Differences of organizational characteristics in new product development: cross-cultural comparison of Korea and the US

Technovation 20 (2000) 497–508 www.elsevier.com/locate/technovation

Differences of organizational characteristics in new product development: cross-cultural comparison of Korea and the US Jaehee Lee a, Jinjoo Lee

a,*

, William E. Souder

b

a

b

Graduate School of Management, Korea Advanced Institute of Science and Technology (KAIST), 207-43 Cheongryangri-dong, Dongdaemoon-gu, Seoul 1370-012, South Korea Center for the Management of Science and Technology (CMOST), Suite 126 ASB, University of Alabama in Huntsville, Huntsville, AL 35899, USA Received 11 June 1999; received in revised form 31 August 1999; accepted 21 October 1999

Abstract To ensure success in the current age of globalization, it is imperative for companies to understand the management practices of competitors both within and outside national boundaries. This study investigates the differences in organizational characteristics in the context of the new product development (NPD) process and the impact of these differences on NPD performance between Korea and the United States. The results show that a high degree of participation in decision making, R&D-marketing integration, top management support, project manager’s skill, project manager’s motivating ability, project manager’s authority from top management, and product champion’s influence is essential for NPD project success regardless of the country in which a company operates. This is consistent with previous studies and suggests there is a global formula for successful NPD. However, the results also show that the use of venture teams, authority concentration, organizational organicity, project manager’s participative style, and existence of the product champion had a different impact on NPD performance in Korea and the US. This implies that there could be country-specific factors that influence the success of NPD, therefore research results from one country should be applied with prudence to other countries. Furthermore, it was found that differences mainly stem from country-specific contexts surrounding NPD activities. With these findings in mind, we proposed an improved research model for cross-cultural study on the impact of organizational characteristics on NPD performance. The model suggests that in addition to a direct impact, the country-specific culture has an indirect impact which is mediated by institutional management systems such as the performance appraisal system.  2000 Elsevier Science Ltd. All rights reserved. Keywords: New product development (NPD); Cross-cultural comparison; Organizational characteristics; Korea

1. Introduction New product development (NPD) has long been recognized as one of the most important activities of business enterprises. Many researchers have tried to probe into both successful and unsuccessful products with the hope of yielding clues to improve management practices and there is a remarkable accumulation of

* Corresponding author. Tel.: +82-2-958-3601; fax: +82-2-9583604. E-mail address: [email protected] (J. Lee)

research that indicates key success factors of NPD (Montoya-Weiss and Calantone, 1994). However, despite extensive studies on NPD, it is still uncertain whether the results of the studies could be applied to all firms in the world, regardless of regional differences. Successful NPD management practices could be different for each country since each has a different national culture (Mishra, 1996; Nakata and Sivakumar, 1996; Schoening et al., 1998), but the scope of most previous studies on NPD management practices is limited to one nation and we are still lacking in crosscultural knowledge. In light of the rapid pace of globalization, it has become more important for companies to understand the management practices of foreign com-

0166-4972/00/$ - see front matter  2000 Elsevier Science Ltd. All rights reserved. PII: S 0 1 6 6 - 4 9 7 2 ( 9 9 ) 0 0 1 6 9 - 8

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petitors and to accept those practices if they prove to be superior. Without such effort, companies will not be able to maintain their competitiveness in the present age of global competition. This study addresses the cross-cultural issue by comparing organizational characteristics in NPD projects between Korea and the US. Organizational characteristics are some of the most frequently cited factors that determine the outcome of NPD projects (Montoya-Weiss and Calantone, 1994), and are very closely related to the national culture. We decided to compare the situations in Korea and the US because there is relatively little information on the NPD process in Korea. Korea is a rapidly changing country and has seen one of the fastest paces of growth among developing countries over the past four decades. Now, Korea has emerged as one of the most important trading partners of the US. In recent years, many US managers have attested to the quality of Korean products and several Korean companies have outperformed their American competitors in many markets around the world. However, only a few studies have been conducted on the management practices of Korean firms, especially on the organizational characteristics within a project setting, which is why we undertook this study. The more specific research questions of this study are as follows: 1. Are there differences in organizational characteristics in NPD process between Korea and the US? 2. Are there differences in the impact of organizational characteristics on NPD performances between Korea and the US? 3. If differences exist, what are the reasons for the differences and what are their implications to NPD management in both countries?

