Mohan Subramaniam and N. Venkatraman

N. Venkatraman
Boston University
School of Management
595 Commonwealth Avenue
Boston MA 02215
Ph: (617) 353 7117
Fax: (617) 353 5003
Email: venkat@bu.edu

ABSTRACT

With increasing globalization of markets the capability to develop new global products - or, new products for multiple country markets - is of growing significance for firms. In this paper we explain the variance in global new product development capabilities among firms as a function of the overseas knowledge they leverage through their routines - or, the regular activities employed for new product development. Our findings provide compelling evidence that firms leveraging tacit as opposed to explicit overseas knowledge are associated with greater global new product development capabilities. In particular, we find firms that leverage tacit differences in the requirements of countries -- either through cross-national teams, teams with domestic members having prior overseas experience, high degrees of headquarter-subsidiary collaboration, or cross-national communication -- are associated with greater global new product development capabilities. These findings are based on a survey of ninety global new product introductions from forty-four multinational companies across multiple industries.

The capability to develop new products is a critical determinant of a firm's competitiveness. New market positions are created through new products and established market positions are rarely sustained without ongoing product innovation. Not surprisingly, significant research attention has been devoted to understanding how new products are developed and introduced to the market. 

Despite the burgeoning stream of literature on new product development however (see Brown and Eisenhardt, 1995, for a review), few studies have addressed the increasingly important case of global products. Global products differ from domestic products as they cater to multiple country markets. A significant aspect of their development process involves factoring in knowledge about multiple overseas markets - knowledge of which resides in overseas locations (Bartlett and Ghoshal, 1989). While prior research on new product development has strongly emphasized the importance of closely integrating market knowledge into product characteristics for new product success (e.g., Cooper, 1994; Clark and Fujimoto, 1990), very little is understood about how firms leverage overseas knowledge for global product development. Such gaps in our knowledge are indeed a cause for concern, given the increasing pressure for companies to compete on a global basis (Ghoshal, 1987; Porter, 1986; Yip, 1995). 

This paper examines the capability of firms to develop new global products as a function of the knowledge they leverage from multiple overseas locations in the product development process. Contending that knowledge is a critical resource within firms, we frame our inquiry using the resource-based view of the firm (Barney, 1991; Dierickx and Cool, 1989). Accordingly, we see a firm's capability being derived from its routines, or, the regular activities through which it uniquely leverages its knowledge resource (Amit and Schoemaker, 1993; Nelson and Winter, 1982). We define global new product development capability as the ability to consistently generate successful new products simultaneously in multiple country markets. Organizational routines are the regular activities that a firm conducts to acquire and leverage overseas knowledge for global new product development. 

Our findings provide compelling evidence that the nature of the routines firms employ to leverage overseas knowledge significantly influences a firm's capability at global new product development. In particular we find that those firm routines, that leverage tacit as opposed to explicit overseas knowledge, are associated with greater global new product development capabilities. Tacit as opposed to explicit knowledge is difficult to codify, and consequently poses significant challenges in transferring across borders. These challenges make tacit overseas knowledge a unique and difficult to imitate resource - as, not all firms are able to transfer and leverage such knowledge. Consequently, those firms that effectively leverage this resource are rewarded with greater global new product development capabilities. Our findings reveal specific patterns in the routines - or, the characteristics of the regular activities - that enable firms to effectively leverage tacit overseas knowledge for greater global new product development capabilities. 

BACKGROUND

The significance of organizational routines for firm capabilities

Organizational routines have recently become the focal point of strategy research on the premise that firm capabilities are embedded within their routines, or, their regular ongoing activities (Barney, 1991; Conner, 1991; Nelson and Winter, 1982). This premise popularized by the resource-based view of the firm, represents a significant shift from the industrial organization perspective of competitive advantage. Accordingly, rather than examine firm performance as a function of how it is positioned within its industry (Porter, 1980), studies have begun to examine firm performance as a function of how capable firms are at deploying their resources through their ongoing routines (Amit and Schoemaker, 1993). Similarly, instead of viewing the sustenance of firm performance primarily as a result of entry or mobility barriers (Porter, 1980), firm performance is believed to be sustained because of capabilities that are differential and difficult to imitate (Barney, 1991). It is unclear however at this stage whether the industrial organization and the resource-based view are complementary, alternatives, or substitutes (see Teece, Pisano and Shuen, 1997 for a discussion on these perspectives). Nevertheless, we believe that routines are critical to firms as they are the source of their differential and inimitable capabilities. 

