Organizing for Effective New Product Development: The Moderating Role of Product Innovativeness

Abstract

Marketing and sales personnel are frequently called on to work with—and sometimes to lead—specialists from other functional areas in the development of new products and services. Such cross-functional interactions can be structured and coordinated in a variety of ways, from bureaucratic approaches to more decentralized participatory mechanisms. Recently, cross-functional team structures have received a great deal of positive press. However, this paper questions whether teams are a universal panacea for shortening development times and improving success rates across all types of projects. It presents a contingency model based on resource dependency theory, which suggests that more participative structures are likely to improve the effectiveness and timeliness of the development process when the product being developed is truly new and innovative. However, the model also predicts that more bureaucratic structures may produce better outcomes on less innovative projects, such as those involving line extensions or product improvements. An empirical test involving 45 projects from 12 firms in widely varying industries substantially supports the model's predictions. The findings indicate that the better the fit between the newness of the product concept and the participativeness of the coordination mechanism used the better the outcomes of the development process in terms of (1) objective measures of product and team performance, (2) the attitudes of team members toward the process, and (3) the efficiency and timeliness of the new product development process.