution,and advertising and promoting their product offering (Song andParry, 1996, 1997a; Song and Montoya-Weiss, 2001). Technical skillsencompass a firm’s existing knowledge of the pertinent technologiesand competency in making technical decisions (Souder et al., 1998).Marketing and technology synergies, respectively, reflect the pro-ject’s fit with a firm’s existing marketing and technical resources andskills (Cooper and Kleinschmidt, 1987; Henard and Szymanski, 2001;Song and Parry, 1997a; Song and Montoya-Weiss, 2001), and capturethe extent to which the embedded firm resources and capabilities atthe disposal of a project, align with the project. Hence, a strong fitwill occur when the requisite resources and capabilities are wellmatched to project needs.

2.3. Project-specific sources of advantage

Coordination routines such as cross-functional integration areregarded a project-specific, as opposed to functional-specific sourceof advantage (Song and Parry, 1997b). Cross-functional integrationrefers to routines or interfacing mechanisms for establishing func-tional coordination and cooperation during the NPD process, and toachieving a level of unity of effort across functional areas indeveloping and launching a new product (Song and Montoya-Weiss, 2001; Song and Parry, 1997b). The gathering and dissemina-tion of market intelligence through cross-functional integrationhave been emphasized in the marketing literature (Jaworski andKohli, 1993; Kohli and Jaworski, 1990; Narver and Slater, 1990) andits importance to new product success is also well documented(e.g., Donnellon, 1993; Kahn, 1996; Kahn and McDonough, 1997;Leenders and Wierenga, 2002; Song and Montoya-Weiss, 2001;Song et al., 1997a,b; Song and Parry, 1997a,b).

2.4. Organizational (a project team’s) implementation capabilities

The quality of implementation of relevant marketing and tech-nical activities during the NPD process may be higher or lowerdepending on the level of proficiency of the project team inconducting requisite activities. Thus proficiencies are derived from(or reflect) a project team’s implementation capabilities (Song andParry, 1997b). Marketing proficiency refers to how well availablemarketing resources and skills are expended or applied to expeditemarketing-related activities related to the NPD project (Song et al.,1997c). Technical proficiency encompasses the project team’sadeptness in applying available technical resources and competen-cies in conducting such activities as engineering and manufacturingevaluations, product testing, determining product specifications,prototyping, and building the final new product (Song andMontoya-Weiss, 2001). As such, NPD project proficiencies reflectorganizational capabilities in NPD project implementation, and aredistinct from embedded organizational (core) resources and cap-abilities available to a project team.

2.5. New product launch performance

NPD studies have measured success in various ways (e.g.,Chryssochoidis and Wong, 1998; Cooper and Kleinschmidt,1994): whereas some use financial measures of success(e.g., profit and sales), others have used non-financial measures

Table 1Summary of Song and his colleagues’ research on new product development and success.

Study Dependent variables Independent variables Main contribution/finding

Parry and Song (1994) New product success Market characteristics, product firm capabilities Market characteristics have the largest negative

correlations with new product success

Song and Parry (1994) New product success Principle components underlying new product

projects

Key determinants of new product success in

Chinese companies

Song and Parry (1996) New product success Strategic factor, market environment factors,

development process factors

The most important factor is product advantage;

market competitiveness was found to be the

least important success factor

Calantone et al. (1996) New product success Organizational factors, NPD process factors,

product factors

The cross-national similarities and differences

between China and the US

Song et al. (1997a) Cross-functional

cooperation

Internal facilitators, external forces Cross-functional cooperation is forced more by

internal facilitators than by external forces

Song et al. (1997b) New product

performance

Project skills, project management skills, skills/

needs alignments, team skills, design sensitivity

Identifying five factors that lead to marketing

and technical proficiencies that directly

determine product quality, and ultimately lead

to new product success

Souder and Song

(1997)

Strategy combination Product design, market choice strategies, market

uncertainty

The correct strategy combination differs

depending on a firm’s perception of market

uncertainty

Song et al. (1997c) New product

performance

Marketing resources synergy, marketing skills

synergy, marketing activity proficiency

Comparing marketing’s role in developing new

products in East Asia

Song and Parry (1997a) New product

performance

Competitive intensity, internal environment, NPD

process

Competitive intensity had a significant and

positive direct effect on the level of competitive

and market intelligence and a significant and

negative direct effect on product competitive

advantage

Song and Parry (1997b) Product performance,

product differentiation

Functional-specific sources of advantage, project-

specific sources of advantage, quality of

implementation in the NPD process,

environmental factors (moderators)

The relationship between product differentiation

and product performance is weakened by

increases in competitive intensity

Song and Montoya-

Weiss (1998)

New product success for

really new and

incremental products

Proficiency in strategic planning, idea

development, and business and market

opportunity analysis, two levels of product

innovativeness (moderators)

Compared the development process and

performance outcomes of really new and

incremental products

Souder and Song

(1998)

Commercial success NPD climate, expertise, management functions,

high/low market familiarity (moderator)

A firm’s level of familiarity with its target market

moderates the effects of NPD climate and

management functions on performance

Xie et al. (1998) New product success Inter-functional conflict, 5-style inter-functional

conflict resolutions (moderators)

The effect of inter-functional conflict on NPD

success differs across cultures

Song and Parry (1999) Product performance,

product competitive

advantage

Marketing synergy, technical synergy, marketing

proficiency, technical proficiency, product

innovativeness (moderator)

Increases in product innovativeness weaken the

influence of product synergies and development

proficiencies on product performance

Song and Montoya-

Weiss (2001)

Financial performance,

product competitive

advantage

Marketing synergy, technical synergy, cross-

functional integration, competitive and market

intelligence, marketing proficiency, technical

proficiency, technological uncertainty (moderator)

Examine the moderating effect of perceived

technological uncertainty on NPD

Montoya-Weiss et al.

(2001)

Virtual team

performance

Conflict management behaviors, temporal

coordination (moderator)

The moderating role of a temporal coordination

mechanism and process structure on the

relationship between conflict management

behavior and virtual team performance

Thieme et al. (2003) New product survival,

process proficiency

Project manager style, project manager skills,

senior management support, cross-functional

integration, planning proficiency

Three aspects of planning(detailed project

planning and control, team member

participation, flexibility and autonomy)

contribute to NPD outcome

Di Benedetto and Song

(2003)

Firm capabilities (inside-

out, outside-in,

marketing, and IT

capabilities)

Strategic type (prospector, analyzer, defender, and

reactor)

Prospectors have greater relative inside-out and

IT capabilities, while defenders have greater

relative outside-in and marketing capabilities

Song et al. (2005) Firm performance Technology-related capabilities, marketing-related

capabilities, marketing related

capabilities� technology related-capabilities

effect, technology turbulence (moderator)

Technology turbulence weakens the influence of

marketing-related capabilities on firm

performance. The interaction of marketing- and

technology-related capabilities was significant

only in the high-turbulence environment

Song and Noh (2006) New product success Project environment, skills and resources, project

leadership, strategic fit, process, product

positioning strategies

Project environments play an important role in

project success and failure

Song et al. (2007) Financial performance Technology capabilities, IT capabilities, market-

linking capabilities, marketing capabilities,

strategic type (moderator)

When strategic type is used as a moderating

variable, prospector� technology capabilities,

prospector� IT capabilities,

analyzer� technology capabilities, analyzer� IT

capabilities, analyzer�marketing capabilities,

defender�market-linking capabilities, and

defender�marketing capabilities were

significant

Song et al. (2008) Strategic type Technology capabilities, IT capabilities, market-

linking capabilities, marketing capabilities

Prospectors would be strongest in technology

and IT capabilities whereas defenders would be


Table 1 (continued )

Study Dependent variables Independent variables Main contribution/finding

strongest in market-linking and marketing

capabilities

Di Benedetto et al.