2. Literature review 2.1. Organizational characteristics and NPD performance The organizational setting of NPD activities has become increasingly important to both academics and managers (Cooper and Kleinschmidt, 1995). The commonly cited organizational characteristics in NPD studies include the method for organizing NPD projects, the structure of project organization, the degree of R&Dmarketing integration, and the characteristics of key persons involved in the execution of the NPD project. The NPD project can be organized in a number of ways that range from the pure project organization to the functional organization, with the hybrid in between (Yap et al., 1998). Recently, we have seen the use of multidisciplinary teams and the combinations of organi-

zational forms prevail in new product work. Larson and Gobeli (1988) showed that project teams and matrix organizations are superior to traditional functional management structures in terms of keeping projects on schedule, while meeting cost and technical performance objectives. Other studies have indicated a contingent perspective that a functional-based form of structure is effective for routine, non-radical, and line extension types of projects while a project-based form of structure is appropriate for more uncertain, radical types of projects (Yap et al., 1998). The structure of project organization influences NPD work. There are several dimensions to the structure of project organization: formalization of procedure, centralization of authority, participation in decision making, and rigidity of the project organization in terms of the mechanistic-organic continuum. In general, more innovative firms tend to be loosely structured, possessing a clear strategic focus for innovation (Calantone et al., 1995; Johne, 1984). Calantone et al. (1993) shows that organicity of the structure has a significantly positive direct effect on both marketing and technical skills as well as resources. The study also suggests that organicity must be coupled with proactive innovation strategy and effective implementation to have the desired effects on product success. The degree of R&D-marketing integration is very important for new product development success (Calantone et al., 1995; Cooper and Kleinschmidt, 1995; Kahn, 1996; Song and Parry, 1992; Yap and Souder, 1994). The NPD process consists of a set of activities either simultaneously or sequentially conducted by R&D and marketing functions. To improve the quality of NPD process and performance, harmonious information exchanges are required among members of these two functions that play different roles (Moenaert and Souder, 1990). There are many empirical studies indicating that R&D-marketing integration is positively related to NPD success (Cooper, 1983; Ottum and Moore, 1997; Souder, 1988; Souder and Song, 1998; Yap and Souder, 1994). Evidence from these empirical studies is strong, consistent, common across a variety of methodologies, and seemingly applicable in both services and products and in both consumer and industrial markets (Griffin and Hauser, 1996). The characteristics of key individuals are also frequently cited organizational variables. Management should provide strong support for NPD and be able to create an atmosphere of trust, coordination and control. The importance of key individuals will often play a vital role during the NPD process. Rothwell (1992) suggested that the success of innovation is people-centered because innovation is essentially a people process and simply attempting to substitute formal management techniques for managerial talent and entrepreneurial flair is not a viable option.

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There could be three groups of key individuals who have a strong impact on NPD performance: top management, project manager, and product champion. The degree of top management support for the project and the stage of the project in which their involvement begins affect the project outcome. The impact is positive if vigorous, visible leadership is provided by top management that has a good understanding of NPD (Yap et al., 1998). A few researches have also indicated that top management supports innovation by setting goals, allocating resources, and speeding up adoption (Ramanujam and Mensch, 1985; Witte, 1977). Hegarty and Hoffman (1990) examined top management involvement among four Western countries. They found that the top manager’s role as strategist is important in the innovation process and the relationship between a top manager’s role and innovation influence were moderated by different emphasis on strategic management practices by managers from different cultural settings. The competence of the project manager affects the fate of the project. Smith and Reinertsen (1991) insisted that, of all the decisions management makes in managing NPD, none is more crucial to success than the choice of a project manager and suggested four skills needed by a project manager which are leadership, vision, technical, and management skills. Besides these skills, successful project managers should be vested with enough authority by top management to fulfil their responsibilities that range across various functions. The product champion achieves distinction by accepting risk, vigorously supporting or advocating the project, helping the project through critical times, overcoming opposition, or leading coalitions (Markham, 1998). The presence of a product champion, his/her influence and his/her authority are related to project success. However, despite the importance of the product champion’s role in NPD process (Schon, 1983; Van de Ven, 1986), no study has demonstrated a positive effect of the product champion on NPD success. Markham (1998) found that champions did not make a positive contribution to project performance from the perspective of the team members. Product champions, however, held a more positive view of the project compared to team members. Although empirical studies have not found the product champions’ direct effect on project success, the champions may affect other people and processes in the organization through their influence in three areas: level of investment, budgets, and project termination decisions; level of support; and level of NPD process integration and strategy innovativeness (Markham, 1998). 2.2. Cultural differences between Korea and the US Over the past 40 years, an enormous amount of research has shown that managers in different countries

