1 ABSORPTIVE CAPACITY AND SOURCE-RECIPIENT ... - CiteSeerX

ABSORPTIVE CAPACITY AND SOURCE-RECIPIENT COMPLEMENTARITY IN DESIGNING NEW PRODUCTS: AN EMPIRICALLY DERIVED FRAMEWORKi

Accepted at Journal of Product Innovation Management (forthcoming 2008)

CELINE ABECASSIS-MOEDASii School of Economics and Management Catholic University of Portugal FCEE-UCP Palma de Cima 1649-023 Lisbon, Portugal Tel: +351 21 721 4274 Email: [email protected]

SIHEM BEN MAHMOUD-JOUINI HEC 1, rue de la Libération 78351 Jouy en Josas cedex, France Tel: +33 1 39 67 72 19 Email: [email protected]

Celine Abecassis-Moedas is Assistant Professor in Strategic Management at School of Economics and Management, Catholic University of Portugal. She holds a Ph.D. from Ecole Polytechnique, Paris. Her research interests include the relationship between information technologies and organization, globalization and location in clothing, New Product Development and particularly the field of design management. Her articles have been published in various journals including Journal of Marketing Management, Journal of Entrepreneurship and Small Business, and International Journal of Operations and Production Management. Sihem Ben Mahmoud-Jouini is Associate Professor at HEC Paris (France) in the Operations Management and IT Department. She holds a Ph.D. from University Paris Dauphine in Project Management and Innovative Offering Strategic Management. She was visiting at Stern Business School (NYU). Her research interests include New Product Development and Strategic Management of Innovation.

1

Short ABSTRACT Numerous publications are dedicated to Absorptive Capacity and New Product Development (NPD). Most are centered on the recipient team and very few consider the effects of the source team knowledge characteristics on the knowledge absorption and the NPD performance. This article analyzes the type of the external knowledge sourced from outside the organization and the process through which it is used by the recipient firm and the effect on NPD performance. This is done through a specific type of source team knowledge, the design, and through the NPD process in industries (clothing and construction) where it plays a key role. NPD cases were analyzed and clustered in three categories of design absorption processes. From these categories, a conceptual framework of the source-recipient knowledge complementarity and its impact on the NPD performance is proposed. The main result is that the complementarity between the recipient and the source knowledge is a critical aspect of the absorption process and therefore of the NPD performance. From a managerial perspective, this research highlights the role of design in the NPD process and how the combination of design knowledge with prior knowledge (marketing or technological) is related to NPD performance. Keywords: Absorptive Capacity, Design, New Product Development

Expanded ABSTRACT Numerous publications are dedicated to Absorptive Capacity and New Product Development (NPD). Most are centered on the recipient team and very few consider the effects of the source 2

team knowledge characteristics on the knowledge absorption and the NPD performance. This paper adopts a dyadic perspective. It analyzes the type of the external knowledge sourced from outside the organization and the process through which it is used by the recipient firm and the effect on NPD performance. This is done through a specific type of source team knowledge, the design, and through the NPD process in two industries in the French context : the clothing and the construction where design plays a key role. 25 NPD cases were analyzed and clustered in three categories of design absorption processes. From these categories, a conceptual framework of the source-recipient knowledge complementarity and its impact on the NPD performance is proposed. The main result is that besides the prior level of knowledge of the recipient team, the complementarity between the recipient and the source knowledge is a critical aspect of the absorption process and therefore of the NPD performance. Knowledge complementarity has an impact on the acquisition and assimilation and also on the transformation and the exploitation of the acquired knowledge. The knowledge complementarity between design and manufacturing on one hand and between design and retail on the other hand was highlighted through four characteristics that emerged from the data analysis (individual vs. collective, tacit vs. explicit, creative vs. problem solving culture and finally profession vs. project orientation). These characteristics revealed the similarity and the diversity of the source and recipient knowledge at the same time. The research shows that firms facing strong constraints such as tight cost and lead time rely on this complementarity to enhance their NPD performance: product effectiveness and process efficiency. From a managerial perspective, this research highlights the role of design in the NPD process and how the combination of design knowledge with prior knowledge (marketing or technological) is positively related to NPD performance.

3

INTRODUCTION

There is a growing stream of literature on Absorptive Capacity and New Product Development (NPD) performance (Murray and Chao, 2005; Stock, Greis and Fischer, 2001; Tsai, 2002; Verona, 1999). This literature concentrates on the benefits in terms of NPD performance of the absorption of a source team knowledge by a recipient team. It does not consider the type of external knowledge sourced from outside the organization and the process through which it is used by the recipient firm. The concept of Absorptive Capacity itself is centered on the recipient team and little is said on the source team and the knowledge it carries. It is as if the source knowledge characteristics were neutral in the knowledge absorption phenomenon. To fill that gap, this article analyzes the abs orption process by adopting a dyadic perspective of the source and the recipient knowledge. It focuses on the combination of these two types of knowledge that occurs during the transformation and the exploitation of the new knowledge in the NPD process. The article focuses on one specific type of source knowledge that plays a key role in NPD and is under studied: design. The combination patterns through which it is exploited in the NPD process is analyzed and the determinant of the absorption process beyond the prior knowledge of the recipient firm is refined. The article argues that besides the prior knowledge as determinant of the Absorptive Capacity (Cohen and Levinthal, 1990), complementarity between the recipient team knowledge and the source team knowledge plays a role in the transformation and exploitation of the source team knowledge. The relationship between Absorptive Capacity and NPD performance is moderated by the complementarity between source and recipient 4

knowledge. The NPD performance is evaluated through process efficiency and product effectiveness (Wheelwright and Clark, 1992). These results emerge from the analysis of NPD projects in two industries (clothing and construction) where the same source team knowledge (namely the design) is absor bed by other players of the NPD project. The design, through the archetypal figure of the architect or the fashion designer plays a key role in the differentiation of the product. The authors argue that the complementarity of the source and the recipient knowledge is a critical aspect of the absorption process and of the NPD performance. The article proposes an empirically derived framework based on an exploratory multi-cases study grounded in the French clothing and construction industries. The article is structured as follows. In the first section, the review of the literature on Absorptive Capacity and NPD shows the main results, and the pertinence of the exploration of the source team and its knowledge. Then design as one specific source team knowledge is explored, and particularly the specificity of this knowledge and of its integration with other components of the NPD process. The second section presents the research methodology characterized by multiple case studies from the clothing and construction industries. In the third section, the data analysis is presented in two main steps: the identification of typical case studies per industry and the clustering and characterization of the case studies in three generic categories across industries. The last section proposes - based on the literature and the data analysis - a conceptual framework and propositions detailing the relationships between the elements of this framework. The limitations and the managerial implications of the research are discussed in the conclusion.

5

THEORETICAL BACKGROUND: ABSORPTIVE CAPACITY, DESIGN AND NPD PERFORMANCE Absorptive Capacity and NPD Performance

The ability of a firm to recognize the value of external knowledge situated in another firm (source), assimilate it and apply it to commercial ends was identified as the Absorptive Capacity (Cohen and Levinthal, 1990). A firm that lacks absorptive capacity will be less likely to recognize the value of new knowledge, less likely to assimilate that knowledge and less likely to apply it successfully to commercial ends (Szulanski, 1996). The Absorptive Capacity of a firm is constituted of four organizational capabilities: acquisition, assimilation, transformation and exploitation of knowledge (Zahra and George, 2002). The acquisition capability refers to the identification and acquisition of externally generated knowledge critical to the firms’ operations. Assimilation refers to the analysis, the interpretation, and the understanding of the information obtained. Transformation refers to the combination of acquired knowledge with the existing one leading to adding, deleting knowledge or interpreting the same knowledge differently. Exploitation is the incorporation of the acquired or transformed knowledge in the operations. These organizational capabilities can be grouped into “potential Absorptive Capacity” (acquisition and assimilation capabilities) and “realized Absorptive Capacity” (transformation and exploitation capabilities). The latter underlines the importance of the firm capacity to leverage the knowledge that has been absorbed: “potential Absorptive Capacity” does not guarantee the exploitation of the acquired knowledge (Zahra and George, 2002). This distinction is also pointed out in Lane, Koka and Pathak’s (2006) definition of a firm’s Absorptive Capacity: “Absorptive capacity is a firm’s ability to utilize externally held knowledge through three 6

