From IT Leveraging Competence to Competitive Advantage in Turbulent Environments_ The Case of New Pr

Information Systems Research Vol.17,No.3,September2006,pp.198–227

issn1047-7047 eissn1526-5536 06 1703 0198

inf orms

?doi10.1287/isre.1060.0094

?2006INFORMS

From IT Leveraging Competence to Competitive Advantage in Turbulent Environments:The Case of New Product Development

Paul A.Pavlou

Anderson Graduate School of Management,University of California,Riverside,Riverside,California92521,

paul.pavlou@https://www.sodocs.net/doc/f117627456.html,

Omar A.El Sawy

Marshall School of Business,University of Southern California,Los Angeles,California90089,

elsawy@https://www.sodocs.net/doc/f117627456.html,

A burning question for information systems(IS)researchers and practitioners is whether and how IT can

build a competitive advantage in turbulent environments.To address this question,this study focuses on the business process level of analysis and introduces the construct of IT leveraging competence—the ability to effectively use IT functionalities.This construct is conceptualized in the context of new product development (NPD).IT leveraging competence is shown to indirectly in?uence competitive advantage in NPD through two key mediating links:functional competencies(the ability to effectively execute operational NPD processes)and dynamic capabilities(the ability to recon?gure functional competencies to address turbulent environments).Envi-ronmental turbulence is also shown to moderate the process by which IT leveraging competence in?uences competitive advantage in NPD.Empirical data were collected from180NPD managers.

Through the construct of IT leveraging competence,the study shows that the effective use of IT function-alities,even generic functionalities,by business units can help build a competitive advantage.The study also shows that the strategic effect of IT leveraging competence is more pronounced in higher levels of environ-mental turbulence.This effect is not direct:It is fully mediated by both dynamic capabilities and functional competencies.Taken together,these?ndings suggest that IS researchers should look beyond the direct effects of ?rm-level IT infrastructures and focus their attention on how business units can leverage IT functionalities to better recon?gure and execute business processes.In turbulent environments,focusing on these aspects is even more vital.

Key words:IT competence;information systems strategy;environmental turbulence;dynamic capabilities; functional competencies;IT-enabled business processes;new product development

History:Cynthia Beath,Senior Editor;N.Venkat Venkatraman,Associate Editor.This paper was received on May4,2004,and was with the authors81

2

months for4revisions.

1.Introduction

A key question for information systems(IS)researchers and practitioners is how IT can build a competitive advantage(Devaraj and Kohli2003),especially in turbulent environments(Sambamurthy et al.2003). Despite numerous studies that examine the strategic value of IT-related constructs on competitive advan-tage,1there are still debates about the strategic poten-tial of IT(Carr2003).

One source of these debates is the use of various broad IT-related constructs that precluded consis-

1For a review of studies on the strategic role of IT-related measures, see Kohli and Devaraj(2003).

tent,unambiguous,and readily comparable studies on the strategic role of the IT artifact.A related source of contention is the?rm level of analysis that may have obscured the effects of IT on spe-ci?c?rm processes.Also,the literature has predom-inantly viewed IT capability as arising from within the IT unit,alas ignoring the role of business users (or“clients”)to strategically leverage IT.To address these three sources of contention,this study develops

a process-level construct of IT following Ray et al.

(2005)who argue that a process(as opposed to a ?rm)level of analysis is the most appropriate level for observing the strategic effects of IT.Building on the IT capability literature,we introduce and develop 198

Figure1The Proposed Research Model

the construct of IT leveraging competence(the ability to effectively use IT functionalities to support IT-related activities)in the new product development(NPD) context.The proposed IT leveraging competence in NPD construct is de?ned as the ability of NPD work units to effectively use IT functionalities to support the units’IT-enabled NPD activities.NPD is an infor-mation and knowledge intensive process(Madhaven and Grover1998,Nambisan2003)and is likely to be facilitated by the effective use of IT functionalities. Having developed a speci?c construct of IT leverag-ing competence speci?cally for the NPD process by focusing on the IT capability of NPD work units out-side of the IT unit,we proceed to examine its impact on competitive advantage in different degrees of envi-ronmental turbulence.

Another open debate in the literature is whether IT-related constructs in?uence competitive advan-tage directly or indirectly(Wade and Hulland2004).2 Recent literature has questioned a direct impact of IT-related constructs on competitive advantage,argu-ing for the existence of mediating links(e.g.,Barua et al.1995,Devaraj and Kohli2003,Soh and Markus 1995).Extending this indirect view,we propose a research model to delineate the mechanisms by which IT leveraging competence in NPD helps build a com-petitive advantage in turbulent environments.We propose two NPD capabilities as missing links in the IT leveraging competence-competitive advantage relationship(Figure1).First,NPD functional compe-tencies(the ability to effectively execute operational NPD activities)are proposed to have a direct impact

2For a summary of papers on the direct and indirect effects of IT on competitive advantage,see Wade and Hulland(2004,p.125).on competitive advantage.Second,dynamic capabili-ties(the ability to integrate,build,and recon?gure existing functional competencies to address turbulent environments;Teece et al.1997)are hypothesized to have an indirect impact on competitive advantage in NPD by recon?guring NPD functional competencies. The paper proceeds as follows:Section2reviews the role of NPD capabilities(functional competencies and dynamic capabilities)in competitive advantage in NPD.Section3introduces and conceptualizes the proposed construct of IT leveraging competence in NPD.Section4explains how IT leveraging compe-tence indirectly in?uences competitive advantage in NPD through the two proposed NPD capabilities.Sec-tion5hypothesizes the moderating role of environ-mental turbulence in the proposed structural model. Section6describes the research methodology and the ?eld study used to test the proposed hypotheses,and §7presents the data analysis and results.Finally,§8 discusses the study’s contributions and implications for theory and practice.

https://www.sodocs.net/doc/f117627456.html,petitive Advantage in NPD

We have chosen the context of NPD to examine the relationship between IT leveraging competence and competitive advantage.NPD is the process of bringing a new product to market,including idea generation and idea screening,concept development and test-ing,business analysis,prototype and market testing, technical implementation,and plans for product com-mercialization and launch(https://www.sodocs.net/doc/f117627456.html,/ wiki/New_product_development).NPD is a strategic process wherein?rms integrate disparate inputs from R&D scientists,engineers,and marketers to jointly

Figure2Proposed Nature of NPD Functional Competencies

develop and launch new products(Clark and Fuji-moto1991).3

Competitive advantage in NPD is a more unam-biguous measure of competitive advantage than an aggregate?rmwide competitive advantage measure. As Ray et al.(2004,p.24)explain,“?rms can have a competitive advantage in some business activities and competitive disadvantages in others.”Therefore, competitive advantage in NPD is herein introduced as the study’s ultimate dependent variable,and the study is conducted at the process level with the NPD work unit as the unit of analysis,which can be either intra?rm or inter?rm(Sivadas and Dwyer2000). Competitive advantage in NPD is achieved by con-currently achieving product effectiveness(quality and innovativeness)and process ef?ciency(time to market and low cost)(Kusunoki et al.1998).Both process ef?ciency and product effectiveness have been indi-vidually linked to a?rm’s pro?tability(Henard and Szymanksi2001).The NPD literature has shown that successful NPD work units must offer an attractive combination of product cost and quality(Atuahene-Gima and Li2004,Brown and Eisenhardt1995,Clark and Fujimoto1991).

The NPD context has two types of NPD capabil-ities(functional competencies and dynamic capabili-ties;Danneels2002),which are proposed to in?uence competitive advantage in NPD,as explained below.

2.1.NPD Functional Competencies and

Competitive Advantage in NPD

The NPD literature views functional competencies as the basis on which new products are built(e.g.,Clark and Fujimoto1991).NPD functional competencies are de?ned as the ability to effectively execute operational NPD processes relative to the competition.

For simplicity,the key NPD functional competencies are customer,technical,and managerial competencies

3For a detailed literature review of the NPD literature,please see Krishnan and Ulrich(2001)and Brown and Eisenhardt(1995).(Danneels2002).First,customer competence involves understanding customer preferences,evaluating com-peting products,and formulating customer incentives. It requires pro?ciency in designing product sales, distribution,pricing,and advertising(Urban and Hauser1993).Second,technical competence involves evaluating the technical feasibility of new product designs,testing prototypes,and assessing technical speci?cations(Pisano1994).Third,managerial compe-tence involves monitoring progress,designing worker incentives,and managing con?icts.We conceptualize NPD functional competencies as a formative second-order model(Figure2).4A formative model is deemed appropriate as these three?rst-order NPD functional competencies facilitate or“form”the second-order overall NPD functional competence.Also,the three NPD functional competencies are complementary to each other(Nerkar and Roberts2004),and they cumu-latively combine to serve the overall purpose of devel-oping new products(Song et al.2005).Finally,because a change in any functional competence does not nec-essarily cause an equal change in the other compe-tencies,a re?ective model seems unlikely.Therefore,a formative second-order model is proposed.