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make different strategic decisions and prefer different types of organizational structures because they hold different fundamental values about people and the way they should behave in organizations (Shane, 1994). Therefore, successful NPD management practices might be different for each country because of cultural differences. National culture has been defined as the collective programming of the mind that distinguishes members of one category of people from those of another (Hofstede, 1980). Hofstede (1983) created four dimensions of the national culture through research on national differences in work-related value patterns in 50 countries. The labels for the four dimensions are power distance, individualism, masculinity, and uncertainty avoidance. His research results showed that Korea and the US have very different national cultures. That is, Korea was included in the “large power distance/low individualism/strong uncertainty avoidance” cluster, while US was in the “small power distance/high individualism/weak uncertainty avoidance” cluster. The cultural differences between Korea and the US can also be explained by the East–West contrast. A primary influence within the Eastern culture is Confucianism that emphasizes the importance of society, the group, and hierarchical relationships within a society. In contrast, the Judeo–Christian religion has been the primary influence in the West and the Protestant Work Ethic epitomizes the Judeo–Christian emphasis on personal achievement and individual self-worth. Thus the underlying contrast between Eastern (Korea) and Western (US) cultures is the relative focus on the good-of-thegroup (Collectivism) in the East versus the good-of-theindividual (Individualism) in the West (Ralston et al., 1997). Through a case study of a US new product team, Donnellon (1993) suggested that prevalence of individualism in American culture made teamwork less successful than in Asia, where collectivism prevails. Nakata and Sivakumar (1996) proposed a relationship which links the NPD process to the five dimensions of national culture — individualism, power distance, masculinity, uncertainty avoidance, and Confucian dynamic — by reviewing and integrating the literature from relevant studies. The point of emphasis on management practices also could be different by country. Hitt et al. (1997) compared strategic decision models of Korean and US executives and showed the differences in Korean and US executives’ strategic orientation. The results suggested that Korean executives pursued growth while emphasizing industry attractiveness, sales and market share. On the other hand, US executives pursued profitability while focusing on projected demand, discounted cash flow and ROI. Some researchers have compared Korean and US corporate management systems (Ungson et al., 1997; Yoo and Lee, 1987) and Table 1 shows the distinctive

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Table 1 Comparison of Korean and US corporate culturea Feature

Korea

US

Importance of seniority Work centrality Basis of achievement Evaluation Promotion Incentive system Social contract Basis of business relationship Structure Job descriptions

Very strong Confucian work ethic Group achievement Non-systematic, past-oriented Seniority Seasonal bonus(uniform) Harmony dominates Personal Relationship People-oriented General

Moderately strong Protestant work ethic Individual achievement Systematic, present-oriented Performance Performance-based incentive Individual justice dominates Written contact Work-oriented Very specific

a

Source: Ungson et al. (1997) and Yoo and Lee (1987).

characteristics of the management systems in the two countries. As mentioned above, although a few researchers have examined cultural differences and their impact on management practices, they largely ignored the cultural differences’ specific ties to NPD. In this study, we try to provide insights into the nature of this relationship.

3. Research design This study was designed around the common premise that organizational characteristics influence NPD performance and the objective was to test this premise on samples of Korean and US NPD projects, as a means to learning more about the impact of cultural differences on NPD management practices. A four-step design was followed. First, previous NPD research findings were consulted to define a guiding model postulating relationships between selected organizational characteristics and the degree of commercial success of a new product. In this study, we considered three categories of organizational characteristics: method for organizing NPD projects, organizational process, and characteristics of key persons in the NPD process. The resulting model is depicted in Fig. 1. Second, questionnaires were used to measure retrospectively organizational characteristics and commercial performance of the selected Korean and US NPD projects. It should be noted that in this study, the dimensions of culture were not directly measured but were approximated by the use of country clusters: Korea versus the US. Third, statistical analyses were undertaken on the collected data to reveal differences and similarities between Korea and the US. Fourth, information on national culture taken from other sources was consulted to help rationalize the results.

