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Volume 20 Number 4 2003

ISBN 0-86176-888-4

ISSN 0265-1335

International
Marketing
Review

International new product development

Guest Editors: Helen Perks and Veronica Wong

www.emeraldinsight.com

International Marketing
Review

ISSN 0265-1335
Volume 20
Number 4
2003

International new product development

Guest Editors
Helen Perks and Veronica Wong

Access this journal online __________________________ 331

Editorial advisory board ___________________________ 332
Abstracts and keywords ___________________________ 333
French abstracts___________________________________ 335
Spanish abstracts __________________________________ 338
Japanese abstracts_________________________________ 341
Guest editorial: research in international new
product development current understanding and
future imperatives
Helen Perks and Veronica Wong ___________________________________

344

A cross-national study of the relationship between

international diversification and new product
performance
Insik Jeong_____________________________________________________

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CONTENTS

CONTENTS
continued

Does culture explain acceptance of new products in a

country? An empirical investigation
Sengun Yeniyurt and Janell D. Townsend____________________________

377

Designing global new product teams: optimizing the

effects of national culture on new product
development
K. Sivakumar and Cheryl Nakata __________________________________

397

International technology transfer: model and

exploratory study in the Peoples Republic of China
C. Anthony Di Benedetto, Roger J. Calantone and Chun Zhang __________

446

Call for papers ____________________________________ 463

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332

EDITORIAL ADVISORY BOARD

EDITORIAL REVIEW PANEL

David Ballantyne
Melbourne Business School, Australia

Dr Jim Bell
Magee College, University of Ulster, UK

Professor Jean J. Boddewyn

The City University of New York, USA

Dr Roger Bennett
London Guildhall University, UK

Dr Marylyn Carrigan
University of Birmingham, UK

Professor Paul Chao

University of Northern Iowa, USA

Professor Tevfic Dalgic

University of Texas at Dallas, USA
Professor Adamantios Diamantopoulos
Loughborough University Business School, UK
Professor Manucher Farhang
Lulea University of Technology, Sweden
Professor Krzysztof Fonfara
Wielkopolska Business School, Poland
Professor Nigel J. Holden
Copenhagen Business School, Denmark

Dr Irvine Clark III

James Madison University, USA
Dr John B. Ford
Old Dominion University, Norfolk, USA
Dr June Francis
Simon Fraser University, Burnaby, BC, Canada
Professor George T. Haley
University of New Haven, USA
Professor E. Kaynak
Pennsylvania State University, USA

Professor Constantine S. Katsikeas

University of Wales, UK

Professor Leonidas Leonidou

University of Cyprus, Cyprus

Sam Okoroafo
University of Toledo, USA

Professor Dale Littler

UMIST, UK

Professor Stan Paliwoda

University of Birmingham, UK

Professor Thomas J. Maronick

Towson State University, USA

Professor K.N. Rajendran

The University of Northern Iowa, USA

Professor Hans Muhlbacher

University of Innsbruck, Austria

Professor Ilkka Ronkainen

Georgetown University, USA

Dr Helen Perks
UMIST, UK

Professor Saeed Samiee

University of Tulsa, USA

Professor C.P. Rao

Kuwait University, Kuwait

Professor Bodo B. Schlegelmilch

Wirtschaftsuniversitat, Wien, Austria

Professor Ronald Savitt

University of Vermont, USA

Professor Vern Terpstra

University of Michigan, USA

Dr Vivienne Shaw
University of Otago, New Zealand

Professor Sandra Vandermerwe

Imperial College, University of London, UK

Dr K. Sivakumar
Lehigh University, Pennsylvania, USA
Dr Chris Styles
University of New South Wales, Australia
Dr Isabelle Szmigin
University of Birmingham, UK
Professor Michael J. Thomas
University of Strathclyde, UK
Dr P.M. Williamson
Liverpool John Moores University, UK
Professor James E. Wills Jr
University of Hawaii, USA

