Controllable Factors of New Product Success: A Cross-National Comparison

Abstract

While the new product literature suggests that managerially controllable factors most strongly affect new product success, few studies have examined how these factors differ across countries. The objectives of this article are: (1) to develop a model of managerially controllable factors associated with new product success, (2) to directly compare the factors that managers perceive to be associated with new product success in the United States and China, and (3) to demonstrate the application of various statistical analyses for increasing the confidence that may be placed in empirical findings and outline methods for assessing whether significant estimation biases exist in cross-sectional data. Our paper should be of interest to new product researchers and international comparative marketing researchers. The implications of our results should also be of considerable value and interest to executives faced with the complex task of selecting and managing new product development projects as well as to those firms experiencing international competition. To accomplish our objectives, we develop a model of managerially controllable factors related to new product success, which includes variables related to the organization, the new product development process, and the product itself. The model is tested using data collected on 142 new products launched in the United States and 470 new products launched in China. We conduct case studies to examine the appropriateness of the data collection methods, to establish the content validity of the concepts, and to assess the usefulness of the measures and constructs in a Chinese context. The model was tested using EQS with covariance matrices as input. We tested the measurement model before assessing the structural relationships. Once the measurement issues were satisfactorily resolved, the structural model was tested for each country individually. Since the results of the individual models for the United States and China were satisfactory, we performed a two-group simultaneous path analysis in order to test for similarities and differences in the factors of new product success between the United States and China. We tested whether or not the path coefficients were invariant across the two countries using a Lagrangian Multiplier test. The challenge for all cross-sectional studies is to reject the hypothesis that many of the parameters associated with the dependent variable are biased by “omitted” firm level effects and other specification errors. We examine these possible biases within the structural equations framework by examining the robustness of the parameters with and without the measurement error interactions fixed and an examination of nominological validity for each country. In addition, since we collected two observations per firm in our Chinese sample, we also examine whether bias exists due to omitted firm effects by comparing within and between estimates. The stability of the within and between estimates also suggests that our findings are robust to omitted firm effects. Our findings provide important managerial guidelines concerning appropriate managerial actions to take in the new product development process for new product managers. First, firms are advised to build appropriate new product development resources and expertise. In both countries, our findings suggest that adequate marketing research, sales force, distribution, advertising, and promotional resources and skills are required for proficiently conducting market assessment studies, testing products, and introducing products. Furthermore, technical resources and skills are positively linked with proficiency in conducting technical activities. Sufficient R&D and engineering resources and skills are related to proficiency in performing technical assessments, designing products, and manufacturing products. Second, our results reveal that a higher proficiency in marketing and technical activities leads to a higher level of new product success in both countries. The level of proficiency of technical activities appears to relate more to the level of new product success than do marketing activities. Third, it is important to collect and assess market and competitive information in order to understand customers' needs, wants, and specifications for the product; to know customers' price sensitivity; to understand customers' purchase decisions; and to learn about competitors' strategies, strengths, and weaknesses. In China, product quality is the second most highly correlated factor of new product success. Therefore, firms competing in China should direct their marketing and technical efforts toward developing quality products.