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Innovation Strategy and Sanctioned Conflict: A New Edge in Innovation? Barbara Dyer and X. Michael

Innovation Strategy and Sanctioned Conflict:

A New Edge in Innovation?

Barbara Dyer and X. Michael Song

Teamwork and harmony are worthy objectives, but a healthy dose of conflict also plays an important role in fostering innovation. In their pursuit of teamwork and harmony, companies run the risk of suppressing the creative tension that brings vitality to new-product development (NPD) efforts. Furthermore, a firm’s choice of innovation strategy may have a significant effect on the organization’s capa- bility for managing conflict. Using results from a survey of 290 marketing and R&D managers from U.S. firms in the electronics industries, Barbara Dyer and X. Michael Song explore the link between strategy and conflict, and the effect this link has on NPD success. Their study examines the following issues: the influence of business strategy on specific conflict-handling behaviors; the relationship between those conflict- handling behaviors and positive conflict outcomes; and the relationship between constructive conflict and new-product success. The study classifies firms predom- inantly pursuing a more aggressive NPD strategy as prospectors and less ag- gressive firms as defenders. Three conflict-handling mechanisms are identified:

integrating behaviors, forcing behaviors, and avoiding behaviors. Compared to the prospector firms, the defender firms in this study perceived significantly higher levels of conflict in their organizations. In handling conflict, the prospector firms perceived a higher level of integrative behavior than the defender firms. The defenders perceived higher levels of forcing and avoiding conflict behaviors. The study identifies a strong, positive relationship between integrative behaviors and constructive conflict. Positive relationships are also identified between constructive conflict and the success of cross-functional rela- tionships, as well as between constructive conflict and NPD business success. For the firms in this study, the results indicate that strategy is associated with the conflict-handling mechanisms the firm uses. For example, the results suggest that an NPD manager in a prospector firm will encounter high use of integrative behaviors, a high number of complex conflicts, a relatively low level of perceived conflict, a high level of formalization, and frequent exchanges of written and verbal communication among the firm’s personnel. The results suggest that managers may help to create an environment conducive to NPD success by assessing their firms’ strategies, emphasizing integrative conflict-handling be- haviors, and employing formalization of organizational procedures. © 1998 Elsevier Science Inc.

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Introduction

R ichard Pascale [38], p. 263] has observed that, “Creativity and adaptation are born of tension, passion, and conflict”—a fact well illustrated

by the new product development (NPD) process, where new ideas, new products, and new processes depend on organization members challenging the sta- tus quo. Thus, it is hardly surprising that few processes

Address correspondence to X. Michael Song, Department of Marketing and Supply Chain Management, The Eli Broad Graduate School of Man- agement, Michigan State University, N334 North Business Complex, East Lansing, MI 48824-1112.

N334 North Business Complex, East Lansing, MI 48824-1112. in the firm take as much of managers’

in the firm take as much of managers’ time or have as profound an effect on the NPD process as conflict [18,47,48]. As Takeo Fujisawa, one of the founders of

Honda, has noted, “

mony. One must cultivate a taste for finding harmony within discord, or you will drift away from the forces that keep a company alive” [38, p. 256]. Or, as Soud- er’s “too-good friends” clearly demonstrates, too much harmony inhibits challenges among team mem- bers and results in overlooked information and obser- vations vital to successful innovation [49]. What may come as a surprise, however, is that the firm’s choice of strategy may have a profound influ- ence on its ability to handle discord and disagreement effectively. As Mitchell and Hustad [34, p. 143] state, “New product decisions are often highly strategic.” Today, the competitive nature of the marketplace makes innovation even more important strategically, as businesses increasingly turn to NPD for their sur- vival amid rapid market changes. It is important to

never want too much har-

you

note that strategic decisions inherently involve a pro- cess of negotiation, because they suggest the consid- eration of change in response to environmental shifts [22, p. 59]. Put simply, just as innovation links to conflict, strategy and strategic decision-making also link to conflict. Today’s business environment further emphasizes the strategy/conflict relationship. The old corporate hierarchical structure has given way in many instances to project teams, task forces, and other work groups [27]. Specifically in the new product environment,

Pinto and Pinto [40, p. 200] state, “

turning to project management and relying to a greater

degree on project teams for the development and im- plementation of new products and programs.” Signif-

icantly, recent research has shown that the effective- ness of teams depends on how well they manage conflict [2]. Mensch and Ramanujam [32, p. 22] con-

that we understand

conditions under which team processes exert a favor- able influence on innovation outcomes, and conditions under which they lead to conflict,” because teams are central to successful innovation. Many companies today are reconsidering a histori- cally negative view of conflict and sanctioning conflict to invigorate, change, and gain a competitive advan- tage in innovation [38]. Honda Motor Corporation exemplifies a company that has proactively and suc- cessfully sanctioned conflict, developing and using waigaya, a contention management system [38] (Ex- hibit 1). For example, in the 1980s, waigaya led to the

cur, stating that it is “

organizations are

imperative

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development of the Honda City automobile, a huge hit in the Japanese domestic market. Among the first disagreements the project team faced was top manage- ment’s objection to initial design ideas because they were too ordinary [38]. However, Honda’s contention management system, through skillful management of diverse opinions, led to a very successful new product. Where disagreement is not well managed, however, the results can be devastating for the NPD process. In NPD, research and development (R&D) and market- ing historically have experienced significant disagree- ments [21,47–49]. For example, marketing can create conflict by pushing R&D for quick product changes to support short-term marketing decisions such as pric- ing, distribution, or advertising. R&D, on the other hand, can create conflict by pushing for technological product improvements that market research has indi- cated may not be important to customers. Either can generate conflict by speaking jargon that can’t be understood by the other. Souder [48] found that, due to differences in such things as jargon, time sense, mo- tives, goals, allegiances, and senses of responsibility, almost 60% of the new product projects he studied experienced significant interface conflict. Where a se- vere disharmony state prevailed, 68% of the new prod- uct projects failed, compared to 23% under a mild