sequential processes: (1) recognizing and understanding potentially valuable new knowledge outside the firm through exploratory learning, (2) assimilating valuable new knowledge through transformative learning, and (3) using the assimilated knowledge to create new knowledge and commercial outputs through exploitative learning”. Prior research on Absorptive Capacity has mainly considered the acquisition and the assimilation process. There have been very few studies specifying the processes through which organizations leverage and exploit the acquired knowledge. This reflects the assumption that the absorption capacity addressed mainly owning scarce resources rather than efficiently deploying them (Lane et al. 2006). This article concentrates on the transformation and exploitation of the assimilated external knowledge and its combination with the prior knowledge through exploitative and transformative learning allowing the latter to be used in new ways (Garud and Nayyar, 1994). Previous research on Absorptive Capacity and mainly Cohen and Levinthal (1990) adopt an ability-oriented perspective focusing on the recipient firm’s capacity to absorb knowledge from others. According to Lane et al. (2006), there is a need for “a somewhat more process-oriented perspective than focus on just a ‘firm’s ability’. (…) Focusing on process is critical in order to move away from the structure/content assumption of prior research”. A process-oriented perspective is adopted here. Prior research on Absorptive Capacity has focused on the recipient team and very little is known about the source team except the work of Lane and Lubatkin (1998) that proposes a “relative Absorptive Capacity” concept in which the learning vary across the source firms. Relying on empirical evidence from a sample of R&D alliances, they show that a firm’s ability to value, assimilate and apply new knowledge from a source firm depends upon (1) the specific 7

type of new knowledge offered by the source firm (2) the similarity between the recipient and the source firm’s knowledge processing systems and (3) the recipient firm familiarity with the source firm set of organizational problems. Other authors propose a framework that highlights the source-recipient team integration resources such as the harmony of relationships and trust, and the knowledge characteristics, such as causal ambiguity and unproveness, as moderators of the relationship between recipient team and source team resources respectively and knowledge acquisition (Murray and Chao, 2005). Following Lane et al. (2006), this research adopts a dyadic perspective considering equally the recipient and the source knowledge but focusing on another type of knowledge in order to extend the scope of the Absorptive Capacity beyond the R&D knowledge. Indeed, most of the literature on Absorptive Capacity has focused on R&D. “As a result, few have examined the role of Absorptive Capacity in the acquisition, assimilation, and commercial application of other types of business-related knowledge, including managerial techniques, marketing expertise, and manufacturing know-how” (Lane et al, 2006). There is a need for research that extends the Absorptive Capacity scope to other types of knowledge than R&D. This research focuses on manufacturing, retail and design knowledge specifically. Cohen and Levinthal (1990) consider that recipient firms have the greatest potential to learn from source firms with similar basic knowledge. These authors have addressed mainly the first dimension of the Absorptive Capacity that is the valuing of external knowledge. In their approach of the Absorptive Capacity, Jansen et al. (2005) focus on the combinative capabilities concept presented by Kogut and Zander (1992) as enablers to synthesize and apply newly acquired external knowledge. Besides these works, the influence of knowledge type on a firm’s ability to utilize it has received relatively little attention, reflecting the underlying assumption that “mere acquisition enhances firm performance” (Lane et al. 2006). This research focuses on 8

the combined effect of the recipient and source knowledge rather than on their similarity. Complementary assets are seen as key to the success of an innovation (Moorman and Slotegraaf, 1999; Teece, 1986). It is suggested that complementarity between the recipient and source knowledge is favorable to absorption (Lofstrom, 2000). This suggestion is explored. In order to study the process of absorption focusing on the transformation and the exploitation (Zahra and George, 2002) or the utilization (Lane et al., 2006) of the acquired knowledge by considering the source and the recipient knowledge in a dyadic perspective, the NPD process is relevant because it represents an activity where the utilization of knowledge is realized. Furthermore, NPD is a knowledge -intensive activity in which the exploitation and the transformation of the acquired knowledge could be analyzed. Focusing on NPD, the article follows Moorman and Slotegraaf (1999) when they consider that product development is a process that “integrates inside-out and outside-in capabilities” and that “firms need effective internal and external learning”. By focusing on the relationship be tween Absorptive Capacity and NDP performance, this work joins previous research that have adopted this approach that is worth being studied (Brown and Eisenhardt 1995; Verona 1999). As mentioned earlier, no research has been carried out that uses a different type of knowledge than R&D and more generally few publications address the role of source team knowledge in NPD performance. In situations where Absorptive Capacity is measured through R&D intensity, the relationship between Absorptive Capacity and NPD performance is positive, with diminishing returns for Absorptive Capacity (Stock et al., 2001). The impact of the Absorptive Capacity on the NPD performance can be evaluated in two ways: process efficiency (speed, productivity and process flexibility) (Clark and Fujimoto, 1991; Iansiti, 1995) and product effectiveness (profitability, market share, product revenue and quality) (Cooper, 1979; Verona, 1999). This research 9

considers the process efficiency (lead time and productivity) and the product effectiveness (fit with market needs and product quality). The existing literature proposes a framework of Absorptive Capacity and NPD performance that can be visualized in Figure 1 with the following propositions. P1: Knowledge acquisition, assimilation, transformation and exploitation are positively related to NPD performance (i.e. process efficiency and product effectiveness). P2: The recipient team prior knowledge is positively related to the Absorptive Capacity of the firm (both potential Absorptive Capacity and realized Absorptive Capacity). P3: The recipient team’s potential Absorptive Capacity is positively related to the knowledge acquisition and assimilation. P4: The recipient team’s realized Absorptive Capacity is positively related to the knowledge transformation and exploitation.

-------------------------------Insert Figure 1 about here -------------------------------This research examines what is the role of the source team knowledge characteristics on the knowledge absorption and the consequent NPD performance focusing on knowledge transformation and exploitation rather than just acquisition and assimilation (the research focuses on the knowledge combination with a high level of detail). As such, it fills the gaps identified in the literature. It adopts a dyadic perspective including the source and the recipient team (rather than the recipient team only) and a process -oriented perspective (rather than ability-oriented). It explores another type of knowledge (design rather than R&D) and it contributes to the reflexion on the determinants of the absorption process beyond the prior knowledge of the recipient firm. C 10

Design Knowledge and NPD Process

Since the success of design-centered firms such as Nokia or Apple, the position towards design has changed and design management is now more considered by firms and scholars (Abecassis -Moedas, 2006; Ravasi and Lojacono, 2005; Vogel, Cagan and Boatwright, 2005; Verganti, 2006). Journal of Product Innovation Management 2005 Special Issue on Design (Lawrence and McAllister, 2005a; 2005b) and the numerous articles dedicated to NPD in that issue (Kreuzbauer and Malter, 2005; Perks, Cooper and Jones, 2005; Veryzer, 2005; Veryzer and Borja de Mozota, 2005) are a proof of that phenomenon. Design offers an effective way to differentiate and position products. It is one among the main component of the NPD process, besides marketing, engineering, manufacturing, etc (Ulrich and Eppinger, 2004; Verona, 1999). Traditional design skills are aesthetics, visualization and technical skills. The specificity of the design activity results from the fact that these skills are located in designers and in design agencies (Walsh, 1996). The management of designers is different from the other members of the firm and several experiences show that it is beneficial to outsource the creative initiative (Munsch, 2004). Outside designers bring a diversity of ideas and views considerably beyond an internal corporate perspective. Designer’s freedom and independence from business pressures is viewed as a way to protect that activity from alterations coming from commercial or productive reasons. “Reliance on market research or feasibility studies may restrain the creative process or alter the original concept” (Ravasi and Lojacono, 2005). Further in this perspective is what Verganti (2006) calls “design-driven innovation”, where a firm like Alessi contacted a famous architect and asked him to design a kettle with no constraint. Sheltering original concepts from interference from other functions is considered crucial but equally, excessive freedom may be 11

