Knowledge Sharing With Suppliers In New Product Development

Published Date: 02 Nov 2017

Improving and updating product lines is critical for the success for any organization. Failure for an organization to change could result in a decline in sales and with competitors racing ahead. The procedure of new product development (NPD) is crucial for an organization. Products go through the stages of their lifecycle and will eventually have to be replaced. The pace is fast and organization needs to produce new products all the time. However, developing new products needs lots of different knowledge. Some of knowledge may not be in the same area of organization. Hence, to reduce the cost and time, knowledge sharing with suppliers is the best way to generate knowledge.

Knowledge sharing and supplier integration are essential for NPD. This research examines the relationship and impact of them to product innovation and product performance in NPD. The study used Amos to test the structural model (figure 1). First of all, the result indicates the relationship between knowledge sharing and supplier integration. Further, the result notices the impact of supplier integration to product innovation and product performance. The finding demonstrates that the role of knowledge sharing in NPD is valuable and it is worth for further investigation.

Keywords: Knowledge sharing, supplier integration, product innovation, product performance, incremental innovation, radical innovation

Acknowledgements

I would like to express the deepest appreciation to the industrial expertise who participated in the survey and spent their valuable time for interviews. Without their help, this research would not be possible.

I would like to express my sincere thankfulness to my Final Year Project supervisor, Dr Richard C. M. Yam for his guidance and persistent help on my Final Year Project from the beginning to the end of this project.

Table of contents

Abstract

Acknowledgements

Table of Contents

List of Tables

List of Figures

Student Final Year Project Declaration Form

Chapter 1: Introduction

1.1 Background of study

1.2 Research motivation

1.3 Research objectives

1.4 Scope of this research

Chapter 2: Literature review and research model development

2.1 Literature review

2.1.1 Satisfaction with knowledge sharing

2.1.2 Time spent on knowledge sharing

2.1.3 Supplier integration in NPD

2.1.4 Product innovation

2.1.5 Product performance

2.2 Research model development

2.2.1 Satisfaction with and Time spent on knowledge sharing

2.2.2 Time spent on knowledge sharing and Supplier integration in NPD

2.2.3 Supplier integration in NPD and Product innovation

2.2.4 Supplier integration in NPD and Product performance

2.2.5 Moderated model – incremental innovation and redical innovation

Chapter 3: Research methods

3.1 Questionnaire design

3.2 Review question design

3.3 Data collection and sample

Chapter 4: Statistical analysis

Chapter 5: Result

5.1 Full model

5.2 Moderated model

5.2.1 Incremental innovation model

5.2.2 Radical innovation model

5.2.3 Comparing moderated model results

Chapter 6: Discussion

6.1 Full model

6.2 Incremental and radical innovation

Chapter 7: Conclusion

7.1 Contributions of the study

7.2 Managerial implications

7.3 Future research ideas

Reference

Lists of tables

Table 1: Measurement scale references

Table 2: The measurement items in the survey questionnaire

Table 3: Review questions

Table 4: Model fit Summary

Table 5: Statistic result of full-model

Table 6: Model fit summary of full-model

Table 7: Statistic result of high level incremental innovation model

Table 8: Model fit summary of Incremental innovation model

Table 9: Statistic result of high level radical innovation model

Table 10: Model fit summary of radical innovation model

Lists of figures

Figure 1: The conceptual model

Figure 2: Testing model spreadsheet

Figure 3: The relationship of constructs in incremental innovation model

Figure 4: The relationship of constructs in radical innovation model

Student Final Year Project Declaration Form

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Chapter 1: Introduction

1.1 Background of study

Earlier supplier integration makes project team effectiveness to have a greater positive effect on product design performance in the NPD process (Petersen et al., 2005). Technology uncertainty (Tatikonda and Stock, 2003) can be mitigated through openly sharing cost and technology information with suppliers (Auster, 1992; Hagedoorn and Narula, 1996; Teece,1986). Therefore, information sharing with suppliers is essential for the NPD process and beneficial in high technology uncertainty. Nevertheless the benefits are also countered by the disadvantages of particular supplier, especially when there are multiple competing technologies vying to become the industry standard (Handfield et al., 1999). Hence, some of companies are not willing to share their knowledge and information to the others. They think knowledge is their own property.

The use of computers has a positive effect on product innovation (Koufteros et al., 2002a). Computers not only create opportunities for organizations to enhance product innovation by quickly designing products and new features that meet specific customer needs, they also provide a perfect communication platform to each cross-functional partner. Successful supplier integration needs a good communication relationship between each party to let them share their knowledge and information effectively.

To measure the product is successful or not, product performance and product innovation are considered to be a scale. Product performance includes the sales goal of product, profit goal of product, profitability of product and satisfaction of customers. All of them are measurable and clear. On the other hand, product innovation includes the firm’s capability of developing unique features, developing new product and features, and developing a number of "new" features. These are the outcome of innovation. Hence, the research can indicate the effect of knowledge sharing and supplier integration on the product in NPD.

1.2 Research motivation

During literature review, I found that knowledge sharing and supplier integration was always mentioned in literature. However, few of literature linked them to investigate the effect of NPD. In this study, knowledge sharing and supplier integration will be mainly focused on.

1.3 Research objectives

Some of firms think the disadvantages of knowledge sharing are larger than the advantages. Hence this research will find the evidence of knowledge sharing is good for NPD.

This study will focus on:

1. To investigate the relationship of knowledge sharing and supplier integration.

2. To determine the impact of knowledge sharing and supplier integration in NPD.

3. To identify the difference of incremental innovation and radical innovation

1.4 Scope of this research

This research will link the knowledge sharing and supplier integration to the product performance and product innovation. The relationship of them will be found. Moreover, the satisfaction and time spent on knowledge sharing are important to knowledge sharing. It will affect the quality of knowledge sharing. Hence, they will be considered in the research. Moreover, there are two kinds of innovation in NPD, which are incremental and radical innovation. The difference between them will be found out.

