Product innovation is an important driver for manufacturing companies to remain
competitive. Although new products are essential to high-technology companies, other
sectors are also focusing on product innovation. As the importance of product
innovation becomes widely recognised, there is a need to analyse the relationship
between product innovation rates and the percentage of revenues generated from new
products (defined as product innovation position). Therefore, the purpose of this study is
to determine why companies (business units) within the same industry sector (i. e., in the
engineering and electrical & electronics engineering sector) operate with different
product innovation positions.
Much of the management literature is based on the assumption that product
innovation leads to improved company performance in terms of competitive advantage,
higher revenues with new products, higher market share and cost or quality advantages.
Taking this argument into account, it might be expected that firms with high
performance are innovating at a faster rate than less successful companies. But this
relationship is not as clear as it appears. Overall, the reasons why companies innovate at
different rates require investigation. In other words: the factors which influence product
innovation positions need deeper examination.
In order to identify the reasons for varying product innovation positions, the
research was divided into three phases: The first phase was a survey of 81 business
units, which collected data on the number of new products developed by companies.
This phase identified errors in measuring the percentage of new products introduced in
the last three years (product innovation rate). Therefore, in the second phase, the errors
in measuring product innovation rate were corrected through a survey and telephone
interviews. In this phase, data from 78 business units were analysed. In the third phase,
further investigations focusing on the question why business units have different
product innovation positions were conducted through case studies. The investigation
used a model of Cooper and Kleinschmidt (1993) as a basis for the case study research
of II business units in the industry sectors engineering and electrical & electronics
engineering.
The results identified three key drivers for product innovation positions: market,
competition and product innovation strategy. Further, the two areas NPD management
and corporate culture were found as key drivers for the management of product
innovation processes. One further important finding is, that product innovation position
do not show how innovative a business unit is. With regard to profits, the cross-case
analysis found that independent from product innovation position only two of 11
business units earn more from new products than from the whole product portfolio (i. e.,
from both existing and new products). This implies that the product innovation rate and
the percentage of revenues are related to the context. It has to be noted that an
investigation of product innovation position was only possible by using a combination
of both survey and case study approach
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