International Marketing Review

Vol. 20 No. 4, 2003
p. 332
# MCB UP Limited
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Guest editorial: research in international

new product development current
understanding and future imperatives
Helen Perks and Veronica Wong
Keywords Product development, Research,
Globalization
Successful new product and service
development increasingly relies on the ability
to adopt an international perspective,
throughout the development process itself, and
by targeting international or global markets,
rather than simply serving domestic customers.
Yet, although there exists an impressive body of
research concerning the management of new
product development, the evidence base with
respect to international (or global) new product
development practices and management is
largely in its infancy, and is, at best,
fragmented. This guest editorial provides a
synopsis of the main research streams in the
broad field of international new product
development, highlighting major gaps in
current knowledge and understanding. The
special issue is a modest attempt at tapping
current thoughts and research investigations in
this critical area, seeking, also, to stimulate
much-needed debate and further research. One
article examines whether international diversity
is positively associated with new product
development performance. Two articles tackle
the role that national culture plays in influencing
consumer acceptance of new products
(technology) on the one hand, and firms global
new product development approach on the
other. A final article investigates technology
transfer as a special case of new technology
adoption in developing markets.
A cross-national study of the relationship
between international diversification and
new product performance
Insik Jeong
Keywords International marketing,
Globalization, Product development,
National cultures, United States of America,
China
Does multinational expansion affect product
innovation performance? If so, does such a
relationship
between
international
diversification and performance vary

depending upon the size of the firm?

Focusing on the learning and experiential
advantages associated with international
diversification, we attempt to find answers to
these critical questions from a cross-national
perspective. Based on a survey of 179 US and
250 Chinese firms, we find that international
markets are important for both US and
Chinese firms, but to a greater extent among
US firms. The results also indicate that new
product performance can vary significantly
depending upon international diversity. While
US firms can generally expect better new
product performance with a growing level of
international diversification, Chinese firms
may experience deteriorating performance after
a certain threshold level. Finally, the firm size
effects appear to be significant among Chinese
firms, but not in the US sample.

Abstracts and
keywords

333

Does culture explain acceptance of new

products in a country? An empirical
investigation
Sengun Yeniyurt and Janell D. Townsend
Keywords Culture (sociology),
Product development, Social economics
This paper investigates the role of cultural
differences in the acceptance of new products,
as moderated by socio-economic variables. In
order to assess the relationship, an analysis
utilizing Hofstedes cultural dimensions, along
with
secondary
data
representing
socio-economic structure and the penetration
rate of new products was undertaken. The
results demonstrate that power distance and
uncertainty avoidance hinder the acceptance
of new products. Also found is that
individualism has a positive effect but the
masculinity dimension has no significant
effect on the diffusion of new products. The
findings regarding the moderation effects of
the socio-economic variables are mixed.
Designing global new product teams:
optimizing the effects of national
culture on new product development
K. Sivakumar and Cheryl Nakata
Keywords Product development,
Globalization, Team working, Culture (sociology)
Companies are increasingly bringing personnel
together into teams from different countries,

International Marketing Review

Vol. 20 No. 4, 2003
Abstracts and keywords
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334

physically and/or electronically, to develop

products for multiple or worldwide markets.
Called global new product teams (GNPTs),
these groups face significant challenges,
including cultural diversity. Differing cultural
values can lead to conflict, misunderstanding,
and inefficient work styles on the one hand, and
strong idea generation and creative problem
solving on the other. A study was conducted to
identify team compositions that would optimize
the effects of national culture so that product
development outcomes are favorable. This
began by developing a theoretical framework
describing the impact of national culture on
product development tasks. The framework
was then translated into several mathematical
models using analytical derivations and
comparative statics. The models identify the
levels and variances of culture values that
maximize product development success by
simultaneously considering four relevant
dimensions of GNPT performance. Next, the
utility of these models was tested by means of
numerical simulations for a range of team
scenarios. Concludes by drawing implications
of the findings for managers and researchers.
International technology transfer:
model and exploratory study in the
Peoples Republic of China
C. Anthony Di Benedetto, Roger J. Calantone
and Chun Zhang
Keywords Product technology,
Transfer processes, Behaviour, China
Adoption of foreign-developed technology by
firms in developing nations will accelerate the

