Strategic Market Position and R&D Capability in Global Manufacturing Industries: Implications for Organizational Learning and Organizational Memory

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Abstract

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

Introduction

The influence of research and development (R&D) capability and market position on business performance is widely recognized and well explored 1, 2, 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.

Section snippets

Theoretical background

The more familiar theories of competitive advantage have come from observing structural-specific characteristics of industries, competitive forces, and strategic interactions between competitors 6, 7. Approaches to conceptualizing advantage which are driven by a structural view specify strategic market position as an important aspect of competitive advantage. This is because the strength of an organization's market position is associated with its cumulative experience. A result of this can be

Research framework

We propose that the importance of R&D capability will shift as the strategic positions of organizations change. Just as organizations grow and change with the product markets they serve, we also expect certain R&D capabilities to become less or more important with such change [17]. More specifically, we expect exploration (as reflected in new product ideas) to be a distinctive capability for growth businesses, and exploitation (as reflected in line extensions) to be a distinctive capability of

Data Sample

A mailing list containing 800 randomly selected U.S. manufacturing companies was purchased from Dun & Bradstreet Information Services. Five hundred and sixty-one key informants (one informant representing one SBU in each company) agreed to participate in the study and were mailed a questionnaire. This procedure—including a follow-up mailing—resulted in 194 SBU responses. Of these, 106 SBUs served markets in the United States and other countries. These SBUs were used for the present study.

Research Instruments

New

Empirical findings

Table 1, Table 2 show the multivariate and univariate results. The multivariate results show a significant overall main effect for business growth and market share. The two-way interaction between the factors was not significant, suggesting that the overall main effects can be interpreted directly. Accordingly, the results show that the number of new product ideas generated from R&D and the number of line extensions launched differ depending on business growth and market share levels.

Our first

Discussion

In this study, we have drawn upon structural views and capability views of competitive advantage to explore how idea generation capabilities and product extension capabilities vary across different levels of business growth and market share. Our findings are four-fold (see Figure 1). First, strong exploration and exploitation capabilities are associated with high business growth and high market share. Second, strong exploration capabilities, but weak exploitation capabilities, are associated

Acknowledgements

This research was supported by funds from the FedEx Center for Cycle Time Research at the University of Memphis. The authors thank Gregory J. Whitwell, G. Tomas M. Hult, and three anonymous IMM reviewers for their careful and constructive comments.

BRYAN A. LUKAS is a senior lecturer in marketing in the Department of Management at the University of Melbourne.

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    BRYAN A. LUKAS is a senior lecturer in marketing in the Department of Management at the University of Melbourne.

    SIMON J. BELL is a lecturer in marketing in the Department of Management at the University of Melbourne.

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