new prod- uct projects failed, compared to 23% under a mild disharmony state and only 13%

disharmony state and only 13% under a state of har- mony [48]. Research offers a number of possible benefits for academic and managerial understanding of the strate- gy/conflict relationship. First, most firms want and need guidance to improve their NPD because of ex- treme competitive pressures [9,23]. Also, previous re- search on general disharmony in NPD offers managers little help with the specific behaviors and mechanisms needed to manage conflict. Because conflict manage- ment is a controllable managerial variable (possible to teach and learn), organizational learning resulting from sanctioned conflict may represent a possible sustainable competitive advantage [44]. Furthermore, research on the strategy/conflict link in NPD helps to fill a gap, because research about implementation and control of the marketing function is still limited [24]. Finally, and most importantly for managers, the data from such research may help to improve new product performance. The purpose of this study is to pursue much needed research about the relationship of strategy and conflict within the NPD process. To do so, we conducted a survey of 290 R&D and marketing managers in the electronic industries in the U.S. We addressed the following issues: (1) the influence of business strategy on specific conflict handling behaviors; (2) the rela- tionship of those conflict handling behaviors to posi- tive conflict outcomes, that is, constructive conflict; and (3) the relationship of constructive conflict to new product success. The results indicate that both NPD researchers and managers can benefit by better under- standing the relationship between strategy and conflict behaviors in the NPD process.

Brief Literature Overview

Conflict research began with studies on the general theories of organizational conflict, the general process of conflict episodes, and the general behavioral ap- proaches to conflict [10,41,50] (See references [29] and [53] for recent in-depth reviews of the conflict literature). More recently, researchers have focused on how organizations handle conflict and how they can improve their conflict management skills [35,51]. Across all research topics, the sum total of conflict research is huge, notwithstanding a relatively narrow range of topics and disciplinary areas, that is, business, economics, psychology, and sociology [29]. However, despite substantial research and widespread accep-

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tance of its importance, organizational conflict re- mains poorly understood [16]. Relatively few studies have explored the relation- ship of strategy and conflict, and those studies have covered a wide variety of contexts [1,15,16,33,44]. Amason [1] approached the paradox of conflict in top management team strategic decision-making, where conflict can improve the quality of decisions but at the same time hurt group consensus and acceptance. Dyer and Song [15] compared conflict behaviors of Japa- nese and U.S. firms following different strategic ap- proaches. Eisenhardt and Zbaracki [16] explored how conflict affects general strategic decision-making, while Miles and Snow’s [33] multiple industry/multi- ple company studies looked at the conflict behaviors associated with particular strategic types. Ruekert and Walker [44, p. 234] focused on implementation issues, stating that variations in the nature of interactions between R&D and marketing based on strategic posi- tion “may have important implications for the effec- tive implementation of those strategies.” More research is needed, however, on the issue of the strategy/conflict relationship in general. It is espe- cially needed within the context of NPD, because conflict plays such a critical role in strategic decision- making and the innovation process. While each of the above studies has addressed an important aspect of strategy and conflict, only Dyer and Song [15] and Ruekert and Walker [44] have done their research in the context of the NPD process.

Hypotheses Development

Strategy and Conflict

This study looks at the relationship between innova- tion strategy, defined as the new product and market development plans of the firm, and task conflict, de- fined as non-personal disagreements over work goals, objectives, and methods. In order to study this rela- tionship, we chose the Miles and Snow typology to assess strategic position, because it classifies firm strategy based on the firm’s approach to innovation and adaptation to market changes. Furthermore, Miles and Snow [33] also observed that firms pursuing dif- ferent innovation strategies used different conflict han- dling methods, possibly because of the different per- sonnel selection criteria used, the different market environments faced, the different functional goals pur- sued, the different skills and abilities needed, or the different structures used by each strategy. Their typol-

ogy has been successfully used in previous cross- functional interface studies [31,33,44,46]. The Miles and Snow [33] typology classifies firms into one of four strategic types: (1) prospectors, that move quickly to seize opportunities in the market place through new products, new markets, and new technologies; (2) defenders, that find and keep secure niches in a stable product or service area, not looking beyond their current product domain; (3) analyzers, that mix an aggressive new product and domain ap- proach in one business with a stable approach in a second business; and (4) reactors, that lack a true strategic perspective and allow themselves to be buf- feted by environmental elements. In sum, Miles and Snow [33] depicted two “polar” strategic types, pros- pectors that choose aggressive market development and defenders that pursue non-aggressive market de- velopment. In this study, reactors, because they are a-strategic, that is, reactive instead of proactive, and fail to link to a proactive strategy, have been dropped from further discussion and data analyses. Also, for purposes of clarity we present the hypotheses in terms of the polar strategic positions. Miles and Snow’s [33] descriptions suggest that prospectors should have higher levels of conflict than defenders, due to environmental complexity and struc- tural differences. On the other hand, based on research of the social perception of conflict approaches, the described hierarchical structure of defender firms could be perceived as conducive to high levels of conflict [5,52]. The limited research done on this ques- tion has had mixed results. For example, Ruekert and Walker [44] using an American sample predicted and found prospectors to have higher levels of conflict. Dyer and Song [14], using a Japanese sample, found defenders to have higher conflict levels. Thus, we hypothesize that:

H 1 : The perceived level of conflict between R&D and marketing will be greater in defender firms than in prospector firms.