(2008)

Radical innovation Technology capabilities, IT capabilities, market-

linking capabilities, marketing capabilities,

management-related capabilities

Technology and IT capabilities are significantly

and positively related to radical product

innovation

Parry et al. (2009) Cycle time Radical products, broad product line, formal NPD

structure, cross-functional teams, heavy weight

project manager, innovation climate

Increasing emphasis on product involving

breakthrough core processes was found to lead

to increased perceptions of satisfactory cycle

time

Song et al. (2009) Performance, positional

advantage

Marketing resources and skills, technical resources

and skills, marketing knowledge, technical

knowledge, supplier involvement

Resources and knowledge are important factors

for improving the performance of the first

product launched by new ventures


(e.g., design, social performance, and technology), or a combinationof the two (e.g., Hultink and Robben, 1995). The most commonmeasures of new product performance are quantifiable (Dyer et al.,1999). They include sales, market share, and profitability data,which can be provided by employees. In the proposed model, NPDlaunch performance will be measured using financial measures.

3. Research hypotheses

3.1. The moderating role of competitive intensity on the relationship

between marketing synergy and marketing proficiency

The more intensive the competitive environment, the moreaggressive a business must be in creating superior customer valueand satisfying customer wants (Jaworski and Kohli, 1993; Kohli andJaworski, 1990; Slater and Narver, 1994). Intense rivalry alsocompels companies to be ever more agile and adaptive to changingcustomer needs and preferences in order to maintain a competitiveedge (Kettunen, 2009; Porter, 1980). In the NPD context, competi-tive intensity has been shown to have a positive direct effect on thefirm’s level of competitive and market intelligence, but a negativedirect effect on product competitive advantage (Song and Parry,1997a) and new product performance (Parry and Song, 1994; Songand Parry, 1996). Typically, a good fit between existing marketingknowledge and resources and project requirements (synergies) mayinform marketing implementation and enhance efficiency in termsof resource allocation, hence, raising marketing proficiency (Songet al., 1997c; Song and Parry, 1997a,b, 1999; Song and Montoya-Weiss, 2001). However, institutionalized capabilities also may leadto incumbent inertia in the face of environmental change (Leonard-Barton, 1992; Lieberman and Montgomery, 1988). Core rigiditycauses structural inertia and resistance to change (Leonard-Barton,1992; Prahalad and Hamel, 1990). Therefore, despite the existenceof the positive effect of competition on competitive and marketintelligence (Song and Parry, 1997a), which enhance technicalproficiency and marketing proficiency, embedded marketingknowledge and potential synergies, under conditions of highcompetition, may reduce the level of efficiency in expeditingmarketing activities due to incumbent inertia (Song et al., 2005).

H1. The association between marketing synergy and marketingproficiency is stronger when competitive intensity is low thanwhen it is high.


between cross-functional integration and proficiency in marketing

and technical activities

In their study of the impacts of external forces and inter-nal facilitators on interfunctional cooperation, and new product

performance, Song et al. (1997a) argue that the absence of asignificant direct effect of the external environment (includingtechnology change and market competitiveness) on both inter-functional cooperation and organizational facilitators (i.e., topmanagement support, evaluation and reward systems) impliesthat the external environment per se may moderate the NPDprocess rather than directly produce an effect. The moderatingrole of external forces was not, however, explicitly tested in theirstudy. While managers’ response to external forces may controlthe latter’s impact on the NPD process, for example, the firmincreases its level of competitive and market intelligence gather-ing, competitive intensity has also been shown to significantly,and negatively impact NPD outcomes, including product compe-titive advantage (e.g., Song and Parry, 1997a), or to weaken thepositive effect of product differentiation on new product perfor-mance (e.g., Song and Parry, 1997b). The potential negativemoderating influence of competitive intensity on the relationshipbetween NPD project coordination (routines) and implementationcapabilities (proficiencies) may also be argued on the basis thatcompetitive dynamics raises the difficulty with which accurateand timely information can be obtained, may render obsolete afirm’s formal NPD process (e.g., stage-gate project management)(Calantone et al., 1997). This may further increase the difficultyfor project team members to reach consensus, thus, increasing thepropensity for conflict and compromise in development activities.Therefore, in a hostile competitive climate, the propensity forestablished routines (i.e., interfunctional integration) to realizeexpected NPD process implementation capabilities will morelikely be reduced.

H2a. The association between cross-functional integration andmarketing proficiency is stronger when competitive intensity islow than when it is high.

H2b. The association between cross-functional integration andtechnical proficiency is stronger when competitive intensity islow than when it is high.


between technology synergy and technical proficiency

For survival, firms must strike a balance between the capacityto innovate, on the one hand, and to leverage existing organiza-tional resources (i.e., synergies), on the other. In the context ofNPD, however, several authors have highlighted the tensioninherent in balancing these two goals. For example, technologysynergy negatively impacts product innovativeness (Henard andSzymanski, 2001) and product innovativeness weakens the influ-ence of technology synergy on technical proficiency (Song andParry, 1999). Owing to the negative impact of competition onproduct advantage, for a given level of technology synergy, a


lower level of technical proficiency will be achieved whencompetitive intensity is high, even though firms, in highlycompetitive markets, are compelled to develop greater adeptnessin differentiating their offerings, while adapting resources to meetand maintain fitness with environmental changes (Johnson andScholes, 1988). Based on the notion that NPD resources canbecome core rigidities, reliance on existing technical knowledgeand resources, information processing structures, and NPD prac-tices/competencies, may inhibit learning mechanisms necessaryfor development of novel ideas (Cohen and Levinthal, 1990;Leonard-Barton, 1992; Levinthal and March, 1993).

H3. The association between technology synergy and technicalproficiency is stronger when competitive intensity is low thanwhen it is high.


between proficiency in marketing and technical activities and new

product launch success

In their study, Song and Parry (1997b) found that the associa-tion between product differentiation and new product perfor-mance was weakened in more intensely competitive markets. Inhighly competitive markets in which consumer preferences andexpectations are unstable and changing quickly, a new productintroduction that triggers aggressive responses from competitors,reduces the potential for highly differentiated new products(in terms of technical performance and ability to meet customers’needs) to gain commercial success. On the contrary, as shown bySong and Parry (1997a), competitive intensity is positively relatedto the firm’s level of competitor and customer intelligence,suggesting that firms’ response to such market conditions, is toescalate market-knowledge seeking efforts. A better-informedfirm will be able to utilize its market-specific knowledge to betteridentify and align marketing launch strategies to market environ-ments. A higher level of market intelligence is also expected tofuel the NPD project team’s capacity to effectively implementselected marketing strategies, hence further raising the chances oflaunch success (Cooper, 1994). Therefore, in highly competitivemarkets, a firm which more effectively executes NPD-relatedmarketing activities, based on good market and competitiveintelligence, is less likely to develop products with poor potential.These implementation capabilities are expected to meet customerneeds, wants, and preferences and to raise the actual performanceof the new product relative to competitors.