This research was began by literature reviewing on knowledge management, supplier integration, supplier involvement ,and building a theoretical model and set of hypotheses based on the extant literature. The development of the study measures and the methodology and data collection are presented. Finally, the result regarding the interrelationships among the variables in the model is obtained and discussed.

Chapter 2: Literature review and research model development

This section defines the satisfaction with knowledge sharing, times spent on knowledge sharing, supplier integration in NPD, product performance and product innovation. These are the critical elements in NPD. By knowledge sharing with supplies, you can generate knowledge for you company easily (Baldwin and Hanel, 2003). Not only can generate knowledge, sharing information with supply also can increase the level of cooperation with supply (Handfield, 1993). In order to measure the impact on NPD, product innovation and performance were involved to be analyzed.

Furthermore, two sets of moderated model will be carried out. They are incremental innovation and radical innovation in NPD. Previous literature indicated supply integration is essential to a firm seeking to develop a radical innovation (Song and Di Benedetto, 2008). However, the difference between incremental innovation and radical innovation were not identified.

2.1 Literature review

2.1.1 Satisfaction with knowledge sharing

Integration requires strong communication among individuals within the supply chain. Knowledge sharing is the most common communication among individuals. Effective two-way communication involves knowledge behaviors of capturing, analyzing, sharing, and acting on information about the business environment (e.g., Droge et al., 2003; Sabherwal and Becerra-Fernandez, 2003). Prior research on early supplier integration maintains that earlier involvement is always better (Griffin and Hauser, 1992; Handfield et al., 1999). Previous studies also suggest that technology uncertainty (Tatikonda and Stock, 2003) can be mitigated through openly sharing cost and technology information with suppliers (Auster, 1992; Hagedoorn and Narula, 1996; Teece, 1986). However, different parties of supply chain only focus on their specific areas. For example, purchasing personnel tend to focus on the supply side of the firm, manufacturing personnel tend to focus on internal operations, and marketing personnel focus outwardly on customer and competitive issues (Swink and Song, 2007). Product development members need to take quite a long time to discuss and reflect on their experiences, to observe their colleagues how to solve the task, interact with technology, interpretation and meaning to their own actions. Through interaction with others, the expertise of each member of the public, sharing, and legalization in order to become part of the product development process. Knowledge sharing is an essential process for NPD activities as sharing is necessary between parties in collaboration for innovation and NPD.

However, Knowledge can be either tacit (difficult to share) or explicit (easy to share, once codified by diagrams, schemes, symbols etc.) (Bektas et al, 2010). Explicit knowledge, sometimes referred to as the complementary knowledge, can be codified and transferred of records from personal memories through oral and written text, graphs, and equations. Then, others may reproduce this knowledge, once the code becomes available. In contrast, tacit knowledge is difficult, almost impossible shared. It is about how we do things, as well as the way of doing things can not be easily described to others. Therefore, a relationship of shared interpretation of knowledge should be established. Achieve shared knowledge interpretation, emphasizing the common cognitive models and frameworks (Weick, 1979; Spender and Grant, 1996). For a good communication between each party, a shared interpretation of their knowledge is necessary. When you can develop a shared interpretation relationship with your partners, the misunderstanding between each individual of the production line can be minimized. It refers to the extent to which members of which organizations recognize the value of information and the processes through which information is given meaning to a collection of individuals (Daft and Weick, 1984). Reaching a shared interpretation of available information of the business environment (e.g., customers, suppliers, third parties and economic environment) to drive unified knowledge-based, performance improving action. Their ability to integrate their specialized knowledge of its employees is critical to planning and implementing a collective response (Isabella, 1990; Grant, 1996; Sutcliffe and Mcnamara, 2001; Maitlis, 2005). Thus, a shared interpretation of knowledge is proposed as a mediator of knowledge dissemination and the design and implementation of a unified knowledge-based response (Huber, 1982; Nonaka and Takeuchi, 1995; ult et al., 2004).

In a project environment, knowledge enables individuals to make decisions, solve problems, and apply it to the action. The consequences of the decisions and actions taken, knowledge, and cited as the addition of new knowledge are in project courses. This is a process of accumulation of knowledge. The accumulation of knowledge to start generating knowledge within the individuals / team (while creating your own design discussions and solutions external artifacts), continue across the individuals / team (an interactive discussion on design issues, through their heritage with verbal and nonverbal ) and the final completion of the project organization by preserving knowledge (obtained through evolutionary design). It is the advantage of knowledge sharing.

2.1.2 Time spent on knowledge sharing

As Knowledge deliver was enhanced when there were long time horizons, high behavioral transparency and multiple knowledge connections between partners, a noncompetitive approach to knowledge transfer, goal clarity, repeated exchanges, and frequent partner interactions. Knowledge sharing is between individuals to exchange their knowledge and work together to create new knowledge. Therefore, the way and time to share knowledge is crucial.

Technology has dramatically improved the ability to transmit information between individuals (Narasimhan and Kim, 2001; Pagell, 2004; Zhou and Benton, 2007). Information sharing support technology includes the hardware and software needed to support information sharing. Information content refers to the information shared between manufacturers and customers. Because of the importance of information sharing, information quality is essential for manufacturers. Information quality measures the degree to which the information exchanged between organizations meets the needs of the organizations (Petersen, 1999). A number of researchers have identified several important characteristics of information quality (Neumann and Segev, 1979; Mendelson and Pillai, 1998). Neumann and Segev (1979) studied four information characteristics: content, accuracy, recency, and frequency. McCormack (1998) measured information by accuracy, frequency, credibility, and availability of forecast. Frequency is measurable for the quality of knowledge/ information sharing. Hence, time spent on knowledge sharing is valuable for knowledge sharing.