Strategy and Conflict Handling Mechanisms

Research has identified two major approaches to con- flict handling, behavioral and structural [43]. The most recognized and respected behavioral measures of con- flict handling are based on the tradeoff managers make between self-interest and interest in others [10,42,52]. This study defines the three fundamental approaches to handling conflict (integrating, avoiding, and forcing behaviors) in the following fashion: (1) integrating

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behavior reflects a significant interest in considering the needs of the other party; (2) forcing behavior reflects low interest in others and high interest in self (one party maximizes his own concern at the expense of the other party); and (3) avoiding behavior reflects low interest in self as well as others (both parties in- volved in the conflict fail to address anyone’s concerns). Miles and Snow [33] in their studies found that, during conflict, prospectors engage in high levels of interaction in response to frequent cross-functional contact in multiple, complex situations, that is, they use an integrative approach. Defenders interact infre- quently and on a routinized basis, seeking timely and simple conflict resolution, that is, they use a non- integrative approach. Prospector emphasis on multiple functional areas, cooperative behavior, and high levels of interaction is indicative of a high level of interest in others, as well as in self, or an integrating conflict handling behavior approach. Defender emphasis on minimal interaction, reduced time investment, in- creased efficiency, and hierarchy is indicative of high interest in self, or a forcing or avoiding conflict han- dling behavior approach. Therefore, we predict that:

H 2 : In conflict situations between R&D and mar- keting, prospector firms will use integrating conflict handling behaviors more than de- fender firms. H 3 : In conflict situations between R&D and mar- keting, defender firms will use forcing and avoiding conflict handling behaviors more than prospector firms.

Organizations use two structural methods to reduce the chance of conflict and to facilitate resolution: formal- ization and centralization [30,44,45]. This study de- fines formalization as the codification of organiza- tional procedures, that is, the written policies, procedures, standards, and processes of the firm. For- malization reduces complexity, uncertainty, and role ambiguity, thereby reducing conflict. The study de- fines centralization as hierarchical authority, or whether decisions must be approved by superiors be- fore being carried out. Centralization simplifies and speeds conflict handling by providing a known process for conflict resolution. It also acts to suppress conflict through the exercise of authority. Miles and Snow [33] clearly state that defenders have high levels of formal- ization and centralization, while prospectors have low levels of formalization and decentralized structures. However, the support for Hypothesis 2 suggests that formalization may be more needed, and therefore seen more, in prospector firms because of their complex

nature and high interaction across functional bound- aries. Given this and the fact that previous empirical work has not entirely supported Miles and Snow’s [33] claims about formalization and centralization of the strategic types [14,44], we expect that:

H 4 : In conflict situations between R&D and mar- keting, prospector firms will rely on formal- ization more than defender firms. H 5 : In conflict situations between R&D and mar- keting, prospector firms will rely on central- ization more than defender firms.

If managers are to handle conflict situations skillfully, they need to understand the relationships among con- flict handling methods, constructive conflict out- comes, and performance. In this study, constructive conflict is defined as personnel working harder, feel- ing energized by the conflict exchange, and seeing positive change. Performance is defined in two ways, as both the quality of cross-functional relationships and business performance, that is, overall marketplace performance and new product program success. Thomas and Kilmann [52] found that conflict behavior styles have a distinct social desirability ranking. The ranking in descending order is integrating, forcing, and avoiding. Based on this ranking, people in organiza- tions respond more favorably to cooperative conflict behavior (other-oriented) than non-cooperative (or self-oriented) conflict behavior. In examining interde- partmental conflict, Lawrence and Lorsch [28] and Burke [11] found that the more collaborative styles of conflict behavior produced positive, functional results. Also, Barker et al [5] found that positive outcomes of conflict correlate with new product project success. It should be noted that these positive outcomes are not to be mistaken for the “too-good friends” situation in which surface harmony glosses over and suppresses disagreement, effectively forestalling true conflict res- olution [49]. This suggests that:

H 6 : In conflict situations between R&D and mar- keting, a positive relationship will be found between integrating conflict handling behav- iors and constructive conflict. H 7 : In conflict situations between R&D and mar- keting, a negative relationship will be found between forcing and avoiding conflict han- dling behaviors and constructive conflict. H 8 : In conflict situations between R&D and mar- keting, a positive relationship will be found between constructive conflict and NPD suc- cess.

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Methodology

Research Instrument Development

We developed our measurement scales using a four- phase iterative procedure [17]. First, scales designed to measure the constructs of interest were drawn from the literature, and an initial research instrument was de- veloped using standard psychometric techniques [36]. Second, we conducted 16 group interviews in nine companies to identified unique subsets of measures that possessed “different shades of meaning” to infor- mants [17]. Third, we submitted a list of constructs and corresponding measurement items to a panel of academic experts for evaluation of clarity, specificity, and representativeness, requesting appropriate addi- tional measures. Fourth, based on the first three phases, we prepared a new draft of the questionnaire and pretested it with five Ph.D. students in a measurement and research doctoral seminar from a well-regarded U.S. business school. Based on feedback from these interviews, the instrument was modified and professionally drafted. To further test the questionnaire, we administered the questionnaire to 26 employees and conducted focus group interviews using a semi-structured format in four companies. We also pretested the final question- naire with 82 marketing, R&D, and engineering per- sonnel from two major chemical companies and a computer company. We conducted exploratory factor analysis to analyze the pretest data and computed coefficient alpha to assess the reliability. The results indicated that all scales exceeded .70 (the minimum level recommended by Nunnally), except the avoiding and forcing conflict behaviors scales. Consequently, six additional items of “equal kind and quality” were added to these scales [26]. The final version of the questionnaire reflected the necessary modifications suggested by the analyses. Appendix A contains the details of the measures. Most measures used a seven-point Likert-type agree–dis- agree rating scale, where 1 is “strongly disagree” and 7 is “strongly agree.”

