Defining new product development capability

There is a large body of research that focuses on the capabilities related to the introduction of new products, services, processes, and business models (Dan-neels 2002; Galunic and Eisenhardt 2001; Lawson and Samson 2001; Salvato 2009). A central concept in this discussion is innovation capability, which can be defined as the capability to transform ideas and knowledge into new prod-ucts, processes and systems that benefit the organization (Lawson and Samson 2001). This is often used and measured as analogous to firm innovativeness (Calantone, Cavusgil and Zhao 2002; Cavusgil, Calantone and Zhao 2003).

Paralleling the innovation capability concept, some authors have used con-cepts such as radical innovation capability (O’Connor and DeMartino 2006), new product development capability (Salvato 2009), transnational new

prod-uct development capability (Subramaniam and Venkatraman 2001) and dy-namic capability (Eisenhardt and Martin 2000; Teece, Pisano and Shuen 1997) to denote the capability of organization to introduce new products, ser-vices, processes or business models into markets.

In this research I focus on new product development capability and by doing so draw attention to the development of new products instead of, for instance, services that the innovation capability includes. Therefore, I follow Salvato (2009) in focusing on the capability of an organization to develop new prod-ucts. This restricts the study into focusing on new product development, as using the concept of innovation capability concept would include aspects such as introduction of new services I wish the leave beyond the scope of the cur-rent inquiry. Specifically, I define new product development capability as the follows:

New product development capability is constitutive of the organizational and strategic processes through which an organization develops and com-mercializes new products.

I conceptualize new product development capability as a form of dynamic ca-pability, much like Lawson and Samson (2001) define innovation capability as a form of dynamic capability. Therefore, in further defining the concept I will draw extensively from the dynamic capability discourse.

The capability constitutes of exercising recurring activities in different stages of new product development process. These can take the form of routines and/or simple rules. As these two can have overlap and as Bingham and Eisenhardt (2011) have noted that there is still debate whether heuristics are a subset of routines, an explication of the nature of different activities will be made in the empirical part when these re-curring activities are examined.

The new product development staff is capable of conducting multiple differ-ent activities in differdiffer-ent developmdiffer-ent projects at any given time. Stemming from this, how the capability is utilized depicts what the managers perceive as the most efficient use of the available human resources (Teece 1980; 1982) who conduct such activities. Therefore, examination of these activities on the organization level lends us an understanding of how the organization utilizes the capability for new product development.

The impetus of new product development capability is to enable a company to develop and commercialize new products. The capability can create, extend and modify the operational capabilities of the organization such as production and marketing by providing them with new offerings to produce and market.

This follows the notion of Winter (2003) in defining the function of dynamic capabilities as affecting the operational capabilities of the organization.

Recurring activities When explicating activities, I use the term activity and recurring activity interchangeably to de-note a category to which routines and simple rules belong to.

A closer explication of the nature of the recurring activities is made when the activities are described in detail in chapter six.

Utilizing the capability can enable achieving multiple different ends, espe-cially as it can drive an organization towards becoming a multiproduct firm.

Utilizing the capability can enable a company to expand beyond its current market to seek faster growth (Teece 1982) or to lower the risk related to a nar-row product portfolio. These outcomes can be achieved by utilizing the knowledge base of the company towards new ends as has been suggested by Teece (1980; 1982). This can relate to both using existing knowledge of prod-ucts or knowledge of how to develop prodprod-ucts to new ends. What can drive organizations towards these ends is the profit-seeking nature of managers (Augier and Teece 2009). Therefore, exercising the capability enables the company to seek new profit opportunities through the development of new products.

Locus of the NPD capability is organization at large and resulting from this the organization is able to develop and commercialize new products. There-fore, the capability lies upstream from the end products that are developed (Teece 1982). The capability is actualized by operationalizing NPD process and the associated NPD activities in NPD projects. Building on this, NPD capability is possessed by organization and actualized through the NPD process that manifests in NPD projects where different NPD activities are performed. In doing so, I follow the disciplined problem solving approach to new product development outlined by Brown and Eisenhardt (1995). What the capability enables is the generation of project level outcomes such as product launches and patents that can also have an impact on the future product development activities of the organization. Figure 2 illustrates these relationships.

Figure 2: NPD capability and its operation

The definition has a number of facets that I wish to discuss here. Firstly, the definition does not explicitly define whether the products are meant to match current market needs or create change in customer needs. This stems from the notion of Eisenhardt and Martin (2000) that dynamic capabilities can match or even create market change. Thus, I perceive that operationalizing the new product development capability can yield both radical and incremental prod-ucts.

Secondly, for a company to possess new product development capability, it has to be able to successfully exercise the capability i.e. develop and introduce new products to the market. This stems from the notion that capabilities are expensive to develop (Zollo and Winter 2002) and therefore they have to be successfully exercised in order to be meaningful.

Thirdly, I associate the effect of exercising new product development capa-bility into project-level outcomes such as the introduction of new products.

Therefore, I focus on the effects that the capability can generate. In doing so, I primarily focus on whether the capability enables reconfiguration as desired (Zahra, Sapienza and Davidsson 2006) which in this study is associated with the capability to successfully launch new products and whether the capability enables other effects that could enhance future new product development and therefore induce improved effectiveness (Zollo and Winter 2002) and/or gen-erate effects on the resource base of the organization (Helfat et al. 2007). Ad-ditionally I do not wish to sideline the effects that new product development can have on the organization itself as, for instance, Schroeder et al. (2000) has highlighted that new products have to be integrated into the organization and that the development of new offerings is often accompanied by the restructur-ing of the organization.