damaging and several researches focus on the need for coordination of design with other functions of the NPD process. It has to be underlined that design is distinct from R&D. Design plays an important part in both technological innovation and non-innovative activities; and within the innovation process it plays an important part both in R&D and in other activities necessary for success in innovation (Walsh, 1996). Design is far less clearly located in the firm than the R&D “it does not fit easily within either the internal or external boundaries of the firm” (Walsh, 1996). The role of design in the NPD process has evolved during these last years (Perks et al., 2005) following three stages. In the 1990s, the design emerged as a discrete functional sub activity separated from the others such as marketing or engineering. It was considered as a black box by the other players of the NPD especially the marketers and engineers: it was a “functional specialism” that stayed in its functional silo. Later, design became a part of multifunctional teams: designers stay with the project until the manufacturing phase acting as a support role and helping to solve manufacturing process problems when they occur. In a third stage, the designer could be considered as interpreter, coordinator and facilitator. In this situation, design skills are: business and market analysis interpretation, design for manufacture or technical analysis and interfacing skills to interact and to communicate with other functions. These stages correspond to the four ways of integration of design into a firm (Berger, Moslein, Piller and Reichwald, 2005; Borja de Mozota, 2003; Veryzer and Borja de Mozota, 2005): (1) the integration to the technical functions where the designer works with the engineering design but is isolated from the marketing and the communication on the product of the firm, (2) the integration to the marketing where designers work mainly on the ways to differentiate the product from the user point of view, (3) the integration to the communication 12

where the designers work on the brand and its identity and finally (4) the integration at the same level of the firm’s other functions where designers play a specific role interacting equally with all the other functions through the NPD process. This integrated position corresponds to the design as “the synthesis of technology and human needs into manufacturing products” (Crawford and Di Benedetto, 2003), which is a broad view of design, considered as covering several activities encompassing aesthetics, ergonomics and ease of manufacture. This perspective highlights that design should be related in equal intensity to the manufacturing sphere and to the marketing one. But works on design focus mainly on a deep understanding of the customer or the user leading to user-oriented or user-centered design (Veryzer and Borja de Mozota, 2005). Previous works have mainly insisted on the role of design to differentiate products and have highlighted the benefits of interfacing design and marketing to better understand users and anticipate uses. Except for the integration of process and product studied by Clark and Wheelwright (1995), the benefits of interfacing design, retail and manufacturing to improve NPD performance have been less studied. In dynamic and competitive environments, the integration of the different disciplines engaged in the NPD process is key and the relationships between design, marketing and manufacturing are complex and ha ve an important effect on NPD performance (Beverland, 2005; Clark and Wheelright, 1995). “The need to understand market requirements, but also to deploy advanced technologies in the NPD effort, can propel a central role for design (…). This was particularly evident in those cases facing highly competitive environments but also being driven to cut back development costs” (Perks et al., 2005). The integration of design with the others functions remains a competitive necessity and is believed to be difficult given the tensions between the values of designers and those of the other players of the NPD process (Beverland, 2005). 13

Given the importance of the design in the NPD process, the aim in this article is to consider it on its own and not as one capability among the technological (manufacturing design) and the marketing (empathic design) functional capabilities such as Verona’s (1999) approach.

RESEARCH SETTING AND METHOD

The aim of this article is to study the absorption process focusing on the transformation and exploitation of the acquired knowledge by considering the source and the recipient knowledge in a dyadic perspective. It highlights the source-recipient knowledge interaction by considering a specific type of source knowledge that plays a key role in the NPD process: the design. For that purpose, the authors developed an exploratory field-based study in the French clothing and construction industries. Below, the research setting and the data collection and analysis method are presented.

Research Setting

This research focuses on design as a specific type of source knowledge that is under researched in the management field and never studied in the Absorptive Capacity perspective. The researchers made their investigation in the clothing and construction industries, where design plays a key role in product differentiation and success and where its interaction with the other expertise or knowledge types is critical in the NPD process. Therefore, design has a central position in these two sectors. Furthe rmore, this knowledge is encoded, embodied, embedded and embrained in archetypical players such as the fashion designer and the architect. At the same 14

time, the NPD process in these industries involves other major players such as the manufacturer or contractor and the retailer or the real estate programmer or owner that have to articulate their knowledge and expertise with design. Indeed, these industries have the specificity of having both industrial concerns (like manufacturing cost minimization and product quality maximization) and creative concerns. The clothing industry is characterized by a strong ‘fashion’ dimension highlighting the designer’s role: products have a short shelf life and unsuccessful ones are highly discounted. The architect’s creativity defines a building’s identity and has a strong impact on the construction. This makes these sectors particularly appropriate to explore the link between the combined effect of one specific type of source knowledge (design) with the recipient knowledge. The NPD process represents the process in which it is possible to evaluate knowledge utilization. It is the unit of observation and the unit of the case studies. The authors analyzed the interactions between the players traditionally involved in design and the other players of the NPD process. Each NPD case is analyzed through a set of three players: designer, manufacturer and retailer in the clothing industry and architect, contractor and real estate developer or owner in the construction industry. For the rest of the article, the standard vocabulary used for this set of players is: designer (including architect), manufacturer (including contractor) and retailer (including real estate developer or owner).

Research Methodology

In order to explore the research question, an exploratory multiple case study-based research was conducted. This method is appropriate to “provide freshness to an already researched topic” 15

(Eisenhardt, 1989). It has been noted that there is a lack of empirical research on the absorption process in general (Lane et al., 2006) and considering the source and recipient knowledge in a dyadic perspective in particular, making a theory building approach particularly appropriate. Therefore, the objective is to inductively identify relevant factors associated to the phenomenon studied and the relationships among them. Bibliographic research on NPD performance, design and Absorptive Capacity was done in order to stimulate theoretical sensitivity and questions (Strauss and Corbin, 1998). A multiple case study methodology was adopted as it allows comparison of findings across a range of situations, it strengthens the validity of the findings and it helps draw out contextual differences. The number of cases studied: 25 (thirteen cases in clothing and twelve cases in construction), corresponds to the range proposed by Miles and Huberman (1994) in multiple-case study (between 15 and 30). For the development of the analysis, the cases are clustered into categories as recommended by Strauss and Corbin (1998) and Yin (2003). The outcome of this exploratory research is a framework that would need to be tested on a larger sample in order to identify its application domains. The case studies were selected following a theoretical sampling: they were not chosen for statistical reasons (Eisenhardt, 1989). Two polar types of cases were identified: cases acknowledged in the industry as efficient absorptions of the design expertise leading to high performance in the NPD process (such as lead time, cost reductions, improvement of product quality and the capacity to offer innovative and competitive products) and others without any absorption. The first group of cases is critical and meets the criterion of being perceived and presented as interesting leaders and best performers in terms of NPD process in the industry. The second group of cases works as representative of the average, it is taken as a control category.

16

The manufacturers involved in the cases studied in the clothing (CLOT) industry, are relatively large firms. Retailers are a range of specialized and generalist retailers, and therefore of variable size. Designers are a combination of free-lance individuals, internal designers and design agencies (small structures compared to retailers and manufacturers). In clothing, the focus is the ready-to-wear segment, as opposed to haute couture or high end of the market. In the construction (CONS) industry, the cases studied involve mainly large established contractors operating on the local and the national market. The owners are public institutions (social housing, ministry of education, etc) or large private players such as real estate developer (housing, offices or hotels). The design agencies are mainly small structures such as the majority of the French architect firms, ranging from five to 20 members. The data was collected via face-to-face interviews and document analysis carried out over a period of two years. A total of 41 interviews were carried out in the clothing industry and 45 interviews in the construction industry (see Table 1 for details on the NPD cases and the players involved). Company names are omitted for confidentiality reasons. The interviews ranged from one to two hours. In each firm, the authors interviewed at least one executive and/or operational in charge of the NPD process. Interview notes were taken and elements were triangulated with documentary data, such as project schedules, design briefs, design dossier and minutes of project meetings. The interviews were conducted by each author separately (one in the clothing industry and the other in the construction) and simultaneously in the two sectors. The authors wrote memos and notes about the several case studies. The focus of the research is the organization of the NPD process, the role of the source team knowledge characteristics and the factors of performance in terms of process efficiency and product effectiveness. The objective of the interviews is to address the following subjects: the 17