speed by which they become globally

competitive in new product development. In
this study, we build and empirically test an
extension of the technology acceptance model
(TAM) the extended TAM applied to
the study of international transfer of product
technology. The extended TAM model derives
from the TAM of Davis et al., extensively used
in information technology applications. The
extended TAM is built on the premise that a
persons attitudes toward a behavior influence
their intentions to perform that behavior, and
behavioral intentions influence the actual
performance of the behavior. In the extended
TAM, perceived ease of use is operationalized
as two independent variables, technological
compatibility and ease of adoption, and
anticipated benefits of adoption are
operationalized in terms of technical and
economic benefits to the adopting firm.
These antecedents have direct and indirect
effects on attitudes toward the adoption of
foreign-developed technology by managers
from developing countries, and on behavioral
intentions to adopt such technology. We
conduct an exploratory empirical test of the
model using a convenience sample of
respondents representing several industries
in the Peoples Republic of China (PRC). Strong
support is found for all hypotheses in the
model. We conclude with research and
managerial
implications
regarding
international technology transfer and new
product development.

French abstracts

ditorial special sur invitation: recherche sur la mise au point de nouveaux

E
produits au niveau international niveau actuel de la comprehension et imperatifs
futurs
Helen Perks et Veronica Wong
Mots-cles Mise au point de produits, Recherche, Globalisation
La mise au point reussie de nouveaux produits et services depend de plus en plus de la capacite
dadopter une perspective internationale, tout au long du processus de mise au point, ainsi quen
visant des marches internationaux ou globaux, plutot quen desservant tout simplement des
clients nationaux. Cependant, bien quil existe une foule impressionnante de travaux de
recherche concernant la gestion de la mise au point de nouveaux produits, les preuves de base
ayant trait aux pratiques et a` la gestion de la mise au point internationale (ou globale) de
nouveaux produits en sont toujours a` leurs balbutiements et elles sont au mieux fragmentees.
Notre editorial, qui se compose darticles rediges par des invites, offre un resume des directions
principales poursuivies par les chercheurs dans le vaste domaine de la mise au point de
nouveaux produits au niveau international; il met laccent sur les lacunes principales qui
existent dans les connaissances et la comprehension actuelles. La revue speciale sefforce, de
manie`re modeste, dexploiter les pensees et recherches actuelles dans le domaine; elle cherche
egalement a` stimuler les debats et les recherches approfondies qui sont si necessaires. Lun des
articles examine la question de savoir si la diversite internationale est en rapport positif avec la
performance de mise au point de nouveaux produits. Deux articles analysent, dune part, le role
que la culture nationale joue dans linfluence exercee sur lacceptation de nouveaux produits (de
nouvelles techniques) par le consommateur et, dautre part, la methode de mise au point de
nouveaux produits par les entreprises, au niveau international. Le dernier article examine le
transfert technologique en tant que cas special de ladoption de nouvelles technologies dans les
marches en developpement.

Une etude transnationale sur le rapport qui existe entre la diversification

internationale et la performance des nouveaux produits
Insik Jeong
Mots-cles Mercatique internationale, Globalisation, Mise au point de produits,
Cultures nationales, Les Etats-Unis dAmerique, La Chine
Lexpansion multinationale affecte-t-elle la performance de linnovation de produits? Si cest le
cas, ce rapport entre la diversification internationale et la performance varie-t-il selon la taille de
lentreprise? Nous nous concentrons sur les lecons retirees de la diversification internationale et
sur les avantages que presentent ces experiences pour essayer de trouver des reponses a` ces
questions essentielles, dun point de vue trans-national. Nous nous fondons sur une enquete
realisee aupre`s de 179 firmes americaines et 250 firmes chinoises et nous trouvons que les
marches internationaux sont tout aussi importants pour les entreprises americaines que pour
les entreprises chinoises, mais quils revetent une plus grande importance pour les firmes
americaines. Les resultats indiquent egalement que la performance de nouveaux produits peut
varier de manie`re significative selon la diversite internationale. Tandis que les firmes
americaines peuvent, de manie`re generale, sattendre a` une meilleure performance de leurs
nouveaux produits, au fur et a` mesure que le niveau de leur diversification internationale
augmente, les firmes chinoises peuvent subir une deterioration de leur performance au-dela` dun
niveau-seuil. Pour terminer, les effets de la taille de lentreprise semblent etre importants aupre`s
des firmes chinoises, mais ce nest pas le cas pour les firmes constituant lechantillon americain.