2.1.3 Supplier integration in NPD

New product development (NPD) is a process, its purpose is to develop, test and consider new market products to ensure that the organization's growth or survival. There are some different kinds of new product. 1) A product that opens up an entirely new market. 2) A product that adapts or replaces an existing product, 3) A product that significantly broadens the market for an existing product. 4) An old product introduced in new market. In this research, 1) and 2) are mainly focused on. Why NPD is important? It is because it can replace declining products, take advantages of new technology, increase market share, fill a gap in the market and bring in new customers etc. In the beginning stage of NPD, which is idea generation, supplier integration is a critical key. A suitable supplier can help you to generate a suitable idea. Hence, firms need to integrate their suppliers to find the right partners to co-operate with. In this process, information and knowledge need to be shared to partners. No matter technology, experience and business status. Therefore, trust between partners is meaningful. It implicates leakage of secret.

Transaction cost economics determines the form of governance and the level of trust may affect the perception of the degree of risk of loss by the agent in the alliance (Nooteboom et al., 1997; Saxton, 1997; Williamson, 1985) but that transaction costs do not increase necessarily with an increase in relationship-specific investments (Dyer, 1997). Suppliers on project teams adds information and expertise regarding new ideas and technology (Chakrabarti and Hauschild 1989) and helps to identify potential problems so they can be resolved early (Wasti and Liker, 1999). By the information from its starting point to its point of use, "Sticky" information can be shared (von Hippel, 1998), thereby resulting in improved problem-solving activities. Suppliers also can get advantages from ‘‘spillover effects’’ that affect future research and development (R&D) projects downstream (Harhoff, 1996). Moreover, Supplier integration brings out possibility of outsourcing and external acquisitions, reduce the internal complexity of the project (Brown et al., 1995) and provides extra personnel to shorten the critical path for NPD projects (Clark and Fujimoto, 1991; Smith and Reinertsen, 1991; Trygg, 1993). Integration of suppliers helps coordinate communication and information exchange, thus reducing delays (Dyer and Ouchi, 1993; Handfield, 1993). Supplier integration helps eliminate redundant work because accessibility and production of parts can be considered early (Clark and Fujimoto, 1991). Supplier integration improves supplier relationships, which leads suppliers to internalize project concerns and thus allows for a better working relationship (Meyer, 1993).

To have successful supplier integration, there is a suggested process to be followed. Through the development of in-depth understanding of the suppliers are being addressed by the start of the process. The second requirement relates to successful enterprise with suppliers is to involve close discussions with suppliers over time to share information in order to build a ‘‘bookshelf’’ of current and emerging technologies that become useful for future requirements. These discussions also led to a detailed understanding of a given technology and cost drivers. Third, successful supplier integration must have a prudent management; managers took the time to ensure that the supplier was included actively in the team decision-making process. Whenever possible, the supplier’s insights were considered in decisions, especially when the team confronted technical issues with which is not in their area. Adhering to these steps was instrumental in ensuring that the buying company fully exploited the value of the supplier’s knowledge and capability. It called successful supplier integration.

2.1.4 Product innovation

Product innovation refers to the capability of organizations to introduce new products and features. Fast-paced changes in technology and customer demand for new and better quality products require enterprises innovative continuously and bring these innovations to market quickly (Blackburn, 1991; Clark and Fujimoto, 1991). Continuing efforts in innovation fosters organizational learning and enables "time-to-market" to be shortened even further. Many practices may affect product innovation. The interaction of functional representatives enables concurrent development to provide a rich information medium for reducing equivocality. Concurrent development reduces equivocality by facilitating an exchange of existing perspectives among functional representatives. As a team, they jointly define problems and resolve conflicts. By enabling the enactment of a shared team vision, concurrent development enhances product integrity, facilitates downstream coordination, and improves product development success. Through information sharing and computer technology, teams were able to develop customized products and new features designed to improve product performance (Barkan, 1992; Rosenthal and Tatikonda, 1992).

How to define new? Products are new to a firm when the firm has little experience and marketing and technological know-how of the products. Products are new to the customer and industry when the customer and industry have little experience and technological/marketing knowledge of them (Garcia and Calantone, 2002). Furthermore, there are two kinds of innovation, incremental innovation and radical innovation. I will discuss them later.

Incremental innovation: A series of small improvements of existing products or product lines, often helps to maintain or improve its competitive position over time. Incremental innovation is frequently used in the high-tech enterprise, the need to continue to improve their products, including new features more and more consumers expect.

Radical innovation: To provide something new to the world by uprooting industry conventions and by significantly changing customer expectations in a positive way. Ultimately, they often end up replacing existing methods / technologies.

2.1.5 Product performance

Product performance can be separated to quality performance and financial performance. Quality gauges the capability of the firm to design and produce products that would fulfill customer expectations (Hall et al., 1991; Doll and Vonderembse, 1991). On the other hand, Profitability is one of the ultimate criteria by which product performance can be assessed. Relative profitability reflects not only the health of a particular company but also its stand vis-à-vis its competitors. Commanding premium prices implies that a company may profit significantly by the product through higher profit margins (Koufteros et al., 2002b). Some may said that market performance can reflect the product performance. Market performance is defined as the level of sales, market share and profitability of the company's market. Sales, market share and profitability, and the company have completed the performance indicators. A company will exhaust its financial resources and business was forced to withdraw from a profit if they can not develop new products. On behalf of the company performance indicators of efficiency and effectiveness, it is appropriate, they represent the market performance.

2.2 Research model development

Based on literature review, we expected that knowledge sharing and supplier integration will affect the result of new product development process. In order to identify the process is successful or not, product innovation and product performance will be the scale of measurement. Moreover, I want to differentia the difference between incremental innovation and radical innovation. Figure 1 shows our conceptual model. The hypotheses of the model are presented in the following part. After that, the moderated models, which are incremental innovation and radical innovation, effect are discussed below.