The NPD and marketing literatures have shown that superior NPD functional competencies are the direct basis on which competitive new products are developed and competitive advantage in NPD is achieved(e.g.,Clark and Fujimoto1991,Song et al. 2005).NPD work units with superior functional com-petencies are capable of building technically supe-rior products that better meet customer needs(e.g., Kusunoki et al.1998,Song and Parry1997).In

4The relationship between?rst-and second-order constructs can be of two types—re?ective or formative.Re?ective structures assume that the latent second-order factor causes the?rst-order factors.For formative structures,the second-order factor is con-ceived to be caused by the?rst-order factors that each represents a unique contribution to the second-order factor(Chin1998).Please see Diamantopoulos and Winklhofer(2001)and Edwards(2001) for a review.

contrast,outdated functional competencies(or“rigid-ities”)(Leonard-Barton1992)result in poor process ef?ciency and product effectiveness,and thus result in inferior new products.

In summary,there is substantial theoretical and em-pirical evidence in the NPD and marketing literatures that superior NPD functional competencies serve as the platform for competitive advantage in NPD(e.g., Song et al.2005).Because NPD functional compe-tencies are herein captured relative to the competi-tion,competitive advantage in NPD denotes developing products superior to those of the competitors. Hypothesis1A(H1A).Superior NPD functional com-petencies positively in?uence competitive advantage in NPD.

2.2.Dynamic Capabilities,Functional

Competencies,and Competitive Advantage

In contrast with functional competencies,which help ?rms undertake the operational day-to-day NPD activities,dynamic capabilities are strategic processes whose objective is to shape functional competencies.5 Dynamic capabilities have been de?ned as“the abil-ity to integrate,build,and recon?gure internal and external competencies to address rapidly changing environments”(Teece et al.1997,p.517).Dynamic capabilities have been viewed as strategic options (Kogut and Zander1996),which allow?rms to shape their existing functional competencies when the opportunity or need arises.

In NPD,dynamic capabilities help?rms recon?g-ure existing NPD functional competencies so they can build products that better match emerging customer needs and take advantage of technological break-throughs(Iansiti and Clark1994).In other words, NPD dynamic capabilities help?rms select the right product concept and shape their requisite NPD func-tional competencies to operationally develop the product right.

5Both dynamic capabilities and functional competencies are com-posed of a complementary set of resources that re?ect the effec-tiveness in executing business processes.While NPD capabilities and NPD competencies are used interchangeably in this paper,for clearness,we use the term capabilities for dynamic capabilities and competencies for functional ones.

Pavlou and El Sawy(2006)identify?ve processes that constitute dynamic capabilities in NPD:recon-?guring resources to better match the environment, sensing the environment,learning,coordinating activ-ities,and integrating interaction patterns.These?ve processes are conceptualized as a two-level frame-work that distinguishes between the goal recon-?guration process and the four enabling processes (sensing,learning,coordinating,integrating),whose role is to enable the goal recon?guration process. Since capabilities and competencies re?ect the effec-tiveness in executing business processes(Nelson and Winter1982),the effectiveness in executing these ?ve processes is driven by a set of capability con-structs.Effectively executing the recon?guration pro-cess is operationalized with a second-order construct of recon?gurability.Effectively sensing the environ-ment is re?ected by market orientation(Kohli and Jaworski1990),effectiveness in learning by absorp-tive capacity(Cohen and Levinthal1990),effective coordination by coordination capability(Malone and Crowston1994),and integrating interaction patterns by collective mind(Weick and Roberts1993).A formative model(Figure3)is proposed to model dynamic capabilities because each?rst-order capabil-ity is posited to enable or“form”the second-order recon?gurability construct.Also,the?rst-order capa-bilities are inherently dynamic,and a change in a?rst-order capability would not necessarily imply an equal change in the other?rst-order capabilities,rendering a re?ective model as less likely.

Within the context of NPD,it is also necessary to distinguish between dynamic capabilities and func-tional competencies.First,while market orientation helps NPD work units to generate,disseminate, and respond to market intelligence to help propose a product that matches customer needs,customer competence helps NPD work units to sell the pro-posed product by designing marketing,sales,pricing, and advertising programs.Second,while absorptive

Figure3The Proposed Nature of NPD Dynamic Capabilities

capacity helps NPD work units to acquire,assimi-late,transform,and exploit existing resources to gen-erate new knowledge,technical competence helps NPD work units to practically develop the product

by testing and evaluating its technical speci?cations. Finally,while coordination capability and collective mind help NPD work units to manage dependencies among resources and tasks to create and implement new ways of performing NPD activities,manage-rial competence helps them administer NPD activities by monitoring progress,designing worker incentives, and managing con?icts.In summary,dynamic capa-bilities are more strategic processes that help NPD work units to introduce the concept for new products, while the functional competencies are more opera-tional processes that help NPD work units to oper-ationally design,manage the development of,and launch the new products.

To interrelate dynamic capabilities with functional competencies and competitive advantage in NPD,we draw on the strategy literature that speci?es the role of dynamic capabilities as recon?guring ineffective functional competencies and shaping more promising ones that better match the environment,better,faster, and cheaper than the competition(Eisenhardt and Martin2000).Applied to NPD,work units compete on the basis of the appropriateness,timeliness,and ef?-ciency by which their NPD functional competencies can be shaped into superior new functional compe-tencies that better match the environment.For exam-ple,by sensing the environment faster and cheaper than the competition,NPD work units are more likely to spot and capitalize on new concepts for new prod-ucts(Day1994).Having selected superior new prod-uct concepts that are likely to match what customers need(superior market orientation),NPD work units will then become more effective in designing supe-rior sales programs(superior customer competence). Also,NPD work units that can learn faster and more ef?ciently than the competition(superior absorptive capacity)will become more effective in developing superior product designs that would make it easier to physically build such new products(Danneels2002). Finally,NPD work units with a superior coordina-tion capability and collective mind are more likely to become more effective in synchronizing their tasks and resources,and their NPD managers will become more effective in administering their day-to-day activ-ities(superior managerial competence).In sum,supe-rior NPD dynamic capabilities are likely to lead to superior NPD functional competencies. Hypothesis1B(H1B).NPD dynamic capabilities pos-itively in?uence superior NPD functional competencies. H1A and H1B suggest that NPD dynamic capabil-ities and NPD functional competencies jointly in?u-ence competitive advantage in NPD.This is because competitive advantage in NPD at any point in time directly draws from NPD functional competencies, which will,over time,depend on dynamic capabilities in NPD.Empirical evidence in NPD shows that?rms with dynamic capabilities build superior new prod-ucts(Henderson and Cockburn1994),and improve their product quality and cycle time(Iansiti and Clark 1994).In contrast,NPD work units that are slow in recon?guring their NPD functional competencies are shown to end up with rigidities(Leonard-Barton 1992).In sum,NPD dynamic capabilities yield a sus-tainable competitive advantage through superior new NPD functional competencies,whose goal is a series of temporary competitive advantages through speci?c new products.Having established the interrelation-ships among dynamic capabilities,functional compe-tencies,and competitive advantage,we proceed to examine how IT leveraging competence can be inte-grated with competitive advantage in NPD.

3.IT Leveraging Competence in NPD We introduce and develop the construct of IT leverag-ing competence in NPD by drawing on the IT capa-bility literature,taking into account the idiosyncrasies of the NPD context,and also by following Ray et al. (2005),who recommend examining IT capability at the process(and not at the?rm)level since“the impact of IT should be assessed where the?rst order effects are expected to be realized”(p.626).

The IT capability literature is rooted in the resource based view.The IT capability literature(summarized in Table1),generally argues that various IT-related resources combine to form an IT capability that is valuable,rare,nonimitable,and nonsubstitutable (Mata et al.1995).Taking this perspective,Bharadwaj (2000)de?nes IT capability as“the ability to mobilize

Table1IT-Related Resources that Combine to Form IT Capability

Studies(in chronological IT-related resources that order)combine to form IT capability

Mata et al.(1995)Access to capital,proprietary technology,

technical IT skills,managerial IT skills Ross et al.(1996a)Reusable technology base(technology asset)

IT-business partnering relationship

(relationship asset)

IT human resources(human asset) Powell and Dent-Micallef Technology(IT)resources

(1997)Complementary IT human resources

Complementary business resources Feeny and Willcocks(1998)Design of IT infrastructure,business and

IT vision,delivery of IS services Bharadwaj et al.(1999)IT infrastructure,business process

integration,internal IT partnerships,

external IT partnerships,

IT management,strategic vision of IT Bharadwaj(2000)IT infrastructure,human IT resources,

IT-enabled intangibles Sambamurthy et al.(2003)IT investment scale,IT capabilities

(as Bharadwaj2000).

