Organizational enablers for NPD portfolio selection
IEEE Transactions on Engineering Management
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Hutchison-Krupat, J., & Kavadias, S. (2017). Organizational enablers for NPD portfolio selection. IEEE Transactions on Engineering Management, PP (99), 1-13. https://doi.org/10.1109/TEM.2017.2739647
Despite substantial research that advocates the “right” portfolio of new product development initiatives for the firm, one important aspect has been overlooked: Creating a portfolio of new product development initiatives is not equivalent to choosing from a menu of initiatives. Rather, these initiatives are defined by and within the organization. Thus, portfolio selection rests upon two challenges: 1) the cross-functional nature of collaborative tasks; and 2) the role of explicit and implicit incentives on innovative outcomes. This paper explores how these factors ultimately determine the initiatives an organization pursues. We abstract a new product development organization as two functional managers who report to senior management and analyze the strategic interactions between all three stakeholders. Senior management decides whether to empower the functional managers to define the initiative and how to reward them contingent on the outcome. We evaluate how the asymmetry of information regarding each function’s capability, and the explicit and implicit rewards and penalties imposed on the functional managers affect the upfront resource allocation. We find a profound effect of the information asymmetry: the set of initiatives the firm deems profitable is reduced, thus impeding the organization’s potential to innovate. To counter such a shortcoming, senior management may optimally misalign the objectives of the stakeholders.
incentives in innovation, new product development (NPD) portfolio, NPD process, technology management, tolerance for failure
External DOI: https://doi.org/10.1109/TEM.2017.2739647
This record's URL: https://www.repository.cam.ac.uk/handle/1810/270022