This study explores the relationship between R&D capabilities and strategic market positions in the global manufacturing industry. The findings from a study of 106 U.S. manufacturers with international business operations show that: (1) organizations with high business growth have an above average R&D capability to generate new product ideas from R&D, regardless of their level of market share; (2) organizations with high market share have an above average capability to launch line extensions, regardless of their level of business growth; and (3) organizations with both high levels of business growth and market share have an above average capability to generate new product ideas from R&D and an above average capability to launch line extensions. Implications for organizational learning and organizational memory are discussed
The influence of research and development (R&D) capability and market position on business performance is widely recognized and well explored 1, 2 and 3. For instance, when financial analysts appraise an organization's earnings prospects, they routinely evaluate expected numbers of new products, business growth, and market share. These factors and others, which are more industry specific, are known to affect the profitability of all organizations in a particular product market [4].
Less comprehensively explored is the potential relationship between R&D capabilities and market position [5]. Consequently, many interesting questions remain unanswered. For example, which R&D capabilities are most important for an organization's strategic market position? Do organizations with high business growth generate more new product ideas and/or launch more line extensions than organizations with low business growth? Should we expect similar findings for organizations with high market share compared to those with low market share? Answers to these questions are especially important for organizations operating in industries that have become increasingly global. In this environment, competing product designs reach the market simultaneously, product life cycles are often compressed, and product boundaries are blurring.
The objective of this study is to determine the relationship between strategic market position and R&D capabilities for internationally operating manufacturing organizations. Specifically, we focus on idea generation and product extension capabilities. We explore how they vary across different levels of business growth and market share by drawing upon structural views and capability views of competitive advantage. To control for cultural and national complexities that might distract from establishing a relationship between market position and R&D capabilities in a global context, we use a homogeneous sample consisting of organizations from a single country competing in international markets. After testing a set of hypotheses empirically, we discuss the theoretical and managerial implications of our findings, thereby deriving direct links to organizational learning and organizational memory.
Two main theoretical implications can be derived from our analysis. The first implication pertains to the finding that organizations with high business growth have an above average R&D capability to generate new product ideas, regardless of their level of market share. This contrasts with high market share organizations which have an above average capability to launch line extensions, regardless of their level of business growth. This observation confirms that different strategic market positions require different R&D capabilities which, in turn, stresses the importance of learning mechanisms to acquire new R&D capabilities. Thus, the concept of organizational learning is likely to play an important role in the market position–R&D capabilities relationship.
Some researchers have already begun to explore the link between organizational learning and capability development. Sinkula, Baker, and Noordewier [23] investigate how learning contributes to marketing program dynamism, while Hult and Ferrell [24] demonstrate an empirical relationship between learning processes and dynamic cycle time capabilities in the purchasing process. These studies could be extended to investigate how organizations build and deploy R&D capabilities. Further, the broader literature on the composition of teams and reward structures [25] might permit more detailed investigation of how to manage the development of new R&D capabilities. Just as teamwork can lead to the speedier and more efficient extension of product lines [26], incentives can stimulate the idea generation process.
The second theoretical implication pertains to the finding that organizations with high market share and high business growth have an above average R&D capability to generate new product ideas and launch line extensions, with no one capability having a disproportionate relationship with market position. This observation suggests that R&D capabilities cumulate as the strategic market position of an organization evolves which, in turn, highlights the importance of memory mechanisms to retain acquired R&D capabilities. Thus, the concept of organizational memory is likely to play an important role in the market position–R&D capabilities relationship.
Preliminary work in the area of organizational memory by Starbuck [27], Lukas, [28], and Walsh and Ungson [29] suggests that organizational memory is composed of storage bins, including physical capital, organizational formations, social capital, and organizational culture [28]. These studies might serve as the basis for a detailed investigation of where complementary R&D capabilities can be stored. Furthermore, the interfunctional coordination literature 30 and 31, with its emphasis on intra-organizational cooperation, might offer some insight into how organizations can manage the storage process. For example, at a very basic level, increased communication and resource flows between functional units could jump-start the encoding of idea generation routines and line extension patterns.
