New Product Development Performance: The Interplay of Entrepreneurial Orientation and Market Orientation
New product development (NPD) is essential for firms in competitively intense markets as it contributes to the competitiveness and growth of firms (Clark & Fujimoto, 1997). Due to dynamic business environments, firms must implement changes to speed pr
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e compatible with experiences and consumption patterns of consumers (Atuahene-Gima & Ko, 2001)—as successful innovations manifest when firms fill the gap between what the market needs and what is currently offered (Slater & Narver, 1995). Atuahene-Gima and Ko (2001) suggest that an EO is a capability to which firms engage in aggressive initiatives to alter the competitive landscape in their favor. High EO firms have a strong focus on major innovations in which a market is not currently in existence which must be created for product diffusion to occur (Frishammar & Horte, 2007). Thus, we hypothesize, entrepreneurial orientation is positively related to the degree of product newness (H2). Although a firm may possess a high degree of EO, the degree of product newness may adversely affect NPD performance. Safer, more incremental innovations will lower the degree of learning for potential customers that may adopt the new product (Lawton & Parasuraman, 1980). Consumers may be unaware of the utility that they may receive to which they may avoid behavioral changes associated with learning effort and attaining potential benefits of radical new products (Hoeffler, 2003). When the costs of purchase, trial, and overcoming information asymmetry outweigh the current usage of products, then the consumer may forgo the purchase and stick to familiarity (Alexander et al., 2008). Thus, we hypothesize the degree of product newness will be negatively related to new product development performance (H3). An alternative strategic orientation, MO, may provide benefits to the firm in some situations, when in conjunction with EO, but it may also hurt the firm in other regards. A firm that possesses a MO philosophy may be too reliant on new product ideas from consumers, which leads to more imitative rather than innovative products (Lawton & Parasuraman, 1980). Prior research has touted MO’s effects on NPD performance (Zhou et al., 2005) yet the meta-analysis conducted by Henard and Szymanski (2001) shows that MO’s effects on NPD performance is not generalizable across research studies. We posit that when firms become entrenched in the product-market in which they operate, they suffer from innovation resistance and technological inertia (Chandy & Tellis, 2000) due to losing focus on breakthrough innovations that may develop new markets. If signs from the market or consumers are not visible, high MO firms may steer clear from radical innovations. Thus, we hypothesize market orientation will negatively affect the relationship between EO and NPD performance (H4a). Although MO may be harmful in terms of NPD performance, it may work positively in conjunction with EO in other regards. MO may lead to a competitive advantage by assessing the needs of consumers and implementing a strategy to fulfill those needs. MO places priority on the profitable creation and maintaining superior customer value (Zhou et al., 2005). If a firm develops radical new products but has a high MO, then the market and customer research that was generated, disseminated, and impl
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