New product development: The significance of leveraging knowledge through routines

The routines to develop product innovations have been the subject of examination for several studies in the new product development literature. Effectively leveraging knowledge is a critical aspect of these routines - as innovation is inherently a knowledge exploiting activity with new products embodying new knowledge (Nonaka and Takeuchi, 1995). Accordingly, this research stream has described various mechanisms by which firms deploy knowledge for new product development. For example, some researchers within this research stream have stressed the importance of cross-functional teams to allow integration of different functional sources of knowledge (e.g. Griffin and Hauser, 1992; Clark and Fujimoto, 1991). Others have focused on overlapping project activities for effective deployment of knowledge (e.g. Takeuchi and Nonaka, 1986; Clark and Fujimoto, 1991) and external and internal communication to ensure consistency in understanding (knowledge) and commonality of objectives (e.g. Allen, 1977; Dougherty, 1992). However, being predominantly domestic in their scope, these studies were not designed to address the special issues concerning knowledge creation and deployment for new global products. 

Distinctiveness of global products: The need to leverage multiple overseas sources of knowledge

Global products are distinct from domestic products because they cater to multiple country markets. In doing so, a vast majority of them are neither totally standardized, nor unique for each country (Boddewyn, Soehl and Picard, 1986; Cavusgil, Zou and Naidu, 1993). Total standardization of global products, even if desirable for economic reasons (Buzzel, 1968; Levitt, 1983) is difficult to achieve due to a host of critical differences among country markets (see Jain, 1989, for an exhaustive review on global product standardization). Offering unique country-tailored products for each country market is also undesirable, as such products face significant disadvantages compared to those that exploit presence and strengths in multiple markets. For instance, they may lack similar economies of scale (Hout, Porter, and Rudden, 1982), or abilities to cross-subsidize (Hamel and Prahalad, 1985), and may have lower operational flexibilities in their manufacturing (Kogut, 1989). 

Hence the design and development for most global products, unlike domestic products, requires balancing adaptation of the product to the unique requirements of multiple country markets with standardization of the product across those markets (Bartlett and Ghoshal, 1989; Prahalad and Doz, 1987). Since knowledge about unique country factors largely originates and resides in overseas subsidiaries, balancing adaptation and standardization in a global product's design necessitates leveraging knowledge from multiple overseas sources in a MNC (Takeuchi and Porter, 1986; Ohmae, 1990). 

Transferring knowledge across borders: enabling factors in MNCs

The mechanisms enabling MNCs to transfer knowledge across borders have been examined by several studies at the organization level, with a primary focus on broad strategic decision-making premises and the structuring of headquarter-subsidiary relationships. MNCs possessing "ideal" attributes in this regard have been given various names: "geocentric" (Perlmutter, 1969), "heterarchies" (Hedlund, 1986), "multi-focal" (Prahalad and Doz, 1987), "transnationals" (Bartlett and Ghoshal, 1989), or "integrated players" (Gupta and Govindrajan, 1993). The cumulative insights of these studies on the diffusion of knowledge and innovation in MNCs at the organization level have however not been applied at the project level where product development activities occur. Consequently, we do not know how such knowledge diffusion attributes of MNCs specifically influence its global new product development capabilities. This paper aims to address these gaps in our understanding. More specifically, we seek to examine the following research question -- what patterns among firm routines most effectively leverage overseas knowledge for greater global new product development capabilities?

CONCEPTUAL FRAMEWORK AND HYPOTHESES

Figure 1 schematically describes our research framework. This framework is conceptually anchored in the arguments of the resource-based view of the firm. Accordingly, overseas knowledge is considered a key resource for global new product development. And, the variance in global new product development capabilities among firms is seen as a function of the unique and difficult to imitate overseas knowledge that firms leverage through their routines for developing global products. We further contend that firms leverage unique and difficult to imitate overseas knowledge by employing routines that leverage tacit as opposed to explicit overseas knowledge. 

Figure 1: Research Framework

 
 

The significance of leveraging tacit overseas knowledge for global new product development capability

One of the fundamental issues facing firms developing products for multiple country markets is addressing the differences among them (Jain, 1989; Takeuchi and Porter, 1986). The knowledge about the differences among countries could be tacit or explicit (Subramaniam, Rosenthal and Hatten, forthcoming). Tacit knowledge is difficult to communicate in formal, systematic or codified form (Nonaka, 1994; von Hippel, 1994). It is said to "indwell" in the minds of people as perspectives or images of reality, and accumulated through experience or "learning by doing" (Hedlund, 1994; Nonaka, 1994; Polanyi, 1966). Explicit knowledge on the other hand is easy to codify and communicate (Nonaka, 1994). 

Many country requirements and the differences among them entail explicit knowledge as they are based on universally accepted and objective criteria. For instance, transmission systems for televisions differ between countries based on universally accepted engineering specifications such as PAL, SECAM, or NTSC. Similarly, cordless telephones need to respond to explicit regulatory laws for distinct frequency ranges in different countries. These differences are not subject to individual interpretations or perspectives, and can be easily codified. 

On the other hand, many differences among country markets involve tacit knowledge -- such as, differences in cultures, tastes, habits and customs (Jain, 1989). Takeuchi and Porter (1986) describe how cultural differences made Campbell soup unpopular in Brazil. Housewives apparently felt they did not fulfill their "proper" role if they served soup they could not call their own, and hence preferred using dehydrated soup starters (of competitors) to which they could add their own ingredients. The understanding of such differences among country requirements is tacit, as it is based upon personal perspectives and interpretations of individuals. 