Figure 1 shows the Conceptual Model

2.2.1 Satisfaction with and Time spent on knowledge sharing

When a firm is satisfied for knowledge sharing with partners, it will spend more time on knowledge sharing. Firms that have a higher degree of knowledge sharing will have a better business performance and a higher level of innovation than firms that do not (Shih et al., 2006a,b). Moreover (Shih et al., 2006a,b) claim that cooperative learning in a design studio relies not only on information technology increasing communication efficiency, but also on how studio participants are motivated to cooperate. Jolly and Wakeland (2008) examine the result of interactions among individuals in an organization with different preferences regarding knowledge sharing, arguing that organizations should actively encourage knowledge sharing. Bandyopadhyay and Pathak (2007) model the interaction between two employees serving in different firms, who have to share their knowledge to work effectively as a team. The results implicated senior management should strengthen the supply chain collaboration between individuals so that better returns can be achieved when knowledge of the degree of complementarily between the individuals sufficiently high enough. Their conclusions show that the sharing of knowledge resources will lead the increase in the expected income of each member in the alliance so that this becomes the source of the power in establishing an alliance. It implicates firms will establish an alliance relationship to get more income. This relationship is long term. Improve knowledge transfer, when a long span of time, the connection between the multiple knowledge of the high transparency of the conduct and partners, non-competitive knowledge transfer, with clear objectives, communicating back and forth, and frequent interaction partners. The processes of knowledge sharing, personal exchange their knowledge, and work together can create new knowledge. As previously discussed, this process is critical to the organization's knowledge of personal knowledge. The process of knowledge sharing is by both knowledge and access to knowledge.

This kind of knowledge generation is the most economy and effective. The satisfaction with knowledge sharing will be increase by getting more suitable information. As a result, you are willing to spend more time on knowledge sharing,

H1. Satisfaction with knowledge sharing is positively related to time spent on knowledge sharing.

2.2.2 Time spent on knowledge sharing and Supplier integration in NPD

Integration requires strong communication among individuals within the firm (Ruekert and Walker, 1987; Levitt and March, 1988; Boisot, 1995; Helfert et al., 2002; Pagell, 2004; Sanders and Premus, 2005). It is the same with supply chain. Other literatures noted that suppliers who had participated early in initial technology sharing discussions later contributed to setting goals regarding project outcomes. Suppliers, because of their technical knowledge or expertise, may have more realistic technology goals and information on the tradeoffs involved in achieving particular goals. Such goals are not limited to cost but often include product performance characteristics (such as weight, size, or speed) and project performance measures (such as development time). Although buying company have the highest authority in goal setting, supplier’s involvement can assist in setting goals that are offensive but reasonable and also in assuring the supplier’s ‘‘buy-in’’ to the goals.

For example, before the detailed design of a new product start, Japanese leading companies would visit its main suppliers. These visits help the purchaser decide which supplier has the abilities to produce an item at the targeted cost and quality levels. The buyer also assesses the supplier’s ability to become part of the product development team. After a general discussion about new products requirement, technical suppliers submit preliminary design. Starting with a basic frame and shape based only on broad product requirements, the product design evolves, with engineers from both companies working together to evaluate alternative designs that satisfy product requirements.

Meet the dynamic rapidly changing uncertainty and rapidly changing environment with an external agent collaboration means higher efficiency, because the access to and exchange of important knowledge and information. Especially, pay attention to vertical relationship within the knowledge can be considered from the supplier, such as requiring the degree of adaptation between the needs of manufacturers and suppliers to capacity between the two drugs to achieve better performance; provide products or services; established suppliers ability to recover from the manufacturer's needs routines. And understand the customer can contain, such as the manufacturer's ability to meet its customers, or the ability of manufacturers need to maintain stability, and to continue the relationship with the customer in order to achieve them adapt to new solutions

Strategic supplier integration between supply chain partners and seize the strategic objectives alignment. The extent of this alignment is facilitated by designing joint knowledge sharing routines that facilitate the use of innovative practices and sharing of new ideas. Strategic supplier integration captures initiatives through which firms can create value through collaborative efforts (Klein, Rai, & Straub, 2007; Villena, Gomez - Mejia, & Revilla, 2009; Lockström, Schadel, Harrison, Moser, & Malhotra, 2010). The main focus of the relationship between the firms shifts from a posture of negotiating prices to a posture of active strategic collaboration (Modi & Mabert, 2007; Bensaou & Venkatraman, 1995). The company may participate in activities to support the continuous improvement measures, and help them understand the trends in market demand. The focus is on managing the extended enterprise, so that firms indulge in sharing best practices to enhance overall system performance (Huiskonen & Pirttila, 2002).

Financial supplier integration is defined as the extent to which supply chain partners jointly invest in projects of mutual interest. Sharing of assets and technology is an important aspect of integration among supply chain partners (Stank, Keller, & Closs, 2002). When firms in the supply chain show willingness to engage in risk sharing, it can have a direct effect on resource efficiencies and process improvements (Modi & Mabert, 2007). Firms can decide to make investments in relationship specific assets (such as dies, fixtures, equipment) that are an important aspect of idiosyncratic inter-firm processes (Dyer & Singh, 1998). Other initiatives such as investment in joint R&D initiatives and new process development projects ensure alignment of expectations among the supply chain partners, and can support a greater understanding of how product and process interfaces across the supply chain can be synchronized (Campbell & Sankaran, 2005).

These kinds of supplier integration are approached by knowledge sharing. Therefore, Time spent on knowledge sharing positively related to supplier integration in NPD.

H2. Time spent on knowledge sharing positively related to supplier integration in NPD.

2.2.3 Supplier integration in NPD and Product innovation

Bozdogan et al. (1998) note that through mutually beneficial commitments firms can gain innovation in product design by proactively codeveloping new products with suppliers. This encourages leveraging of specialized knowledge from the supplier’s network and so creates new technological knowledge with suppliers ( Bidault, Despres, and Butler, 1998; Bonaccorsi and Lipparini, 1994). Baldwin and Hanel (2003) suggest that suppliers can generate innovative ideas when they develop new materials for manufacturers and co design new products with the manufacturers to demonstrate these new materials.