4. Research methods 4.1. Sample and data collection The analyses reported here are based on the INTERPROD database which were completed at the Center for Management of Science and Technology (CMOST) at the University of Alabama in Huntsville. The full database contains over 1 million items of historical life cycle data on 2000 innovative new products from 500 firms in 19 countries. For this study, Korean and US data from the INTERPROD database were used. The information pertains to a total of 52 Korean (from 15 firms) and 86 US (from 31 firms) NPD projects related to high technology products. These “high technology products” include computers, electronic devices, drugs, and transportation equipment (SIC groups 28, 35, 36, and 38). Twenty of 52 Korean NPD projects were from small firms and thirty-two were from large ones. Similarly, thirty-eight out of 86 US projects were from small firms and fortyeight were from large ones. All the companies were well established and each had introduced several new products during the past five years. Respondents in each firm were asked to complete the questionnaire on NPD projects, which was developed in English-written form by the INTERPROD project team and translated into Korean for respondents in Korea. The respondents were generally project managers who had extensive responsibilities for the selected NPD projects within their firms. In addition to the project managers, marketing managers were asked for their input to measure NPD commercial performance and R&D-marketing integration. 4.2. Measurement The degree of commercial success of each project was measured on the five-point scale shown in Table 2,

J. Lee et al. / Technovation 20 (2000) 497–508

Fig. 1.

Conceptual framework of this study for Korea/US comparison.

adopted from other field studies in which it was developed, tested, and validated (Song et al., 1997; Souder and Jenssen, 1999). “Expectations” were defined in terms of seven criteria used by both the Korean and US respondents: sales revenue, market share, return on investment, profit, customer satisfaction, contribution to technology leadership, and contribution to market leadership. Respondents were instructed to use these criteria in making their judgements on the overall degree of commercial success with respect to the product’s actual performance versus the expectations (goals) originally set.

Turning to the method for organizing the NPD project, we used a nominal scale that listed eight possible methods. Project managers checked all the appropriate methods used for their respective projects. The organizational process category included five variables. They were level of procedure formality, level of authority concentration, level of participation in decision making, degree to which the organization is organic, and degree of R&D-marketing integration. The degree of R&D-marketing integration was measured by the arithmetic mean of five items: level of contact, level of information flow, level of friction between technical and commercial enti-

Table 2 Degree of commercial success of a new product The commercial outcome of this product was (circle one number that best describes your assessment) Product Commercial Outcome Degree of Commercial Success Far Above Expectations Slightly Above Expectations Met Expectations Slightly Below Expectations Far Below Expectations

501

5 4 3 2 1

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ties, level of participation in problem definition by commercial entities, and level of participation in problem definition by technical entities. Five-point Likert-type scales from 1 (very low) to 5 (very high) were used to measure the five variables. The category for characteristics of key individuals included a total of nine variables related to top management, project manager, and product champion. The degree of top management support, the timing of top management involvement (i.e. how early in the project the involvement began), degree of project manager’s participative style, degree of project manager’s motivating ability, degree to which the project manager has broad authority, level of product champion’s position in the organizational hierarchy, and level of product champion’s influence were also measured by five-point Likert-type scales. The level of the project manager’s skill was measured by the arithmetic mean of his/her technical, marketing, and management abilities. Existence of the project champion was measured by a two-point dichotomous scale (yes, no). The project managers who pursued the selected projects looked over all the independent variables. For the degree of R&D-marketing integration and the level of project manager’s skill, which were measured by multiple items, Cronbach reliability analyses and factor analyses were run on the combined database of Korean and US NPD questionnaire responses (n=138 products). The alpha coefficients of the degree of R&D-marketing integration and the level of project manager’s skill were above 0.70, which indicated acceptable reliability in terms of Nunnally’s (1978) standard for research. Factor analysis results for each multi-item measures turned out to be consistent with our prior expectation. That is, all the five items for R&D-marketing integration fitted into one factor which explained 53.3% of the variance, and all three items for the level of project manager’s skill also fitted into one factor which explained 56.3% of the variance.