Tippins and Sohi(2003)IT objects(hardware,software,

and support personnel)

IT knowledge(technical knowledge about

IT systems)

IT operations(IT utilization to manage

information)

and deploy IT-based resources in combination or cop-resent with other resources and capabilities”(p.171). IT capability has been viewed as a complex,multi-dimensional construct,and the literature has proposed several speci?c IT-related resources that combine to form an IT capability.The literature suggests that IT capability has three key dimensions:(a)the acqui-sition of IT resources,such as technology assets (Ross et al.1996),IT objects(Tippins and Sohi 2003),and the overall IT infrastructure(Bharadwaj 2000,Feeny and Willcocks1998);(b)deployment of IT resources through tight IT-business relationships, such as IT-business partnering(Ross et al.1996),IT partnerships(Bharadwaj et al.1999),and business-IT vision(Feeny and Willcocks1998);and(c)leverag-ing of IT resources,such as technical IT skills(Mata et al.1995,Tippins and Sohi2003,Ray et al.2005)and human IT resources(e.g.,Bharadwaj2000,Powell and Dent-Micallef1997,Ross et al.1996).Based on these three dimensions,Bharadwaj et al.(2002,p.4)de?ne IT capability as the“?rm’s ability to acquire,deploy, and leverage its IT resources to shape and support its business strategies and value chain activities.”

This three-dimensional representation of IT capabil-ity views the construct at the?rm level of analysis, and views the IT capability construct to be predom-inantly drawn from within the IT unit.However, to develop an IT capability construct speci?cally for the NPD context,we need to adapt the?rm-level IT capability to the NPD process and focus on the leveraging capabilities of NPD work units as busi-ness users(or clients).Because the acquisition and deployment dimensions of IT capability are largely based on the IT investment decisions of IT executives and are primarily implemented by IT staff within the IT unit,we argue that the acquisition and deploy-ment dimensions of IT capability are unlikely to dif-ferentiate among NPD work units.6Hence,we focus on the leveraging dimension of IT capability,which is more likely to help NPD work units differentiate themselves from competing work units,and to build a competitive advantage in NPD.

In the past decade,the NPD context has been in-fused with NPD software packages(Nambisan2003). Today’s NPD packages can be viewed as generic technologies(Ray et al.2005)that can be readily acquired from NPD software vendors,and that can be easily deployed with little effort and expertise. Also,the deployment of NPD software tools does not require tight IT-business partnerships to be success-ful.7Conversations with NPD managers and NPD software vendors con?rm that there is little variation among commercial NPD tools.These conversations also con?rmed that the acquisition and deployment of NPD software packages is a rather straightforward task that is handled by this company’s internal IT unit.Therefore,the leveraging of IT functionalities by 6Acquiring and deploying NPD technologies are likely to improve performance in an absolute sense compared with not having acquired and deployed such NPD technologies.However,because most NPD work units have acquired and implemented such tech-nologies,these two dimensions are unlikely to strategically differ-entiate across competing NPD work units.

7In contrast,the acquisition and deployment of an integrated ?rmwide IT infrastructure requires tight IT-business partnerships and substantial time and expertise,and it is thus likely to differen-tiate across?rms(e.g.,Feeny and Willcocks1998).

NPD work units as clients is herein viewed as the primary source of differentiation in NPD work units. Our view of IT leveraging competence in NPD is thus consistent with the IT capability literature(Table1), but it takes into account the process level of analysis and the idiosyncrasies of the NPD context to concep-tualize a speci?c construct of IT capability outside of the IT unit as the leveraging competence of clients. Most important,because the acquisition,deploy-ment,and leveraging dimensions of IT capability fol-low a sequential progression,the leveraging of an NPD package draws directly from its acquisition and deployment.If a poor NPD package was purchased or was poorly deployed by the IT unit,or both,the ineffective acquisition and deployment are likely to undermine its effective leveraging by the NPD work unit.Thus,even if our view only focuses on the leveraging dimension of the overall IT capability con-struct,our concept of IT leveraging competence in NPD largely accounts,albeit indirectly,for the acqui-sition and deployment dimensions.

Following these requirements and based on the notion that leveraging of IT resources is the primary differentiating factor among NPD work units,we de?ne IT leveraging competence in NPD as the ability of NPD work units to effectively use IT functionali-ties to support IT-enabled NPD activities.IT leverag-ing competence in NPD thus describes the ability of NPD work units to be aware of what IT functional-ities have to offer,to understand when to use them if they may be useful,and(when they decide to use them)to do so effectively by taking advantage of their speci?c IT functionalities.Beyond the focal NPD con-text,IT leveraging competence would be described as the ability to effectively leverage IT functionalities to support speci?c IT-enabled activities.Our de?nition is therefore most consistent with Tippins and Sohi (2003)who describe their notion of IT competency as the extent to which a?rm is knowledgeable about and effectively utilizes IT tools to manage information within the?rm.

In addition to distinguishing IT leveraging compe-tence in NPD from?rmwide IT capability,we also need to distinguish it from other IT-related constructs. First,IT leveraging competence in NPD is differ-ent from IT functionality and IT resources because IT leveraging competence in NPD re?ects the effec-tive use of NPD IT resources and functionalities,not merely their existence,the quality of NPD packages, or any unique IT functionalities.Second,IT leverag-ing competence in NPD is different from IT invest-ments or IT spending in NPD.Mere IT investments and spending do not guarantee that the acquired and deployed NPD packages will be properly under-stood and effectively used.Investing in IT without effectively leveraging these investments is unlikely to enhance performance(Tippins and Sohi2003). Empirical evidence has shown no consistent relation-ship between a?rm’s IT investments and its prof-itability(Mata et al.1995,Powell and Dent-Micallef 1997,Tippins and Sohi2003).Whereas IT functional-ity,resources,and investments can be easily copied, imitated,or duplicated by the competition(Clemons 1991),we view IT leveraging competence in NPD as a rare,valuable,nonimitable,and nonsubstitutable capability that is likely to be heterogeneously dis-tributed across NPD work units.

3.1.The Dimensions of IT Leveraging

Competence in NPD

To identify the primary dimensions of IT leveraging competence in NPD,we?rst reviewed the academic NPD literature(e.g.,Nambisan2003,Rangaswamy and Lilien1997).Our starting point was Nambisan’s (2003)proposed dimensions of IT tools in NPD(pro-cess management;project management;information and knowledge management;and collaboration and communication).With these dimensions in mind,we examined over30commercial NPD packages for additional dimensions,and also for IT functionali-ties that would suggest the need for including,inte-grating,or dropping any dimensions.Our review con?rmed Nambisan’s(2003)four dimensions,but it suggested the need to integrate process and project management under a single dimension.Summariz-ing this review,the systems that NPD work units commonly employ are(1)project and resource man-agement systems;(2)knowledge management sys-tems;and(3)cooperative work systems.Table2 describes what constitutes the effective use of these NPD systems.

Drawing on Table2,we propose three key dimen-sions of IT leveraging competence in NPD:(a)effec-tive use of project and resource management systems

Table2Key IT-Enabled NPD Activities and Effective Use of NPD Systems

Key IT-enabled Effective use

NPD systems NPD activities of NPD systems Project and resource Scheduling and time?Quickly prioritizing tasks and management management keeping deliverables on track systems to ensure realistic schedules

Resource?Analyzing and measuring

management work,tasks,and resources

Task assignment?Knowing the true availability

of people,skills,and

resources to enable appropriate

task assignment Knowledge Coding and sharing?Leveraging IT tools for storing, management of knowledge archiving,retrieving,sharing, systems and reusing project information

and best practices

Creation of knowledge?Creating online knowledge

directories communities(e.g.,virtual

discussion forums)focused on

new ideas and products

Knowledge?Leveraging IT tools for

networking locating relevant expertise Cooperative work Conveyance?Describing and de?ning systems product structures,

con?gurations,and routines

Presentation?Effectively manipulating

the format of our contributions

Convergence?Adequacy of using IT tools

(e.g.,desktop sharing)for

simultaneously working

together in real-time

(PRMS),(b)effective use of knowledge management systems(KMS),and(c)effective use of cooperative work systems(CWS),as described below.