As tacit knowledge lacks objective criteria for consistent description, it could have several alternate interpretations -- each interpretation having different implications for the design tradeoffs of the new global product being developed. For instance, preferences of shapes of television cabinets vary with cultures and could involve several possible interpretations, making the comprehensive codification of the knowledge-base driving them very difficult (von Hippel, 1994). Moreover, unlike explicit differences such as PAL/ SECAM/ NTSC, the insights to arrive at these interpretations evolve with experience and largely reside in the minds of subsidiary managers located in those countries. 

Tacit aspects of overseas market knowledge and plants are hence more difficult to interpret and transfer from overseas subsidiaries to design headquarters, or, where global new product development projects are conducted (Kogut and Zander, 1993; Nonaka, 1994). Consequently, such knowledge is less likely to be equally possessed by all competitors. As product innovations primarily occur by exploiting consumer preferences or needs in ways not perceived by or known to others, the opportunities for such differential interpretation are greater when exploiting tacit aspects of overseas knowledge. Explicit aspects of overseas knowledge on the other hand, are more likely to be equally possessed by all competitors because of the relative ease in transferring such knowledge across borders. They thus provide lesser opportunities for differential interpretation and hence lesser likelihood for innovation. 

Furthermore, for ongoing innovation, the ability to continually spot new opportunities from a tacit knowledge-base of overseas markets is less likely to be imitated as tacit knowledge is not easily diffused (Zander and Kogut, 1995). Such knowledge is also cumulative, building upon prior knowledge and becoming more in-depth over time (Cohen and Levinthal, 1990; Nonaka, 1994), making it difficult to replicate unless comparable time and experience is devoted (Dierickx and Cool, 1989). Addressing more tacit as opposed to explicit overseas knowledge for designing a global product is hence more likely to not only provide a lead in continually generating product innovations, but to deter others from quick imitation and thus increase the probabilities of market success (Banbury and Mitchell, 1995). Hence, we assert that leveraging greater tacit as opposed to explicit overseas knowledge enhances a firm's global new product development capability.

Leveraging tacit overseas knowledge: patterns of routines

The effectiveness by which firms leverage tacit overseas knowledge is a function of the routines, or the regular activities they employ for developing global products. We contend that successful patterns among these routines will reflect a combination of two sets of such activities. The first concerns addressing greater tacitness in the information about differences among countries. This is a necessary condition to leverage tacit overseas knowledge, as without doing so a tacit overseas knowledge base cannot be created in the first place. 

However, merely addressing tacit differences among countries is not sufficient to effectively leverage tacit overseas knowledge. This is because effectively acquiring and processing such tacit information - and consequently leveraging it for global new product development -- requires appropriately rich information processing mechanisms (Egelhoff, 1988; Galbraith, 1977; Daft and Lengel, 1986). Employing rich information processing mechanisms - which is the second activity required to leverage tacit overseas knowledge -- is essential because information on tacit differences is more difficult to acquire and process (Van de Ven and Delbecq, 1974). 

For instance, Sanyo (a Japanese manufacturer) reportedly positions its cordless telephone based on "soft appearance" (Subramaniam, et.al. forthcoming). Knowledge about what constitutes "soft appearance" in multiple countries is tacit as this knowledge is difficult to codify and transfer from overseas locations. This is because there are numerous possible interpretations of what "soft appearance" means in different country contexts. A comprehensive understanding of all the possible nuances of "soft appearance" resides only in the minds of the concerned overseas managers. In such a context, firms employing richer information processing mechanisms - such as, face to face contact with overseas managers - are better off integrating this information into their product development process than firms employing lean information processing mechanisms - such as, written memos or reports (Daft and Lengel, 1986). Hence, firms that address tacit differences among countries and also employ rich information processing mechanisms are more likely to effectively integrate tacit information into the new products developed and consequently more effectively leverage tacit overseas knowledge. 

Hypotheses: Patterns of routines leveraging tacit overseas knowledge and global new product development capability

We propose four information processing mechanisms that firms could employ in varying degrees of richness. The combinations of the choices firms make as to the nature of differences among countries they address, and the richness of information processing mechanisms they employ represent the patterns of routines that influence global new product development capability. 