5. Results 5.1. Comparison of organizational characteristics between Korea and the US The results of this study suggest that Korea and the US had somewhat different NPD management practices in terms of organizational characteristics. Fig. 2 indicates that there were some differences in the method for organizing NPD projects between Korea and the US. In Korea, the use of NPD departments (61.5% of projects), use of new product managers (34.6%), and top management control (26.9%) were the most frequently employed methods in organizing NPD projects, while in the US, new product managers (44.2%), top management control (30.2%), and matrix organizations (29.1%) were

most often used. Taking a closer look at each method, more NPD departments, fewer venture teams, and fewer matrix organizations were used in Korea than in the US. This result implies that the use of multifunctional or team-based methods in Korea is significantly lower than in the US. Although it has been accepted that the use of multifunctional or multidisciplinary teams prevails in new product work today (Larson and Gobeli, 1988; Page, 1993), the results of this study indicate that Korean firms still depend highly on traditional functional-based approaches when organizing NPD projects. Considering the prevalence of collectivism in Korea, the results of this study are not consistent with the general belief that collectivism promotes a team approach in NPD by emphasizing harmony among team members (Nakata and Sivakumar, 1996). The possible explanation for the inconsistency is the performance evaluation and reward system in Korean firms. Most Korean firms conduct performance evaluations only within a functional department and they are not acquainted with the performancebased reward system. This means that Korean firms do not have adequate tools to control multifunctional-based project teams in NPD. Table 3 shows the result of a t–test (P⬍0.1) and indicates differences in organizational characteristics in terms of organizational processes and key persons between Korea and the US. Compared to the US, Korea recorded a statistically significant lower mean value in levels of authority concentration, degree of R&D-marketing integration, timing of top management involvement, level of project manager’s skill, and degree to which the project manager has broad authority. The lower mean value in level of authority concentration and degree to which the project manager has broad authority in Korea reflects the high collectivism in Korea. The prevalence of collectivism in Korea, which upholds group values and beliefs, seems to limit concentration of authority to a few people in the NPD process and results in low authority of the project manager. The differences between Korean and US firms mentioned above stem from both a contrast in cultural aspects as well as the different methods used for organizing NPD projects in each country. In functional-based project teams existing in most of the Korean firms, the functional department manager has strong authority over broad tasks and it is difficult for the project manager to secure the necessary authority for implementing NPD projects. In Korea, the project manager is under the control of the department manager and it is the department manager who has important decision-making power in the NPD process such as resource allocation and scheduling changes. The lower value for the timing of top management involvement in Korea also seems to stem from the reason explained above. However, the lower values for the degree of R&Dmarketing integration and level of project manager’s

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503

Fig. 2. Differences in the use of methods for organizing NPD projects.

skill in Korea cannot be clearly explained by cultural aspects. In this case, the possible reason is the weakness of management systems in Korean firms. That is, Korea is a follower not only in terms of technology development but also in terms of NPD management system development. Although managers in Korea know that the two variables are critical factors for NPD success from previous research results and various benchmarking efforts, they seem to suffer from a lack of knowledge and resources to improve the management system.

5.2. Comparison of the impact of organizational characteristics on NPD performance between Korea and the US Is the impact of organizational characteristics on NPD performance different between Korea and the US? Table 4 shows how NPD performance varies according to the use of specific methods in organizing a NPD project based on the subgroup analysis. Subgroup analysis is a process in which the sample is split into two subgroups

Table 3 Differences in organizational characteristics between Korea and US Korea (n=52) Characteristics of organisation process Level of procedure formality Level of authority concentration Level of participation in decision making Degree of organizational organicity Degree of R&D-marketing integration Characteristics of Key Persons Degree of top management support Timing of top management involvement Level of project manager’s skill Degree of project manager’s participative style Level of project manager’s motivating ability Degree of project manager’s authority Existence of product champion a b c d e

Mean value of the variable. Standard deviation of variable. frequency of the projects with product champion. X2-value. *P⬍0.1; **P⬍0.05; ***P⬍0.01; ****P⬍0.001.

