In progress Inter-firm Governance : Controlling suppliers for product and process innovation

Reference:
ERIM PhD 2013 RSM LIS 02 JvdE_SR

Abstract

Firms rely on other organizations for product and process innovation projects. However, coordination of these inter-organizational activities is a challenge due to various control issues such as asymmetric information between partners in the supply chain, differences in risk aversion and opportunistic behavior. This study will examine the application and effectiveness of control mechanisms over suppliers during product development and process innovation projects in high-tech industries. Since the application of control mechanisms is contingent upon internal and external factors affecting inter-organizational relationships, this study will also assesses the effect of three contextual factors: transaction characteristics, project characteristics and environmental uncertainty. The results of this study will help in examining the effectiveness of control mechanisms to manage inter-organizational relationships during product and process innovation projects.

Keywords

Organizational control, supply chain, new product development, process innovation, inter-organizational relationships

Time frame

2013 - 2017

Topic

This PhD project will first investigate the relationships of interest through experimental designs and a field survey. These designs will enable a direct observation of the flow of knowledge, which is difficult in field settings. The findings of the experiments will subsequently be externally validated through a multi-informant field survey. The results of this research will help firms and their managers to better understand how product innovation projects should be organized and controlled.

The development of successful product innovations is far from easy. Numbers show that about 40% of the new products launched into the marketplace fail. An important reason for this high failure rate is that new products often do not provide sufficient benefits to customers (Henard & Szymanski, 2001). Also, the development of new products is often delayed, allowing competitors to gain an early entrant advantage (Griffin, 1997). The root of these problems lies in our limited understanding of how product innovation should be managed.

 

Organizational control theory forms a good basis for studying the management of product innovation projects (Sethi & Iqbal, 2008; Tiwana & Keil, 2007). The theory distinguishes three main control mechanisms through which project managers can align the interests of project team members with those of the firm (Ouchi, 1979; Turner & Makhija, 2006). Outcome control refers to setting goals and evaluating the extent to which these goals are achieved. Process control prescribes behavior, rules and processes and evaluates the extent to which team members engage in them. Clan control relies upon a socialization process between managers and their employees in order to eliminate goal incongruence between them.

Several studies tried to answer the question whether these controls are useful for achieving successful product innovation or not (Bonner, Ruekert, & Walker, 2002; Cardinal, 2001; Tatikonda & Rosenthal, 2000; Tiwana, 2008; Tiwana & Keil, 2007). The findings of these studies, however, are mixed. Some studies, for example, have found process control to positively affect project performance (Cardinal, 2001) and other studies found negative effects (Bonner, Ruekert, & Walker, 2002; Tiwana & Keil, 2007). Also, outcome control has been found to have a positive impact on performance (Cardinal, 2001) but other studies did not find such effects (Bonner, Ruekert, & Walker, 2002; Tiwana & Keil, 2007). Some authors have investigated the joint effects of different control mechanisms (Rijsdijk & Van den Ende, 2011). However, much knowledge is lacking on the effects of the controls that managers use in innovation projects.

Turner and Makhija (2006) have developed theory on how control affects knowledge processes within organizations. They use the distinction from organizational control theory  between outcome related knowledge and process related knowledge (Ouchi, 1979). Outcome related knowledge concerns certain goals or outcomes that a firm or manager desires. Process related knowledge concerns the means, behaviors, or processes by which these goals can be accomplished. The use of outcome controls suggests that outcome related knowledge is available within the firm (Ouchi, 1979).

For example, a project team in a car manufacturing company may receive instructions to design a new engine that does not run on fossil fuels. Knowledge on how to develop this engine (process related knowledge) is currently unavailable. Project team members will therefore engage in the acquisition of new process related knowledge (Turner & Makhija, 2006). The search for this information is uncertain and unsystematic and the newly acquired knowledge is varied (Szulanski, 1996). Organizational members will therefore have diverse interpretations of how this new information can be used for the engine. This diversity is likely to lead to original applications of knowledge (Turner & Makhija, 2006) and can lead to all sorts of outcomes such as an engine running on hydrogen, one using electricity, or any other type of engine that meets the preset goals.

Process controls and clan controls each impact knowledge management processes in their particular way, thereby leading to higher levels of precision and adaptability respectively (Ouchi, 1979; Turner & Makhija, 2006). In a product innovation setting, process control is therefore likely to lead to technical product quality and project timeliness, whereas clan controls lead to flexibility that can be useful in, for example, technologically turbulent environments.

Supervisory Team

Jan van den Ende
Professor of Management of Technology and Innovation
  • Promotor
René de Koster
Professor of Logistics and Operations Management
  • Promotor
Serge Rijsdijk
Serge Rijsdijk
  • Daily Supervisor