3.1.1.Effective Use of PRMS.PRMS provide IT functionalities designed for the project and pro-cess management of NPD projects(McGrath and Iansiti1998),such as Oracle Project Management tools.8PRMS have three key functionalities:First, the scheduling and time management functionality, such as that provided by IBM’s NPD planning tools,9 helps NPD work units obtain real-time information on project status,integrate dispersed information,and monitor performance.It also helps work units visual-ize project status,monitor the progress of work?ows, and track project deliverables.Second,the resource

8https://www.sodocs.net/doc/f117627456.html,/applications/projects/index.html? management.html

9https://www.sodocs.net/doc/f117627456.html,/solutions/plm/doc/jsp/indseg/cross/ planning/management functionality,such as that provided by SAP’s Asset Life-Cycle Management,10helps NPD work units manage their shared resource dependen-cies by breaking down the project into smaller tasks and identifying matching resources.It also provides real-time information on the availability,usage,and cost of various resources to achieve the best possible resource allocation.Third,the task assignment func-tionality helps NPD work units link project deliv-erables to tasks,decide which resources to use for each task,and align tasks among people to avoid task duplication.It also models the true availability of peo-ple,skills,and resources so that multiple tasks can be performed in parallel.In summary,since these three PRMS functionalities can help support the NPD pro-cess in value-adding ways,the effective use of PRMS is proposed as a key facet of IT leveraging competence in NPD.

3.1.2.Effective Use of KMS.KMS have a poten-tial role in supporting knowledge management activ-ities in NPD.For example,Dassault’s Enovia11is designed to facilitate the acquisition,assimilation, transformation,and exploitation of tacit and explicit knowledge.KMS have three key functionalities:First, the knowledge coding and sharing functionality helps NPD work units capture,codify,assimilate,and share knowledge,such as product designs and engineering data.It also allows NPD work units to permanently store their project histories(e.g.,discussions and work data)in content repositories to make them accessi-ble for reuse.Second,the functionality for the cre-ation of knowledge directories,such as that provided by data warehousing systems,helps NPD work units gain easy access to project information and best prac-tices from prior projects.Third,the knowledge net-working functionality enables communication forums and knowledge communities that help NPD work units discuss new product ideas.It also helps NPD work units locate relevant expertise through visual-ization IT technologies.Because these KMS function-alities can enhance the NPD process in value-adding ways,the effective use of KMS is proposed as a key facet of IT leveraging competence in NPD.

10https://www.sodocs.net/doc/f117627456.html,/solutions/plm/keycapabilities/asset.asp 11https://www.sodocs.net/doc/f117627456.html,/10+M5a090141a36.0.html

3.1.3.Effective Use of CWS.CWS,or groupware, are technologies that enable collaborative work by enabling group communication across time and space. CWS have three key functionalities:First,the con-veyance functionality,such as Oracle’s CADView,12 enables data-based collaboration,content manage-ment,and sharing ideas.For example,CAD visual-ization tools allow NPD work units to concurrently examine engineering drawings and product struc-tures from any location.Second,the presentation functionality,such as that found in?ltering,struc-turing,and modeling tools,enables NPD work units to transform their tacit ideas into graphic images.By sorting,structuring,and analyzing individual contri-butions into a collective design,presentation systems allow NPD work units to manipulate the format of their individual contributions and give new meaning to existing contributions.Third,the convergence func-tionality,such as Oracle’s Project Collaboration tools13 can clarify assumptions,elicit tacit knowledge,and construct product histories by enabling NPD work units to work together and review product designs in real time.This functionality helps NPD work units brainstorm,converge their ideas,?nd solutions for new products,and reach group consensus.Because these CWS functionalities can help enhance the NPD process in value-adding ways,the effective use of CWS is proposed as a key element of IT leveraging competence in NPD.

3.2.IT Leveraging Competence in NPD as

a Formative Higher-Order Model

IT leveraging competence in NPD is viewed as a latent construct,conceptualized as a second-order fac-tor formed by a set of three?rst-order facets(effec-tive use PRMS,KMS,CWS).Therefore,to describe the nature of IT leveraging competence in NPD,we propose a formative second-order model(Figure4), which is a coherent and parsimonious depiction of the multidimensional nature of IT leveraging competence in NPD.

12https://www.sodocs.net/doc/f117627456.html,/applications/B2B/

Product_Development/index.html?CAD3D.html

13https://www.sodocs.net/doc/f117627456.html,/applications/projects/index.html? collaboration.html Figure4The Proposed Higher-Order Model for IT Leveraging

Competence in NPD

The second-order model is implied by the com-plementarities among IT functionalities in NPD sys-tems(Rangaswamy and Lilien1997).Because there is convergence of these three related functionalities in NPD packages(Nambisan2003),the proposed dimensions cumulatively contribute to a higher-order IT leveraging competence,which can more parsimo-niously explain their cumulative effect(as opposed to three distinct individual effects).Using a similar logic,Bharadwaj et al.(1999)also view?rmwide IT competence as a second-order factor formed by?rst-order factors.Moreover,the effective use of PRMS, KMS,and CWS is likely to change over time and be affected in a different way by other factors.Because NPD work units are likely to use these IT systems with various degrees of effectiveness,the effective use of each system is proposed to affect IT leveraging competence in NPD in a formative fashion.Besides, since a change in the ability to leverage any single sys-tem does not necessarily imply an equal change in the ability to leverage another system,a re?ective model is less likely.Thus,a formative second-order model is deemed appropriate for viewing the construct of IT leveraging competence in NPD.

4.IT Leveraging Competence and

Competitive Advantage in NPD

To delineate how IT leveraging competence in NPD links to competitive advantage in NPD,we?rst discuss the direct impact of IT leveraging competence on NPD capabilities,and we then discuss the mediating role of NPD capabilities in the relationship between IT leveraging competence and competitive advantage.

4.1.Linking IT Leveraging Competence with NPD

Capabilities

Drawing on the logic that the effective use of IT functionality can facilitate information-intensive and

knowledge-intensive processes,we propose IT lever-aging competence in NPD to support NPD capa-bilities.Because NPD capabilities are information and knowledge intensive(Madhaven and Grover 1998),they can be enhanced by the effective lever-aging of IT functionalities(McGrath and Iansiti1998, Nambisan2003).First,IT leveraging competence in NPD can support information processing through enhanced communication and increased ef?ciency of information sharing.Second,the ef?ciency,scope,and ?exibility of NPD capabilities can be enhanced by IT leveraging competence.IT leveraging competence can facilitate the ef?ciency of NPD capabilities by facilitat-ing rapid and reliable knowledge sharing(Alavi and Leidner2001),it can increase their scope by increasing knowledge reach and richness(Sambamurthy et al. 2003),and it can enhance their?exibility by enhancing the accessibility and availability of knowledge(Zahra and George2002).

While both types of NPD capabilities are informa-tion and knowledge intensive capabilities that can be potentially enhanced by the effective use of IT func-tionalities,dynamic capabilities rely on more general information and knowledge than functional compe-tencies that tend to use more?rm-speci?c knowledge. Therefore,the direct impact of IT-leveraging compe-tence in NPD is expected to be on dynamic capa-bilities by leveraging IT functionalities embedded in PRMS,KMS,and CWS to manage general knowledge; in contrast,NPD functional competencies are unlikely to be enhanced by the effective use of PRMS,KMS, and CWS,but they are more likely to be enhanced by other customized IT systems that manage?rm-speci?c knowledge.

4.1.1.IT Leveraging Competence and NPD Dy-namic Capabilities.IT leveraging competence in NPD is conceptualized to directly enhance each of the four?rst-order dynamic capabilities—market orienta-tion,absorptive capacity,coordination capability,and collective mind.

Market Orientation.IT leveraging competence in NPD is proposed to enhance market orientation.First, by accelerating the ef?ciency by which information is acquired by the environment,the effective use of KMS enables NPD work units to stay current with market intelligence.Second,the effective use of CWS enables information?ows,thus enhancing the ability of NPD work units to disseminate market intelligence.Finally, the effective use of CWS enables NPD work units to collectively assess market intelligence and test vari-ous new product concepts,thus enabling their respon-siveness to market intelligence.In sum,by enhancing the ability of NPD work units to generate,dissemi-nate,and respond to market intelligence,IT leverag-ing competence in NPD enhances market orientation. Absorptive Capacity.IT leveraging competence in NPD is proposed to in?uence absorptive capacity. First,by analyzing,coding,and sharing tacit knowl-edge,the effective use of KMS makes NPD work units more competent in acquiring product-related knowl-edge.Second,by facilitating easy access to stored knowledge,the effective use of KMS enhances the competence of NPD work units in articulating,inter-preting,and synthesizing new and stored knowl-edge,thus enabling knowledge assimilation.Third, the effective use of CWS can enhance the problem-solving capability of NPD work units and the units’ability to generate new thinking(Tippins and Sohi 2003),thereby enabling knowledge transformation. Fourth,the effective use of CWS can enhance the abil-ity of NPD work units to pursue new product ini-tiatives and?nd new solutions(McGrath and Iansiti 1998),thus enabling superior knowledge exploita-tion.In summary,by enhancing the ability of NPD work units to acquire,assimilate,transform,and exploit new knowledge,IT leveraging competence can enhance absorptive capacity.

