Resource allocation, incentives and organizational structure for collaborative, cross-functional new product development

• Main Author: Hutchison-Krupat, Jeremy
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01.01.2011
• Subjects: Collaboration; Communication; Compensation; Compensation plans; Corporate management; Empowerment; Engineering; Fines & penalties; Friction; Incentive plans; Incentives; Knowledge; Management; Manufacturing; Marketing; Objectives; Organizational structure; Portfolio management; Product development; Resource allocation; Stakeholders; Studies; Teams
• ISBN: 9781267470263; 1267470267

New product development (NPD) is critical to a firm’s long term viability. The ability to formulate, and execute, a comprehensive NPD strategy rests on knowledge and capabilities that are dispersed throughout the organization. Critical managerial decisions regarding long term decisions are, by definition, “high level” decisions that look at the big picture, simply because the details required to make more precise calculations do not exist or are highly volatile. Instead, allocation decisions are made in the hope that the “right” product will eventually emerge from the NPD organization (those people that implement strategy). This thesis addresses important operational aspects relating to fundamental components of any successfully executed NPD strategy: the processes, incentives and structure of decision rights that should be implemented given the objectives and capabilities of the firm. In the first essay (Chapter 2), we outline when a firm might prefer to compensate members of a NPD project team either, as individuals (e.g. based on their functional contribution to overall value) or as a team (e.g. based on the overall profit generated). We find that neither team nor individual based compensation is preferred for all types of projects. Specifically, when there is higher uncertainty, the firm can benefit by employing team-based compensation. We discuss the implications of our findings towards the firm’s ability to pursue different types of projects. Next, in Chapter 3, we look at the strategic resource allocation processes that are employed by firms in order to decide whether NPD initiatives get funded or not. We find that there is not a “one size fits all” resource allocation process that all firms should employ. Furthermore, we extend this finding by further by providing a rationale explaining why even a single firm could benefit by employing multiple processes internal to the firm. In Chapter 4, we empirically explore how key managerial levers of the firm (i.e. incentives, tolerance for failure, and project management structure) affect an individual’s propensity to invest in a project. Our analysis brings forth several underexplored and novel aspects. We examine how multiple managerial levers work in concert with one another (revealing interactions that, to our knowledge, have not been exposed). We also recognize an important aspect of most (if not all) NPD contexts: the probability of success is strongly tied to the level of resources that are invested.