3.54a (1.18)b 3.85 (0.72) 3.71 (0.83) (n=51) 3.73 (0.99) 3.18 (0.58) 4.33 (0.75) (n=46) 1.31 (0.73) 3.54 (0.53) 3.94 (0.85) 3.90 (0.80) 3.65 (1.06) 45c (86.5%)

US (n=86)

3.19 4.13 3.87 3.62 3.64

t-valuee

(1.23) (0.98) (1.09) (1.02) (0.82)

1.65 ⫺1.93* ⫺0.94 0.65 ⫺3.82****

4.15 (0.96) 1.91 (1.20) 3.76 (0.78) 3.81 (1.01) 3.76 (1.15) 4.00 (1.04) 75 (87.2%)

1.10 ⫺3.64**** ⫺2.01** 0.77 0.89 ⫺1.88* 0.01d

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Table 4 Impact of methods for organizing NPD projects on NPD performance Korea Used NPD Department NPD Manager Venture team Task Force NPD Committee Matrix Organization Top Management Control Dyad a

2.87 2.61 1.80 2.18 2.67 4.00 2.29 2.89

Non-used (n=31) (n=18) (n=5) (n=11) (n=6) (n=3) (n=14) (n=9)

2.40 2.73 2.78 2.83 2.69 2.60 2.84 2.64

(n=20) (n=33) (n=46) (n=40) (n=45) (n=48) (n=37) (n=42)

US Used

t-valuea 1.18 ⫺0.28 ⫺3.38*** ⫺1.37 ⫺0.07 1.72* ⫺1.27 0.48

t-valuea

Non-used

2.64 (n=14) 2.97 (n=38) 3.63 (n=19) 3.00 (n=22) 2.80 (n=5) 3.08 (n=25) 2.58 (n=26) 2.92 (n=12)

2.83 2.66 2.56 2.73 2.80 2.68 2.90 2.78

⫺0.40 0.91 2.66*** 0.68 0.00 1.04 ⫺0.85 0.27

(n=71) (n=47) (n=66) (n=63) (n=80) (n=60) (n=59) (n=73)

*P⬍0.1; **P⬍0.05; ***P⬍0.01; ****P⬍0.001.

based on a contextual factor and correlation coefficients between independent variables and dependent variables are compared. In Korea, two of eight methods showed statistically significant differences in NPD performance: venture teams and matrix organizations. Projects that employed venture teams recorded lower performance while projects that used matrix organizations recorded higher performance. However, in the US, only one of the methods, that is the use or non-use of venture teams, led to a statistically significant difference in performance. Considering previous study results that say venture teams tend to be poorly executed and are high risk endeavors (Bart, 1988; Crawford, 1994; Barczak, 1995), it is noteworthy that companies using venture teams in the US recorded high performance. It may be that in the US, these firms reaped great success in the area of venture business over the last decade and learned useful skills for managing venture teams. However, in Korea, the use of venture teams is still a new method for organizing NPD projects

and cannot guarantee the success of NPD without careful consideration. By the way, it is very interesting to note that projects which used matrix organizations recorded higher performance in Korea. Although only three out of 52 projects used matrix organizations in Korea (because of the lack of performance-based incentive system as mentioned earlier), the influence of matrix organizations on NPD performance seems to be positive Table 5 shows that the level of authority concentration and the degree to which the organization is organic had significantly different impacts on NPD performance between Korea and the US. It is noted that the encouragement of authority concentration facilitates NPD success in the US but not in Korea, and that the provision of an organic setting within a project organization facilitates NPD success in Korea but not in US. The other three variables did not have a significantly different impact on NPD performance between Korea and the US. The level of procedure formality was found to have no relationship with NPD performance in both Korea and

Table 5 Differences in correlation coefficients between Korea and US Correlation with NPD Performancea Korea US Characteristics of Organizational Process Level of procedure formality Level of authority concentration Level of participation in decision making Degree of organizational organicity Degree of R&D-marketing integration Characteristics of Key Persons Degree of top management support Timing of top management involvement Level of project manager’s skill Degree of project manager’s participative style Level of project manager’s motivating ability Degree of project manager’s authority Level of product champion’s position(high-up) Degree of product champion’s influence a