Coordination Capability.IT leveraging competence in NPD is proposed to enhance coordination capabil-ity.First,by making it easier to identify available resources and providing visibility of real-time project data,the effective use of PRMS can enhance the abil-ity of NPD work units to quickly and accurately allo-cate resources to project tasks.Second,the effective use of scheduling and time management functionalities in PRMS makes NPD managers more capable in appoint-ing NPD workers to relevant tasks and enables them to better monitor the performance of NPD workers. Third,by providing real-time information on project status and enabling aggregate project portfolios,the work?ow capabilities of PRMS can help NPD work units become more capable in identifying synergies among their resources and tasks,better synchronizing their activities,and executing their collective activities

in parallel(Sethi et al.2001).By enhancing the ability of NPD work units to allocate resources,assign tasks, and synchronize activities,IT leveraging competence in NPD can enhance coordination capability. Collective Mind.Because a collective mind is devel-oped by integrating the thought worlds of multi-ple individuals,IT leveraging competence is expected to facilitate a collective mind in NPD work units by making knowledge visible and accessible and by providing a common language for communication (Boland and Tenkashi1995).First,by making it easy to share knowledge,the conveyance functionality in CWS enables NPD workers to be forthcoming in shar-ing their individual knowledge.Second,the effective use of presentation functionality in CWS allows NPD work units to achieve rich communication,sense-making,and perspective sharing.Hence,by making the social environment of online group conversations richer through presentation functionalities,the effec-tive use of CWS enables NPD workers to stay in touch with what others do,to visualize how they?t in,and to learn how their work affects others.Third,by facil-itating shared structures of interaction,the effective use of convergence functionality in CWS enhances the ability of NPD work units to build shared interpreta-tions and reach consensus.In sum,by enhancing the ability of NPD work units to contribute,represent,and rely on the group system,IT leveraging competence in NPD can enhance the collective mind of NPD work units.

Integrating the proposed impact of the various dimensions of IT leveraging competence in NPD on the respective elements of the four?rst-order dynamic capabilities,we formally hypothesize: Hypothesis2(H2).IT leveraging competence in NPD positively in?uences NPD dynamic capabilities.

4.1.2.IT Leveraging Competence and NPD Func-tional Competencies.IT leveraging competence in NPD speci?cally aims to enhance information-and knowledge-intensive NPD capabilities.However,the operational nature of the NPD functional competen-cies is unlikely to be enhanced by the effective use of PRMS,KMS,and CWS,whose primary role is to process information and manage knowledge.For example,while market orientation(ability to generate, disseminate,and respond to market intelligence)can be enhanced by IT leveraging competence(as justi?ed above),customer competence(ability to design market-ing programs and formulate customer incentives)is unlikely to be directly enhanced by the effective use of IT functionalities in NPD.Accordingly,while absorp-tive capacity(ability to acquire,assimilate,transform, and utilize knowledge)can be directly enhanced by IT leveraging competence in NPD,technical compe-tence(ability to evaluate new designs,assess techni-cal speci?cations,and test prototypes)is unlikely to be facilitated by the effective use of IT functionalities. Accordingly,managerial competence(ability to design incentives,monitor progress,and manage con?icts)is also unlikely to be directly enhanced by IT leveraging competence in NPD.In sum,because NPD work units cannot get much bene?t by leveraging PRMS,KMS, and CWS to enhance their competence in undertaking their three basic operational activities,IT leveraging competence in NPD is not proposed to enhance the NPD functional competencies.

Even if IT leveraging competence in NPD is not expected to directly enhance functional competencies in NPD,this does not suggest that NPD functional competencies or functional competencies in general cannot be enhanced by the effective use of IT.First and most important,NPD work units use different IT systems to manage the information and knowl-edge needed to perform their operational processes. For example,designing customer programs and for-mulating incentives are usually performed by?rm-speci?c customer IT systems that are often speci?c to the?rm’s customer base(e.g.,consumers ver-sus distributors).Also,evaluating product designs and testing prototypes is often facilitated by propri-etary product testing equipment that are particular to the company’s focal products(e.g.,automobiles versus consumer goods).Designing incentives and managing con?icts are often facilitated by?rmwide management applications that may also be used in NPD.Therefore,the ability to execute operational activities may be enhanced by various customized IT systems that focus on?rm-speci?c knowledge,but it is not directly supported by the focal IT functional-ities present in generic NPD software packages that are leveraged to manage general knowledge.Second, there is a close relationship between dynamic capabil-ities and functional competencies(H1B),which sug-gests that the impact of IT leveraging competence

in NPD may be evident on NPD functional com-petencies,albeit indirectly.These arguments suggest that the direct impact of IT leveraging competence in NPD is on the information-and knowledge-intensive NPD dynamic capabilities.The impact of IT lever-aging competence in NPD on functional competen-cies is thus expected to be indirect,mediated by NPD dynamic capabilities.

4.2.Indirect Impact of IT Leveraging Competence

on Competitive Advantage in NPD

We propose an indirect impact of IT leveraging com-petence in NPD on competitive advantage through the mediating role of NPD capabilities.Following the pro-cess view of organizations and Porter’s(1985)value chain model,NPD capabilities(NPD functional com-petencies and NPD dynamic capabilities)are viewed as resources enabling primary activities because they are directly involved with the product’s physical development and delivery.On the other hand,IT leveraging competence in NPD can be viewed as a resource enabling secondary activities because it is not directly involved in a product’s physical cre-ation and delivery,but it has an indirect,supporting impact on the primary activities by directly enhanc-ing the NPD capabilities.Grant(1995)proposes a hier-archy of?rm capabilities in which MIS-related func-tional competencies are viewed as the platform on which other higher-order organizational capabilities are built.Grant suggests that the higher the order of ?rm capabilities,the more immediate is their impact on competitive advantage.Building on Grant’s view, IT leveraging competence in NPD is proposed as the basis for(higher-order)NPD capabilities,and is thereby farther away from competitive advantage in NPD.

Applying these arguments to NPD,the role of IT leveraging competence is to enhance NPD capabilities (dynamic capabilities and,in turn,functional compe-tencies),and its direct impact should be observed on the NPD capabilities,and not on the outcomes of the NPD capabilities(that is,competitive advantage in NPD).These arguments suggest an indirect impact of IT leveraging competence on competitive advantage in NPD through dynamic capabilities and functional competencies:

Hypothesis3(H3).NPD capabilities(NPD dynamic capabilities and NPD functional competencies)mediate the impact of IT leveraging competence on competitive advantage in NPD.

5.The Moderating Role of

Environmental Turbulence Environmental turbulence describes the general con-ditions of uncertainty or unpredictability because of changes in consumer preferences and technology de-velopments(Mendelson and Pillai1998).Environ-mental turbulence in NPD arises from two primary sources(Jap2001):First,market turbulence creates unpredictability in market demands,consumer needs, and competitor strategies.Second,technological tur-bulence creates uncertainty regarding new technolog-ical breakthroughs.

5.1.Environmental Turbulence on IT Leveraging

Competence—Dynamic Capabilities Link

In turbulent environments,where there is need for ef?cient and effective management of knowledge (Grant1996),the effect of IT leveraging compe-tence on dynamic capabilities is likely to be more pronounced.Environmental turbulence increases the knowledge intensity of business processes,escalat-ing the importance and emphasis on knowledge(Hitt et al.1998).The increased knowledge intensity of the competitive landscape requires the effective use of IT functionality to support business processes.Because turbulent environments require the use of IT to sup-port rapid communications,the higher the rate of environmental turbulence,the greater the need for IT leveraging competence to support knowledge?ows (Mendelson and Pillai1998).In sum,these suggest that IT leveraging competence in NPD should have a stronger effect on dynamic capabilities in higher degrees of environmental turbulence. Hypothesis4(H4).The positive relationship between IT leveraging competence in NPD and dynamic capabili-ties is positively moderated(reinforced)by environmental turbulence.

5.2.Environmental Turbulence on NPD

Capabilities—Competitive Advantage Link Environmental turbulence is proposed to moderate the NPD capabilities–competitive advantage relation-ship because it enhances the relative advantage of

recon?guring NPD functional competencies while weakening the advantages gained from ef?ciently exploiting existing ones(Teece et al.1997).Turbulent environments increase the possibility that dynamic capabilities would recon?gure new NPD functional competencies.Dynamic capabilities can be viewed as strategic options(Kogut and Zander1996),which give a?rm the choice to pursue new directions when the opportunities arise.The higher the environmental tur-bulence,the more likely these options will become valuable(Sambamurthy et al.2003).In contrast,sta-ble environments reward the ef?cient exploitation of existing functional competencies(Leonard-Barton 1992).Because NPD functional competencies necessi-tate a costly,time-consuming,and often irreversible accumulation of resources,their continuous recon?g-uration is likely to disrupt their ef?ciency and value potential(Zammuto1988).Hence,environmental tur-bulence reduces the value of existing NPD functional competencies,while it enhances the value potential of dynamic capabilities.

