Organizational Enablers for NPD Portfolio Selection

32 Pages Posted: 20 Aug 2009 Last revised: 5 Jul 2017

See all articles by Jeremy Hutchison-Krupat

Jeremy Hutchison-Krupat

University of Cambridge - Judge Business School

Stelios Kavadias

Cambridge Judge Business School

Date Written: June 09, 2017

Abstract

Despite substantial research that advocates the "right" portfolio of new product development initiatives for the firm, one important aspect has been overlooked: creating a portfolio of new product development initiatives is not equivalent to choosing from a menu of initiatives. Rather, these initiatives are defined by and within the organization. Thus, portfolio selection rests upon two challenges: the cross-functional nature of collaborative tasks, and the role of explicit and implicit incentives on innovative outcomes. This paper explores how these factors ultimately determine the initiatives an organization pursues. We abstract a new product development organization as two functional managers who report to senior management, and analyze the strategic interactions between all three stakeholders. Senior management decides whether to empower the functional managers to define the initiative, and how to reward them contingent on the outcome. We evaluate how the asymmetry of information regarding each function's capability, and the explicit and implicit rewards and penalties imposed on the functional managers affect the upfront resource allocation. We find a profound effect of the information asymmetry: the set of initiatives the firm deems profitable is reduced, thus impeding the organization's potential to innovate. To counter such a shortcoming, senior management may optimally misalign the objectives of the stakeholders.

Keywords: NPD Portfolio, NPD Process, Incentives in Innovation, Tolerance for Failure, Technology Management

JEL Classification: O31, O32, L23, D81, J33

Suggested Citation

Hutchison-Krupat, Jeremy and Kavadias, Stylianos, Organizational Enablers for NPD Portfolio Selection (June 09, 2017). Atlanta Competitive Advantage Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1457339 or http://dx.doi.org/10.2139/ssrn.1457339

Jeremy Hutchison-Krupat (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Stylianos Kavadias

Cambridge Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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