Balancing Business Performance and Knowledge Performance of New Product Development: Lessons from ITS Industry

Abstract

New product performance (NPD) has a critical impact on a company's profitability and thus on its long-term survival. This study identifies two important dimensions of new product performance: business performance and knowledge performance. The business performance of a new product in the market can be regarded as the outcome of exploitative NPD activity, while knowledge performance, the degree of new knowledge creation, can be seen as the outcome of NPD exploratory activity. While recent studies have suggested the importance of organizational ambidexterity in terms of exploration and exploitation, few have investigated its determinants at the product-level. This study addresses this issue, focusing on controllable factors in NPD, through an empirical examination of sixty NPD projects in the information and telecommunications service industry. We find that while product quality contributes to business performance, organizational support and NPD marketing and technical proficiency contribute to performance in both dimensions. The trade-off relationship between the two is illustrated by the level of NPD technical challenge, which has a negative effect on business performance but a positive effect on knowledge performance. Overall, our study shows that exploration can be compatible with exploitation in NPD. Based on the results, we derive managerial implications over various stages of an NPD project.