Sample Design and Response Rate

Our sampling frame included member firms listed in the Electronic Industries Association’s 1994 Trade Directory and Membership List. Random selection from this list resulted in 800 firms in the U.S. that

satisfied the study’s desired criteria: (1) firms produc- ing physical products; and (2) firms with departmen- talization of the marketing and R&D functions. Be- cause information was incomplete in the trade association listing for 631 of these firms, pre-survey calls were made to these companies to verify address, location of manufacturing, existence of both a market- ing and R&D department, and/or the name of the marketing director as the contact person for the study. Adjusted for company mortality, personnel attrition, incorrect or unusable addresses, and subsequent fail- ure to meet the study criteria, the final sample frame included personnel from 727 eligible member compa- nies of the Electronic Industries Association (EIA). In administering the mail survey, we followed the Total Design Method recommended by Dillman [13]. The questionnaires were sent to both R&D and mar- keting managers in the 727 firms. After the initial mailing and three follow-ups, 176 companies returned a single survey, 52 companies returned both surveys, and one company returned a single survey without functional area identification. Totally, 290 usable re- sponses were received from 229 companies, resulting in a 31% response rate at the company level. To test for possible non-response bias, a multivariate analysis of variance analysis (MANOVA) of the first- and second-wave respondents was performed on all vari- ables used in this study [3]. No significant differences were found at .05 for all variables, suggesting that non-response biases did not pose a major problem for subsequent analyses.

Measures

Innovation strategy was measured using an 11-item scale adapted from Conant et al’s [12] Miles and Snow typology scale. The study classifies firms predomi- nantly pursuing a more aggressive NPD strategy as prospectors and those firms predominantly pursuing a less aggressive NPD strategy as defenders. A 12-item scale was used to measure conflict levels consisting of five items from the market orientation study by Jawor- ski and Kohli [23], five items from the business strat- egy study by Ruekert and Walker [44], and two new items suggested by pre-test focus group interviews. All of the items used to measure conflict behavior came from scales developed by Rahim [42]. The five- item formalization scale and the five-item centraliza- tion scale used in this research come from a study by Hage and Aiken [20] and have been used by many cross-functional interface studies, for example, Gupta

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et al [19] and Song and Parry [46]. Constructive con-

flict was measured by a five-item scale developed by Barker et al [5]. Quality of cross-functional relation- ships was measured with a six-item scale adapted from organizational measurement scales developed by Barker et al [5]. The business performance scale mea- sured the overall marketplace performance and new product program success, using a ten-item scale de- veloped from the pre-test interviews and a review of the PIMS studies [46] (see Table 1 for a sample of measurement items or Appendices A and B for the complete scale items used in the study).

Analysis and Results

Measurement Validation

We conducted a series of statistical analyses to vali- date the measurement model. First, we performed ex- ploratory factor analysis to assess the construct valid- ity of the scales used in the study [26]. The results validated all scales, but suggested that a single scale

for integrative conflict behaviors was superior to using

a separate scale for each of the different levels of

integrative behaviors. Furthermore, this supported the

Table 1. Sample of Measurement Items a

study focus of contrasting the three conceptually dis- tinct conflict behaviors, integrative, forcing, and avoiding. Thus, a 13-item scale measuring integrating conflict handling behavior was developed and used to test those hypotheses addressing integrative conflict handling behaviors. Second, we conducted confirmatory factor analyses (CFA) through LISREL to assure unidimensionality, convergent validity, and discriminant validity using the covariance matrix of the remaining items as input [25]. The overall fit of the measurement models is excellent, with the normed fit index (NFI), non- normed fit index (NNFI), and comparative fit indices (CFI) [7,8] for the model exceeding the critical level (.90) cited by Bearden et al [6]. In addition, all items had a significant loading to their respective constructs and all loadings were significant (p .05), demon- strating that the scales for the constructs have conver- gent validity. Examination of the Phi matrix further indicates that the correlation between constructs is significantly different from one, establishing discrimi- nant validity. Third, we classified the responses into the dominant strategic type (prospectors or defenders) using SAS’s FASTCLUS procedure. As an additional check, a

Construct

Items

Conflict level

When R&D and Marketing work together there is little or no interdepartmental conflict. People conflict on how to proceed on tasks. When Conflicts Arise Between R&D and Marketing, Generally We try to bring all issues into the open in order to resolve them in the best way. Encourage others to express their feelings and views fully. When Conflicts Arise Between R&D and Marketing, Generally We believe it is better to keep feelings to ourselves rather than create hard feelings. Try to smooth over conflicts by trying to ignore them. When Conflicts Arise Between R&D and Marketing, Generally We tenaciously argue the merit of initial positions when disagreements occur. Want the other to make concessions, but don’t want to make concessions ourselves. Written procedures and guidelines are available for most work situations. Formal communication channels have been established. There is little action taken here until a supervisor approves a decision. Even small matters have to be referred to someone higher up for a final answer. When Conflicts Arise Between R&D and Marketing, Generally We know each other better because of the way conflicts are handled. Are more sensitive to one another because of the way that conflicts are handled. In general all things considered, we feel highly pleased with the way in which we work together on a new product development. We have a high degree of trust in each other. Compared to our major competitiors, our overall new product program is far more successful. Our overall performance of our new product program has met our objectives.