Hypothesis5A(H5A).The relationship between NPD functional competencies and competitive advantage in NPD is negatively moderated(attenuated)by environ-mental turbulence.

Hypothesis5B(H5B).The relationship between dy-namic capabilities and functional competencies in NPD is positively moderated(reinforced)by environmental tur-bulence.

6.Research Methodology

6.1.Measurement Development

Wherever possible,measurement items were adapted from existing scales.For new measures and for those that required signi?cant changes,standard scale de-velopment procedures were used(Churchill1979). First,the domain of each construct was speci?ed.Sec-ond,a large pool of items was developed based on the conceptual de?nition,ensuring that these items tapped the construct’s domain.From this pool,items were chosen based on whether they conveyed differ-ent yet related shades of meaning(Churchill1979). Third,the items were re?ned based on pretests of the survey instrument.Special care was taken to ensure that the measures were applicable to NPD managers,while capturing their abstract concept.All measure-ment items were measured at the NPD work unit level,as shown in the appendix.As is common in strategy research,the survey instructions asked the NPD managers to respond relative to their work unit’s major competitors.

6.1.1.IT Leveraging Competence in NPD.A new measure was developed for IT leveraging competence in NPD that aimed to assess the extent to which generic IT functionalities are effectively used by NPD work units.Our goal was to assess comparative com-petence across NPD work units in leveraging general-purpose IT tools with similar functionalities across software packages.However,since some of the NPD activities that are supposed to be enhanced by the IT tools potentially can be performed without the use of NPD packages,our challenge was to speci?cally cap-ture the effectiveness in using particular IT functional-ities to facilitate NPD activities.Hence,the construct’s measurement items were introduced with the follow-ing request:“Please rate the effectiveness by which your NPD work unit uses the following IT function-alities in the NPD process.”To emphasize the effec-tiveness in leveraging IT functionalities,some items focused on the adequacy of speci?c IT functionalities, assuming that users who are familiar with these IT tools would report in terms of how well they lever-age the functionality to undertake their activities,and not how good the IT tool is.Nonetheless,the NPD activities were underlined to stress to the respondents that the emphasis is on the actual execution of spe-ci?c activities by effectively using IT functionalities, and not on the quality of the IT tool itself.Moreover, for the NPD activities that could not be undertaken without the use of IT functionalities,the measurement items did not include the particular IT functionality and only assessed the effectiveness in undertaking the particular activity.In sum,we believe that these variations in the phrasing of the measurement items would together capture the IT leveraging competence in NPD construct.Finally,while IT leveraging com-petence in NPD is supposed to be captured relative to the competition,since it is dif?cult for NPD work units to self-assess how well they leverage IT tools compared to their major competitors,the measure-ment items only assessed the absolute effectiveness in using IT functionalities.

The effective use of PRMS was measured with seven new items based on Rangaswamy and Lilien (1997),focusing on the effective use of scheduling and time management,resource management,and task assignment functionalities to prioritize tasks and keep deliverables on track,analyze and measure work,and represent the availability of people,tasks,and re-sources.The effective use of KMS was measured with six new items,based on concepts in Alavi and Leid-ner(2001).These items focused on the effective use of coding and sharing of knowledge,creation of knowl-edge directories,and knowledge networking func-tionalities to store,archive,and share project informa-tion,create online knowledge communities on new products,and locate relevant expertise.The effective use of CWS was measured with six new items based on ideas in Wheeler et al.(1999).These items con-centrated on the effective use of conveyance,presen-tation,and convergence functionalities to allow NPD work units to simultaneously work together in real time.Finally,for validation purposes,we measured the overall degree of IT leveraging competence in NPD with two direct indicator items.

https://www.sodocs.net/doc/f117627456.html,petitive Advantage in NPD.Follow-ing Ray et al.(2004),competitive advantage in NPD is captured at the process level as the outcome of NPD work units.In NPD,competitive advantage can be achieved by concurrently achieving process ef?-ciency and product effectiveness.Process ef?ciency refers to time to market and development cost,and it was measured with three items(Kusunoki et al. 1998).Product effectiveness refers to product quality and innovativeness,measured with three items(Sethi et al.2001).Competitive advantage in NPD is thus operationalized as the combination between process ef?ciency and product effectiveness as a nine-item interaction measure.This operationalization has one degree of separation from the self-reported measures of process ef?ciency and product effectiveness,thus ex ante helping mitigate concerns about common method bias.

For validation purposes,a direct perceptual mea-sure of competitive advantage was also captured with two items(Jap2001).Also,three accounting meas-ures—return on sales(ROS),return on assets(ROA), and sales growth(SG)—were reported by the NPD managers at the NPD work unit level as absolute three-year average values(Atuahene-Gima and Li 2004).

6.1.3.NPD Functional Competencies.Marketing and technical NPD competencies were measured using items developed by Song and Parry(1997), while managerial competence was measured with items developed by Sethi et al.(2001).Overall NPD functional competence was also measured with two indicator items.

6.1.4.NPD Dynamic Capabilities.Dynamic ca-pabilities were measured with37items(Pavlou and El Sawy2006).Market orientation was measured with eight items to capture the effective generation, dissemination,and responsiveness to market intelli-gence by NPD work units(Jaworski and Kohli1993). Absorptive capacity was measured with10items to capture the effective acquisition,assimilation,trans-formation,and exploitation of knowledge by NPD work units(Zahra and George2002).Coordination capability was measured with eight items to cap-ture the effective resource allocation,task assignment, and activity synchronization by NPD work units (Malone and Crowston1994).Collective mind and its three elements—contribution,representation,and subordination—were captured with eight items based on Weick and Roberts’s(1993)theoretical descrip-tion.Finally,for validation purposes,two indicator items captured the overall degree of NPD dynamic capabilities.

6.1.5.Environmental Turbulence.Market and technological turbulence was measured using Jaworski and Kohli’s(1993)scales that capture the pace of customer and competitor changes and technological breakthroughs.Moreover,an overall environmental turbulence construct was directly measured with two indicator items.

6.1.6.Control Variables.Several NPD factors that have been previously shown to be related to NPD success were measured,so that their effects on com-petitive advantage in NPD and NPD capabilities are controlled.

?First,cross-functional integration is the quality of interaction among different functional areas;it has been shown to in?uence the success of NPD(Clark and Fujimoto1991).It was measured using two-item scale developed by Song and Parry(1997).

?Second,NPD experience is measured as the work unit’s age(Song and Parry1997).

?Finally,?rm size(number of employees and?rm revenues),work unit size(NPD work unit members), and whether the respondents were senior versus mid-level managers were measured as control variables. 6.2.Survey Administration

A?eld study was conducted in which data were collected from two samples of respondents using the same data-collection procedure.One group of re-spondents was drawn from the554participants at the 2002PDMA(Product Development and Management Association)conference(https://www.sodocs.net/doc/f117627456.html,/2002/). Additional respondents were drawn from the 161participants of the2003Roundtable Manage-ment Conference(https://www.sodocs.net/doc/f117627456.html,/codev/ CoDev2003/CD03_audience.html).Because the study’s key respondents were NPD managers,we ?rst eliminated?rms not involved with NPD and job titles not closely corresponding to NPD man-agement.The list was also re?ned by contacting the participants and asking whether they have been involved in NPD projects as NPD managers.The ?nal list contained386(PDMA)and121(Roundtable Management)participants.

Invitation e-mails were then sent,explaining the study’s purpose and requesting participation.The e-mail body assured recipients that the responses would be treated con?dentially and that the results would only be reported in aggregate.The respondents were asked to click on the URL link provided in the e-mail message that linked to an online instrument. The respondents were offered as incentive a cus-tomized report that summarized the study’s results (more than90%of the respondents requested this report).

The respondents were asked to self-select a spe-ci?c NPD work unit that they had managed.To avoid social desirability bias,the respondents were asked to select a work unit with which they were most familiar,and not a typical,successful,or failed one.14A formal check also assessed the respondents’

14To address social desirability bias,the performance outcomes of all work units were examined.The mean of the performance out-comes was3.44on a?ve-point scale(STD=0 78),which was in roughly the middle of the scale.familiarity with their NPD work https://www.sodocs.net/doc/f117627456.html,ing a cut-off point of4 4=anchored at very familiar and 5=extremely familiar),all respondents(mean=4 31, STD=0 84)were deemed suf?ciently knowledgeable

and all responses were retained.To collect an equal number of intra-and inter?rm NPD work units,the respondents were asked to favor selecting external NPD units.As a result,56%of the responses were on inter?rm work units.Finally,to assure a collective response,the survey instructions requested that the NPD managers obtain collective input by consulting with other members of their NPD work units.