characteristics of the design knowledge, the relationship between the design knowledge and the recipient knowledge (manufacturer or retailer), and finally the absorption process and the flow of knowledge. After presenting the research goal as the exploration of the determinants of a successful knowledge absorption, the interviews followed an interview guide, encompassing the following topics. First, the interviewee was asked to describe the general profile of the firm, its characteristics, its general performance, the markets targeted, and its global organization. In order to explore the design knowledge absorption, respondents were asked to narrate the whole product development story. The following themes were addressed: the participation of the firm in the global process (involvement stages, deliverables, knowledge mobilized, etc), the interactions with the other players of the development under study, the process and product performance. Respondents were asked to identify what made the NPD process perform, what type of information was exchanged between the three players in the NPD process and how efficiently, and what part of the knowledge was shared. Respondents were probed more deeply in order to surface detailed descriptions of specific design actions. For the first group of the best performing firms, respondents were encouraged to relate and build on specific episodes that provided rich evidence to support the activities related to the design. Further questions concerned how design knowledge was acquired and exploited. The design knowledge absorption process was the focus of the interviews, respondents were asked to discuss how much they considered this knowledge as different or similar from their own, how the design knowledge was combined with the preexisting firm’s knowledge and what were the challenges of the design absorption on both sides (recipient and source).

18

-----------------------------Insert Table 1 about here ------------------------------

Data Analysis Process

During the presentation and discussion of their material and first analysis, the two authors found their first results surprisingly similar. These similarities between two sectors generally considered as different from several dimensions (industrial structure, type of products, regulations, environment dynamics, type of players involved, buying process by the end user, etc) constituted a source of insight for the authors (Strauss and Corbin, 1998). They were steeped in their data and knew a lot about the area under study. A second round of data analysis then took place: the data were re-explored and analyzed in an interactive process. The two researchers exchanged they research material (memos, notes, etc) in order to improve the reliability of their analysis. They examined repeatedly their data and exchanged their notes and analysis to seek robustness and plausibility of the themes and the propositions that emerged from these data. Following an iterative work, they clustered the case studies into three categories valid across the two industries: two categories differ in term of driving player in the absorption process and the third is a control one with no absorption. The control category allowed to identify the characteristics of the types of knowledge studied (manufacturing, retail and design). It allowed to show the differences between manufacturing and design on the one hand, and between retail and design on the other hand. Therefore it also allowed to show and analyze the challenges to the knowledge absorption. These challenges have 19

not been studied by the Absorptive Capacity literature that has focused on the similarity of knowledge between the recipient and the source on acquisition and assimilation. The first two categories in which there has been absorption have allowed to show how these challenges were addressed through an analysis of the knowledge characteristics. The research process is summarized in Figure 2. The results are summarized into a framework underlying new propositions linking the absorption process, the source and recipient knowledge complementarity and the NPD performance. During the research process the discussions and the work-in-progress presentations in seminars of the research centre to which the authors belonged represented insightful moments. The research centeriii is made of a dozen of researchers working on the drivers of NPD performance and is a place where the authors shared and confronted their emergent ideas. -----------------------------Insert Figure 2 about here ------------------------------

DATA ANALYSIS

Clustering of Case Studies into Categories of Design Absorption Processes

The iterative comparison of the absorption cases in the two industries led to the identification of three categories across industries. One category is constituted by the NPD cases without any absorption process. This category corresponds to the second group of cases and is used as a control category (CCAT) in order to analyze the relative characteristics of the source and 20

recipient knowledge in their pure format without absorption, more precisely without combination and transformation effects. The other two categories of design absorption processes differ in terms of the driving player of the absorption process and the impact on the NPD performance. In category 1 (CAT1), the manufacturer absorbs design and combines its prior technical knowledge with the design knowledge absorbed in order to enhance the NPD performance. In category 2 (CAT2), the retailer absorbs design and combines its prior market knowledge with the design knowledge absorbed in order to enhance the NPD performance. The clustering of cases into categories is detailed in Table 2.

Control Category: No absorption process. In this category each player mobilizes his specific knowledge. There is no absorption of the design knowledge. CCAT-CLOT. The NPD process is organized around three players, which operate with their own specific knowledge. The designer designs products according to a design brief received either from the manufacturer or from the retailer. The designer has little interaction with the manufac turer or the retailer. The brief from the manufacturer or the retailer reflects each actor’s main concern: the retailer reflects the needs from the market, the manufacturer reflects the manufacturing constraints (material, cost) and the designer has a creative perspective. The manufacturer executes the production of the designed product, for a given cost. From his technical knowledge, he is able to advise on the feasibility of the products (cost, fabric constraints). In this category none of the actors has absorbed any other’s knowledge. The four case studies in this category are: CLOT1, CLOT2, CLOT3 and CLOT4. CCAT-CONS. The design in the construction industry is associated primarily to the architect for the functional and aesthetic dimension and to the engineers for the technical dimension 21

(structure of the building, electricity, fluid circulation, thermal and acoustic isolation, etc). The other players are the owner/developer that launch the construction project and sell or exploit the resulting building and the contractors that build and execute the works. The owner/developer has the relationship with the future customers or users of the building: he knows their needs and uses. He synthesizes these elements to the architect (into a design brief), which proposes a solution of space and volume that fulfills the pursued functionalities. He can be innovative and anticipate new uses. The architect designs the architectural aspects of the building in response to the owner’s request. The contractors and especially the engineering departments of the firm define the execution methods and the operations permitting the realization of the building, based on the architectural and technical design previously established. Each player participates to the NPD process mobilizing his specific knowledge with little interaction. The five case studies in this category are: CONS1, CONS2, CONS3, CONS4 and CONS5.

Category 1: Manufacturer absorbs design. The manufacturer (mastering the operational and technical knowledge) absorbs a part of the design knowledge from the traditional designer and combines this knowledge with his existing knowledge in order to optimize the manufacturing process of the planned product reducing its cost and enhancing its quality (technical characteristics of the product). CAT1-CLOT. The manufacturer absorbs part of the design knowledge and is able to transmit part of the technical constraints to the designer, and the manufacturer becomes more aware of the freedom and creativity that is needed by the designer. The manufacturer absorbs designer’s knowledge, and combines manufacturing knowledge and design knowledge. To develop a new product, the manufacturer first lets the designer create in a free environment. Then, the new 22

product is shown and discussed between the design and the manufacturing department, and there are discussions and adjustments made between the two. Design knowledge is about identifying fashion trends and transforming them into a product. Manufacturing knowledge is about the capacity to eva luate costs and quality of products. The manufacturing pushes towards simplification to reduce costs and increase product quality. The design team resists simplification and accepts only up to a point and if it does not deteriorate the image, quality and creativity of the product. After this process has happened a few times, the manufacturer and the designer internalize each other’s expectations and constraints. The designer becomes more aware of the cost constraints and how they can be respected without altering too much the product. The manufacturing department is more aware of what the designer wants to keep. The case studies are CLOT5, CLOT6, CLOT7 and CLOT8. For example in case CLOT5, the designer is drawing a T-shirt with 2 lines of sewing on the side. The manufacturing knowledge allows to suggest that the same look can be achieved by reducing the amount of fabric. That makes the product cheaper to manufacture for the equivalent of 4% cost reduction. CAT1-CONS. The participation of the contractor (in case CONS6 for example) consists in designing some components of the building, like the underground parking, which demands technical knowledge and which constitutes a stake for the contractor, because it determines the foundations of the building, where costs can strongly vary. This design is based on the knowledge of the contractors regarding the works and the building structure. But this design cannot be separated from the design of the volume and surfaces in the upper floors because the position of the foundations determines the structural elements of the building that cannot be easily modified later. It is the combination between these two knowledge (manufacturing and 23

architecture) that allows the contractor to propose the best parking design that respects both construction costs and architectural constraints. This part of the building does not have an impact on the global project’s look in which the architect expresses the building identity and his signature. The contractors participate to the design of components, which have almost no stake for the architect and enable widening the solution exploration domain. This exploitation of the absorbed design knowledge leads to cost reduction and to product quality improvement; more precisely it avoids the multiple modifications of the design in order to integrate later technical constraints that leads to quality problem. The case studies that constitute this category are CONS6, CONS7 and CONS8.

