The Form of Relationship between Firm‐Level Product Innovativeness and New Product Performance in Developed and Emerging Markets

Abstract

This study compares the new product performance outcomes of firm‐level product innovativeness across a developed and emerging market context. In so doing, a model is constructed in which the relationship between firm‐level product innovativeness and new product performance is anticipated to be curvilinear, and in which the nature of this relationship is argued to be dependent on organizational and environmental factors. The model is tested using primary data obtained from chief executive officers and finance managers in 319 firms operating in the United Kingdom, an advanced Western market, and 221 firms from Ghana, an emerging Sub‐Saharan African market. The model is assessed using a structural equation model multigroup analysis approach with LISREL 8.5. In the United Kingdom and Ghana, the basic form of the relationship between firm‐level product innovativeness and business success is inverted U‐shaped, but the strength and/or form of this relationship changes under differing levels of market orientation, access to financial resources, and environmental dynamism. While commonalities are identified across the two countries (market orientation helps firms leverage their product innovativeness), differences are also observed across the samples. In Ghana, access to financial resources enhances the relationship between product innovativeness and new product performance, unlike in the United Kingdom where no moderation is observed. Furthermore, while U.K. firms leverage product innovativeness to their advantage in more dynamic environments, Ghanaian firms do not benefit in this way: here, high levels of innovation activity are less useful when markets are more dynamic. If the study's findings generalize, there are a number of implications for managers of both emerging and developed market businesses. First, managers in both developed and developing market firms should focus on determining and managing an optimal balance of novel and intensive product innovativeness within the context of their unique institutional environments. Second, for emerging market firms, a market orientation capability helps businesses leverage local market intelligence, enabling them to compete with multinational giants flocking to emerging markets, but typical developed market learning approaches may be insufficient for multinational firms when seeking to compete in emerging markets. Third, for emerging market firms, access to finances helps deliver product innovation success (although this is not the case for developed market firms, possibly due to strong financial institutions). Finally, unlike developed market firms, burdened by institutional voids at home, emerging market firms appear to be less capable of competing on an innovation front in more dynamic market conditions. Accordingly, policymakers in emerging markets should consider identifying ways to help businesses raise market orientation levels, and seek to create conditions that enhance access to financial capital (e.g., direct financing, matching grants, tax rebates, or rewarding ...

Greasing the Wheels of Change: Bribery, Institutions, and New Product Introductions in Emerging Markets

“…While prior work in this area has paid significant attention to micro-specific explanations of technological, financial, or organizational nature (Evanschitzky et al, 2012;Nadkarni & Chen, 2014), our understanding of the impact of external environments on a firm's product strategy remains limited (Bstieler, 2012). This issue is particularly salient in the context of emerging markets, which are often marked by high uncertainty and volatility (Lee et al, 2011;Story et al, 2015). By evaluating the moderating effects of formal and informal institutions, this work answers recent calls to examine the impact of macro-contextual factors on new product strategies (Story et al, 2015).…”

“…While most research in this area develops micro-specific explanations around the characteristics of products, firms, and technologies (Evanschitzky, Eisend, Calantone, & Jiang, 2012;Nadkarni & Chen, 2014), this study answers recent calls to examine the impact of external environments on new product introductions (Bstieler, 2012), particularly in the context of emerging markets (Story, Boso, & Cadogan, 2015). By showing that the effectiveness of product strategy is moderated by the formal and informal settings in which firms operate, it underscores the complex role of institutions in relation to successful introduction of new products.…”

“…contingencies have yet to be explored in the literature, particularly in relationship to new product introductions in an international (Lee, Wong, & Calatone, 2011) and emerging market context (Story et al, 2015). Answering these calls, I examine the effects of two salient contextual features of emerging markets (i.e., bribery and institutional quality) on a firm's performance with respect to new product introductions.…”

“…Environments that are perceived by managers to be highly uncertain, due to unpredictability or their inability to understand and adapt to specific contextual changes, will affect negatively new product introductions (Wind & Mahajan, 1997;Li & Atuahene-Gima, 2001). Thus, recent findings in the literature suggest that macro-contextual factors, such as cultural values (Evanschitzky et al, 2012) or institutional settings (Story et al, 2015), should be included in explanations of these product introduction decisions since these factors reflect salient challenges for both firms and managers (Bstieler, 2005). Furthermore, such…”

International entrepreneurial orientation and regional expansion

“…International product innovativeness refers to a tendency to develop new products or service offerings abroad (Balabanis & Katsikea, 2003;Story et al, 2015) and encompasses a tendency to intensively and inventively innovate to produce and launch new products in foreign markets (Miller & Friesen, 1982;Boso et al, 2013). International risk-taking is an inclination to take risks in the face of foreign market uncertainty (Covin & Miller, 2014).…”