French abstracts

335

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La culture explique-t-elle lacceptation de nouveaux produits dans un pays? Une

analyse empirique
Sengun Yeniyurt et Janell D. Townsend
Mots-cles Culture (sociologie), Mise au point de produits, Economie sociale
Larticle examine le role que jouent les differences culturelles dans lacceptation de nouveaux
produits, telle quelle est moderee par les variables socio-economiques. Afin devaluer le rapport,
les auteurs ont entrepris une analyse en se servant des dimensions culturelles de Hofstede, ainsi
que de donnees secondaires representant la structure socio-economique et le taux de penetration
de nouveaux produits. Les resultats demontrent que la distance de limpulsion et levitement de
lincertitude empechent lacceptation de nouveaux produits. Nous trouvons egalement que
lindividualisme a un effet positif, mais que la dimension de masculinite na aucun effet
significatif sur la diffusion de nouveaux produits. Les resultats concernant les effets de
moderation des variables socio-economiques sont mixtes.
Concevoir des equipes globales pour les nouveaux produits: optimalisation des
effets de la culture nationale sur la mise au point de nouveaux produits
K. Sivakumar et Cheryl Nakata
Mots-cles Mise au point de produits, Globalisation, Travail en equipe, Culture (sociologie)
Les societes regroupent de plus en plus leur personnel en equipes provenant de differents pays,
et ce de manie`re physique et /ou electronique, afin de mettre au point des produits destines a` des
marches multiples ou mondiaux. Appelees equipes globales pour les nouveaux produits (global
new product teams GNPTs), ces groupes se heurtent a` dimportants defis, notamment la
diversite culturelle. Les valeurs culturelles differentes peuvent dune part, entraner des conflits,
des malentendus et des styles de travail inefficaces mais, dautre part, elles sont capables
dengendrer de puissantes idees et de resoudre les proble`mes de manie`re creative. Une etude fut
entreprise afin didentifier les compositions dequipes qui optimaliseraient les effets de la culture
nationale de sorte que les resultats de la mise au point des produits soient favorables. Nous
avons commence par elaborer une structure theorique qui decrit limpact de la culture nationale
sur les taches qui constituent la mise au point des produits. Nous avons ensuite traduit cette
structure en plusieurs mode`les mathematiques au moyen de derivations analytiques et de
statistiques comparees. Les mode`les identifient les niveaux et les variances des valeurs
culturelles qui maximalisent le succe`s de la mise au point des produits, en considerant
simultanement quatre dimensions pertinentes de la performance de lequipe GNPT. Nous avons
ensuite mis lutilite de ces mode`les a` lessai au moyen de simulations numeriques pour toute une
serie de scenarios dequipes. Pour terminer, nous avons deduit les implications de nos resultats
pour les directeurs dentreprises et les chercheurs.
Transfert international de la technologie: etude de mode`les et etude explorative en
Republique Populaire de Chine
C. Anthony Di Benedetto, Roger J. Calantone et Chun Zhang
Mots-cles Technologie des produits, Processus de transfert, Comportement, La Chine
Ladoption de la technologie mise au point a` letranger par des entreprises etablies dans des
nations en voie de developpement va augmenter la vitesse avec laquelle elle devient competitive
au niveau international dans la mise au point de nouveaux produits. Dans letude que voici,
nous avons elabore, puis mis a` lessai de manie`re empirique, une extension du mode`le
dacceptation de la technologie (technology acceptance model TAM) le mode`le TAM elargi
applique a` letude du transfert international de la technologie des produits. Le mode`le TAM
elargi est derive du mode`le TAM de Davis et al., largement utilise dans les applications
informatiques. Le mode`le TAM elargi repose sur le principe que les attitudes dune personne
envers un certain comportement influencent leurs intentions dexecuter ce comportement, et les
intentions comportementales influencent lexecution meme du comportement. Dans le mode`le