Category 2: Retailer absorbs design. The retailer (who knows the needs of the customers and their uses) absorbs part of the design knowledge from the traditional designer in order to make the product fit better with market needs and to reduce lead time. CAT2-CLOT. In this category, the retailer develops its own brand of products, which provides higher profits than branded products. To be able to develop new products in-house, it absorbs design knowledge. The retailer, through products sales results from stores is aware of products’ success and market trends. The retailer’s knowledge is about understanding the market needs and being able to answer them. The designer’s knowledge is about being creative, to think outside of any constraint. Rather than letting the designer create a new product from scratch, the retailer prefers to start from best-seller products and patterns from the database. From that constraint (domain of possible), the retailer allows the designer to be creative and make changes. By doing this, it allows to design a new product more rapidly and then to be able to make changes up to the last minute (and therefore be aware of the latest market trends). The main 24

advantage is that by starting from market successful products, it increases the potential market success of new products. The integration of retail and design allows for more process efficiency (lead time) and product effectiveness (in terms of fit with market needs). The case studies are: CLOT9, CLOT10, CLOT11, CLOT12, CLOT13. For example, in case CLOT12, the manufacturer starts the new product from an existing best-selling skirt. The designer makes alterations on the fabric and the pockets. Given that the pattern exists, it can be transformed very quickly and go to production. Changes are made up to the last minute, the process is flexible. Because the new product is the adaptation of an existing best selling product, it increases its market success. CAT2-CONS. In these cases, a part of the architectural design is done by the owner. The owners are professionals for whom the building constitutes an asset and a production tool. These firms want to develop innovative products in order to create new markets such as elderly people residence (CONS12). Their objective is to reduce the global cost (investment and exploitation) of the building during its life cyc le such as for the office developers or the hotel (CONS10 and CONS11). Because of their thorough knowledge of the market and of the customers (usages, business model, etc.), the owners actively participate in the architectural and technical design. The architectural design is broken down into the design of the building envelope done by an external architect, and the functional design done by the owner in order to best fit with the users needs and uses. Besides its participation to the functional design, the owner involves external architects to maintain a diversified style for its buildings and an access to famous architects’ brand names. Indeed, the exterior architecture, for example, is used by the owner as one component of the image of the firm such as for the office developer or the hotel. Owners combine their extensive knowledge of the uses, the exploitation costs and the user needs with the 25

design knowledge absorbed during the numerous interactions with the architects through the past construction projects they were involved in. By separating the functional design from the detailed and the envelope design and by taking part into the first one, the owners enhance the product effectiveness and its fit with the market needs. The product efficiency is also enhanced because the owner participation in the design reduces the project lead time. The use constraints are introduced at the beginning of the project avoiding the multiple exchanges back and forth between the designer and the owner. The design brief cons iders the usage constraints. By absorbing a part of the design, the owner develops a capacity to express the usage constraints in an actionable way for the designer. The case studies are: CONS10, CONS11 and CONS12. -----------------------------Insert Table 2 about here ------------------------------

Difference and Relatedness between Source and Recipient Knowledge

During the analysis of the absorption process by the manufacturer or the retailer, the respondents insisted on the differences between design knowledge and their own knowledge. These differences highlight the challenges of the absorption of design knowledge by the other players of the NPD process. They were expressed through four characteristics that were inductively generated from the data and enlightened by prior research on knowledge characteristics. The NPD processes analyzed in category 1 and 2 were considered as successful by the players involved. Therefore, these differences were no obstacle to the absorption and were overcome by the strong need and desire of players to improve the NPD process performance. As 26

a matter of fact, the analyzed absorption situations are in environments with tight cost and lead time constraints or need to innovate or renew products. The analysis of the knowledge characteristics in the non-absorption cases (CCAT) allows to understand the knowledge in its pure format, before any transformation and combination, and therefore to compare it with the transformed and combined one. After highlighting the differences between the design on one hand and the manufacturing and the retailing on the other and the challenges associated with them, we analyze how these challenges were addressed in the absorption cases. In these cases, firms (manufacturers and retailers) have abs orbed design knowledge and have combined it with their prior knowledge to improve the NPD performance in terms of lead time, costs, fit with market needs and product quality. Paradoxically, these firms rely on the characteristics at the origin of the differences in order to combine their prior knowledge with the acquired knowledge and transform it in a new one that is exploited with benefits in the NPD process. More precisely, it is the combined effect of theses differences with relatedness characteristics between the prior and the acquired knowledge that makes that possible. Indeed, even if the players involved don’t have the same training process or education, they are working on developing the same product and they are interested in the same end-users. They address the same issues but from different points of expertise: they use the same objects (blueprints, estimation costs, etc) and exchange technical elements. Individual vs. collective. Manufacturers and retailers perceived the design knowledge as attached to individuals. It is associated to the style and identity of the designer: it is inscribed and anchored in individuals. That is different from the dominant knowledge of the manufacturer and the retailer that is rather embedded in the collective of the firm. Indeed, the firm’s knowledge is 27

rarely strongly associated to one individual. The challenge is to absorb this individual design knowledge. According to the owner in CONS1 case, the architect has a very specific design of the volume (proportions, distributions, etc) leading to a recognizable style among many others such as a brand or a signature. The more designers are involved into the NPD process on a daily basis, the more their knowledge becomes embedded into the collective level of the organization. With the presence of designers, the design culture is spreading, and the collective culture includes more design. According to the manufacturer in case CLOT7, internal individual designers create a design culture in the firm that spreads to other departments. Tacit vs. explicit. Design knowledge is viewed as a strongly tacit one. It is rarely inscribed in tools or objects, which makes it hard to transfer. Manufacturer and retailer’s knowledge is much more explicit. Some of their expertise is embedded into technical databases, cost analysis and market studies. In case CONS1, the architect could not explicit the aesthetic constraints that the windows of the building had to respect. It led to numerous modifications. The engineers of the contractor organized several meetings with the architect in order to refine the works regarding this part of the building. The aesthetic dimension remained during a long time a source of misunderstanding while the other constraints were clear and respected (economical, functional, technical, etc). Design knowledge used to be tacit, but through the absorption of design knowledge, industrial players have worked with designers to make some of their knowledge more explicit. It resulted in the use of computer aided design tools, in which design knowledge is partly inscribed. In case CLOT10, the retailer explained that with the computer aided design tools, not as many experienced designers were needed. Part of the design knowledge was embedded in these tools , 28

and they could be manipulated by less experienced designers. In case CONS6, the expertise of the contractor is partly inscribed in database of material costs, network of suppliers involved in the project, regulations, etc. The understanding of the way the architect organizes t he space and the volumes in the building combined with this expertise, led to the contractor’s propositions of optimal underground parking that are harmoniously integrated in the global architecture. This was possible by the enrichment of the contractor’s database. Creative vs. problem solving culture. According to the manufacturer and the retailer, designers have a different approach of projects that corresponds to a divergent exploration rather than to a problem solving one (identification of a solution for a well specified problem). A designer searches new trends in a proactive perspective for each project. He thrives for creativity and variety, to differentiate products, whereas manufacturing searches standardization to reduce costs, lead time and quality problems. Design tries to free itself from all constraints to favor creativity. By doing that it does not take into account (at least at the beginning of the project) the production, exploitation or market constraints during the life cycle of the product (diversity of references, maintenance, etc). In case CONS2, the other players say that the architect does not communicate on the design process. He remains a black box for the other players involved. In case CONS5, the architect explores a new solution and does not accept to reproduce parts of old buildings tested by the owner team and that provide good conditions of exploitation. The architect favors creativity: he feels that adopting architecture elements proposed by the owner means losing his freedom. In case CLOT1, the designer starts by designing new products in a free environment, as if there were no market or cost constraint. It is only in the second iteration that constraints are acknowledged. 29

