Journal
IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT
Volume 65, Issue 1, Pages 59-71Publisher
IEEE-INST ELECTRICAL ELECTRONICS ENGINEERS INC
DOI: 10.1109/TEM.2017.2739647
Keywords
Incentives in innovation; new product development (NPD) portfolio; NPD process; technology management; tolerance for failure
Categories
Ask authors/readers for more resources
Despite substantial research that advocates the right portfolio of new product development initiatives for the firm, one important aspect has been overlooked: Creating a portfolio of new product development initiatives is not equivalent to choosing froma menu of initiatives. Rather, these initiatives are defined by and within the organization. Thus, portfolio selection rests upon two challenges: 1) the cross-functional nature of collaborative tasks; and 2) the role of explicit and implicit incentives on innovative outcomes. This paper explores how these factors ultimately determine the initiatives an organization pursues. We abstract a new product development organization as two functional managers who report to senior management and analyze the strategic interactions between all three stakeholders. Seniormanagement decides whether to empower the functional managers to define the initiative and how to reward them contingent on the outcome. We evaluate how the asymmetry of information regarding each function's capability, and the explicit and implicit rewards and penalties imposed on the functional managers affect the upfront resource allocation. We find a profound effect of the information asymmetry: the set of initiatives the firm deems profitable is reduced, thus impeding the organization's potential to innovate. To counter such a shortcoming, senior management may optimally misalign the objectives of the stakeholders.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available