To achieve a desired level of new product success, firms alsohave to place greater emphasis on efficient implementation oftechnical activities (Iansiti and West, 1997; Itami and Numagami,1992). In particular, competition compels the firm to pursuecontinuous innovation (Peters, 1984). High quality execution oftechnical activities or efforts to align resources expended withenvironmental conditions determines optimal outcomes (e.g.,competitive advantage) (Grant, 1991), and may be expected toassure higher levels of commercial success. Therefore, whencompetition is intense, firms tend to reap higher levels of successfor the effort they place into quality execution/implementation ofappropriate strategies. In contrast, in less competitive markets,expending this level of effort may not yield the same level ofsuccess. In other words, it is likely for firms to enjoy higherreturns on investment in marketing and technical inputs whenthere is fierce rivalry than in the absence of such rivalry.

H4a. The association between marketing proficiency and newproduct launch success is stronger when competitive intensity ishigh than when it is low.

H4b. The association between technical proficiency and newproduct launch success is stronger when competitive intensityis high than when it is low.

3.5. The moderating role of technology change on the relationship

between marketing synergy and marketing proficiency

Technological change may result in new products that neverexisted before, are radical or even disruptive (Bower andChristensen, 1995), implying the creation of new product cate-gories, and the need for new channels of distribution and sellingefforts in order to successfully take new products to market,rendering obsolete existing marketing skills and resources forselected new product projects (Song and Montoya-Weiss, 2001).As shown by Song et al. (2005), environmental dynamics(e.g., technology turbulence) weaken the influence of market-ing-related capabilities on firm performance. Hence, the beneficialeffects of potential marketing synergies (i.e., fit between existingmarket knowledge and skills and the new product project) onmarketing proficiency can be easily undermined by changingtechnology. Or, the potential to leverage existing marketingsynergies is diminished due to changing technology. The market-ing effort even if well executed cannot fight the forces oftechnology, in a sense.

H5. The association between marketing synergy and marketingproficiency is stronger when technology change is low than whenit is high.


between cross-functional integration and proficiency in marketing

and technical activities

When technology change is high, NPD project managers facegreater uncertainty and may lack information concerning poten-tial application of emerging technology to the current develop-ment project. Impending changes to technology are also harder topredict if heightened competition and dynamic customer needsand wants render new products obsolete at an increasing pace(Kleinschmidt and Cooper, 1991). Moreover, perceptions of tech-nological uncertainty lead to more critical evaluations of informa-tion exchanged between functional managers in the project team,in turn, this increases the potential for inefficiencies and conflictsin development activities (Song and Montoya-Weiss, 2001). Iftechnological environments are changing rapidly and reflect highuncertainty, the NPD team’s efforts for joint information proces-sing among organizational subunits during the NPD process toderive a high level of development proficiency from leveringsynergies and stronger structural integration may be impededbecause there is a negative interaction effect between inter-functional conflict and the use of collaboration on new productperformance (Xie et al., 1998). Thus, the beneficial effects ofcross-functional integration on proficiency in marketing andtechnical activities may be attenuated in conditions of hightechnology change. Hence,

H6a. The association between cross-functional integration andmarketing proficiency is stronger when technology change is lowthan when it is high.

H6b. The association between cross-functional integration andtechnical proficiency is stronger when technology change is lowthan when it is high.



between technology synergy and technical proficiency

In the presence of technological turbulence, firms are com-pelled to increase their information search and processing effortsto reduce technical uncertainty (Moorman and Miner, 1997).Involving changes in core concepts for product innovativeness,technological resources and capabilities have a stronger positiverelationship to radical innovation than marketing resources andcapabilities (Di Benedetto et al., 2008). However, increases inproduct innovativeness weaken the relationship between tech-nology synergy and technical proficiency (Song and Parry, 1999).Song and Montoya-Weiss (2001) also found that technologyturbulence weakens the influence of technology synergy ontechnical proficiency. Although firms may be pressured todevelop new technological capabilities, leading to innovation(Di Benedetto et al., 2008), information-processing activities(such as information acquisition, interpretation, transmission,storing, retrieving, and use) may be limited, as NPD resourcesmay become core rigidities (Leonard-Barton, 1992; Liebermanand Montgomery, 1988; Prahalad and Hamel, 1990; Teece et al.,1997). Therefore, the benefits of technology synergies and theirpositive impact on technical proficiency may not be as high whentechnology is rapidly changing due to incumbent inertia.

H7. The association between technology synergy and technicalproficiency is stronger when technology change is low than whenit is high.


between proficiency in marketing and technical activities and new

product launch success

Rapidly changing technological environments imply that thereis no dominant supplier or leader in an evolving industry. Thiscreates more windows of opportunity and potential niches atwhich innovative new products, offering a tremendous leap invalue, can be targeted (Drucker, 2002; Kim and Mauborgne, 2004).Rapid technological change calls for higher levels of marketinginput to the NPD project due to the need for assiduous informa-tion-gathering and adaptation to changing market/customer needs(Muralidharan, 1999, 2003). In conditions of high technologychange, companies, which find and exploit new product andmarket opportunities, are more likely to undertake really new orradical innovations (Lichtenthaler and Ernst, 2009). A projectteam’s implementation capabilities in terms of marketing activities(e.g., segmentation, targeting, pricing, and advertising), enable the

Table 2Sample characteristics.

Firm Descriptors Level

Number of company employees Less than 250

251–500

501–1000

1001–1500

1501–3000

3001–5000

Over 5000

Type of industry sector Metals and fabricated metal products

Computers, electrical and electronics

Motor vehicles and other transport equipm

Chemicals and chemical products

Machinery and mechanical equipment

Refined petroleum, rubber and plastic pro

Food, beverages, textiles and paper produ

firm to better implement its marketing programs, which was foundto underpin radical innovation in US and Japanese companies(Di Benedetto et al., 2008). In addition, a project team’s technicalimplementation capabilities or proficiencies (e.g., product devel-opment, production, and manufacturing activities) allow a firmto maintain costs and/or achieve product differentiation(Di Benedetto et al., 2008) leading to product profitability andnew product success (Song and Parry, 1997a). For really newproducts, working to improve proficiency in strategic planning,technical development, and commercialization increases new pro-duct profitability (Song and Montoya-Weiss, 1998). Arguably, thecapacity of staff to execute technical activities to a high level ofproficiency increases success rate despite the prevailing complex-ity and uncertainty in the technological environment.