TAM elargi, la facilite dutilisation percue est rendue operationelle sous forme de deux variables
independantes, a` savoir la compatibilite technologique et la facilite dadoption, et les avantages
attendus de ladoption sont rendus operationnels en termes davantages techniques et
economiques pour la firme qui adopte la technologie. Ces antecedents ont des effets directs et
indirects sur les attitudes envers ladoption, par les directeurs dentreprises, de la technologie
mise au point a` letranger dans des pays en voie de developpement, ainsi que sur les intentions
comportementales dadopter cette technologie. Nous realisons un essai empirique exploratoire
sur le mode`le, en nous servant dun echantillon commode de repondants, representant plusieurs
industries en Republique Populaire de Chine (Peoples Republic of China PRC). Nous
decouvrons des preuves solides pour toutes les hypothe`ses renfermees dans le mode`le. Pour
terminer, nous indiquons quelles sont les implications pour les directeurs dentreprises et les
chercheurs en ce qui concerne le transfert international de la technologie et la mise au point de
nouveaux produits.

French abstracts

337

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Spanish abstracts
Editorial invitada: investigacion sobre el desarrollo internacional de productos
nuevos entendimiento actual y cuestiones imperativas futuras
Helen Perks y Veronica Wong
Palabras clave Desarrollo de productos, Investigacion, Globalizacion
El desarrollo satisfactorio de productos y servicios nuevos depende cada da mas de la
habilidad para adoptar una perspectiva internacional a traves de todo el proceso de desarrollo
mismo, y para dirigirse a mercados internacionales o globales, en lugar de surtir simplemente a
los clientes nacionales. Sin embargo, aunque existe un contingente impresionante de
investigacion sobre la gestion del desarrollo de productos nuevos, la base de evidencia con
respecto a las practicas y la gestion del desarrollo internacional (o global) de productos nuevos,
se encuentra mayormente en su fase infantil, y es, como poco, fragmentada. Nuestra editorial
invitada ofrece una sinopsis de las principales ramas de investigacion en el amplio campo del
desarrollo internacional de productos nuevos, destacando huecos importantes en el
conocimiento y la comprension actuales. La edicion especial es un intento modesto de
interceptar el pensamiento y las investigaciones actuales en esta area crtica, intentando al
mismo tiempo estimular un muy necesitado debate, as como mas investigacion. Un artculo
examina si la diversidad internacional se asocia positivamente con el rendimiento del desarrollo
de productos nuevos. Por una parte, dos artculos tratan la funcion que la cultura nacional
desempena a la hora de influir sobre la aceptacion del consumidor de productos nuevos
(tecnologa), y por otra, el planteamiento del desarrollo global de productos nuevos de las
empresas. Un ultimo artculo investiga la transferencia de tecnologa como caso especial de la
adopcion de tecnologa nueva en mercados en vas de desarrollo.
Un estudio transnacional de la relacion entre la diversificacion internacional y el
rendimiento de productos nuevos
Insik Jeong
Palabras clave Marketing internacional, Globalizacion, Desarrollo de productos,
Culturas nacionales, Los Estados Unidos de America, China
Afecta la expansion multinacional el rendimiento de la innovacion del producto? En caso
afirmativo, vara dicha relacion entre la diversificacion internacional y el rendimiento
dependiendo del tamano de la empresa? Enfocandonos en las ventajas de aprendizaje y de
experiencia asociadas con la diversificacion internacional, intentamos encontrar respuestas a
estas cuestiones crticas desde una perspectiva transnacional. Basandonos en una encuesta de
179 empresas estadounidenses y 250 empresas chinas, descubrimos que los mercados
internacionales son importantes tanto para las empresas estadounidenses como chinas, pero
aun mas para las estadounidenses. Los resultados tambien indican que el rendimiento de
productos nuevos puede variar significativamente dependiendo de la diversidad internacional.
Mientras que las empresas estadounidenses pueden esperar generalmente un mejor rendimiento
de productos nuevos con un nivel creciente de diversificacion internacional, las empresas chinas
pueden experimentar un deterioro del rendimiento a partir de un cierto nivel umbral.
Finalmente, los efectos del tamano de la empresa parecen ser significativos entre las empresas
chinas, pero no en la muestra estadounidense.

