Capability Stretching in Product Innovation

Abstract

Product innovation is conventionally treated as a mechanism for organizations to renew their product portfolios. In this paper, we suggest that product innovation not only enables organizations to introduce new products to the market but also challenges organizations to renew their technological capabilities. Capability stretching is the degree to which an organization extends its technological capabilities to bridge the gap between what it has already known and what the development of a new product requires it to know. Capability stretching can be challenging because it involves the acquisition and assimilation of new and distant knowledge. Drawing on a longitudinal study of product introductions in the workstation industry, we find that capability stretching reduces the chance of new product survival. Furthermore, we also find that organizational boundaries moderate the negative relationship between capability stretching and product survival: Vertical integration exacerbates this negative relationship, whereas horizontal boundary mitigates this negative relationship. However, capability stretching can also be rewarding, as it renews technological capabilities and therefore facilitates adaptation to technological changes. We draw implications for the linkages between product innovation and capability development.

Tacit Knowledge and Firm Performance Relationship. The Role of Product Innovation and the Firm Level Capabilities

“…Technology plays a dominant role in the use of tacit knowledge in firm innovation capabilities (Flor & Oltra, 2005;Howells, 1996). Recent studies point out that product innovation helps firms to renew their technical capabilities through acquisition of new knowledge (Wang & Chen, 2018). Information technology systems record rich information about the past and ongoing projects and provide a platform for not only sharing explicit knowledge (Chen & Mohamed, 2010), but also to fuse collaborative knowledge creating capabilities and thereby turn an organization into a "knowledge creating company" (Nonaka, Umemoto, & Senoo, 1996).…”

Greasing the Wheels of Change: Bribery, Institutions, and New Product Introductions in Emerging Markets

“…To address these questions, I investigate how bribing affects the innovative performance of firms in emerging markets, as reflected by their new product introductions (Bstieler, 2012; Katila & Ahuja, 2002; Wang & Chen, 2018). Introduction of new products represents a central aspect of firms’ strategy (Nadkarni & Chen, 2014) that provides avenues to diversify and adapt to evolving markets (Schoonhoven, Eisenhardt, & Lyman, 1990) and determines their subsequent survival and success (Banbury & Mitchell, 1995; Chaney & Devinney, 1992).…”

Partial adjustment toward target R&D intensity

“…In the short run, however, firms may try to smooth R&D intensity and anchor their R&D intensity on past R&D intensity. First, firms smooth R&D intensity over time, because R&D activities are cumulative and require continued investments over time (Griliches, ; Wang and Chen, ). To benefit from R&D investments, firms have to keep investing in R&D projects over time and avoid suspending and disrupting important R&D projects (Nelson and Winter, ; Malerba et al, ).…”

“…Debt is an unfriendly instrument for the financing of R&D, because the requirements of debt financing do not fit well with R&D activities (Hall and Lerner, ). First, debt requires debtors to pay creditors back on schedule, while R&D activities have uncertain – and possibly distant – payoffs (Manso, ; Wang and Chen, ). Second, debt usually requires collaterals, while R&D activities involves substantial intangible assets that cannot function as collaterals (Williamson, ).…”