The combination of design knowledge with the manufacturer or retailer knowledge leads to the identification of two types of modules: standard and differentiating ones that reconciles variety with cost and lead time reduction. The integration of these modules is partly due to the relatedness of the two types of knowledge. In case CONS8, the combination of design knowledge with manufacturing knowledge relative to the costs of the works led the contractor to propose to differentiate standard modules for invisible parts that could be integrated in very different global architectures. The architect focuses on the global distribution of the space and the volumes. In case CLOT6, the manufacturer has set up a database of patterns so that when a new product is designed, it can be quickly put into production. It is a way to reconcile designer’s creativity and manufacturer’s efficiency constraints. Profession vs. project orientation. According to the manufacturers and the retailers, designers belong to a profession to which they strongly identify: “they are architects or designers above all”. They favor exchanges and communication within the profession above the ones with the others project players. They give more importance to the reactions of their peers than to the ones of the other project players involved in the NPD process. In case CONS1, the contractor said that through the building he designs, the architect maintains a dialogue with his peers. He favors this exchange on the one with the other players of the project (owner, contractor, etc). “It looks like his objective through the building was to be in the front page of architecture magazine rather than to satisfy the users needs”, CONS5 owner. It is also the case for CLOT3, in which the designer cared more about his peer’s recognition than about the product sales. The peer orientation of the designer could be considered as an element that facilitates the absorption process because it permits to the manufacturer or retailer when they absorb a part of the design knowledge to be better able to speak to the designers by integrating their language and 30

way of thinking. In cases CLOT10 and CLOT13, retailers underlined that designers that were on the payroll and had lunch with their colleagues, tended to spread their professional orientation throughout the firm and to rebalance their orientation towards the firm and the NPD project. In case CONS12, the owner insisted on the fact that the absorption of architectural knowledge allowed them to evaluate quickly architect propositions in terms of cost and uses. They had acquired the language to communicate. Through the analysis of the cases across industries and across categories, this article argues that these differences in knowledge characteristics could be analyzed as obstacles but they also reveal a relatedness or complementarity between the source and the recipient knowledge that has a positive impact on the knowledge combination. Complementary knowledge can be viewed as pieces of a jigsaw. Design knowledge is different from manufacturer or retailer knowledge, but it can be combined with those in order to have a new knowledge that can be exploited for an improved NPD performance.

DISCUSSION AND FRAMEWORK PROPOSAL

The aim of this article is to contribute to the analysis about the determinants of successful absorption proces ses and specifically the combination patterns through which the source knowledge is transformed and exploited by adopting a dyadic perspective. The NPD process is a unit of analysis and high NPD performance is an indicator of a successful absorption process. This article focuses on one specific type of source knowledge that plays a key role in the NPD process and that is under studied in the management literature: design.

31

Based on the data analysis and in order to address the open issues related to the Absorptive Capacity theoretical framework mentioned at the end of the theoretical background, the article proposes a conceptual framework of the absorption process and NPD performance highlighting the positive effect of knowledge complementarity between the source and the recipient knowledge on the absorption process and the NPD performance.

Similarity vs. diversity between source and recipient knowledge

Literature on Absorptive Capacity does not consider the type of the external knowledge sourced from outside the organization. Little previous research (Lane et al., 2006; Murray and Chao, 2005) has mentioned the need for a dyadic perspective, where the source team is equally considered with the recipient one. Murray and Chao (2005) considered knowledge characteristics, such as the causal ambiguity and the unproveness as moderators of the relationship between recipient team and source team resources respectively and knowledge acquisition. Cohen and Levinthal (1990) have highlighted the necessary balance of similarity and difference between the source and the recipient type of knowledge. But these authors addressed the first dimension of the Absorptive Capacity: the valuing of the source knowledge and the acquisition of external knowledge. Lane et al. (2006) pointed out that knowledge characteristics have been viewed as independent and mediating variables affecting the knowledge recognition, acquisition and assimilation. Therefore “the influence of knowledge type on a firm’s ability to utilize it has received relatively little attention”. The focus here is on the transformation and exploitation of the external knowledge.

32

Absorptive capacity theory recognizes that interactions among players having different knowledge are critical: “The knowledge transformation oc curs when managers combine two incongruous frames of references to arrive at new knowledge that can be exploited for generating profits” (Zahra and George, 2002). The differences pointed out by the NPD players between the design (source) knowledge and the manufacturing and the retailing (recipient) knowledge were highlighted through four characteristics that emerged from the data analysis (individual dimension, tacitness, creativity culture and professional orientation). But several studies on the knowledge brokerage and combination showed that heterogeneous knowledge needs a common base to be successfully integrated (Hargadon, 2005). The diversity vs. similarity dimension of knowledge has been considered by many researchers as a fruitful determinant for learning at the individual and the organizational level as well. “The ideal structure of knowledge in an individual’s network should reflect only partially overlapping knowledge complemented by nonoverlapping diverse knowledge” (Cohen and Levinthal, 1990). Focusing on R&D knowledge, Lane and Lubatkin (1998) have shown the effect of the similarity between the recipient and the source firm’s knowledge processing systems and the recipient firm familiarity with the source firm set of organizational problems on the valuation, assimilation and application of the external knowledge. They concluded that valuable interorganizational learning requires partners that have sufficient knowledge similarity to facilitate learning and sufficient knowledge dissimilarity to provide something worth learning leading to positive outcomes such as innovation and firm performance. The focus of this article is on another specific type of knowledge that plays a key role in a specific organizational process: the design knowledge and the NPD process. The successful absorption cases analyzed through the NPD processes showed that it is through the same 33

characteristics that illustrated the differences between the design knowledge and the manufacturing and the retailer knowledge that solutions could be found in order to absorb the source (design) knowledge and combine it with the recipient (manufacturing and the retailing) knowledge. The common basis that led to the combination of the recipient knowledge with the source knowledge is referred to as the relatedness between the two knowledge. The two types of knowledge are related in a sense that they address similar problems, are embedded in similar objects, lead to the same outcomes, etc.

Source knowledge absorption and NPD performance

Design can be viewed as part of technological and marketing capabilities (Verona, 1999). Here, it is considered as a knowledge on itself and the cases analyzed show that the design knowledge (source) can be combined either with manufacturing knowledge (that impacts the NPD process in terms of product cost and technical characteristics of the product) or with market knowledge (that impacts the NPD process in terms of product fit with market needs and lead time). These combinations enhance process efficiency and pr oduct effectiveness. This approach enriches previous researches that have considered the design as an independent aspect of the NPD performance or as one element among the technical and the marketing capabilities. The article focuses on the combined effect of the design with the manufacturing on one hand and with the marketing on the other to generate higher performance of the NPD process through process efficiency and product effectiveness.

34

The dyadic perspective rebalances the focus from the recipient knowledge to the source and the recipient knowledge. But it does not take it away from the recipient knowledge. The recipient knowledge plays an important role in the absorption of design knowledge. It determines the zone of impact in the NPD performance criteria. The absorption of design knowledge by a manufacturer (CAT1) has a positive effect on process efficiency (cost) and product effectiveness (quality). The absorption of design knowledge by a retailer (CAT2) has a positive effect on process efficiency (lead time) and on product effectiveness (fit with market needs). The impact on NPD performance is differentiated according to the recipient type, as can be see in Figure 3. -----------------------------Insert Figure 3 about here ------------------------------

Knowledge complementarity

In the literature, the balance between the knowledge similarity and diversity is operationalized as knowledge complementarity, defined as knowledge that is both related and diverse (Lofstrom, 2000). Complementary resources simultaneously complement each other (Teece, 1986). Evidence suggests that resource complementarity not similarity is associated with high performance in acquisitions (Harrison et al., 1991). The acquisition of firm with similar resources may produce more short-term value because economies of scale are easier to achieve than economies of scope. But having access to complementary resources allows firms to learn new and valuable capabilities. Resource-based theory leads to the conclusion that synergistic benefits from resource combination are more likely when based on complementarity rather than 35

similarity (Teece, 1986). The work on knowledge complementarity concerned mainly concurrent firms acting on the same position of the supply chain and focused on the effects on alliances (Doz and Baburoglu, 2000; Gulati, 1995) or acquisitions (Harrisson et al., 1991). The work that addressed complementarity between non competitive firms focuses on knowledge coordination between actors along the supply chain (manufacturers and suppliers) (Roper and Crone, 2003). Moorman and Slotgraaf (1999) showed that complementarity which also has been referred to as “cospecialization, interconnectedness, synergy and integration increases firm effectiveness and efficiency”. Through the analysis of the absorption patterns in the NPD processes, the work of these authors is enriched by adopting a knowledge flow perspective rather than a content one. As a conclusion, the framework derived from the literature is completed (see Figure 1) by building a new framework (see Figure 4) highlighting the role of the source-recipient knowledge complementarity on Absorptive Capacity and NPD, as detailed in the following propositions.