Integrating behavior

Avoiding behavior

Forcing behavior

Formalization

Centralization

Constructive conflict

Cross-functional

relationship quality

Business performance

a Responses were on a seven-point Likert-type agree–disagree rating scale, where 1 “strongly disagree” and 7 “strongly agree.”

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MANOVA analysis was performed using all 11 strat- egy measures to confirm the appropriateness of the classification. Fourth, we computed construct reliability using co- efficient alpha. The results indicated that the coeffi- cient alphas for the study’s constructs ranged from .77 to .94, exceeding the .70 level considered acceptable for studies of this nature [36,39]. Examination of the patterns of item-to-item correlations and item-to-total correlations indicated that there were no deviations from the internal consistency and external consistency criteria.

Hypothesis Testing

Following McKee et al [31] and Song and Dyer [45], this study tests hypotheses H1 through H5 using MANOVA and Duncan’s multiple range test. The Duncan method, one of the oldest multiple-stage tests in current use, controls for the Type I comparisonwise error rate and provides greater power than Tukey’s. Hy- potheses were accepted or rejected at significance level .05 for both the F-tests and Duncan tests. Wilks’ Lambda, Pillai’s Trace, and Hotelling-Lawley’s Trace also were used to test the relationship between strategic types and the variables of interest. Hypotheses 6, 7, and 8 predicted simple associations between two interval, continuous, and linear variables and were tested using Pearson product-moment correlation.

Results

Tables 2 and 3 present the mean responses of pros- pector and defender firms, the associated F-statistics,

and the results of the Duncan multiple range test for all hypotheses. The data support all of the predictions of the study, with the exception of Hypothesis 5, which predicted that prospector firms would rely on central- ization more than defender firms. Conflict level. Defender firms were found to per- ceive significantly higher levels of conflict in their organizations than prospector firms (p .01; 4.21 for Ds and 3.62 for Ps). This finding contradicts both the findings of Miles and Snow [33] and Ruekert and Walker [44]. One explanation might be that behavior during conflict episodes affects perceptions of conflict more than the number of conflict episodes experi- enced. If this is the case, it might be good news for the firm, because controlling the number of conflict situ- ations may be far less doable than controlling the ways that firm members behave once disagreements arise. An alternative explanation might be that, in defender firms, which focus more on technology according to Miles and Snow [33], R&D has more influence in the organization than marketing, leading to conflict based on power struggles between the two areas. Further research is needed to clarify the relationship explored by this research question. Behavioral conflict handling. As predicted in Hy- potheses 2 and 3, prospector firms perceived a higher level of integrative behavior in conflict handling than defender firms (p .01, 5.29 for Ps and 4.69 for Ds), and defender firms perceived higher levels of forc- ing and avoiding conflict behavior than prospector firms (p .01, 3.93 for Ds and 3.46 for Ps; 3.46 for Ds and 3.03 for Ps). These findings support previous research in other conflict contexts. It is difficult to

Table 2. Hypothesis Testing Results: H1–H5 Conflict Level and Conflict Handling Mechanisms

Hypothesis

Mean Value by Strategy Type

Construct

Prospectors (P)

Defenders (D)

ANOVA

F-Statistic

H1: Ds will have a higher perceived level of conflict than Ps. H2: Ps will use integrating conflict handling

Conflict level

3.62

behaviors more than Ds. H3: Ds will use forcing conflict behaviors more

Integrating behavior

5.29

b

than Ps (a). H3: Ds will use avoiding conflict behaviors

Forcing behavior

3.46

b

more than Ps (b).

Avoiding behavior

3.03

b

H4:

Ps will rely on formalization more than Ds.

Formalization

4.41

c

 

c

H5:

Ps will rely on centralization more than Ds.

Centralization

2.47

4.21

4.69

3.93

3.46

3.89

3.01

b

b

b

c

c

25.21

32.62

18.02

12.90

11.83

24.88

a

a

a

a

a

a

a Significant at a level of .01.

b Means of behavioral mechanisms.

c Means of structural mechanisms.

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Table 3. Hypothesis Testing Results: H6–H8 Conflict Handling Mechanisms, Constructive Conflict, and NPD Success

Hypothesis

Construct

Correlation

Probability

H6: A positive association will be found between integrating conflict handling behaviors and constructive conflict.

Integrating/constructive conflict

.54

.0001

H7: A negative association will be found between forcing conflict behaviors and constructive conflict.

Forcing/constructive conflict

.35

.0001

H7: A negative association will be found between avoiding

Avoiding/constructive

.28

.0001

conflict behaviors and constructive conflict.

conflict

H8: A positive association will be found between

Constructive/cross-functional

.53

.0001

constructive conflict and new product development success.

success

H8: A positive association wil be found between constructive conflict and new product development success.

Constructive conflict/market success

.26

.0001

compare these findings, however, to those of the Ruekert and Walker [44] study because their Proposi- tion 4 linked avoidance and integrative behaviors. Because these constructs differ diametrically, as shown by Rahim [42] and by factor analysis in this study, the results of Ruekert and Walker’s Proposition 4 are uninterpretable. This study, then, provides a new data point. Structural conflict handling. The results on struc- tural forms of conflict management were mixed. While Hypothesis 4 is supported, the data did not support Hypothesis 5. Prospector firms do perceive higher use of formalized organization structure than defender firms (p .01, 4.41 for Ps and 3.89 for Ds). However, counter to the stated hypothesis, defenders exhibit a higher level of centralization than prospec- tors (p .01, 3.01 for Ds and 2.47 for Ps). The Ruekert and Walker [44] study predicted higher for- malization in defenders, but found the differences be- tween strategic types practically nil, with the results not significant. Song and Dyer’s [45] results on for- malization, based on a Japanese sample, support the results found in this study. When Ruekert and Walker [44] proposed that de- fenders would use centralization more than prospec- tors as a conflict handling mechanism, their finding was statistically significant, but with the means re- versed—that is, prospectors used centralization more than defenders. Dyer and Song [14] found the same, concluding that the higher complexity of prospector NPD demands multiple methods of conflict manage- ment. Thus, given the extant findings on this construct in the NPD conflict literature, the results for Hypoth- esis 5 are surprising. Certainly, it appears that the use of centralization as a conflict handling mechanism