Supplier integration appears to be indispensable for product development. Talent and ability of supplier can bring significant advantages in product development process. Suppliers share useful knowledge about materials, pricing, and process capability. The knowledge provided by suppliers is cross-functional in nature and may have an important effect on the pricing, performance, quality, features, and timing of introduction of the products. Suppliers can answer questions from the product development team and thus reduce uncertainty. Suppliers can also provide suggestions for increasing product and process simplicity, which reduce complexity.

It is beneficial to the supplier to get involved early in the innovation process, at the design stage (Petersen et al., 2005). It is usually much more costly and difficult to make changes to the specifications of components downstream in the innovation process (Crawford and Di Benedetto, 2006). Involvement in the design stage allows the supplier to ensure that it will be able to supply the components being specified in the innovation’s design, and to make the appropriate investments in equipment, tools, and training where necessary. Supplier involvement in the product design also minimizes the possibilities of design errors, and the chance that the supplier will need to make costly changes downstream in the innovation process. For these reasons, supplier involvement in product design should result in more cost-efficient production, better quality and more innovative components.

Moreover, taking into account specifically product innovation, firm’s marketing capabilities, understood as "integrative processes designed to apply the collective knowledge, skills, and resources of the firm to the market-related needs of the business" (Weerawardena & O’Cass, 2004) acquire an important role to anticipate market requirements and to create durable relationships with suppliers and customers.

Therefore, drawing upon (i)manufacturers can improve their product innovation capability managing carefully their supplier and customer relationships (Kaufman et al., 2000); (ii) the importance of integrated systems of product supply and product distribution channels in order to obtain value information from suppliers and customers (Pimentel & Oliveira, 2010); and (iii) the lack of empirical studies about understanding of how supplier and customer involvement impact on competitive advantage (Feng et al., 2010), considering innovation as a key component of firm’s competitive advantage (Carmona-Lavado et al., 2010), this article propose SUCU (supplier and customer relationships) innovation model with the aim of analyzing jointly these vertical relationships on product innovation, highlighting their complementarity condition in order to achieve better outputs.

H3. Supplier integration in NPD is positively related to Product innovation.

2.2.4 Supplier integration in NPD and Product performance

Product performance is referred to financial and quality part. Increased supplier involvement during the product commercialization and launch should be advantageous (Petersen et al., 2005). The highly involved supplier may be more willing to cooperate in the launch of the product, and may be motivated to share the costs of activities supporting the launch. If the launch is successful, the continued existence of the new product is ensured, and the supplier reaps a financial reward for its participation (Chen et al., 2004). Therefore, Information sharing can also decrease information asymmetry, which prevents opportunism in the supply chain. This results in better sales and profitability of the products (Rosenzweig et al., 2003). Not only is the financial part, the quality of product also improved by supplier integration. von Hippel (1988) suggested that customers can provide their know-how regarding product improvement possibilities, new product functions, assessment of prototype and future product trends. Customers may also provide diverse knowledge that speeds up the learning process, leading to a greater number of new products. Yli-Renko et al. (2001) reported that the effectiveness of knowledge acquisition depends on close social relationships between firms and its key customers and, in turn, the knowledge gained directly enhances product development performance. All in all, Petersen et al. (2003, 2005); Ragatz et al. (1997) found that greater supplier involvement improves new product performance rates.

Transaction cost economics theory, manufacturers and suppliers and customers to design and develop new products and enhance the integration of the supply chain, by creating a highly evolved, non-contractual relationship self-executing. These relationships directly improve profits and sales goals derived from new products (Rosenzweig et al., 2003).

H4. Supplier integration in NPD is positively related to Product performance.

2.2.5 Moderated model – incremental innovation and redical innovation

There is an additional question that arose from this study addresses whether or not the relationships in the conceptual model vary depending on the types of innovation of product in the new product development. The data was separated into two sets. One is the high level of incremental innovation. Another one is high level of radical innvaotion.

Incremental innovation (sometimes referred to as sustaining innovation) uses existing forms or technologies as a starting point. It either makes incremental improvements to something or some process or it reconfigures it so that it may serve some other purpose.

Radical innovation is defined as fundamental changes in new products that represent revolutionary changes in product or process technology (Liefer et al.’s, 2000). Radical innovations are, by definition, major departures from the state of current knowledge in terms of product performance, process technology, or substantial cost-saving technology; thus they embody high degrees of new knowledge as well as high levels or risk and uncertainty (Utterback and Abernathy, 1975; Liefer et al., 2000). Despite the risks, firms that consistently succeed at radical innovation outperform their competitors (O’Connor et al., 2004). Firms engage in the risky process of developing and launching radical innovations because commercially successful radical innovations are often cornerstones of corporate growth. Radical innovations account for 24% of the profits from new product introductions, but represent only 10% of all new product introductions (Martin, 1995). Therefore, Radical innovation is a high risk project, however, it brings high profit.

Knowledge sharing can eliminate the uncertainty of new product development (Auster, 1992; Hagedoorn and Narula, 1996; Teece,1986). Level of uncertainty is much higher in radical innovation than the one in incremental innovation. Hence, the benefit in knowledge sharing and supplier integration may be greater in radical innovation than the benefit in incremental innovation. As we all know the profit in radical innovation is higher than the incremental innovation. However, because of the high level of uncertainty and risk on radical innovation, firms are not willing to develop radical innovation. To encouraged firms to develop a radical innovation line, this study analyzes the difference between incremental innovation and radical innovation in NPD by knowledge sharing and supplier integration. Knowledge sharing is the available way to tackle uncertainty and should have a better result on radical innovation.

H5. Radical innovation has a better result on our conceptual model than incremental innovation.

Chapter 3: Research methods

In order to test the hyptheeses, scientistic evidence that can prove the posited relationship was sought. To find such scientistic evidence, measeurements were taken for each construct to have a survey on this reseach. The measurements based on existing scales on pervious research. Table 1 shows the measurement scale referrences.

3.1 Questionnaire design

After the literature review, the region of study had been found. A suitable questionnaire was used to analyze the model and test the hypothesises. Not only the questionnaire, a set of review questions were set to interview some expertise in industrial area after built the research model.