International Marketing Review

Vol. 20 No. 4, 2003
Spanish abstracts
# MCB UP Limited
0265-1335

Explica la cultura la aceptacion de nuevos productos en un pas?

Una investigacion emprica
Sengun Yeniyurt y Janell D. Townsend
Palabras clave Cultura (sociologa), Desarrollo de productos, Economa social
Este trabajo investiga la funcion de las diferencias culturales en la aceptacion de productos
nuevos, como algo moderado por variables socioeconomicas. Con objeto de evaluar la relacion,

se adopto un analisis que utiliza las dimensiones culturales de Hofstede, junto con datos
secundarios que representan la estructura socioeconomica y el ndice de penetracion de
productos nuevos. Los resultados demuestran que la distancia del impulso y el evitar la
incertidumbre impiden la aceptacion de productos nuevos. Tambien se descubrio que el
individualismo tiene un efecto positivo, pero la dimension de la masculinidad no tiene un efecto
significativo sobre la difusion de productos nuevos. Los descubrimientos relacionados con los
efectos moderadores de las variables socioeconomicas son mixtos.

Spanish
abstracts

339

Diseno de equipos globales de productos nuevos: optimizacion de los efectos de la

cultura nacional sobre el desarrollo de productos nuevos
K. Sivakumar y Cheryl Nakata
Palabras clave Desarrollo de productos, Globalizacion, Trabajo de equipo, Cultura
(sociologa)
Progresivamente, las empresas estan reuniendo al personal para formar equipos de distintos
pases fsica y/o electronicamente, con objeto de desarrollar productos para mercados
multiples o mundiales. Estos grupos, denominados equipos globales de productos nuevos
(GNPTs), se enfrentan a unos retos significativos, incluyendo la diversidad cultural. Por una
parte, los valores culturales divergentes pueden conducir a conflictos, malentendidos y estilos
de trabajo ineficientes, y por otra, a la generacion de ideas fuertes y a la resolucion creativa
de problemas. Se realizo un estudio destinado a identificar la composicion de equipos que
optimice los efectos de la cultura nacional, para que los resultados del desarrollo del producto
sean favorables. Comenzamos por desarrollar un marco teorico describiendo el impacto de la
cultura nacional sobre las tareas de desarrollo de productos. Seguidamente, el marco se
tradujo en varios modelos matematicos utilizando derivaciones analticas y estatica
comparativa. Los modelos identifican los niveles y las varianzas de los valores culturales
que maximizan el exito del desarrollo de productos mediante la consideracion simultanea de
cuatro dimensiones oportunas de rendimiento del GNPT. Luego, se ensayo la utilidad de estos
modelos mediante simulaciones numericas para una gama de escenarios de equipos.
Concluimos ofreciendo implicaciones de nuestros descubrimientos para gerentes e
investigadores.