In the?rst sample,of the386respondents,44 could not be contacted,12respondents indicated that ?rm policy forbade their participation,and15of the invitees indicated they were not quali?ed to partici-pate in the study.After two reminders,121responses were received(39%response rate).In the second sample,of the161participants,25were unreach-able,and four indicated inability to respond.Follow-ing two reminders,59responses were obtained(43% response rate).These response rates are higher than most survey studies because(a)personal communi-cation was sought with the participants,(b)the study was endorsed by the conference organizers,(c)the authors participated in the conferences and estab-lished personal contacts,and(d)responses through paper questionnaires were also collected during the conferences.

Nonresponse bias was assessed by verifying that early and late respondents did not signi?cantly dif-fer in their demographic characteristics and responses on principal constructs.Early respondents were iden-ti?ed by selecting those that responded in the?rst two weeks.All t-tests between the means of the two groups showed no signi?cant differences(p<0 1 level).

Because dyadic data from inter?rm NPD work units would have been desirable,if the respondents selected an inter?rm unit they were asked to provide the contact information of the respective NPD manager from the partner?rm.From the99inter?rm work units,47names were received,and28matched pairs were obtained(60%response rate).The average abso-lute differences in paired responses for all constructs were less than5%,the average correlation between the respondents was0.63(range across constructs=

0 17–0.87),and the interrater reliability alpha was0.71. These results indicate no systematic bias between the informants,and their responses were thus averaged to derive a single score for each inter?rm NPD work unit.

7.Data Analysis and Results

Data analysis was conducted with partial least square (PLS),which is a structural equation modeling(SEM) technique that uses a component-based approach to estimation.Because of the large number of vari-ables relative to the sample size and the existence of second-order formative factors and moderating effects,PLS was deemed more appropriate than other SEM techniques such as LISREL and EQS.

7.1.Respondent Characteristics

The majority of the respondents were from the high-tech(14%),manufacturing(12%),medical devices (11%),and consumer goods(8%)industries.Respon-dents that represented less than5%of the sample came from the chemical,electronics,and automotive industries,among others.Of the respondents,80% identi?ed their positions as NPD managers,10%indi-cated executive positions,and10%indicated“others.”The NPD purpose was applied research(68%),basic research(23%),and routine engineering(9%).Demo-graphics and descriptive statistics were similar across both https://www.sodocs.net/doc/f117627456.html,ing Chow’s(1960)statistic15and Wilk’s lambda,16the results of the two samples were statistically nonseparable and were therefore pooled.

7.2.Measurement Validation

To assess the construct validity of the principal constructs,in addition to reliability testing17we formed the second-order formative constructs,18and

15The Chow test determines whether the coef?cients in a regression model are the same in separate subsamples.

16The Wilk’s lambda criterion measures differences between groups. 17Reliability was assessed with the PLS internal consistency measure.

18In PLS,second-order formative constructs can be approximated using two approaches(Chin et al.2003).The?rst approach directly measures the higher-order constructs with the measurement items of the?rst-order factors.The second approach models the path weights from the?rst-to the second-order constructs(the weights of formative constructs are treated as PLS coef?cients,and the tested whether they are highly correlated with their indicators.

7.2.1.IT Leveraging Competence in NPD.The reliability of the IT leveraging competence in NPD was0.95,and the reliabilities for the effective use of PRMS,KMS,and CWS were0.89,0.89,and0.91, respectively.19

The second-order construct of IT leveraging compe-tence in NPD was formed by calculating the weights i of the?rst-order constructs to the second-order construct(Edwards2001)using a principal compo-nents factor analysis(Diamantopoulos and Winkl-hofer2001,p.270):

IT Leveraging Competence in NPD

= 1×Effective Use of PRMS

+ 2×Effective Use of KMS

+ 3×Effectuve Use of CWS

The impact of all 1 ?rst-order constructs on IT lever-aging competence is signi?cant p<0 01 (Figure5). variance explained in the second-order construct is unity).The second procedure was chosen since it closely corresponds to our proposed conceptualization of formative second-order constructs. 19In addition to reliability testing for all measurement items of each of the?rst-order dimensions of IT leveraging competence in NPD (effective use of PRMS,KMS,CWS),we compared the correlations among the items that measured effective utilization of IT tools and those that measured the effectiveness of IT tools.For the seven items that measured the effective use of PRMS,the average cor-relation among all items was0.69.The average correlation among the four items that measured the effective utilization of IT tools was0.72,and the average correlation among the three items that measured the effectiveness of IT tools was0.71.The average corre-lation among the items that measured the effective utilization of IT tools with the items that measured the effectiveness of IT tools was 0.67.For KMS,the average correlation among all items was0.70. The average correlation among the four items that measured the effective utilization of IT tools was0.71,and the average correlation among the three items that measured the effectiveness of IT tools was0.73.The average correlation among the items that measured the effective utilization of IT tools and the items that measured the effectiveness of IT tools was0.68.For the effective use of CWS,the average correlation among all six items was0.74,while the average correlation among the?ve items that measured the effectiveness of IT tools was0.75.Because all these correlations are virtually identi-cal,it suggests that the respondents did not respond differently in terms of tool effectiveness and effective tool utilization.

Figure 5The Second-Order Formative Construct of IT Leveraging Competence in NPD

Note.

??

Signi?cant at p <0 01.

As shown in Figure 5,the correlation between the two indicator items that measured the overall effec-tiveness of using IT functionality in NPD with the aggregate second-order construct was 0.88 p <0 001 .Even if the indicator merely serves as a proxy of the second-order constructs,it indicates if the aggre-gate variable describes what it is intended to measure (construct validity).We also examined the correla-tions among the ?rst-order constructs,since high cor-relations suggest that the ?rst-order constructs may belong to the same set,even if formative constructs need not be correlated (Chin 1998).As shown in Fig-ure 5,the correlations among the ?rst-order factors were 0.66,0.70,and 0.74 p <0 01 .Because a re?ec-tive model would render extremely high correlations (often above 0.80),a formative model seems more likely.We also tested whether the second-order con-struct of IT leveraging competence in NPD fully medi-ates the impact of the ?rst-order constructs (effective use of PRMS,KMS,CWS)on NPD dynamic capabili-ties,using a mediation test (omitted for brevity).This step ensures that the second-order construct is a more parsimonious representation of the ?rst-order con-Table 3Correlation Matrix and Composite Factor Reliability Scores for Principal Constructs

Construct

Reliability Mean STD ITLC PRMS KMS

CWS

DC

FC

CA

ET

IT leveraging competence in NPD (ITLC)+0.952 53 1.250 94Effective use of PRMS (PRMS)0.892 60 1.140 89??0 90Effective use of KMS (KMS)0.892 63 1.400 91??0 70??0 85Effective use of CWS (CWS)0.912 45 1.250 89??0 66??0 74??0 79NPD dynamic capabilities (DC)+

0.923 580.820 43??0 26??0 40??0 41??0 87NPD functional competencies (FC)+0.833 330.990 30??0 32??0 25??0 26??0 34??0 85Competitive advantage in NPD (CA)0.9114 65 3.750 22??0 26??0 120 20?0 42??0 38??0 87Environmental turbulence (ET)+

0.85

3 28

1.26

0 18?

0 20?

0 15?

0 14

0 22??

0 17?

0 28??

0 73

?

Signi?cant at p <0 05;??Signi?cant at p <0 01.Items on the diagonal (in bold)represent AVE scores.+

ITL C,DC,FC,and ET are second-order constructs formed by weighted sums of their ?rst-order constructs.

structs and fully captures their predictive power on the dependent variable it is theorized to predict (Chin 1998).The IT leveraging competence in NPD measure is the only signi?cant predictor when all ?rst-order constructs are controlled for,con?rming its full medi-ating role.In sum,these tests support the proposed second-order formative model of IT leveraging com-petence in NPD and verify its construct https://www.sodocs.net/doc/f117627456.html,petitive Advantage in NPD.This con-struct was measured as a nine-item interaction measure between process ef?ciency and product effectiveness,whose reliability was 0.91.To validate the construct validity of competitive advantage in NPD,we ?rst calculated the correlation betweeen the interaction measure with a direct measure of compet-itive advantage (Jap 2001).The correlation was 0.67 p <0 01 ,validating the proposed measure.Second,we examined the correlations among three accounting measures (ROS,ROA,and SG)with the study’s mea-sures.ROS is the ratio of net operating income over sales,and is often used as proxy for product qual-ity.ROS was highly correlated with product effective-ness (0.68,p <0 01).ROA is the ratio of net operating

income over average total assets,and is considered a proxy for ef?ciency.ROA was highly correlated with process ef?ciency(0.74,p<0 01).SG measures the rate of change of sales,and is considered a key indi-cator of market acceptance of new products.SG was highly correlated with product effectiveness(0.29,p< 0 01)and process ef?ciency(0.34,p<0 01),while it was highly correlated with the interaction measure (0.55,p<0 001).These?ndings suggest the validity of proposed measure for competitive advantage in NPD. While the self-reported measure of competitive advantage in NPD can be criticized for its subjectivity, it has its own advantages because archival account-ing ratios are not readily available at the NPD work unit level.Nevertheless,to prevent such criticism,we collected archival data for ROS,ROA,and SG at the ?rm level and matched them with the self-reported accounting ratios at the NPD work unit level.Because the self-reported NPD work unit–level accounting ratios are highly correlated with the corresponding archival?rm-level data,20this further supports the validity of the proposed interaction measure of com-petitive advantage in NPD.