First, cross-national teams represent richer information processing mechanisms as compared to domestic teams. This is because cross-national teams enable co-location, socialization and inter-personal contact of individuals possessing relevant tacit knowledge. Cross-national teams are thus more effective at processing tacit information as compared to domestic teams (Nonaka, 1994). Consequently, a combination of addressing high tacitness in overseas information and employing cross-national teams will result in higher global new product development capability. Hence: 

The importance of new product development to business performance has been underscored by numerous studies. It is considered a primary source of organizational renewal (Dougherty, 1992) and a critical factor for preempting competition (Clark and Fujimoto, 1991). Moreover, for firms competing in international markets the value of developing global products is reckoned to be particularly important for global competitiveness (Chen and Stucker, 1997; Yip, 1995). Hence the greater a firm's capabilities at developing new global products the greater we can expected its business performance to be. Hence: 

We use six variables to control for the other possible factors that may have an influence on global new product development capability. The first two variables -- brand image in overseas markets, and overseas market share -- were chosen as they co-vary with global new product development capability. They co-vary because several "other" factors that influence a firm's overseas brand image and overseas market share also influence its global new product development capability. Hence using these control variables enables controlling for several of these "other" factors that are not possible to comprehensively enumerate and incorporate in the framework. The other four control variables were chosen because their influence on global new product development capability can be inferred from prior studies. The higher a firm's global marketing infrastructure the better the firm is structured to compete globally (Porter, 1986) and hence is more likely to have greater global new product development capabilities. Similarly, the greater the number of countries targeted for global new product development, the greater the firm's chances for simultaneous introductions in multiple markets -- and hence the greater its likelihood for higher global new product development capability. Next, the higher the market concentration the lower the likely market rivalry and hence the higher the odds of the new global product being successful in the market place (Porter, 1980). Finally, the greater the permeability of managers across borders, or, the greater the frequency of managers visiting other country locations the higher the likelihood of innovation in MNCs (Bartlett and Ghoshal, 1989; Gupta and Govindrajan, 1993; Perlmutter, 1969). 

METHODOLOGY

Our research design consisted of a cross-sectional survey using key informants. The survey was administered to key members of global new product development teams - or, members who had an important role to play in the global new product development process. A single informant gave information about each global new product development process. The survey was administered across multiple industries. Its scope was restricted to manufactured products. The new products selected for this survey were those which were introduced in the market in the last five years, and had been in the market for at least a year. 

Sampling

The sampling of companies and their global new product development processes relied on the access that we could get into companies. Access was critical in order to identify the relevant managers within each company who had experience in developing global products. Not all product development projects within multinational companies developed global products. Consequently, we needed information from a source within each company to help identify those managers who could serve as key informants for this study. 

Based on the access that we could get into companies, we received a total of 102 responses from fifty-one multinational companies. We discarded 12 of these responses. Three pertained to non-manufactured products (software and franchise expansion). Five responses were about new products not yet launched and four more were not complete responses. This left a total of 90 usable responses on forty-three different product categories from forty-four multinational companies. Forty three of these were from the consumer packaged goods sector, twenty three from the consumer durables sector and twenty four from the industrial products sector (see Table 2, pages 27-28, for details of the companies and the product categories surveyed). 

Although the sampling process was non-random, the acquired sample represents a broad cross-section of product categories and firms. Several of the firms represented are leading multinational companies who account for a significant portion of the global economy. Twenty-two of these companies were ranked in the 1997 Fortune 1000 list in terms of revenue. Four of these companies were ranked in the top hundred list. Four more were ranked in the top fifty list. Many of these companies have been cited in prior studies as exemplary global competitors. A majority of the companies in the sample were U.S.-based. Three companies in the sample were based in Europe, one in Japan and one in South Korea. The predominance of U.S.-based companies in the sample is because of the difficulty in getting access into non-U.S.-based companies for data collection. 

Key Informants

We used key informants to provide data on global new product development processes. Selecting appropriate informants is critical - as, the reliability of information about activities related to a group or an organization depends on whether the selected persons have the requisite knowledge - or, are from a vantage point to do so. A majority of the informants (62%) for this study were at upper middle or senior levels in their organizations. (Titles of Directors, Vice Presidents and Presidents). This is indicative of the vantage point they had in providing information on the complex and multi-level activities concerning global new product development. Also, 92% of the informants represented the functions of R&D/Engineering, Marketing and General Management. These functions are critical functions for new product development. 

Survey Instrumentation

We developed the survey instrument in several phases. The first phase consisted of several hours of interviews with managers involved in the practice of global new product development. These interviews gave us a first-hand appreciation of how the practice of global new product development was actually conducted in multinational companies. With this understanding serving as a background, we then systematically searched the literature on new product development, international business, strategic management and organization theory for relevant scales. This search resulted only in a few scales that were applicable to the conceptual framework and hypotheses of this study. For a majority of the constructs, however, we developed new scales. Table 3 (pages 28-30) provides details of all the constructs and their measures. Two of the key constructs developed in this study are additionally discussed below. 