varies with context beyond the difference of strategic type. The finding may be unique to the electronic industries, for example, heavily impacted by an indus- try characteristic such as environmental volatility. This can only be settled by further research. Performance. The data support all of the outcome hypotheses (H6, H7, and H8). Integrating behaviors were found to have a strong, positive correlation with constructive conflict (p .01, .54), substantiating Ruekert and Walker’s [44] results. Forcing was found to have a negative correlation with constructive con- flict (p .01, .35), and avoiding was found to have a negative correlation with constructive conflict (p .01, .28). Constructive conflict was found to have a strong, positive correlation with cross-functional rela- tionship success (p .01, .53). Constructive conflict was also found to have a positive correlation with NPD business success (p .01, .26). The data show that the association of conflict handling behaviors with constructive conflict within firms is strong. In the interest of comparison to prior studies, we have pro- vided the means by strategic type for the business performance variable in Table 4. As will be noted, the means of the prospectors are higher than the means of the defenders.

Table 4. Business Performance Results by Strategic Type

Performance Variable

Prospector ( )

Defender ( )

Quality of cross-functional relationships

5.12

Business performance

4.78

4.15

3.97

a

a

a Prospector and defender means significantly different at .05.

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Discussion

Implications

Although managers today understand that the firm’s strategy molds an NPD approach, few consider that strategy may also mold a conflict handling climate that affects new product success. Two decades ago, Souder [47–49] began a series of important studies dealing with the effect of general conflict, or disharmony, on the NPD process. A decade ago, Ruekert and Walker [44] investigated the relationship between strategy and specific conflict mechanisms in the NPD process using three divisions of a single Fortune 500 company. Ruekert and Walker [44] predicated their hypotheses upon the strategic descriptions developed by Miles and Snow [33]. Since that time, little has been done in the NPD area to verify or challenge earlier findings, de- spite the importance of the strategy/conflict link to successful innovation [5,18]. This study provides im- portant data that represents 290 new product managers across the U.S. electronics industries and ties the strat- egy/conflict relationship to new product performance. Our results suggest that strategy is associated with the conflict handling mechanisms used by the firm, providing an opportunity for managers to generate a baseline for understanding those mechanisms. As in- dicated by our findings and in some instances on Miles and Snow’s [33], an NPD manager in a prospector firm, for example, will likely find a baseline that includes high use of integrative conflict handling be- haviors, a relatively high number of complex conflicts, a relatively low level of perceived conflict, high for- malization, and personnel that exchange verbal and written communication frequently. This suggests that managers in prospector firms should go with their firms’ strengths in integrative behaviors and in formal- ization, because these are strongly associated with constructive outcomes and, therefore, with new prod- uct success. However, because formalization may not be a mandated part of organization structure for these firms [33], new product managers may want to make special efforts to ensure effective formalized rules and communications within the NPD process. Also, al- though prospector firms frequently interact, managers still must work to assure the quality of those interac- tions. While a prospector strategy appears to encour- age good conflict management habits, prospector firms must never forget that they also have greater need and greater risk. Without open forums for differ-

ent thoughts and ways of doing things, the creative process in these firms may suffer irrevocable damage. An NPD manager in a defender firm, on the other hand, based on Miles and Snow [33] and this study, will likely find a baseline including high use of forcing and avoiding conflict handling behaviors, a relatively low number of conflicts, a relatively high level of perceived conflict, high centralization, and less fre- quent cross-functional interaction involving verbal communication and written communication. On the positive side, these less aggressive new product devel- opers need fewer conflict handling mechanisms and have efficient mechanisms built into their firm struc- ture [33]. On the negative side, based on our results, centralization, forcing, and avoiding have negative associations with constructive conflict. Because con- structive conflict has a positive association with per- formance, although forcing and avoiding may be ap- propriate behaviors in other decision areas of the firm, these behaviors may not be appropriate in all instances in the inherently cross-functional atmosphere of NPD. Managers raised in the school of scientific manage- ment may never have considered that “forcing through” solutions can lead to negative results in terms of conflict handling and new product success. They often see their actions as “getting things done.” Yet, the use of force (which is frequently sanctioned) may have a very negative impact on new product success. Another concern for some firms may be the desire to change their innovation strategy from defender to prospector. Miles and Snow [33] suggest that either strategy can be successful if the firm remains consis- tent in carrying out the correct engineering and admin- istrative support. While both prospectors and defend- ers may be successful, our results show that prospectors perceive higher levels of both the quality of cross-functional relationships and new product suc- cess. Furthermore, our results indicate that strategy changes would likely be associated with changes in the ways firms handle their disagreements. Our under- standing of empirical findings in this area of research, however, depends on some basic underlying assump- tions. Miles and Snow [33] conceptualize innovation strategy from a quantitative perspective, that is, num- bers of new product projects and numbers of markets. The conflict handling approaches described in the typology support those goals. The relationships among innovation strategy, conflict handling, and the quality of new product efforts and outcomes needs to be more fully explored. If the relationships differ based on changed assumptions, then managers might have to

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make tradeoffs in their conflict handling methods, depending on whether the amount or the quality of innovation matter more to the firm. Finally, this study suggests that a constructive con- flict goal provides a necessary frame of reference to help managers move away from a negative view of conflict. Managers may need to promote a planned sanctioning of certain types of conflict and of certain conflict handling mechanisms to promote positive out- comes for cross-functional relationships and NPD suc- cess. In a business world buffeted by uncontrollable, changing conditions, conflict management represents a controllable factor that should be viewed as a pro- active tool. Thus, managers using appropriate conflict handling approaches may gain constructive conflict outcomes resulting in improved new product success and an important edge in innovation [38].

