Crisis management in new product development: A tale of two stories

Abstract

This research examines how firms manage crises in new product development (NPD), and suggests that a high level of perceived crisis can result in better new product performance. In addition, the role of team communication is underlined in the relationship between perceived crisis and new product performance. Team communication is categorized into two types: formal vs. informal, each playing a distinct role in crisis management. More importantly, this study argues that there exist dual routes in the crisis-performance relationship: mediation and moderation. A survey study is implemented for hypothesis testing, and data is collected from 119 NPD teams in high-tech industries. Results show that formal communication partially mediates the relationship between perceived crisis and new product performance, and that there is also a direct effect of perceived crisis on performance. Meanwhile, formal communication negatively moderates the direct effect of perceived crisis on new product performance, while informal communication positively moderates this effect. The co-existence of mediation and moderation results in a managerial dilemma regarding formal communication: it positively mediates but negatively moderates the crisis-performance link. Findings suggest that informal communication can play a complementary role in offsetting the negative influence of formal communication.