The measure for the dependent variable - global new product development capability, was developed based on integrating some key attributes forwarded by prior related studies. These attributes include frequency of new product introductions (Noboeka and Cusumano, 1997), order of market entry (Banbury and Mitchell, 1995), simultaneous entry in multiple markets (Porter, 1986) and the ability of the product to be both responsive to market requirements and competitive in terms of price (Bartlett and Ghoshal, 1989). The measure for the degree of tacitness was adapted from the dimensions of tacitness discussed by Zander and Kogut (1995). Three dimensions from their study relevant to this context were complexity, codifiability and observability of the information on the differences among countries. That is, when the information on the differences among countries considered for developing the global product was more complex, less codifiable and more difficult to observe, that information was considered more tacit relative to explicit (see Table 3 for the specific measures). 

We pilot tested the face validity of these scales with 16 managers involved with global new product development. We spent around 2 hours with each of these managers, discussing each question and indicator with them so as to ascertain that their interpretation of the question was consistent with the meaning of the construct. Based on their feedback, we reworded some of the questions for better clarity and ease of understanding. 

All the constructs using multiple indicators were tested for their reliability. Cronbach alphas for all the constructs were well above the recommended value of 0.7 (see Table 3). Furthermore, the constructs were tested for their convergent and discriminant validity. Each construct was paired with another construct - and, all the pair combinations were factor analyzed using varimax rotation. The indicators of each construct loaded only on its own construct for all the pairs of constructs. Hence, convergent and discriminant validity requirements were satisfied for these constructs (detailed results available on request). 

RESULTS

Table 4 (page 31) summarizes the means, standard deviations and the zero-order correlations among the constructs. We used multiple regression analysis to test our hypotheses. Tables 5-8 present the results of the regression analysis. Model 1 in these exhibits presents the cumulative effects of the control variables. Together they contribute to an adjusted R² of .515 and the F statistic is highly significant (p< .001). This confirms our a priori expectations of the influence of the control variables on global new product development capability.
 

Table 5: Regression Analysis Results: Hypothesis 1
Dependent Variable: Global New Product Development Capability
 

	Model 1 (Control)	Model 2 (Main effects)	Model 3 (Interaction  effect:H1)
Control Variables: (Unstandardized) Beta Values
Market Concentration	.132**	9.9E-02	5.4E-02
Brand Image in overseas markets	.380****	.35****	.33****
Overseas market share	.233**	.26***	.3****
Scope	3.6E-02*	3.8E-02*	4.4E-02**
Global marketing infrastructure	.168	.15	.13
Permeability of managers across borders	.234***	.206***	.23***
Main Effects Model (Model 2)
Degree of Tacitness		4.8E-02
Cross-national teams		.387
Interaction Effect Model (Model 3)
Degree of Tacitness (DTACIT)			3.7E-02
Cross-National Teams (CNT)			.417*
Interaction term: DTACIT X CNT			.57****
Model Statistics
N	90	90	90
R2	.548	.56	.62
Adjusted R2	.515	.518	.58
Model F	16.8****	12.9****	15.3****

* p < 0.1; **p< .05, *** p < .01, **** p < .001 
 

Model 2 in Table 5 shows the influence of the degree of tacitness and cross-national teams on global new product development capability. Taken individually, both these variables are non-significant. However, Model 3 confirms that their interaction effect is significant. Thus hypothesis 1 is supported. 

Table 6: Regression Analysis Results: 
Hypotheses 2
Dependent Variable: Global New Product Development Capability
 

	Model 1  (Control)	Model 4 (Main effects)	Model 5 (Interaction  effect: H2)
Control Variables: (Unstandardized) Beta Values
Market Concentration	.132**	.126**	.12**
Brand Image in overseas markets	.380****	.42****	.42****
Overseas market share	.233**	.25***	.24****
Scope	3.6E-02*	3.4E-02	3.5E-02
Global marketing infrastructure	.168	8.5E-02	.11
Permeability of managers across borders	.234***	.23***	.28****
Main Effects Model (Model 2)
Degree of Tacitness		5.1E-02
Prior overseas experience of domestic team members		.313
Interaction Effect Model (Model 3)
Degree of Tacitness (DTACIT)			4.4E-02
Prior overseas experience (POVSEXP)			.24
Interaction term: DTACIT X POVSEXP			.36*
Model Statistics
N	90	89	89
R2	.548	.57	.59
Adjusted R2	.515	.528	.54
Model F	16.8****	13.3****	12.5****

* p < 0.1; **p< .05, *** p < .01, **** p < .001 

Similarly, Table 6 shows (in Model 4) that the individual effects on global new product development capability of the degree of tacitness and of teams with domestic members having prior overseas experience is not significant. However, Model 5 shows that their interaction effect is significant. Hence, Hypothesis 2 is supported. 
 