Limitations

The limitations of our research should be weighed when interpreting its results. The study does not pre- tend to address all of the pertinent questions about the influence of innovation strategy on conflict manage- ment issues. It focuses only on the question of strate- gy’s association with the firm’s behavioral and struc- tural conflict handling mechanisms and their relationship with performance. Also, the respondents in this study are corporate managers. It is important to note that leaders of functional areas tend to exhibit role behavior reflecting the position of their groups and should give an accurate group perspective in this type of research [4]. Nonetheless, caution is advised in interpreting results and care should be taken in gener- alizing these results to other employees. As Olson et al [37] point out, the use of subjective measures of per- formance raises the possibility of common method bias. Our study reduced this risk by obtaining re- sponses from highly qualified personnel who routinely deal with precise quantitative data on their firms’ general and new product performance. Future re- searchers, however, may wish to include objective measures of firm performance. Finally, the analyses used in this study are correlational and cannot verify causal relationships.

Future Research

There are many future research possibilities. An im- portant next step would be to explore the mechanisms through which prospector/defender strategies might

influence the handling of conflict within firms. Future researchers might want to pursue the points on which Ruekert and Walker’s [44] study and this one diverge. There is more to learn, also, about the factors leading to constructive conflict, the causes of conflict situa- tions, the issue of conflict history, the consistency of conflict handling approaches, and the cognitive frames brought to conflict situations. Fine research could be done in the area of conflict and speed to market. A key goal for conflict researchers might also be the devel- opment of an empirically valid instrument to measure the constructive conflict climate of the NPD process. Such an instrument could establish a quick and accu- rate baseline, as well as appropriate goals, for organi- zations desiring to implement sanctioned conflict training to improve their NPD process. Research on market orientation has briefly touched on the issue of conflict, indicating a need in that area to expand our understanding of the relationship among market ori- entation, conflict, and performance. Finally, as busi- ness goes global, researchers will need to explore cross-cultural conflict issues to help firms maximize their innovation efforts in the increasingly diverse and, consequently, highly conflictful work environment of the future.

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Appendix A. Measurement Items and Measurement Validation Using LISREL

Item Construct

Loadings

T-Test

Source

Conflict Level: (Reliability .87) When R&D and Marketing Work Together There is little or no interdepartmental conflict.* The objectives pursued by the marketing department are incompatible with those of the R&D department. We get along well with each other.* People in one department generally dislike interacting with those from the other department. Employees from the two departments feel that the goals of their respective departments are in harmony with each other.* People conflict on how to proceed on tasks. People differ on basic goals the two areas should pursue. People differ on the best way to accomplish new product goals. Employees agree on which tasks are urgent.* People conflict over how they should carry out their work. Employees from the two departments share the same values.* People in the two areas rate the importance of decisions in the same way.* Integrating Behavior: (Reliability .91) When Conflicts Arise Between R&D and Marketing, Generally We Try to bring all issues into the open in order to resolve them in the best way. Encourage others to express their feelings and views fully. Try to investigate an issue in order to find a solution agreeable to us both. Work hard to thoroughly, jointly learn about the issues. Exchange complete and accurate information in order to help solve problems. Openly share concerns and issues. Stress the importance of “give and take.” Look for middle ground to resolve disagreements. Negotiate to achieve goals. Arrive at compromises that both areas can accept. Propose compromises in order to end deadlocks. Go the “extra mile” to get along with each other. Try to meet each others’ schedules whenever we can. Avoiding Behavior: (Reliability .84) When Conflicts Arise Between R&D and Marketing, Generally We Try to keep differences of opinion quiet. Avoid openly discussing disputed issues. Try not to get mixed up in conflict. Believe it is better to keep feelings to ourselves rather than create hard feelings. Try to smooth over conflicts by trying to ignore them. Look for ways to bypass unpleasant exchanges. Avoid being put “on the spot” by keeping conflict to ourselves. Try to stay away from disagreements. Forcing Behavior: (Reliability .81) When Conflicts Arise Between R&D and Marketing, Generally We Try to put a single area’s needs first. Stick to initial positions to get each other to compromise. Tenaciously argue the merit of initial positions when disagreements occur. Want the other to make concessions, but don’t want to make concessions ourselves. Look for faults in each other’s initial positions. Treat issues in conflict as a win–lose contest. Enjoy winning an argument. Overstate our needs and positions in order to get our way. Are firm in purusing one side of an issue.