7.2.3.NPD Functional Competencies.The sec-ond-order model of NPD functional competencies (Figure2)was obtained by calculating the coef?-cients of the?rst-order functional competencies to the second-order factor:

NPD Functional Competencies

=0 33×Customer Competence

+0 39×Technical Competence

+0 43×Managerial Competence The correlation between the indicator items for overall NPD functional competence with the aggre-20Even if overall?rm performance may not be equivalent to the performance of a speci?c NPD work unit,comparing overall ?rm performance with NPD work unit performance is a reason-able validation check.This weighted regression test is based on 64respondents who provided the required information to allow us to collect archival?rm performance data.Firm performance was weighted based on the size of the NPD work unit relative to the ?rm’s size(number of employees).The three univariate regression values for the three performance ratios were beta=0 18 p<0 05 for ROA,beta=0 20 p<0 05 for ROS,and beta=0 25 p<0 05 for SG.gate second-order construct of NPD functional com-petencies was0.84 p<0 01 ,and the construct reliability was0.83.These results suggest the con-struct validity of NPD functional competencies.

7.2.4.NPD Dynamic Capabilities.Similar tests were performed to assess the formative second-order construct of NPD dynamic capabilities(Figure3),and the results follow:

Recon?gurability=0 23×Market Orientation

+0 33×Absorptive Capacity

+0 35×Coordination Capability

+0 27×Collective Mind

The NPD dynamic capabilities(recon?gurability) indicator was correlated with the second-order con-struct at0.81 p<0 00 ,while the construct reliability was0.92,thereby inferring the construct’s validity.

7.2.5.Environmental Turbulence.The reliability of the aggregate measure for environmental turbu-lence was0.85,which is highly correlated r=0 91 with its two indicator items,suggesting construct validity.

The reliabilities,descriptive statistics,correlation matrix,and the average variance extracted(AVE)of the principal constructs are shown in Table3. Convergent and discriminant validity is inferred when the measurement load much higher on their own construct than on other constructs,and when the square root of the AVE is larger than the correlations with other constructs(Chin1998).As shown in Table3,all AVEs were above0.70,and they are much larger than all cross-correlations.Moreover,dis-criminant and convergent validity was also exam-ined using the con?rmatory factor analysis procedure in PLS(omitted for brevity).All items loaded heav-ily on their hypothesized constructs(all above0.68) compared to all other cross-loadings(all below0.43). These results suggest that the principal constructs have convergent and discriminant validity.

7.3.Testing the Proposed Research Model

The proposed research model was tested with PLS Graph3.0.The PLS path coef?cients are shown in Fig-ure6,and the signi?cance levels were assessed with

Figure6The Proposed Research Model

Notes.Variance explained shown in bold.?Signi?cant at p<0 05.

??Signi?cant at p<0 01.

200bootstrap runs.The moderating effects of envi-ronmental turbulence were tested as part of the over-all structural model with interaction terms formed by cross-multiplying all standardized items of each con-structs,following the procedure of Chin et al.(2003). Only signi?cant relationships and signi?cant control effects are shown in Figure6.

First,NPD functional competencies have a sig-ni?cant direct impact on competitive advantage in NPD(beta=0 33,p<0 01),thereby supporting H1A. Moreover,NPD dynamic capabilities have a signif-icant impact on NPD functional competencies,sup-porting H1B.Also,IT leveraging competence in NPD has a signi?cant impact on NPD dynamic capabili-ties(beta=0 39,p<0 01),thus supporting H2.As hypothesized,there was no signi?cant direct rela-tionship between IT leveraging competence and NPD functional competencies(beta=0 03,n/s).The direct impact of IT leveraging competence in NPD on com-petitive advantage was also not signi?cant(beta= 0 07)when NPD dynamic capabilities and NPD func-tional competencies were included in the model, thereby supporting the mediating role of NPD capa-bilities,and thereby supporting H3(also see§7.4). The impact of IT leveraging competence in NPD on NPD dynamic capabilities is positively moderated by environmental turbulence(beta=0 14,p<0 05), thus supporting H4.Environmental turbulence atten-uates the impact of NPD functional competencies on competitive advantage(beta=?0 25,p<0 01),thus supporting H5A,while it positively moderates the relationship between dynamic capabilities and NPD functional competencies(beta=0 31,p<0 01), thereby supporting H5A.The tests for the moderated relationships were conducted by following the recom-mendations of Carte and Russell(2003),assuring that the variance explained due to the moderated effects is signi?cant beyond the main effects.More speci?cally, f tests comparing the R2values between the main and interaction effects were performed(Chin et al.2003).21 7.4.Further Examining the Mediating Role of

NPD Capabilities

NPD capabilities were formally hypothesized(H3) to be a key mediator in the relationship between IT leveraging competence and competitive advantage in NPD.To provide further support for this hypothe-sis,three models were tested(excluding environmen-tal turbulence).22As Figure7shows,Model C with 21f=R2(interaction model)?R2(main effects model)/ 1?R2(main effects model)].For the interaction effect between IT leveraging compe-tence and environmental turbulence(H4),F=0 15that denotes a medium effect.For the interaction effect between dynamic capa-bilities and NPD functional competencies(H5A),F=0 26,which denotes a large effect.For the effect between functional NPD com-petencies and environmental turbulence(H5B),F=0 18,which denotes a medium effect.

22While Figure7shows a signi?cant direct relationship between NPD dynamic capabilities and competitive advantage(beta=0 26, p<0 01),this coef?cient becomes insigni?cant(beta=0 11,p<0 1)

Figure 7Test of the Superiority of the Mediating Role of NPD Capabilities

0.17

Model B: Mediated model with NPD functional competencies

Model C: Mediated model with both NPD capabilities

Notes.Variance explained is shown in bold.?

Signi?cant at p <0 05.??

Signi?cant at p <0 01.+

Signi?cant at p <0 10.

both NPD capabilities explains signi?cantly higher variance in competitive advantage in NPD than either the direct (Model A)or the indirect (Model B)model,the latter of which includes only NPD functional com-petencies.Therefore,from a predictive perspective,it is necessary to include both NPD capabilities to more accurately predict competitive advantage in NPD.Notably,Model B suggests that IT leveraging com-petence in NPD has a signi?cant direct effect on NPD functional competencies.This ?nding suggests that NPD functional competencies are not IT free,but that the direct effect of IT leveraging competence empiri-cally becomes insigni?cant when NPD dynamic capa-bilities are included in the model (as hypothesized in H1B).Finally,as shown in Model C,the direct effects of IT leveraging competence on competitive advan-tage in NPD are insigni?cant,thus further validating the full mediating effects of NPD dynamic capabilities and NPD functional competencies.7.5.

The Proposed Research Model at Different Levels of Environmental Turbulence

To examine the proposed model in environments with different levels of environmental turbulence,we

when the moderating role of environmental turbulence is included (Figure 6).

formed clusters using the procedure of Ketchen and Shook (1996)that uses Ward’s method of hierarchi-cal cluster analysis.The variables used for cluster-ing were market and technological turbulence.The two-cluster solution was selected based on analyti-cal results and a graphic inspection of the icicle plot.As shown in the MANOVA analysis (Table 4),Clus-ter 1 n =97 (termed “high-turbulence”cluster)had higher degrees of turbulence than Cluster 2 n =83 (“low-turbulence”cluster).Most ?rms in Cluster 1came from the high-tech,electronics,and telecom industries.Cluster 2mostly included chemical,man-ufacturing,and food industries.These distinctions are consistent with Mendelson and Pillai’s (1998)high versus low clockspeed industries.

To validate the proposed two-cluster solution (Ket-chen and Shook 1996),a second MANOVA analysis

Table 4Cluster Analysis Results and Cluster Validation

Cluster 1Cluster 2Variable n =97 n =83 t -value Comparison Market

4.0(0.95) 2.6(0.90) 6.12 p <0 01 1>2turbulence Technological 4.2(0.83) 2.3(0.84)7.89 p <0 01 1>2turbulence Environmental 3.7(0.82)

2.8(0.92)

4.32 p <0 01

1>2

turbulence