Table 7: Regression Analysis Results: Hypothesis 3
Dependent Variable: Global New Product Development Capability
 

	Model 1 (Control)	Model 6  (Main effects)	Model 7 (Interaction  effect: H3)
Control Variables: (Unstandardized) Beta Values
Market Concentration	.132**	.12**	9.8E-02
Brand Image in overseas markets	.380****	.38****	.38****
Overseas market share	.233**	.24**	.23**
Scope	3.6E-02*	3.8E-02*	3.5E-02
Global marketing infrastructure	.168	.157	.14
Permeability of managers across borders	.234***	.22***	.19**
Main Effects Model (Model 2)
Degree of Tacitness		5.9E-02
Degree of collaboration		.7.4
Interaction Effect Model (Model 3)
Degree of Tacitness(DTACIT)			5.8E-02
Degree of collaboration (DCOLLAB)			.11
Interaction term: DTACIT X DCOLLAB			8E-02*
Model Statistics
N	90	90	90
R2	.548	.56	.57
Adjusted R2	.515	.51	.52
Model F	16.8****	12.6****	12.1****

 * p < 0.1; **p< .05, *** p < .01, **** p < .001 

The same patterns of results appear in Tables 7 and 8. While the main effects themselves are not significant, the interaction effects are. Hence, as seen from Models 7 and 9, hypotheses 3 and hypotheses 4 are also supported. 

Table 8: Regression Analysis Results: Hypothesis 4
Dependent Variable: Global New Product Development Capability
 
 

	Model 1 (Control)	Model 8 (Main effect)	Model 9 (Interaction  effect: H4)
Control Variables: (Unstandardized) Beta Values
Market Concentration	.132**	.13**	.121**
Brand Image in overseas markets	.380****	.39****	.39****
Overseas market share	.233**	.23**	.21**
Scope	3.6E-02*	3.7E-02*	3.7E-02*
Global marketing infrastructure	.168	.167	.18
Permeability of managers across borders	.234***	.23***	.23**
Main Effects Model (Model 2)
Degree of Tacitness		4.2E-02
Degree of communication		-6.1E-02
Interaction Effect Model (Model 3)
Degree of Tacitness (DTACIT)			5.5E-02
Degree of communication (DCOMMU)			-5.1E-03
Interaction term: DTACIT X DOMMU			7.7E-02*
Model Statistics
N	90	90	90
R2	.548	.55	.57
Adjusted R2	.515	.505	.52
Model F	16.8****	12.4****	12.1****

* p < 0.1; **p< .05, *** p < .01, **** p < .001 

Finally, Table 4 shows a significant correlation between global new product development capability and business performance. This correlation supports Hypothesis 5 and confirms the prediction that global new product development capability leads to higher business performance. 

Table 9 shows the summary of the results. All the hypotheses were supported by the data. 

Table 9: Summary of the results
 

Hypotheses	Relationship tested	Result
H1	Influence of the interaction between the degree of tacitness and cross-national teams on global new product development capability	Supported (p<.001)
H2	Influence of the interaction between the degree of tacitness and teams with domestic members having prior overseas experience on global new product development capability	Supported (p<.1)
H3	Influence of the interaction between the degree of tacitness and degree of collaboration on global new product development capability	Supported (p<.1)
H4	Influence of the interaction between the degree of tacitness and degree of communication on global new product development capability	Supported (p<.1)
H5	Influence of global new product development capability on business performance	Supported (p<.01)

DISCUSSION

The findings provide compelling evidence that the nature of routines a firm employs to leverage overseas knowledge significantly influences its global new product development capability. 

Successful patterns among these routines involve a combination of addressing more tacit as opposed to explicit differences among countries, and employing rich information processing mechanisms so as to effectively leverage tacit knowledge in the product development process. 

Differences among countries have long been understood to make the process of developing global products difficult (e.g., Boddewyn et. al., 1986; Buzzel, 1968). Moreover, cultural differences among countries have also been singled out for creating this difficulty (Jain, 1989). However, the competitive implications of the choices firms make in terms of the nature of differences among countries they choose to address have neither been examined nor noticed by prior studies. Our results confirm that those firms that effectively leverage knowledge regarding tacit differences among countries - or, knowledge that is difficult for others to acquire and leverage - are more likely to possess greater global new product development capabilities. On the other hand, those firms who choose to leverage only knowledge regarding explicit differences - or, knowledge that is easy for most competitors to acquire and leverage - are less likely to have greater global new product development capabilities. These results support some of the core tenets of the resource-based view of the firm - that is, firm capabilities are a function of resources that are unique and difficult to replicate. Tacit overseas knowledge clearly appears to be one such resource for global new product development capability. 

Our results also reveal that interactions among the independent variables rather than their main effects are associated with greater global new product development capabilities. Put differently, the results confirm that merely addressing tacit differences among countries is not sufficient to generate high global new product development capabilities. Rich information processing mechanisms are also essential -- considering the difficulty in acquiring information on tacit differences among countries. Similarly, the results also show that rich information processing mechanisms by themselves are not associated with high global new product development capabilities. This is probably because many MNCs have attained parity in terms of these mechanisms. Consequently, these information processing mechanisms have limited value in the current competitive context of these firms, unless they are employed to leverage information and knowledge that is unique and difficult for other firms to acquire. 