.87

9.82

[23]

.67

8.79

[23]

.39

4.49

[23]

.32

3.54

[23]

.86

9.66

[23]

.84

11.69

[44]

.67

7.63

[44]

.59

7.51

[44]

.63

7.70

[44]

.74

7.86

[44]

.92

11.21

Focus group

.52

6.20

Focus group

.72

8.84

[42]

.64

8.35

[42]

.43

6.02

[42]

.60

7.84

[42]

.57

7.69

[42]

.58

8.65

[42]

.71

8.69

[42]

.63

9.15

[42]

.54

8.42

[42]

.70

11.13

[42]

.52

8.43

[42]

.55

7.86

[42]

.30

3.87

[42]

.66

7.87

[42]

.78

9.36

[42]

.49

5.47

[42]

.79

8.73

[42]

.78

9.74

[42]

.60

6.86

[42]

.62

8.50

[42]

.60

7.59

[42]

.60

6.30

[42]

.74

9.08

[42]

.80

9.14

[42]

.87

11.07

[42]

.27

3.07

[42]

.63

8.04

[42]

.18

1.96

[42]

.39

4.59

[42]

.29

3.99

[42]

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Appendix A. (continued)

 

Item Construct

Loadings

T-Test

Source

Formalization: (Reliability .77) Written procedures and guidelines are available for most work situations. Formal communication channels have been established. Written documents, such as budgets, plans, and schedules, are an integral part of the job. Performance appraisals in our organization are based on written performance standards.

Duties, authority, and accountability of personnel are documented in policies, procedures, or job descriptions. Centralization: (Reliability .90) Any decision I make has to have my boss’ approval. There is little action taken here until a supervisor approves a decision. Even small matters have to be referred to someone higher up for a final answer. A person who wants to make his own decision would be quickly discouraged here. I have to ask my boss before I do almost anything. Constructive Conflict: (Reliability .80) When R&D and Marketing Work Together, Generally We See constructive changes occur on projects because of conflicts. Know each other better because of the way conflicts are handled. Are more sensitive to one another because of the way that conflicts are handled. Feel energized and ready to get down to work after a conflict. Feel hostile toward each other after a conflict.* Quality of Cross-Functional Relationships: (Reliability .94)

In General

.

.

1.15

10.73

[20]

.96

10.34

[20]

.83

8.34

[20]

.48

4.32

[20]

.87

8.58

[20]

1.04

12.09

[20]

1.14

12.89

[20]

1.15

13.80

[20]

.99

12.69

[20]

1.05

14.81

[20]

.62

8.03

[5]

.75

10.91

[5]

.86

11.22

[5]

.66

7.67

[5]

.42

5.01

[5]

. We feel very satisfied in our work with each other. We feel a strong commitment to working with each other on new product development. We have a high degree of trust in each other. The way we work together inspires all of us to better job performance. We feel highly committed to joint work with each other on new product development. All things considered, we feel highly pleased with the way in which we work together on new product development. Business Performance: (Reliability .85) Overall, our company is one of the most successful in the industry. Our overall performance of our new product program has met our objectives. From an overall profitability standpoint, our new product development program has been successful. Compared to our major competitors, our overall new product program is far more successful. Compared to our major competitors, our new product development cycle time has been relatively less. Our product-line breadths are much broader than those of our competitors. The overall price of our new products is higher than that of our competitors. The timing of our product introduction is good. Our company has relatively high market shares. Our new product development costs generally stay within our budgeted costs. Overall Fit Indices:

.73

10.51

[5]

.74

11.56

[5]

.78

10.84

[5]

.72

11.11

[5]

.76

11.76

[5]

.99

14.24

[5]

1.21

13.50

[46]

1.07

13.17

[46]

.89

10.49

[46]

1.28

15.35

[46]

.76

8.17

[46]

.86

8.24

[46]

.57

7.17

[46]

.69

8.40

[46]

1.03

10.36

[46]

.59

6.48

[46]

Normed Fit Index (NFI):

.96

Non-Normed Fit Index (NNFI):

.99

Comparative Fit Index (CFI):

.99

Incremental Fit Index (IFI):

.99

Relative Fit Index (RFI):

.96

*Item reverse scored.

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Appendix B. Strategy Measurement Items In this section, we are interested in perceptions of firm strategy. The following statements describe how a firm might strategically approach new product development. To what extent do you disagree or agree with the following statements in reference to your firm? (Here: 1 “strongly disagree” and 7 “strongly agree”; and numbers between 1 and 7 indicate various degrees of agreement or disagreement).

Item Construct

Loadings

T-Test

Source

Strategic Type: (Reliability: .88) In comparison to our competitors, the products we provide our customers are more innovative and continually changing. In contrast to our competitors, my organization has an image in the marketplace as a firm with a reputation for being innovative and creative. My firm spends significant amounts of time continuously monitoring the marketplace for changes and trends. In comparison to our competitors, the increases or losses in demand which we have experienced are due most probably to our practice of aggressively entering new markets with new types of products.

One of this firm’s key goals relative to its competitors is availability of the people, resources, and equipment required to develop new products and markets. In contrast to our competitors, our managerial employees exhibit competencies (skills) that are broad, entrepreneurial, diverse, and flexible—enabling change to be created. The one thing that protects my organization from its competitors is that we are able to consistently develop new products and new markets. Our management staff concentrates on developing new products, new markets, and new market segments more than many of our competitors. In contrast to many competitors, my organization identifies marketplace trends and opportunities that can result in product offerings new to the industry or able to reach new markets. In comparison to our competitors, the structure of my organization is product or market oriented. Unlike our competitors, our company procedures to evaluate performance are decentralized and participatory, encouraging many company members to be involved. Overall Fit Indices:

1.07

13.08

[12]

1.05

12.12

[12]

1.03

10.78

[12]

.92

9.80

[12]

.89

9.92

[12]

1.06

11.83

[12]

1.22

15.49

[12]

1.30

16.07

[12]

1.04

12.21

[12]

.88

10.64

[12]

.63

6.71

[12]

Normed Fit Index (NFI):

.95

Non-Normed Fit Index (NNFI):

.97

Comparative Fit Index (CFI):

.97

Incremental Fit Index (IFI):

.97

Relative Fit Index (RFI):

.94