Environmental Uncertainty, Organizational Integration, and New Product Development Effectiveness: A Test of Contingency Theory

Abstract

R&D/marketing integration clearly improves new‐product development (NPD) effectiveness. However, achieving this integration increases the costs of NPD efforts. If technical and market uncertainty moderate the effects of integration on NPD effectiveness, perhaps a firm can achieve NPD success in a more cost‐effective manner by seeking the appropriate level of integration, based on the perceived level of uncertainty.In a study of 101 NPD projects at high‐tech firms in the U.S. and the U.K., William E. Souder, J. Daniel Sherman, and Rachel Davies‐Cooper explore the interplay between technical and market uncertainty, integration, and NPD effectiveness. Their study examines two types of integration: R&D/marketing integration and direct R&D/customer integration. The study measures NPD effectiveness in terms of such indicators as NPD cycle time, prototype development proficiency, design change frequency (a negative performance indicator), and product launch proficiency. The responses from both the U.S. and the U.K. firms provide balanced samples of high and low uncertainty projects, as well as successful and unsuccessful projects.The results of this study support previous research regarding the positive effects of both R&D/marketing integration and direct R&D/customer integration on NPD effectiveness. However, only one measure of NPD effectiveness—R&D comercialization effectiveness—was affected by both R&D/marketing integration and direct R&D/customer integration. This result suggests that the two types of integration are distinct from one another and that managers need to emphasize different types of integration, depending on which aspects of NPD effectiveness their firms need to improve.The results also suggest that technical and market uncertainty influence some aspects of NPD effectiveness. For example, the perceived level of technical uncertainty was found to influence prototype development proficiency and to moderate design change frequency. In other words, these results support the idea that a high level of technical uncertainty warrants paying extra attention to increasing prototype development proficiency in the interest of reducing design change frequency. However, the results also reinforce the idea that NPD activities generally involve high levels of technical and market uncertainty, which means that the high cost of integration may be a requirement for NPD success.