H8a. The association between marketing proficiency and newproduct launch success is stronger when technology change ishigh than when it is low.

H8b. The association between technical proficiency and newproduct launch success is stronger when technology change ishigh than when it is low.

4. Methodology

4.1. Sample and data collection

Respondents were drawn from Korean manufacturing compa-nies. We collected data using the drop-and-collect survey (DCS)method, which involved one of the authors in personally deliver-ing the survey instrument (questionnaire) and collecting thecompleted questionnaire (e.g., Ibeh et al., 2004). We focused onmanufacturing (non-service) industries and randomly selectedcompanies that engage in NPD from the databases of the KoreaChamber of Commerce and Industry (KCCI), which yielded a poolof 447 companies. Of 336 firms that had initially agreed toparticipate, data on 244 firms were collected. 12 cases withincomplete answers were eliminated, yielding a final total of232 completed, usable questionnaires (a 52% response rate),which contributed to the ensuing data analysis. FollowingArmstong and Overton (1977), a non-response bias check wasconducted by comparing early and late respondent scores on theincluded constructs. We found no non-response bias among ourrespondents (p4 .05). Table 2 provides summary statistics of thestudy sample.

Frequency Total Mean

23 (9.9%) N¼232 (100%) 4707

22 (9.5%)

49 (21.1%)

47 (20.3%)

33 (14.2%)

33 (14.2%)

25 (10.8%)

34 (14.7%) N¼232 (100%) –

50 (21.5%)

ent 32 (13.8%)

45 (19.4%)

23 (9.9%)

ducts 18 (7.8%)

cts 30 (12.9%)

Table 3Correlations and summary statistics of the study constructs and control variables.

Construct 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. Marketing synergy 1.00

2. Cross-functional integration .48nn 1.00

3. Technology synergy .58nn .56nn 1.00

4. Marketing proficiency .57nn .48nn .60nn 1.00

5. Technical proficiency .55nn .52nn .62nn .55nn 1.00

6. New product launch success .45nn .37nn .49nn .45nn .44nn 1.00

7. Competitive intensity � .06 � .02 � .05 .03 .14n� .01 1.00

8. Technology change .11 .04 .07 .04 � .01 .04 .06 1.00

9. Firm size .12 � .01 .13 .02 � .07 .18nn .10 .05 1.00

10. Industry dummy 1 .01 .06 .05 .01 .01 .01 .01 .32nn .03 1.00

11. Industry dummy 2 � .04 � .05 � .13 � .13n� .14n

� .05 .01 � .02 .03 � .21nn 1.00

12. Industry dummy 3 .01 � .09 � .05 .04 .07 .02 .02 � .06 � .08 � .26nn� .20nn 1.00

13. Industry dummy 4 � .04 .08 .09 � .02 .05 � .11 .12 � .10 .18nn� .17nn

� .13n� .16n 1.00

14. Industry dummy 5 � .07 � .07 .06 � .12 � .01 .06 � .18nn� .03 .02 � .15n

� .12 � .14n� .10 1.00

15. Industry dummy 6 .04 � .06 .01 .06 � .04 .06 .11 � .01 � .03 � .20nn� .15n

� .19nn� .13 � .11 1.00

Mean 4.35 5.06 4.90 4.42 5.40 4.43 5.38 3.70 7.26 .22 .14 .19 .10 .08 .13

Standard deviation 1.09 1.11 1.07 1.20 1.06 1.20 1.41 1.16 1.40 .41 .35 .40 .30 .27 .34

Composite reliability .83 .82 .92 .79 .75 .86 .80 .77 – – – – – – –

Average variance extracted .61 .61 .78 .65 .60 .67 .58 .54 – – – – – – –

Number of items 3 3 3 2 2 3 3 3 – – – – – – –

Note: all significance tests are two-tailed. New product launch success was measured along a seven-point Likert scale, from 1¼very unsuccessful, to 7¼very successful. All

other constructs were measured along seven-point Likert scales, ranging from 1¼strongly disagree, to 7¼strongly agree. Firm size is the natural log of the number of

employees of the firms. Six industry dummies were created (dummy 1¼computers, electrical and electronics, dummy 2¼motor vehicles and other transport equipment,

dummy 3¼chemicals and chemical products, dummy 4¼machinery and mechanical equipment, dummy 5¼refined petroleum, rubber, and plastic products, and dummy

6¼food, beverages, textiles, and paper products) with the metals and fabricated metal products industry acting as the base group.

n po .05.nn po .01.


4.2. Questionnaire development

A questionnaire was first developed in English and thentranslated into Korean using a professional translator. Afterdeveloping the Korean-version questionnaire, it was translatedback into English (Craig and Douglas, 2000). There were no criticaldifferences found between the two versions, hence confirmingequivalence. A draft questionnaire, prepared using well-estab-lished scales drawn from the relevant literature, was subjected toa pre-test. We contacted a random selection of 33 NPD managersfrom a list of 100 Korean-based firms operating in a variety ofmanufacturing industries in order to test the reliability andvalidity of the measures with a small sample. The results of theKorean-based pre-test indicated that measures loaded strongly ontheir corresponding constructs and showed an acceptable level ofreliability.

4.3. Measures

Dependent, independent and moderator variables: we operatio-nalized the key constructs in our conceptual framework usingmulti-item scales. The Appendix contains a description ofresponse formats and specific items for the multi-item scales.Marketing synergy was measured with a eight-item scale takenfrom Song and Parry (1997b) and Song and Montoya-Weiss(2001). Cross-functional integration was a four-item scale adoptedform Song and Parry (1997a,b) and Song and Montoya-Weiss(2001). Technology synergy was a six-item scale adopted fromSong and Parry (1997b). Marketing proficiency and Technical

proficiency were each measured using six-item scales, bothadopted from Song and Parry (1997a) and Song and Montoya-Weiss (2001). New product launch success was a ten-item scale(i.e., profit, sale and market share), taken from Song and Parry(1997b). Competitive intensity was measured with a four-item,adapted from Song and Parry (1997b). There are few studies thathave examined the moderating effect of technology change inrelation to new product success, a notable exception being studies

by Song and Montoya-Weiss (2001). Thus, we adopted the latter’sfive-item technology change scale. New product launch successwas measured along a seven-point Likert scale, from 1¼veryunsuccessful, to 7¼very successful. All other constructs weremeasured along seven-point Likert scales, ranging from1¼strongly disagree, to 7¼strongly agree.

Control variables: to eliminate potential confounds, we controlfor firm size and industry type, both of which are commonlyfound to influence the outcome of NPD activities. The importanceof firm size in innovation and NPD research has been welldocumented (Chandy and Tellis, 2000; Tatikonda and Montoya-Weiss, 2001). We measure firm size using the natural logarithmictransformation of the number of employees in a firm. To controlfor industry effects (e.g., Lichtenthaler, 2007), six industry dum-mies were created (computers, electrical and electronics, motorvehicles and other transport equipment, chemicals and chemicalproducts, machinery and mechanical equipment, refined petro-leum, rubber, and plastic products, and food, beverages, textiles,and paper products) with the ‘metals and fabricated metalproducts’ industry being used as the base group.