P5: The source team acquired knowledge is positively related to the knowledge acquisition and assimilation. P6: The positive relationship between the potential Absorptive Capacity and the knowledge acquisition and assimilation becomes stronger as the complementarity between the knowledge of the recipient team and the knowledge of the source team increases. P7: The positive relationship between the realized Absorptive Capacity and the knowledge transformation and exploitation becomes stronger as the complementarity between the knowledge of the recipient team and the knowledge of the source team increases. P8: The positive relationship between the source team acquired knowledge and the knowledge acquisition and assimilation becomes stronger as the complementarity between the knowledge of the recipient team and the knowledge of the source team increases.

-----------------------------36

Insert Figure 4 about here -----------------------------CONCLUSION

From a theoretical point of view, this research has enriched the Absorptive Capacity literature by zooming on the characteristics of the external knowledge sourced relative to the recipient knowledge. The article argues that these relative characteristics affect the absorption and particularly the combination and transformation of the absorbed knowledge with the prior knowledge. Therefore, this dimension needs to be taken into account in the analysis of the link between knowledge absorption and NPD performance. This research has also contributed to a shift of focus from the recipient team exclusively to a dyadic perspective in which both the recipient and the source team are central to the absorption process. Finally, the main theoretical result is that the positive relationship between knowledge absorption and NPD performance is moderated by the source-recipient knowledge complementarity. It is highlighting the role of the complementarity between the recipient and the source knowledge as a moderator of knowledge transformation and exploration. Nevertheless, this approach is not deterministic: knowledge complementarity on its own is not enough to make absorption work. The cases analyzed correspond to situations with tight cost and lead time constraints, in which knowledge complementarity supported firms in the absorption challenges. Firms’ motivation for the absorption is also key in the phenomenon. This research also has limitations. First, this research proposes results based on an exploratory field study anchored in the French clothing and construction industries. The range of functions is limited to retail, manufacturing and design, which are just some of the functions 37

involved in the NPD projects. Another is that the constructs based on cases studies and on the organizational theory of Absorptive Capacity, the New Product Development and the design knowledge related literature, need to be tested empirically on a higher scale and on more industries. From a managerial point of view, this research furthers understanding of design management and the benefits provided in terms of NPD in combining design knowledge with industrial ones (like marketing or technology). It underlines the benefits of integrating design capabilities in manufacturing-driven or retail-driven organizations, to complement the existing perspective and to increase the NPD performance. It also shows the benefits of the absorption of complementary knowledge compared with the absorption of similar knowledge.

REFERENCES

Abecassis-Moedas, C. (2006). Integrating Design and Retail in the Clothing Chain: an Empirical Study of the Organisation of Design. International Journal of Operations and Production Management 26(4):412-428. Berger, C, Moslein, K., Piller, F. and Reichwald R. (2005). Co-Designing the Customer Interface for Customer-Centric Strategies: Learning from Exploratory Research. European Management Review 2(3): 70-87. Beverland, M.B. (2005). Managing the Design Innovation-Brand Marketing Interface: Resolving the Tension between Artistic Creation and Commercial Imperatives. Journal of Product Innovation Management 22(2):193-207. Borja de Mozota, B. (2003). Design Management. New York: Allworth Press.

38

Brown, S.L., Eisenhardt, K.M. (1995). Product Development: Past Research, Present Findings and Future Directions. Academy of Management Review 20(2):343-378. Clark, K.B. and Fujimoto, T. (1991). Product Development Performance: Strategy, Organization and Management in the World Auto Industry. Boston, MA: Harvard Business School Press. Clark, K.B. and Wheelwright, S.C. (1995). The Product Development Challenge: Competing through Speed, Quality and Creativity. Cambridge, MA: Harvard Business School Press. Cohen, W.M. and Levinthal, D.A. (1990). Absorptive Capacity: a New Perspective on Learning and Innovation. Administrative Science Quarterly 35(1):128-152. Cooper, R.G. (1994). Third-Generation New Product Processes. Journal of Product Innovation Management 11(1):3-14. Cooper, R.G. (1979). The Dimensions of Industrial New Product Success and Failure. Journal of Marketing 43:93-103. Crawford, M. and Di Benedetto, A. (2003). New Products Management, 7th ed, New York: Mac Graw-Hill. Doz, Y. and Baburoglu, O. (2000). From Competition to Collaboration: the Emergence and Evolution of R&D Collaboratives. In: Cooperative Strategy: Economics, Business and Organisational Issues, D. Faulkner and M. de Ronds (eds.). New York: Oxford University Press, 173-192. Eisenhardt, K.M. (1989). Building Theories from Case Study Research. Academy of Management Review 14(4):532-550. Garud, R. and Nayyar, P. (1994). Transformative Capacity: Continual Structuring by Intertemporal Tec hnology Transfer. Strategic Management Journal 15:365-385. Gulati, R. (1995). Does familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances. Academy of Management Journal 38:85-112.

39

Hargadon, A.B. (2005). Leading with Vision: the Design of New Ventures. Design Management Review 16(1):33-39. Harrisson, J.S., Hitt, M.A., Hoskisson, R.E. and Ireland, D.R. (2001). Resources Complementarity in Business Combinations: Extending The logic to Organization Alliances. Journal of Management 27:679-690. Iansiti, M. (1995). Shooting the Rapids: Managing Product Development in Turbulent Environments. California Management Review 38(1):37-58. Jansen, J.J.P, Van den Bosch, F.A.J. and Volberda, H.W. (2005). Managing Potential and Realized Absorptive Capacity: How Do Organizational Antecedents Matter? Academy of Management Journal 48(6):999-1015. Kogut, B. and Zander, U. (1992). Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology. Organization Science 3:383-397. Kogut, B. and Zander, U. (1996). What Firms do: Coordination, Identity and Learning. Organization Science 7:502-518. Kreuzbauer, R. and Malter, A.J. (2005). Embodied Cognition and New Product Design: Changing Product Form to Influence Brand Categorization. Journal of Product Innovation Management 22(2):165-176. Lane, P.J., Koka, B.R. and Pathak, S. (2006). The Reification of Absorptive Capacity: a Critical Review and Rejuvenation of the Construct. Academy of Management Review, 31(4):833863. Lane, P.J. and Lubatkin, M. (1998). Relative Absorptive Capacity and Interorganizational Learning. Strategic Management Journal 19:461-477. Lawrence, P. and McAllister, L. (2005a). Marketing Meets Design: Core Necessities for Successful New Product Development. From Special Issue Guest Editors. Journal of Product Innovation Management 22(1):1-2.

40

Lawrence, P. and McAllister, L. (2005b). Marketing Meets Design: Core Necessities for Successful New Product Development. Journal of Product Innovation Management 22(2):107108. Lofstrom, S. (2000). Absorptive Capacity in Strategic Alliances: Investigating the Effects of Individuals’ Social and Human Capital on Inter-Firm Learning. Organization Science Winter Conference, Keystone, Colorado. Miles, M.B. and Huberman, M. A. (1994). Qualitative Data Analysis: An Expanded Sourcebook, Second Edition. London: Sage Publications. Moorman, C. and Slotgraaf, R.J. (1999). The Contingency Value of Complementary Capabilities in Product Development. Journal of Marketing Research 36:239-257. Munsch, K. (2004). Outsourcing Design and Innovation. Research Technology Management 47(1):27-30. Murray, J.Y. and Chao, M.C.H. (2005). A Cross-Team Framework of International Knowledge Acquisition on New Product Development Capabilities and New Product Market Performance. Journal of International Marketing 13(3):54–78. Perks, H, Cooper, R. and Jones, C. (2005). Characterizing the Role of Design in New Product Development: an Empirically Derived Taxonomy. Journal of Product Innovation Management 22(2):111-127. Ravasi, D. and Lojacono, G. (2005). Managing Design and Designers for Strategic Renewal. Long Range Planning 38:51-77. Roper, S. and Crone, M. (2003). Knowledge Complementarity and Coordination in the Local Supply Chain: Some Empirical Evidence. British Journal of Management 14:339-355. Stock, G.N., Greis, N.P. and Fischer, W.A. (2001). Absorptive Capacity and New Product Development. Journal of High Technology 12:77-91. Strauss, A. and Corbin, J. (1998). Basics of Qualitative Research. Techniques and Procedures for Developing Grounded Theory (2nd ed.). Newbury Park: Sage.