These results open up some other interesting avenues for future research. One intriguing question for future research to examine is: what determines the choices firms make in terms of the nature of overseas information (tacit or explicit) they address? Our results do not reveal any pattern of correlation between the degree of tacitness of overseas information firms choose to address and their organizational characteristics. For example, one would have expected to see that firms well established in overseas markets (that is, having higher global marketing infrastructures) to have greater proclivity to address more tacit rather than explicit differences. One may have also expected to see firms employing rich information processing mechanisms to address greater tacit differences among countries. Neither of these conjectures is however supported by our evidence (see Table 4). Future research could explore whether this critical choice of addressing tacit differences among countries is purely accidental or is systematically related to some factors. 

Another avenue for future research is to test if the influence of tacit overseas knowledge on global new product development capability differs across industry contexts. Although our sample consisted of product categories representing multiple industries, we did not have a sizable set of responses in each of the different industry sectors to test for such contingencies through sub-group analysis. An independent t-test however revealed no significant differences (at p=.1) in the mean values of the degree of tacitness across consumer packaged goods, consumer durables, and industrial products in our sample. 
 

CONTRIBUTIONS AND CONCLUSIONS

This study makes several important contributions to theory, methodology and business practice. From a theoretical standpoint it contributes to the literature streams of global strategy and international business by providing new insights on a critical aspect of competing globally that has not been addressed by prior studies. Moreover, by considering knowledge as a key resource within organizations, this study also integrates the resource-based view of the firm with the emerging knowledge-based view of the firm. The knowledge-based view of the firm believes that the competitive advantage of a firm lies in its ability to create, store and apply knowledge (Grant and Baden-Fuller, 1995; Zander and Kogut, 1995). Of particular interest to this research stream has been the significance of tacit knowledge within organizations. Tacit knowledge is now widely believed to be an important and untapped source of competitive advantage. This study is one of the first few to provide empirical evidence on the critical role of tacit knowledge in influencing firm capabilities. From a methodological perspective this study develops new measures for key constructs such as tacit knowledge and capabilities. From a managerial perspective this study provides guidelines to managers in making some critical choices in the process of global new product development. 

The use of a single informant to collect data is one limitation of this study. However, considering that all the hypotheses (and the results) were based upon interaction effects rather than main effects, it is unlikely that the common method bias would have influenced our results. In other words, it is unlikely that managers would have an "interaction-based theory" in their minds that could be biasing their responses and these results. 

To conclude, our study sheds light on some important but unaddressed aspects of innovation processes of firms competing in the global market. We examined the patterns of routines by which firms successfully leverage overseas knowledge for global new product development. Our evidence confirms that leveraging tacit as opposed to explicit overseas knowledge is associated with greater global new product development capabilities. Our results also reveal that firms leveraging tacit differences among countries through cross-national teams, teams with domestic members having prior overseas experience, a high degree of collaboration between headquarters and subsidiaries, and a high degree of cross-national communication, are associated with greater global new product development capabilities. At a more fundamental level this study confirms a core tenet of the resource-based view of the firm - that, firm capabilities are a function of unique and difficult to imitate resources leveraged through the firm's ongoing routines. 

Table 2: Companies and Product Categories represented in the Sample
 

Sr.No.	Company	Product Category
1.	3M	Sponges, Cosmetics
2.	Abbot Laboratories	Baby food
3.	Alberto Culver	Shampoo
4.	Bausch & Lomb	Contact Lenses
5.	Becton Dickinson	Digital thermometers, Insulin injectors
6.	Black & Decker	Cordless Drills
7.	British-American Tobacco Company	Cigarettes
8.	Brown Group	Children's footwear
9.	Caterpillar Company	Hydraulic Excavators
10.	Cummins	Diesel Engines
11.	Daewoo	Dishwashers, Hydraulic Excavators, Forklift Trucks, Machine Tools
12.	Duracell	Batteries
13.	Eastman Kodak	Films, Digital Cameras
14.	Fuji Xerox	Copiers
15.	GE Appliances	Refrigerators
16.	Gillette	Writing instruments, Razors
17.	Hallmark Cards	Greeting cards
18.	Helene Curtis	Cosmetics
19.	Hershey Foods	Chocolate Confectioneries
20.	Hewlett Packard	Medical Imaging Devices, Printers, Digital Cameras
21.	Honeywell	Temperature control systems
22.	Jafra Cosmetics	Cosmetics
23.	Johnson & Johnson	Toothbrushes
24.	Liptons	Food products
25.	L'Oreal	Cosmetics
26.	Lucent Technologies	PBX Systems
26.	Maytag	Dishwashers, Refrigerators
27.	Mead Johnson	Baby foods
28.	Motorola	Cellular telephones
29.	Nortel	PBX Systems
30.	Ocean Spray Cranberries	Food products
31.	Oral-B	Toothbrushes
32.	Osram Sylvania	Fluorescent lamps
33.	Parker Pen Company	Writing Instruments
34.	Philips	Digital Cameras
35.	Polaroid	Digital Cameras, Films