5. Data analysis and results

First, the psychometric properties (reliability, convergent, anddiscriminant validity) of the constructs used in the research modelwere evaluated following Churchill (1979) and Anderson andGerbing (1988). Second, to further evaluate the reliability of themeasures employed, and their convergent and discriminant valid-ity, we used confirmatory factor analyses (CFA). Then, the moder-ating hypotheses were tested using hierarchical moderatedregression analysis (Aiken and West, 1991). This is appropriatebecause the sample size should always be more than 10 times thenumber of free model parameters (MacCallum et al., 1996;Marcoulides and Saunders, 2006) to use multi-group structuralequation modeling (SEM). We ran an initial regression with thecontrol, the predictor and the moderator variables to determine


their main effects (respectively, the first, second, and third models).The hypothesized interactions were added to the fourth model, thusproviding a test of the moderation hypotheses (see Tables 4–6).

5.1. Reliability and validity of the measurement scales

The reliability of all the scales used in the research wasinitially calculated using Cronbach’s a coefficient. The internalreliability for all the scales was acceptable, ranging from .81 for

Table 4Results of hierarchical moderated regression—marketing proficiency.

Marketing profi

b (t-value)

Model 1a

Firm size .04a (.61)

Industry dummy 1 � .13 (�1.37)

Industry dummy 2 � .22n (�2.59)




Industry dummy 6 � .05 (� .58)

Marketing synergy

Cross-functional integration


Technology change

Competitive intensity�marketing synergy (H1)Competitive intensity� cross-functional integration (H2a)Technology change�marketing synergy (H5)Technology change� cross-functional integration (H6a)R2 .05

Adjusted R2 .02

DR2 .05

F 1.60

aStandardized beta values are reported.

y Significant at po .1.n Significant at po .05.nn Significant at po .01.

Table 5Results of hierarchical moderated regression—technical proficiency.

Technical profi

b (t-value)

Model 2a

Firm size .07a (1.07)




Industry dummy 4 .03 (.33)



Cross-functional integration

Technology synergy


Technology change

Competitive intensity� cross-functional integration (H2b)Competitive intensity� technology synergy (H3)Technology change� cross-functional integration (H6b)Technology change� technology synergy (H7)R2 .04

Adjusted R2 .01

DR2 .04

F 1.19



competitive intensity to .95 for new product launch success,indicating satisfactory internal consistency for the measurements(Nunnally, 1978). For the measurement model, the CFA using theLISREL program was performed on the entire set of itemssimultaneously (Anderson et al., 1987). The model indicates thatw2¼287.41 (degree of freedom¼181, p¼ .000). Following an

alternative to w2 (i.e., w2/df ratio) proposed by Byrne (1998), thefinal model is adequate: w2/df ratio¼1.59 (i.e., less than 2), withgood overall model fit indices (RMSEA¼ .050, GFI¼ .898,NNFI¼ .945, and CFI¼ .957).

ciency

Model 1b Model 1c Model 1d

.02 (.29) � .02 (� .38) � .01 (� .20)

� .06 (� .75) � .05 (� .63) � .02 (� .29)

� .22y (�1.71) � .12y (�1.69) � .10 (�1.45)

.01 (.09) .01 (.07) � .00 (� .03)

� .05 (� .77) � .06 (� .85) � .05 (� .81)

� .10 (�1.47) � .09 (�1.31) � .08 (�1.23)

.02 (.33) .02 (.25) .04 (.58)

.42nn (6.83) .43nn (6.86) .45nn (7.21)

.28nn (4.46) .27nn (4.42) .26nn (4.19)

.06 (1.01) .05 (.88)

� .02 (� .38) .01 (.08)

� .14n (�2.27)

.09 (1.49)

� .11y (�1.89)

.03 (� .50)

.39 .40 .43

.37 .36 .39

.34 .01 .04

15.51nn 12.74nn 1.62nn

ciency

Model 2b Model 2c Model 2d

.03 (.47) .01 (.19) .02 (.35)

� .05 (� .64) � .05 (� .61) � .05 (� .70)

� .08 (�1.13) � .08 (�1.27) � .08 (�1.28)

.07 (.95) .05 (.76) .04 (.63)

� .02 (� .37) � .05 (� .81) � .06 (� .90)

� .03 (� .51) � .01 (� .15) � .02 (� .32)

� .04 (� .55) � .06 (� .97) � .07 (�1.13)

.26nn (4.09) .25nn (4.13) .25nn ( 4.21)

.46nn (7.38) .48nn (7.47) .47nn ( 7.68)

.18nn (3.54) .18nn ( 3.52)

� .04 (� .82) � .01 (� .21)

.03 (.44)

� .10y (�1.67)

� .18nn (�2.94)

.05 (.79)

.43 .46 .49

.41 .43 .46

.39 .03 .03

18.03nn 16.68nn 13.54nn

Table 6Results of hierarchical moderated regression—new product launch success.

New product launch success

b (t-value)

Model 3a Model 3b Model 3c Model 3d

Firm size .22ann (3.15) .19nn (3.30) .20nn (3.38) .17nn (2.94)

Industry dummy 1 � .04 (� .40) .02 (.29) .01 (.10) .01 (.06)

Industry dummy 2 � .08 (� .90) .06 (.78) .06 (.82) .08 (.99)

Industry dummy 3 � .00 (� .01) .03 (.38) .03 (.39) .02 (.25)

Industry dummy 4 � .16y (�1.84) � .14y (�1.96) � .13y (�1.79) � .13y (�1.81)

Industry dummy 5 .01 (.11) .09 (1.32) .07 (1.03) .05 (.65)

Industry dummy 6 .03 (.33) .06 (.80) .07 (.93) .07 (.89)

Marketing proficiency .35nn (4.81) .33nn (4.63) .33nn (4.65)

Technical proficiency .25nn (3.52) .27nn (3.77) .28nn (3.89)

Competitive intensity � .09 (�1.48) � .06 (�1.01)

Technology change .07 (1.20) .07 (1.23)

Competitive intensity�marketing proficiency (H4a) .17n (2.41)

Competitive intensity� technical proficiency (H4b) � .09 (�1.37)

Technology change�marketing proficiency (H8a) .01 (.16)

Technology change� technical proficiency (H8b) .12y (1.79)

R2 .06 .33 .34 .37

Adjusted R2 .03 .30 .30 .32

DR2 .06 .27 .01 .03

F 1.97y 11.33nn 9.68nn 7.82nn




The scale composite reliability for each construct was satisfac-tory (i.e., CRZ values ranged from .75 to .92) (Fornell and Larcker,1981). The AVE (average variance extracted) for each constructranged from .54 to .78, exceeding the acceptable level of .50,while the shared variance between two constructs (i.e., squaredcorrelation) is lower than each construct’s AVE (Fornell andLarcker, 1981), suggesting discriminant validity. This study exam-ined the fit of a model in which all indicators loaded on one factor(w2(209)¼1264.85). The measurement model (w2(181)¼287.41)was found to fit the data significantly better than the one factormodel (i.e., change in w2

¼977.44, change in df¼28, po .001)(Brockman and Morgan, 2006). This result also demonstrates thatthe probability of common method variance occurring is mini-mized and common method bias was not a serious problem inthis study. Table 3 reports correlation matrix and summarystatistics of the study constructs and control variables.