FisherZ

⫺0.01 ⫺0.21 0.33 0.34 0.54

(51) (51) (50)** (51)** (49)***

0.09 0.23 0.49 0.08 0.53

(86) (86)** (86)**** (86) (86)****

⫺0.55 ⫺2.47*** ⫺1.06 1.51* 0.08

0.32 0.04 0.51 0.45 0.46 0.25 ⫺0.10 0.34

(48)** (51) (51)* (51)*** (51)*** (51)*** (43) (44)**

0.26 ⫺0.18 0.55 0.09 0.43 0.40 0.02 0.27

(86)** (86)* (86)*** (86) (86)**** (86)**** (75) (75)**

0.35 1.22 ⫺0.31 2.18** 0.21 ⫺0.93 ⫺0.62 0.45

*P⬍0.1; **P⬍0.05; ***P⬍0.01; ****P⬍0.001.

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Table 6 Impact of product champion’s existence on NPD performance

NPD Performance a b

Korea Existence

Nonexistence

t–value

US Existence

Nonexistence

t–valueb

2.68a (n=44)

2.71 (n=7)

0.06

2.99 (n=75)

1.55 (n=11)

3.53***

Mean value of the variable *P⬍0.1; **P⬍0.05; ***P⬍0.01; ****P⬍0.001

the US, while level of participation in decision making and degree of R&D-marketing integration were important for NPD success in both countries. It is very interesting to note that the variables showing differences between Korea and US reflect the difference in organizational cultures prevailing in the two countries: that is, collectivism versus individualism. Table 5 also shows that the impact of key persons on NPD performance was somewhat different between Korea and the US. First, top management support was significantly correlated with NPD performance in Korea and the US but the timing of top management involvement was significant only in the US. This result implies that in Korea, even if top management gets involved early in the project, that does not facilitate NPD success. This may be because of the top management’s poor understanding of the NPD project. Without an exact understanding of the attributes of the NPD project, including both technical and managerial aspects, early involvement of top management might lead to confusion in the progress of the project. Second, the project manager’s skill, motivating ability, and necessary authority from top management were all significantly correlated with NPD performance in both Korea and the US. However, the correlation between the project manager’s participative style and NPD performance was significant only in Korea and markedly greater in Korea than the US. Although this result also could be explained by high collectivism in Korea, it is more appropriate to attribute the result to the fact that the functional-based management system prevailed in Korea. In the functional-based management system, the NPD project manager has weak authority and power to control team members and he/she cannot but try to draw in team members by adopting a participative style. Finally, Table 6 shows that the impact of a product champion’s existence on NPD performance was different between Korea and the US. Projects with a product champion recorded significantly better performance in the US, but not in Korea. This result can also be explained by the same reason described above. In Korea, the existence of a project champion does not necessarily facilitate NPD success because he/she may not have sufficient authority. With other characteristics of the product champion, as shown in Table 5, his or her position in the organizational hierarchy has no significant corre-

lation with NPD performance in both Korea and the US, but his or her influence in the organization is significantly correlated with NPD performance in both countries. 5.3. Management implication In the broad area of management, a considerable amount of research has shown that managers in different countries make different strategic decisions and prefer different types of organizational structures because they hold different fundamental values about people and the way they should behave in organizations (Shane, 1994). The results from this study have also shown that there were some differences in organizational characteristics and their impact on NPD performance between Korea and the US. This implies that research results from one country should be carefully applied to other countries. We found that cultural differences between Korea and the US led to different NPD management practices in terms of organizational characteristics. Especially, distinction of collectivism and individualism explained many aspects of the differences between the two countries. For example, the prevalence of collectivism in Korea emphasized the importance of low authority concentration, high organizational organicity, and high degree of project manager’s participative style for NPD success. However, non-cultural factors including performance appraisal system and capability to adopt advanced management practices were also found to lead to differences between Korea and the US. For example, the lack of a performance-based appraisal system in Korea resulted in low use of team-based methods for organizing NPD projects and a low degree of authority delegated from top management. It also meant that the existence of a project champion had no impact on NPD performance. The low capability in adopting advanced management practices caused low use of venture teams and matrix organizations, low level of R&D-marketing integration, low level of project manager’s skill, and lower NPD performance by projects using venture teams. It also should be noted that the three contexts mentioned above are closely interrelated with one other. For example, the performance appraisal system is influenced by the culture. Hofstede (1998) has suggested a prop-