Table 2 (contd.): Companies and Product Categories represented in the sample
 

Sr.No.	Company	Product Category
36.	Reckitt & Colman	Air freshners
37.	Reebok	Athletic Shoes
38.	Siemens	Induction Motors, Generators
39.	Smith Kline Beecham	Toothpaste
40.	Tambrands	Tampons
41.	Tennant	Machine Tools
42.	Trane Company	Room air conditioners
43.	Whirlpool	Refrigerators, Washing Machines
44.	Wyeth-Ayerst International	Baby food

Table 3: Constructs and their Measures
 

1. Global New Product Development Capability (Cronbach Alpha: .84)

With respect to your key competitors, please rate how your product category currently fares, on the following dimensions:  -Frequency of new global product introductions -Being first in the market with new product introductions -Ability to introduce new versions simultaneously in several markets -Ability to respond to unique requirements of different countries Measured on a 1 to 7 scale: Much worse than competition - About the same --- Much better than Competition

2. Composition of teams (Domestic or Cross-national)

How many of the team members were overseas members (based at overseas offices/subsidiaries)?  Dummy variable -- measured as 1 if there were overseas members in the team, 0 otherwise.

3. Composition of teams (members with prior overseas experience or not)

How many of the domestic team members had prior overseas experience? (posted in overseas offices for at least a year)?  Dummy variable -- measured as 1 if there were members with overseas experience in the team, 0 otherwise.

 

4. Degree of collaboration (Cronbach Alpha: .84)

To what extent did you collaborate with overseas subsidiaries on the following aspects of managing the global product category (at the time of the project)?  -Product pricing -Planning new products, programs -Competitive analysis and product positioning -Launching new products Measured on a 1-7 scale: Minimal collaboration - Moderate collaboration - Extensive collaboration

5. Degree of communication (Cronbach Alpha: .86)

How frequently did the following activities with regard to your project occur?  -Telephone conversations with overseas managers -Faxes to and from overseas managers -Email to and from overseas managers Measured on a 1 to 7 scale: Very rarely (once a year) - Moderately (monthly) - Very frequently (daily)

6. Degree of tacitness in overseas information (Cronbach Alpha: .81)

Please indicate the characteristics of the information acquired from overseas locations (about differences among overseas markets, manufacturability in overseas plants etc.) The information your project acquired:   Was simple Was easy to comprehensively document in manuals or reports Was easy to comprehensively understand from written documents Was easy to precisely communicate through written documents Was obvious to all competitiors   Was easy to identify without personal experience in oveseas locations Was complex Was dfficult to comprehensively document in manuals or reports Was dfficult to comprehensively understand from written documents Was dfficult to precisely communicate through written documents Had subtle nuances known only to a few competitiors Was dfficult to identify without personal experience in oveseas locations   < ------- > Measured on a 1-7 scale

Note: This question was preceded by two other questions that provided the survey respondents the background for this construct. These questions were:

1.How significant for your project was the following information to develop the new global product? (on a 1-7 scale: Was of no significance ---- Was of great significance)

2.  How new or novel was the following information used by your project for developing the new global product? (on a 1-7 scale: Not at all new ---- Substantially new)

For each of these questions, the inndicators were:
-Information on overseas market preferences
-Information on feasibility of manufacturing various design alternativesin overseas plants
-Information on differences among overseas markets
 

7. Business Performance (Cronbach Alpha: .91)

How satisfied are you with your Division's current performance in the following areas:  Growth in sales relative to competition  Growth in market share relative to competition  Return in investment  Return on sales Measured on a 1-7 scale: Not at all satisfied - Moderately satisfied - Extremely satisfied

8 & 9. Brand image in overseas markets and Overseas market share (Control Variables)

With respect to your key competitors, please rate how your product category currently fares, on the following dimensions:  Brand image in key overseas markets  Market share in key overseas markets Measured on a 1 to 7 scale: Much worse than competition - About the same --- Much better than competition

 

10. Global Marketing Infrastructure (Control Variable)

Marketing/Sales offices that supported your product category Measured with respect to "presence in important country markets" of this indicator, on a 1 to 5 scale: In none 0% - In very few < 10% - In some (10-50%) - In most (50-90%) - In almost all (90-100%)

11. Market Concentration (Control Variable)

The market served by the global product: Measured ona 1-7 scale.

12. Number of countries targeted (Control Variable)

Requirements of how many countries were important considerations for the new global product's design?

13. Permeability of managers across borders (Control Variable) (Cronbach Alpha: .88)

How prevalent were the following practices in your Division (at the time of the project)?  Regular visits to HQ by overseas managers (middle management)  Regular visits to overseas subsidiaries by HQ managers (middle management)  Informal interactions between HQ and overseas subsidiary middle managers Measured on a 1-7 scale: Very rare --- Moderately prevalent - Extremely prevalent.

Click  here to see complete Table 4
 

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