5.2. Hypotheses testing

The results for Hypothesis 1 are shown in Table 4 Model 1dincluded the interaction term (competitive intensity�marketingsynergy) to test for the conditions of competitive intensity onmarketing synergy. The significance of the interaction termvariable is shown by its t-statistic (�2.27; Po .05). These resultssupport Hypothesis 1. Regarding Hypothesis 2a, model 1d inTable 4 shows the insignificance of the interaction term (compe-titive intensity� cross-functional integration) as shown by itst-statistic (1.49; p¼ .14), fails to provide support for Hypothesis 2a.The results for Hypothesis 2b are presented in Table 5. Model 2dincluded the interaction term (competitive intensity� cross-func-tional integration) to test for the conditions of competitiveintensity on cross-functional integration relationship, failing toprovide support for Hypothesis 2b. In the case Hypothesis 3, theinteraction term is significant (t-statistic¼–1.67; Po .10), sup-porting Hypothesis 3 (see Table 5). The results for Hypothesis 4aare presented in Table 6. Model 3d included the interaction term

(competitive intensity�marketing proficiency) to test for theconditions of competitive intensity on marketing proficiency.The significance of the interaction term variable is shown by itst-statistic (2.41; Po .05), supporting Hypothesis 4a. RegardingHypothesis 4b, model 3d in Table 6 shows the insignificance ofthe interaction term (competitive intensity� technical profi-ciency) as shown by its t-statistic (�1.37; p¼ .17), fails to providesupport for Hypothesis 4b. In the case Hypothesis 5, the interac-tion term (technology change�marketing synergy) is significant(t-statistic¼–1.89; Po .10), supporting Hypothesis 5 (seeTable 4). Regarding Hypothesis 6a, model 1d in Table 4 showsthe insignificance of the interaction term (technology chan-ge� cross-functional integration) as shown by its t-statistic(� .50; p¼ .62), fails to provide support for Hypothesis 6a. Theresults for Hypothesis 6b are given in Table 5. Model 2d includedthe interaction term (technology change� cross-functional inte-gration) to test for the conditions of technology change on cross-functional integration relationship, supporting Hypothesis 6b. Inthe case Hypothesis 7, model 2d in Table 5 shows the insignif-icance of the interaction term (technology change� technologysynergy) as shown by its t-statistic (.79; P¼ .43), fails to providesupport for Hypothesis 7. In the case Hypothesis 8a, the interac-tion term (technology change�marketing proficiency) is insig-nificant (t-statistic¼ .16; P¼ .87), failing to provide support forHypothesis 8a (see Table 6). Regarding Hypothesis 8b, model 3din Table 6 shows the significance of the interaction term as shownby its t-statistic (1.79; Po .10), supporting Hypothesis 8b.

6. Discussion

This study examined the moderating effects of two externalenvironment variables (competitive intensity and level of tech-nology change) on the relationships between key determinants ofNPD and new product launch success. Our results show thatmarketing synergy results in weaker marketing proficiency, when


competitive intensity is high than when it is low [H1]. There arelimitations to developing new products based on an expansion ofthe existing marketing knowledge and resources when competi-tion is strong, possibly because many essential resources forsatisfying customer needs lie outside the firm’s boundaries (Dozand Hamel, 1998). In addition, our results show that competitiveintensity weakens the influence of technology synergy on tech-nical proficiency [H3]. Furthermore, the results show that com-petitive intensity exhibited a significant, positive direct effect ontechnical proficiency, reinforcing the notion that competitiveintensity, in compelling the firm to better understand whatproduct functions and attributes are more preferable (Day,1994), and to foster continuous innovation (Peters, 1984; Songand Parry, 1997a), yields higher levels of proficiency in technicalactivities. However, while firms may face greater pressure todrastically modify their product or to launch innovative newproducts, in highly competitive markets, firms’ capacity to effi-ciently develop unique and superior products through applyingnew, advanced technology may be impeded. Although companiesscale up efforts to enhance NPD proficiencies, in the face ofaggressive competitor responses, marketing and technologysynergies lower proficiency in development activities becausecompetitors are more likely to react faster and deeply embeddedmarketing and technical knowledge and resources may lead toincumbent inertia or core rigidity.

The results also suggest that technology change weakens theinfluence of marketing synergy on marketing proficiency [H5].Technology change can reduce the value of prior marketingknowledge and resources, reducing management’s ability to makeaccurate predictions of consumer preferences and subsequenttimely response. When shifts in technology are frequent ordramatic, consumers have difficulty in articulating what theyneed or want. Thus, translating consumer preferences into pro-duct specifications may be more complex and challenging (Songand Montoya-Weiss, 2001), while rendering obsolete existingknowledge and resources. Our result is similar to that of Songand Montoya-Weiss (2001), which shows that marketing synergyhas a significantly weaker effect on marketing proficiency underhigh perceived technological uncertainty.

However, the results do not lend support to the proposedmoderating effect of technology change on the positive impact oftechnology synergy on technical proficiency [H7]. Technology istheoretical and practical knowledge, skills and artifacts that canbe used to develop products and services as well as theirproduction and delivery systems (Burgelman et al., 1996). Ingeneral, higher levels of technology synergy enhance absorptionof information and usage of practices related to existing compe-tencies through the very same experience-based structures(Cohen and Levinthal, 1990), whereas when technology changeis high, identifying and translating customer needs into producttechnical specifications may require technical skills or knowledgedifferent to that required when technologies are stable (Song andMontoya-Weiss, 2001), implying that there is no moderatingeffect of technology change on the influence of technologysynergy on technical proficiency, because the potential, negativeeffect of incumbent inertia or core rigidity may counteract thepotential, positive effects of technology synergy on technicalproficiency, when technology change is high.

Our results show that technology change weakens the influ-ence of cross-functional integration (i.e., routines) on technicalproficiency [H6b]. High technological change tends to increasethe difficulty of reaching consensus and may increase the pro-pensity for conflict in technical activities (Song and Montoya-Weiss, 2001). Under such circumstances, conflict may, in turn,reduce the team’s capacity to proficiently carry out technicalactivities. In terms of the important role of sources of ideas and

knowledge for NPD in preventing organizational inertia, the effectof organizational coordination/openness relative to that of closedinnovation (i.e., R&D performed internally in the company withlittle or no contacts to other employees or external partners) onNPD performance (e.g., the quality of the product) has beenshown to be insignificant (Knudsen and Mortensen, 2011). Thelatter study suggests that even with increasing openness, theprojects are slower and carry higher cost compared to expecta-tions and/or to the typical project in the firm. Moreover, whentechnological turbulence is high, the effect of project inflexibilityon learning failure is worsened (Kettunen, 2009; Sethi and Iqbal,2008). In addition, organizational structure/culture influences afirm’s strategy as well as its processes (Belassi et al., 2007). One ofthe structural characteristics of Korean companies is centraliza-tion, which refers to the hierarchy of authority and degree ofparticipation in decision making (Aiken and Hage, 1968; Redding,2001). Centralization, and accompanying barriers to information-flow, can reduce the initiatives that a unit might take in inter-unitexchange, thus impeding dissemination and utilization of infor-mation and hindering idea generation (e.g., Kohli and Jaworski,1990; Menon and Varadarajan, 1992; Troy et al., 2001; Tsai,2002). Hierarchical, top-down communications encourage work-ers to adhere to established norms, while discouraging creativityand risk-taking (Li, 1999). Although tighter inter-functional coor-dination may offer opportunities for integrating diverse informa-tion and perspectives, in highly unpredictable, intenselycompetitive, and rapidly changing technology environments, theexpediency of project teams in sampled companies to executeNPD activities (i.e., technical proficiency) may be limited due tothe aforementioned structural constraints.