Table : Measurement Scale References

Construct

No. of indicators

Source

Knowledge sharing

7

Fugate et al. / Journal of Operations Management 27 (2009) 247-264

Supplier integration

2

Koufteros, Cheng, & Lai / Journal of Operations Management 25 (2007) 847-870

Product innovation

3

Koufteros et al. / Journal of Operations Management 20 (2002) 331-355

Product performance

4

Lau and Yam / Industrial Management & Data Systems Vol. 107 No. 7, (2007) 1036-1065

Type of product innovation

7

Y. Li et al. / Journal of Operations Management 26 (2008) 257-274

Table : The measurement items in the survey questionnaire

1. Satisfaction with knowledge sharing

Not at all

(1)

To some extent

(2)

Parrtly

(3)

To a great extend

(4)

Completely

(5)

i) How satisfied are you with the exchange of information during cooperation between the units?

ii) Was some specific information that was not shared or revealed the cause of delay or lower performance?

Not at all

(1)

Rarely

(2)

Regularly

(3)

Often

(4)

Continously

(5)

iii) There was sufficient sharing of experiences and ideas during the cooperation

iv) Lack of information has disturbed the task accomplishment and cooperation

2. Time spent on knowledge sharing

Hardly

(1)

<2%

(2)

2-10%

(3)

10-25%

(4)

>25%

(5)

i) Objectification of intensity of knowledge sharing through objective measurement of times spent on the sharing of knowledge

ii) How much time did you spend on expressing your knowledge and experience in oral communication to share it with the others units?

iii) How much time did you spend on expressing your knowledge and experience in written communication (exclude the collect of information and writing reports) to share it to the others units?

3. Supplier integration in NPD

Not at all

(1)

Very low

(2)

Low

(3)

Neutral

(4)

High

(5)

Very high

(6)

Extensive

(7)

i) The level of strategic partnership with our major supplier

ii) Our firm has been involved in developing long term relationship with its suppliers

Type of innovation

4. Incremental innovation (II)

Strongly disagree

(1)

Disagree

(2)

Slightly disagree

(3)

Neutral

(4)

Slightly agree

(5)

Agree

(6)

Strongly agree

(7)

i) Our firm often create new patterns of product.

ii) Our firm often improve existing process and product

iii) Our firm often exploit existing technologies

5. Radical innovation (RI)

/

/

/

/

/

/

/

i) Our firm often create radically new products

ii) Our firm often introduce radically new concept in innovations

iii) Our firm often develop and introduce new technologies into the industry

iv) Our firm are often the creator of new techniques and technologies

Outcome of product

6. Product innovation

Much below

(1)

Below

(2)

Slightly below

(3)

Neutral

(4)

Slightly above

(5)

Above

(6)

Much above

(7)

i) Our capability of developing unique features

ii) Our capability of developing new product and features

iii) Our capability of developing a number of "new" features

7. Product performance

Strongly disagree

(1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly agree

(5)

i) The product has achieved our sales goal

ii) The product has achieved our profit goal

iii) The product has had great profitability

iv) Customers are very satisfied for the product performance

3.2 Review question design

This review question is designed for interviewing the expertise in industrial area of Hong Kong to compare the reseach findings and reality situation. These expertise are the senior manager of their firms. They understand their company’s situation and the problems they faced. The questions based on the pervious literature and this reseach findings. There are several questions form each construct and two additional questions for incremental innovation and radical innovation. Some of them are open-ended questions to give some space to the expertise to share their opinions.

Table 3: Review questions

Review Questions

Satisfaction of Knowledge Sharing with partners:

1. Does your company have a shared interpretation of knowledge relationship with other firms?

2. Do you think a shared interpretation of knowledge between partners can improve the cooperation with each other? Why?

3. Does your company be willing to exchange information and experiences during cooperation with other firms?

4. Do you think the information and experiences exchange can improve the cooperation with partners? Why?

5. Is there any obstacle to hinder knowledge sharing between partners? Give examples.

6. How to solve the above problems?

Time Spent on Knowledge Sharing with partners:

1. Does your company apply technology to improve the ability to transmit information? (Such as information system)

2. Does your company share knowledge spontaneously? Why?

3. Does your company be willing to spend more time to express your knowledge and experiences when your partners asked? Why?

Supplier Integration in NPD:

1. Do you think a better cooperation relationship can lead to a higher level of strategic partnership with suppliers? Why?

2. Does your company have a long term relationship with specific suppliers? Why?

3. Do your company and suppliers always use the mutual information to make joint decisions in NPD? Why?

4. Which type of supplier integration does your company prefer? (Grey-box or Black-box integration) Why?

5. Is it necessary for the suppliers involved extensively to the new product development project? Why?

Product Innovation:

1. Do you think a higher level of strategic partnership with suppliers can lead to a higher capability of developing unique features and new products? Why?

2. Does your company’s product innovation can follow or even beyond the market pace? Why?

3. Are there any tools or strategies can be use to develop unique features and new products?

Product Performance:

1. What are the measurements of product performance?

2. How your company defines product performance?

3. Do you think a higher level of strategic partnership with suppliers can lead to a better product performance?

Additional Question:

1. If your company is producing an incremental innovation product, which supplier integration will your company prefer? (Gray-box or Black-box) Why?

2. If your company is producing a radical innovation product, which supplier integration will your company prefer? (Gray-box or Black-box) Why?

*Gray-Box integration is a formalized supplier integration. Joint development activity between buyer and supplier.

Black-Box integration which design is primarily supplier driven, based on buyer’s performance specifications.

3.3 Data collection and sample

210 manufacturers in Hong Kong replied the questionnaire of this research. They are covered the Metal, mechanical & engineering, Electronics and electrical, Textiles and apparel, and Printing / Packaging Materials industries in Hong Kong.