41

Szulanski, G. (1996). Exploring Internal Stickiness: Impediments to the Transfer of Best Practices within the Firm. Strategic Management Journal 17:27-43. Teece, D.J. (1986). Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy. Research Policy 15:285-305. Tsai, W. (2002). Knowledge Transfer in Intraorganizational Networks: Effects of Network Position and Absor ptive Capacity on Business Unit Innovation and Performance. Academy of Management Journal 41:464-476. Ulrich, K.T. and Eppinger, S.D. (2004). Product Design and Development, New York: Mac Graw-Hill. Van den Bosch, F.A.J., Volberda, H.W. and De Boer, M. (1999). Coevolution of Firm Absorptive Capacity and Knowledge Environment: Organizational Forms and Combinative Capabilities. Organization Science 10(5):551-568. Verganti, R. (2006). Innovating through Design. Harvard Business Review December:114122. Verona, G. (1999). A Resource-Based View of Product Development. Academy of Management Review 24(1):132-142. Veryzer, R.W. (2005). The Role of Marketing and Industrial Design in Discontinuous New Product Development. Journal of Product Innovation Management 22(1):22-41. Veryzer, R.W. and Borja de Mozota, B. (2005). The Impact of User-Oriented Design on New Product Development: An Examination of Fundamental Relationships. Journal of Product Innovation Management 22(2):128-143. Vogel, C.M., Cagan, J. and Boatwright, P. (2005). The Design of things to come. Upper Saddle River, N.J.: Wharton School Publishing. Walsh, Vivien (1996). Design, Innovation and the Boundaries of the Firm. Research Policy, 25(4):509-529. Wheelwright, S.C. and Clark, K.B. (1992). Revolu tionizing Product Development, Quantum Leaps in Speed, Efficiency and Quality. New York: The Free Press. 42

Yin, R.K. (2003). Case Study Research. Design and Methods - 3rd ed. New York, Sage Publications. Zahra, S. and George, G. (2002). Absorptive Capacity: a Review, Reconceptualization and Extensions. Academy of Management Review 27(2):185-203.

43

Figure 1. A Framework of Absorptive Capacity and New Product Development Performance

Recipient team prior knowledge

Recipient team Potential Absorptive Capacity

Recipient team Realized Absorptive Capacity

Knowledge acquisition & assimilation

Knowledge transformation & exploitation

NPD performance Process efficiency & Product effectiveness

Figure 2. The research process

-Iterative process -Parallel and interactive process between the two researchers - Discussion during the research group seminars

Research Process Data collection of NPD process case studies (CLOT)

Output

Data collection of NPD process case studies (CONS)

A framework of absorption process and NPD performance highlighting knowledge complementarity between source and recipient

Clustering of case studies into categories of absorption processes Characterization of the absorption process in each category Identification of characteristics of design compared with manufacturing and retail knowledge, respectively: -Difference -Relatedness

44

Figure 3. Source knowledge absorption and NPD performance by category (by recipient type) Category 1 Manufacturer’s Knowledge Knowledge complementarity

Absorption of design knowledge by manufacturer

NPD performance -Process efficiency (cost) -Product effectiveness (quality)

Designer’s Knowledge

Retailer’s Knowledge

Knowledge complementarity

Category 2 NPD performance

Absorption of design knowledge by retailer

-Process efficiency (lead time) -Product effectiveness (fit with market needs)

Designer’s Knowledge

Figure 4. A Framework of Absorptive Capacity, Source-Recipient Knowledge Complementarity and New Product Development Performance

Recipient team prior knowledge

Source-recipient knowledge complementarity Source team acquired knowledge

Recipient team Potential Absorptive Capacity

Recipient team Realized Absorptive Capacity

Knowledge acquisition & assimilation

Knowledge transformation & exploitation

New framework

45

Exisiting framework (see Fig. 1)

NPD performance Process efficiency & Product effectiveness

TABLE 1 List and characteristics of the case studies Number of Manufacturer interviews characteristics

Designer characteristics

Retailer characteristics

Clothing Industry CLOT1 Womenswear

3

Individual designer

Department store

CLOT2 CLOT3 CLOT4 CLOT5

3 3 3 3

Design agency Famous designer Famous designer 3 internal designers

Supermarket Specialty chain Department store Independent store

CLOT6 CLOT7

Lingerie Womenswear Menswear Fashion menswear Womenswear Womenswear

2 internal designers 5 internal designers

Department store Specialty chain

CLOT8

Jeans

4

3 internal designers

Department store

CLOT9 CLOT10

Womenswear Lingerie

3 3

5 internal designers 2 internal designers

Department store Discounter

1 internal designer 4 internal designers

Supermarket chain Department store

Case

NPD product

Lingerie Fashionable womenswear CLOT13 Basic menswear 13 cases CLOT Construction Industry CONS1 Engineering school CONS2 Social Housing

3 3

National manufacturer Subcontractor Subcontractor Local manufacturer National manufacturer Local manufacturer National manufacturer National manufacturer Local manufacturer National manufacturer Subcontractor Subcontractor

4

Subcontractor

2 internal designers

Specialty chain

4

National contractor

Famous architect

4

Local contractor

Local architect

CONS3

3

National contractor

Famous architect

Ministry of education Social housing office (public) Exposition centre

3 3 5

National contractor National contractor National contractor

Local architect National architect National architect

CLOT11 CLOT12

3 3

41

CONS4 CONS5 CONS6

Exposition Hall High School Court building Private housing

CONS7

Private housing 3

Local contractor

Local architect

CONS8 CONS9

Prison 4 Automotive 4 Training center Office building 4

National contractor National contractor

National architect National architect

National contractor

National architect

Hotels 5 Housing for 3 Elderly people CONS 45

National contractor Local contractor

National architect National architect

CONS10

CONS11 CONS12 12 cases

46

Local authority Ministry of justice Private real estate developer Private real estate developer Ministry of justice Professional organization International real estate developer (private) Hotel developer Private real estate developer

TABLE 2 Clustering of Case Studies into Categories Category Case studies CLOT Case studies CONS description Control Category: Specific manufacturer, retailer and design knowledge. Each player mobilizes its specific knowledge. There is no absorption of the design knowledge. CLOT1 CONS1 CLOT2 CONS2 CLOT3 CONS3 CLOT4 CONS4 CONS5 Category 1: Manufacturer absorbs design knowledge. The manufacturer possesses technical knowledge (technical specifications of the product, cost…) and combines it with absorbed design knowledge in order to enhance process efficiency (cost) and product effectiveness (quality). CLOT5 CONS6 CLOT6 CONS7 CLOT7 CONS8 CLOT8 CONS9 Category 2: Retailer absorbs design knowledge. The retailer possesses market knowledge (market expectations, past best-sellers…) and combines it with absorbed design knowledge in order to enhance process efficiency (lead time) and product effectiveness (in terms of fit with market needs). CLOT9 CONS10 CLOT10 CONS11 CLOT11 CONS12 CLOT12 CLOT13

i

The authors wish to thank JPIM editor Anthony Di Benedetto and two anonymous reviewers for their helpful comments. The authors are also grateful to Thomas Paris that contributed to the initiation of this research project and with whom they had many fruitful discussion. ii Address correspondence to: Celine Abecassis -Moedas, School of Economics and Management, Catholic University of Portugal, FCEE-UCP, Palma de Cima, 1649-023 Lisbon, Portugal. iii Management Research Centre (Centre de Recherche en Gestion CRG) Ecole Polytechnique.

47