Contrary to our expectations, there is no moderating effect ofcompetitive intensity on the relationship between cross-func-tional integration and both marketing and technical proficiency[H2a and H2b respectively] and there is no moderating effect oftechnology change on the relationship between cross-functionalintegration and marketing proficiency [H6a]. When externalenvironments are turbulent, there is greater need for effectiveinformation-processing activities, including information acquisi-tion, interpretation, transmission, storage, retrieval, and usage(Glazer, 1991; Ottum and Moore, 1997), the proclivity for higherlevels of cross-functional cooperation and interaction may serve toelevate development proficiency whereas increasing conflictsamong functions may decrease integrated cross-functional effec-tiveness for information-related activities. Thus the potential,negative effect of interfunctional conflict or a negative interactionbetween interfunctional conflict and collaboration may counteractthe potential, positive effect of integrated cross-functional inputon development proficiency.

As hypothesized, competitive intensity strengthens the posi-tive impact of marketing proficiency on new product launchsuccess [H4a]. In intensely competitive markets, marketing pro-ficiencies are paramount in enabling the firm to gain and sustain acompetitive advantage, in the face of heightened pressure toaccelerate new product introduction (Li, 1999) and to persuadetarget customers to adopt its new product over those of itscompetitors (Li et al., 1999). Moreover, a company faces greaterpressure to develop products of a higher quality than competingoffers. Adept firms will place greater emphasis on early andpreliminary market (i.e., consumers and competitors) assess-ments to gage technical and manufacturing feasibility, marketsize and acceptance, and commercial potential (Cooper, 1995).Importantly, our findings affirm the notion that quality of market-ing execution is a necessity for successful new product launchsuccess, but, the returns are magnified in highly competitiveenvironments. In a sense, our findings suggest that competitionmay bring out the best in marketing and it pays.


However, our results do not support the proposed hypothesisthat competitive intensity strengthens the positive impact oftechnical proficiency on new product launch success [H4b]. Whilecompetitive intensity may spur firms to step up their marketingefforts and hence achieve higher levels of new product launchperformance, technical proficiencies may not bring similar divi-dends in terms of higher levels of new product launch success.Superior or improved levels of technical (be it process or product)related efficiencies are insufficient to improve launch outcomeswhen competition is fierce, but only to maintain success atplanned levels. As such, we neither observed a lowering norincrease in the positive impact of technical proficiency on newproduct success. Moreover, although competition may forcecompanies to enhance product innovativeness to satisfy consu-mer preferences, product innovativeness does not necessarilyresult in enhanced product advantage (Kleinschmidt andCooper, 1991). Innovativeness weakens the influence of technicalproficiency on product advantage (Song and Parry, 1999). Thefindings support the notion that technical proficiency may poten-tially yield a technologically superior product, but commercialsuccess is not always assured (Cooper, 1979). The development ofnew, emerging, especially state-of-the-art, technology entails ahigh level of risk, while requiring substantial investment (Sorescu,et al., 2003; Wind and Mahajan, 1997). In highly competitivemarkets, such risk and investment in securing technologicalsuperiority may possibly attenuate the potential to leveragetechnical proficiencies to improve product launch success.

The results do not lend support to the proposed moderatingeffect of technology change on the positive impact of marketingproficiency on new product launch success [H8a]. When technol-ogies are evolving rapidly, potential users cannot compare emer-ging new offerings with existing alternatives or similar offeringsin the market; and, they are often unable to envision the potentialentailed in a highly innovative new offering (Veryzer, 1998). Forreally innovative offerings, customer needs are often unspecified,and thus an emphasis on business and market opportunityanalysis could be ineffective and undesirable (Lynn et al., 1996).These findings suggest that, under high technology change, thereare limits to the extent that extra investment in market knowl-edge (and higher proficiency in marketing activities) will pay offin additional new product success.

As hypothesized, technology change strengthens the positiveimpact of technical proficiency on new product launch success[H8b]. Dynamic technological environments may offer greateropportunity for harnessing the returns on firms’ investmentin technical proficiencies during NPD. If technologies are notestablished and still evolving, there is greater chance for a winnerto emerge because a dominant technology has not as yet arisen.Technological shifts in the environment generate uncertaintybecause they increase firm-level competition as technologicallysuperior firms attempt to displace incumbents with outmodedtechnologies (Buganza and Verganti, 2006; Kotha and Nair, 1995).Although developing products in a technologically turbulentenvironment may be challenging, with rapid and unpredictableshifts in the technology during the development time windowdemanding continuous and expensive project adaptation (Buganzaand Verganti, 2006), greater intensity of technical related activities(such as efforts to understand new technology and anticipation oftechnical problems) prior to development greatly reduces technicalrisks and uncertainties inherent in NPD projects (Cooper andKleinschmidt, 1995; Song and Montoya-Weiss, 2001; Song andParry, 1997a,b; Verworn et al., 2008). This helps a firm to moreeffectively respond to technological change and enhance the odds ofsuccess (Verworn et al., 2008). Under conditions of rapid technologychange, heightened attention to technical activities also enables thefirm to increase competitive advantage based on superior product

attributes (Pisano, 1994; Song and Montoya-Weiss, 2001). The moretechnical risks or uncertainties can be reduced during the NPDprocess, the lower the likelihood of deviations from technicalspecifications/requirements, hence improving the chances of pro-duct development success. Thus, the firms that are motivated todevelop superior ability to implement technical activities are morelikely to maximize returns when technology change is high.

7. Implications and conclusions

Our study contributes to the literature in several ways. Thefindings reaffirm the importance of adopting a contingencyperspective in examining links between key determinants ofNPD and new product launch success and reinforce Song andhis colleagues’ works on NPD process and the relationshipbetween capabilities and performance. The results from our studysuggest that external environments weaken the positive impactsof core capabilities such as functional-specific sources of advan-tages (resources) and project-specific sources of advantages(routines) on implementation capabilities (development profi-ciency) because of incumbent inertia or core rigidity. In particular,we examined the extent to which competitive intensity andtechnology change amplify the effects of implementation cap-abilities on overall new product launch success. In certain cases,firms can improve new product launch performance by seizingthe opportunity to capitalize on technological change and com-petitive climates: as our findings show, sample firms reportedhigher new product launch success when marketing activitieswere proficiently executed, in conditions of intense competitionand when technical activities were proficiently executed, inconditions of rapidly changing technology.