After collecting the data, models were established. Amos 20 is the software to build up models. Models were calculated by this software to see whether fit or not. This method allows a virtual model to test the entire system of variables to determine simultaneous analysis of the degree of statistical data in it. The purpose of the software is consistent with quantitative observation running through statistical experimental results thus obtained results are presumed relationship holds or not. Data was analyzed to tell a particular variable is very important to forecast results. In this study, AMOS20 software was used. The criteria will be mentioned later.

After 76 models were built, a suitable model had been found (Figure 1). Then I based on this model to start this study.

In order to improve the comprehensibility of the draft questionnaires, 15 experts who are the senior manager of the industries in Hong Kong, were interviewed to compare the findings of this research and the reality of manufacturing. These are the face to face interviews.

Chapter 4: Statistical analysis

The figure 1 model is analyzed by Amos 20 and the result is significant. To see whether the model is fit or not, there are six Fit Index which are RMR, GFI, AGFI, NFI, CFI and RMSEA. Our model result was compared with the Fit Guideline. If at least four of six model Fit Index are within the Fit Guideline, it means the model is fit. The Model Fit Summary table showed the requirement of them. Moreover, we can find the relationship of the constructs from Estimates and P. If the number of Estimates is positive, the relationship of two constructs is positive, vice versa. When the P > 0.05, it means the relationship is not significant. Furthermore, when P = * is good, P = ** is better, and P = *** is the best significant.

Table 4: Model Fit Summary

Fit Index

Fit Guideline

RMR

≦0.08

GFI

≧0.90

AGFI

≧0.80

NFI

≧0.90

CFI

≧0.90

RMSEA

<0.07

By using the knowledge of literature review, I built up model from simple one first. I started from contribute a three constructs model. If the model was fit, then I added other constructs one by one. If the model that I built was not fit, I must try the whole new model from the beginning. The model is better as complicate as possible. When I had calculated a model, I kept record to avoid redundant work. I used excel to make a spreadsheet for recording. The spreadsheet recorded the constructs that I used, model fit or not, significant or not, and a hyperlink which is a word file of the model result. The result and draw of the model was pasted in the word file. Therefore, when I press to a hyperlink, the correlated model will come out. These works can record my work clearly and prevent rework. Also the working process can be found from there. To find a suitable model was the most complicated part in this research. And I spent a lot of time on this procedure.

Figure 2: Testing model spreadsheet

Chapter 5: Result

5.1 Full-model

There is the statistic result of this research full-model below.

Table 5: statistic result of full-model

Model

RMR

GFI

AGFI

PGFI

Default model

.043

.970

.926

.388

Saturated model

.000

1.000

Independence model

.241

.741

.611

.494

Model

NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2

CFI

Default model

.890

.817

.924

.869

.922

Saturated model

1.000

1.000

1.000

Independence model

.000

.000

.000

.000

.000

Model

RMSEA

LO 90

HI 90

PCLOSE

Default model

.099

.049

.152

.054

Independence model

.273

.237

.310

.000

Regression Weights: (Group number 1 - Default model)

Estimate

S.E.

C.R.

P

Label

TSK

<---

SKS

.483

.118

4.100

***

SI

<---

TSK

.423

.077

5.504

***

PI

<---

SI

.628

.065

9.725

***

PP

<---

SI

.202

.040

5.112

***

Table 6: Model Fit Summary of Full-Model

Fit Index

Model

Fit Guideline

RMR

0.043 √

≦0.08

GFI

0.970 √

≧0.90

AGFI

0.926 √

≧0.80

NFI

0.890 X

≧0.90

CFI

0.922 √

≧0.90

RMSEA

0.099 X

<0.07

Figure 2 shows the Relationship of Constructs in Full-model

From table 5, we can see the full-model is fit. The full-model meets 4 of 6 fit index requirements.

The entire hypothesis were supported (P = ***) and they all had a positive estimate. That means (H1) Satisfaction with knowledge sharing is positively associated with Time spent on knowledge sharing, (H2) Time spent on knowledge sharing is positively related to Supplier integration in NPD, and Supplier integration in NPD is positively related to Product innovation and Product performance.

5.2 Moderated models

The data was separated into two sets. One is high level of incremental innovation group which is 5 or above of average mark in incremental innovation. Another one is high level of radical innovation group which is 5 or above of average marks in radical innovation. There are 109 firms in high level of incremental innovation group and 91 firms in high level of radical innovation group. In these two groups of firms, only 59 companies are overlapped. Hence, this data is statistically worth for studying.

5.2.1 Incremental innovation model

There is the statistic result of this research high level of incremental innovation model below.

Table 7: statistic result of high level incremental innovation model

Model

RMR

GFI

AGFI

PGFI

Default model

.039

.967

.918

.387

Saturated model

.000

1.000

Independence model

.227

.746

.620

.498

Model

NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2

CFI

Default model

.882

.804

.950

.912

.947

Saturated model

1.000

1.000

1.000

Independence model

.000

.000

.000

.000

.000

Model

RMSEA

LO 90

HI 90

PCLOSE

Default model

.078

.000

.161

.252

Independence model

.262

.212

.315

.000

Regression Weights: (Group number 1 - Default model)

Estimate

S.E.

C.R.

P

Label

TSK_M

<---

SKS_M

.507

.185

2.744

.006

SI_M

<---

TSK_M

.408

.100

4.077

***

PI_M

<---

SI_M

.604

.082

7.396

***

PP_M

<---

SI_M

.122

.045

2.738

.006

Table 8: Model Fit Summary of Incremental innovation Model

Fit Index

Model

Fit Guideline

RMR

0.039 √

≦0.08

GFI

0.967 √

≧0.90

AGFI

0.918 √

≧0.80

NFI

0.882 X

≧0.90

CFI

0.947 √

≧0.90

RMSEA

0.078 X

<0.07

5.2.2 Radical innovation model

There is the statistic result of this research high level of radical innovation model below.