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osition that pay-for-performance compensation practices will be used more widely in countries with higher levels of individualism. We think that Korean firms exactly meet the proposition. Most Korean firms conduct performance appraisals only within a functional department and they are not acquainted with team-based or taskbased performance appraisal because of the prevalence of collectivism. Furthermore, because of their peculiar culture, performance rating is not a significant factor in determining an employee’s promotion or compensation in Korean companies. The Confucian ethic in Korea, which has traditionally been a dominant ethical guideline, also emphasizes interpersonal harmony and collective welfare (Kim et al., 1994). Thus, pay-for-performance compensation is rarely used and this results in fewer incentives to adopt team-based methods for NPD projects, even if it might be a more effective method in Western countries. The results and interpretations described above provide some interesting points in the area of cross-cultural research on NPD. That is, culture influences NPD management practices through two different paths: direct and indirect. In the case of the indirect path, the influence of culture on NPD management practices is mediated by institutional management systems. Especially, in studies at the project level, the indirect impact of culture should be carefully investigated. For example, in this study, Korean firms’ collectivism resulted in less use of payfor-performance compensation practice and this, in turn, resulted in less use of the team-based approach in

Fig. 3.

organizing NPD projects. Without considering the indirect impact of culture, we cannot attribute the lower use of the team-based approach in Korea to high collectivism. Fig. 3 shows this relationship. Although an enormous amount of research has investigated the influence of culture on NPD activities, researchers usually focused on the direct impact of culture. The propositional model shown in Fig. 3 might be helpful for future study and may lead to a greater understanding of the internal mechanism of cultural influences. Finally, in addition to the differences, we found many common features between Korea and the US. The existence of common features between the two countries implies that there could be a global or worldwide formula for successful NPD. The organizational characteristics that are equally important for successful NPD in both countries are as follows: — high level of participation in decision making, — high degree of R&D-marketing integration, — high level of top management support, — high level of project manager’s skill, — high level of project manager’s motivating ability, — high level of project manager’s authority from top management, and — high level of product champion’s influence. It should be noted that these findings are also consistent with prior studies (Cooper and Kleinschmidt, 1987; Souder, 1988; Yap et al., 1998). Consequently, for suc-

Propositional model derived from this study.

J. Lee et al. / Technovation 20 (2000) 497–508

cessful NPD, it is important to understand a variety of organizational aspects influencing NPD performance and to know how these organizational aspects change according to the context surrounding NPD projects.

6. Conclusion

This study investigated the differences of organizational characteristics in NPD process and their impact on NPD performance between Korea and the US. The study showed that some organizational characteristics had a common impact on NPD performance in Korea and the US. This result is consistent with findings from previous studies and suggests there is a global or worldwide formula for successful NPD. For example, a high degree of participation in decision making, R&D-marketing integration, top management support, project manager’s skill, project manager’s motivating ability, project manager’s authority from top management, and product champion’s influence is important for NPD project success regardless of in which country the NPD process takes place. However, the study also showed that some organizational characteristics including the use of venture teams, authority concentration, organizational organicity, project manager’s participative style, and existence of a product champion had different impacts on NPD performance in Korea and the US. This implies that there could be country-specific factors that influence success of NPD, therefore research results from one country should be applied with prudence to other countries. Furthermore, it was found that the differences were mainly due to the country-specific contexts surrounding NPD activities such as culture, general capability to adopt advanced management practices, and performance appraisal system. With this in mind, we proposed an improved research model for cross-cultural study on the impact of organizational characteristics on NPD performance. It suggests in addition to the direct impact, culture has an indirect impact which is mediated by institutional management systems. In this age of globalization, it has become more important to understand the management practices of different countries and the proposed model might be helpful in understanding countryspecific mechanisms of NPD management. Finally, it must be noted that this study was limited to examining the bivariate relationship between each organizational characteristic and NPD success. Future studies should examine the inter-relatedness between organizational characteristics and the different features of those relationships for different countries.

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Acknowledgements This study is part of INTERPROD, a 19-country cross-national study under the direction of Dr. Wm. E. Souder at the Center for Management of Science and Technology (CMOST), University of Alabama in Huntsville, USA. INTERPROD is funded by National Science Foundation grant SBR9408272, Marketing Science Institute grant 4-386 and US Air Force contract F49620-941-0456.

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