The theoretical framework and empirical results have severalmanagerial implications. First, the study draws managers’ atten-tion to the importance of improving marketing and technologysynergies and skills with particular emphasis on ongoing learningpractices and mechanisms for learning (e.g., market assessment,technology assessment, product testing, prototype testing, testmarketing, and launch assessment) in order to offset the negativeeffects of a firm’s embedded marketing and technology resourcesand knowledge on a project team’s implementation capabilities inthe NPD process in dynamic markets. Second, to increase newproduct launch performance in dynamic markets, managers shouldpay closer attention to improving the skills base of employees.Specifically, firms operating in intensely competitive marketsshould focus their efforts on raising proficiency in marketingactivities, while those in markets characterized by rapid technolo-gical change should focus their efforts on raising proficiency intechnical activities.

The study also has a number of limitations, which should betaken on board when interpreting the findings. Common methodvariance is an issue that survey research must always acknowl-edge. Although this bias was not found using the Harman’s singlefactor test (Podsakoff et al., 2003), future research should considerusing different sources of data to ensure to minimize commonmethod bias. Our study is subject to the limitations created byemploying a single respondent instead of multiple respondentsfrom participating firms. It may be beneficial to use multiplerespondents in future research to enhance validity and general-izability (Phillips, 1981). The problems of employing a cross-sectional design and collecting both independent and dependentvariables simultaneously at a given point of time could also beovercome using longitudinal studies (Slater, 1995). However, thelatter can be time-consuming and are not without their limitations.We focused on studying a limited number of variables. Additionalresearch will be useful to gain a better understanding of the


relationships uncovered in this study. Future investigations of theNPD process should consider additional moderators in the pro-posed relationships. For instance, industry munificence (or growth)may be important. In addition, internal, firm factors, such asorganizational structure (e.g., centralization and formalization)and firm size (e.g., large versus small firms), and product factors(e.g., high tech versus low tech product) may be importantmoderators in explaining the inter-relationships between compo-nents of the NPD and outcomes.

8. Appendix. Measurements

Marketing synergy (Song and Parry, 1997b; Song andMontoya-Weiss, 2001):

�
Our company’s marketing research skills were more thanadequate for this project. � Our company’s salesforce skills were more than adequate for
this project.
� Our company’s distribution skills were more than adequate for
this project.
� Our company’s advertising/promotion skills were more than
adequate for this project.
� Our company’s marketing research resources were more than
adequate for this project.
� Our company’s salesforce resources were more than adequate
for this project.
� Our company’s distribution resources were more than ade-
quate for this project.
� Our company’s advertising/promotion resources were more
than adequate for this project.

Cross-functional integration (Song and Parry, 1997a,b; Songand Montoya-Weiss, 2001):

�
The degree of integration between R&D and manufacturingwas high. � This product was developed from frequent interactions
between customers and our cross-functional product develop-ment team—it was a truly a cross-functional team effort.
� The degree of integration between marketing and R&D
was high.
� The degree of integration between manufacturing and market-
ing was high.

Technology synergy (Song and Parry, 1997b):

�
Our company’s R&D skills were more than adequate for thisselected project. � Our company’s engineering skills were more than adequate for
this selected project.
� Our company’s manufacturing skills were more than adequate
for this selected project.
� Our company’s R&D resources were more than adequate for
this selected project.
� Our company’s engineering resources were more than ade-
quate for this selected project.
� Our company’s manufacturing resources were more than
adequate for this selected project.

Marketing proficiency (Song and Parry, 1997a; Song andMontoya-Weiss, 2001):

�
Our company correctly determined market characteristics andtrends.
�
Our company correctly appraised competitors and their pro-ducts-both existing and potential. � Our company correctly identified ‘‘appeal’’ characteristics that
would differentiate and sell the product.
� Our company correctly executed test marketing programs in
line with the plans for commercialization.
� Our company correctly conducted a market study or market
research—a detailed study of market potential, customerpreferences, purchase process, etc.
� Our company correctly launched and introduced the product
into the marketplace-selling, promotion and distribution.

Technical proficiency (Song and Parry, 1997a; Song andMontoya-Weiss, 2001):

�
Our company correctly conducted preliminary engineering,technical and manufacturing assessments. � Our company correctly built the product to designated or
revised specifications.
� Our company correctly evaluated laboratory tests to deter-
mine basic performance against specifications.
� Our company correctly executed prototype or ‘‘in house’’
sample product testing.
� Our company correctly determined the final product design
and specifications.
� Our company worked continuously for cost reduction and
quality control.

New product launch success (Song and Parry, 1997b):

�
How successful was this selected project from an overallprofitability standpoint? � Relative to your firm’s other new products, how successful was
this selected project in terms of profits?
� Relative to competitors’ products, how successful was this
selected project in terms of profits?
� Relative to your firm’s objectives for this selected project, how
successful was this selected project in terms of profits?
� Relative to your firm’s other new products, how successful was
this selected project in terms of sales?
selected project in terms of sales?
successful was this selected project in terms of sales?
� Relative to your firm’s other new products, how successful was
this selected project in terms of market share?
selected project in terms of market share?
successful was this selected project in terms of market share?

Competitive intensity (Song and Parry, 1997b):

�
There were many competitors in target country-markets. � There was a strong, dominant competitor – with a large
market share – in target country-markets.
� Potential customers were very loyal to competitors’ products
in target country-markets.
� New product introductions by competitors were frequent in
target country-markets.

Technology change (Song and Montoya-Weiss, 2001):

�
The rates (speed and pace) of the changes in the technologyemployed in this project were very unpredictable. � The technology used in this product was changing rapidly.


�
The change in R&D technology for this project was veryunpredictable. � The technology involved in this project was an ‘‘undeveloped
science,’’ i.e., the technology was not well understood, thephenomena were not well-defined and the predictive state-of-the art was very low. There was much trial and error research.
� It was very difficult to predict where the technology used in
this product would be in the following 2–3 years.

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Dr. Keon Bong Lee is an Assistant Professor at School ofBusiness Administration, Korea University, Korea. Heobtained his doctoral degree from the Aston BusinessSchool, UK. His research interests include new productdevelopment, international marketing strategies andinternational new product launch. His work has appearedin International Marketing Review and Journal of BusinessResearch.

Dr. Veronica Wong is a Professor of Marketing at Uni-versity of Sussex, UK and Distinguished Professor Auden-cia Nantes, Ecole de Management, France. Her researchinterests include the marketing of innovations, productand brand development, international new productdevelopment and global marketing strategies, with parti-cular emphasis on high-technology environments. Shehas published numerous articles in refereed and profes-sional journals as well as contributions to research andmanagerial books. Her work has appeared in Journal ofProduct Innovation Management, Research Policy, Journal ofInternational Business Studies, Industrial Marketing Man-agement, International Marketing Review, and EuropeanJournal of Marketing among others.

Documents

Identifying the moderating influences of external environments on new product development process