Table 9: statistic result of high level radical innovation model

Model

RMR

GFI

AGFI

PGFI

Default model

.061

.923

.808

.369

Saturated model

.000

1.000

Independence model

.260

.677

.515

.451

Model

NFI

Delta1

RFI

rho1

IFI

Delta2

TLI

rho2

CFI

Default model

.805

.674

.854

.746

.927

Saturated model

1.000

1.000

1.000

Independence model

.000

.000

.000

.000

.000

Model

RMSEA

LO 90

HI 90

PCLOSE

Default model

.163

.089

.244

.009

Independence model

.324

.269

.382

.000

Regression Weights: (Group number 1 - Default model)

Estimate

S.E.

C.R.

P

Label

TSK_M

<---

SKS_M

.370

.185

1.997

.046

SI_M

<---

TSK_M

.457

.114

3.997

***

PI_M

<---

SI_M

.733

.088

8.334

***

PP_M

<---

SI_M

.200

.052

3.879

***

Table 10: Model Fit Summary of Radical innovation Model

Fit Index

Model

Fit Guideline

RMR

0.061 √

≦0.08

GFI

0.923 √

≧0.90

AGFI

0.808 √

≧0.80

NFI

0.805 X

≧0.90

CFI

0.927√

≧0.90

RMSEA

0.163 X

<0.07

5.2.3 Comparing moderated models results

Figure 3 shows the Relationship of Constructs in Incremental innovation model

Figure 4 shows the Relationship of Constructs in Radical innovation model

From table 8 and 10, we can see the incremental innovation model and radical innovation model are fit. These two models meet 4 of 6 fit index requirements.

In H1, incremental innovation is more significant than radical innovation. In H2, they all are significant. Radical innovation is slightly positively related. In H3, they all are significant and radical innovation has a more positive impact on product innovation if there is a higher level of supplier integration. Finally, radical innovation has more effect on H4. It means knowledge sharing has more positive effect on product performance in radical innovation than incremental innovation.

Chapter 6: Discussion

6.1 Full model

From the result, knowledge sharing with partners seems to be a successful element of NPD. When a firm satisfies with knowledge sharing, it will spend more time on knowledge sharing. Then the level of integration with suppliers will be higher. Hence the product innovation and performance will be better. It is the case that was found in this research. We can see knowledge sharing is the key of NPD. However, is it the same with reality?

Apart from the questionnaire of 210 manufacturers, there are 15 expertise were interviewed. They gave their experience and situation of their firms. A shared interpretation relationship with partners can improve the cooperation. It helps to build trust and relationship between partners, supplier & alliances. Also, helps to improve the efficiency & quality, because all parties can work at the same level of quality and direction synchronously (Clark and Fujimoto, 1991). Also, partners will not duplicate the efforts for searching the same stuffs. Not only shared interpretation relationship, the information and experiences exchange also can improve the cooperation with partners (Meyer, 1993). It helps to improve the efficiency of product development, because all the parties know what the goal & objective would be, similarly, partners will also share their knowledge and experience with you, also, it helps build trust between all the parties. Also, this is a kind of "resource exchange". "I give my partners something they need (Petersen, 1999). Then, they give me back what I want".

No doubt that they all agree knowledge sharing is benefit for NPD. However there are lots of obstacles to hinder knowledge sharing. Firms treat knowledge is their property. They do not want to see that their partner clones their knowledge such as product or technology for benefit (Handfield et al., 1999). Knowledge is a weapon of company. If there is any leak out of information and knowledge especially unique information, it will be a disaster. In NPD, product uniqueness is the most important element. If the competitors produce a product that has the same feature with you, your market sharing will decrease. Hence, lots of company do not willing to share their knowledge although they understand knowledge sharing will make their product better. In order to solve this problem, there are some solutions. Sign contract, apply patent and have a joint venture relationship with suppliers can tackle information and knowledge leakage. However they are not the main purpose for this research. They can be studied in the future.

Furthermore, a better cooperation relationship can lead to a higher level of strategic partnership with suppliers (Stank, Keller, & Closs, 2002). Suppliers can be treated as an extended production lines, in other words, that is for cost saving and reduce factory overhead. Suppliers have their own strengths, knowledge and technology that partners may not have, then, they can provide reliable and quality components for final product. And better relationship can reduce suppliers’ bargaining power for long run. The norms, qualities, standards, system and communication are well established already, that will save much time for communication and negotiation. For the joint make decisions in NPD, there is a difference between large firms and small firms. Mostly, large firms would not make any joint decision with suppliers in NPD, their R&D and engineer will only take the comment and information account into their own decision making. It is because they want to avoid any unclear responsibly if there is any problem later on. However, small firms will do it because it is a common industry practice customer gives idea to suppliers and suppliers will evaluate and advise if any problem on the new product/idea. So mostly there will be mutual information to make joint decisions in NPD.

Higher level of strategic partnership with suppliers can lead to a higher capability of developing unique features and new products (Bozdogan et al., 1998). The strong trust, clear norm & objective can be created in a higher level strategic partnership. During the knowledge and experience exchanges, that helps to observes what is the trend and change in the market and technology in different fields. That will create more ideas, it really helps for product innovation. On the other hand, a higher level of strategic partnership with suppliers can lead to a better product performance (Petersen et al., 2005), yet the cost may be higher due to the suppliers’ need and requirement.

6.2 Incremental and radical innovation

From 5.2.3 comparing moderated model results, we found that H2, H3, and H4 are more significant and positive in radical innovation. The result indicates knowledge sharing and supplier integration are more effective in radical new product development than the incremental new product development. It is an encouragement to the firms that want to develop radical new product but move back because of the large uncertainty and risk. First of all, this study proves that knowledge sharing and supplier integration is positively related to product innovation and performance. Then from the moderated model, this study identifies the product innovation and performance in radical innovation is better than incremental innovation by knowledge sharing and supplier integration. Knowledge sharing and supplier integration is the cure of the threat (uncertainty).

There are two reality examples, which are T-Touch watch of Tissot (incremental innovation) and Facebook Home mobile (radical innovation).

Since 1999, when a Swiss watchmaker, Tissot, presented its revolutionary touch-screen technology T-Touch watch, it drew instant attention. The Touch Collection has become the most desira