Transferencia de tecnologa internacional: estudio exploratorio y de modelo en la

Republica Popular China
C. Anthony Di Benedetto, Roger J. Calantone y Chun Zhang
Palabras clave Tecnologa de productos, Procesos de transferencia, Comportamiento, China
La adopcion de tecnologa desarrollada en el extranjero por parte de empresas de naciones en
vas de desarrollo acelerara la velocidad a la que estas se convertiran en globalmente
competitivas, con respecto al desarrollo de productos nuevos. En este estudio, construimos y
ensayamos empricamente una extension del modelo de aceptacion de tecnologa (TAM) el
TAM extendido aplicado al estudio de la transferencia internacional de tecnologa de
productos. El modelo TAM extendido deriva del TAM de Davis et al., utilizado ampliamente en
aplicaciones informaticas. El TAM extendido se edifica sobre la premisa de que las actitudes de
una persona hacia un comportamiento influyen sobre sus intenciones de realizar dicho
comportamiento, y las intenciones conductistas influyen sobre la realizacion real del
comportamiento. En el TAM extendido, la facilidad percibida de uso se operacionaliza como

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dos variables independientes; la compatibilidad tecnologica y facilidad de adopcion, y los

beneficios anticipados de la adopcion se operacionalizan en terminos de los beneficios tecnicos y
economicos para la empresa adoptante. Estos antecedentes tienen efectos directos e indirectos
sobre las actitudes hacia la adopcion de tecnologa desarrollada en el extranjero por parte de
gerentes de pases en vas de desarrollo, y sobre las intenciones conductistas de adoptar dicha
tecnologa. Nosotros realizamos un ensayo emprico exploratorio del modelo utilizando una
muestra de conveniencia de participantes que representaban a varias industrias de la Republica
Popular China (RPC). Se encontro un apoyo firme para todas las hipotesis del modelo.
Concluimos con investigacion e implicaciones gestoras relacionadas con la transferencia
internacional de tecnologa y el desarrollo de productos nuevos.

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The current issue and full text archive of this journal is available at
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Guest editorial: research in

international new product
development current
understanding and future
imperatives
Helen Perks
Manchester School of Management, UMIST, Manchester, UK, and

Veronica Wong
Aston Business School, Birmingham, UK
Keywords Product development, Research, Globalization
Abstract Successful new product and service development increasingly relies on the ability to
adopt an international perspective, throughout the development process itself, and by targeting
international or global markets, rather than simply serving domestic customers. Yet, although
there exists an impressive body of research concerning the management of new product
development, the evidence base with respect to international (or global) new product development
practices and management is largely in its infancy, and is, at best, fragmented. This guest editorial
provides a synopsis of the main research streams in the broad field of international new product
development, highlighting major gaps in current knowledge and understanding. The special issue
is a modest attempt at tapping current thoughts and research investigations in this critical area,
seeking, also, to stimulate much-needed debate and further research. One article examines whether
international diversity is positively associated with new product development performance. Two
articles tackle the role that national culture plays in influencing consumer acceptance of new
products (technology) on the one hand, and firms global new product development approach on the
other. A final article investigates technology transfer as a special case of new technology adoption
in developing markets.

International Marketing Review

Vol. 20 No. 4, 2003
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DOI 10.1108/02651330310485135

The notion that markets are becoming increasingly internationalized and

globalized is not new. In the past two decades, this has been an observable
trend that has posed both difficulties and opportunities for a host of businesses
in both manufacturing and service sectors. In the context of innovation and,
more specifically, new product development, organisations have had to grapple
with more demanding regional and global customers and a rising level of
international competition, suppliers and resource markets, not forgetting the
pressure to keep pace with rapid technological change and modern advances in
information and communication technologies. Realistically, firms that seek to
excel cannot ignore these challenges. Instead, they can ensure survival by
capitalising on internationalization opportunities. Previous research suggests
that companies that adopt an international and world-market focus when
developing and commercializing new technologies or products achieve higher

market share and financial performance than those that have a narrower,
domestic market focus (e.g. Kleinschmidt and Cooper, 1988). Hence, firms
propensity to enhance the commercial returns on new product development is
raised through targeting international or global markets rather than simply
serving domestic customers. In order to create value for international or global
customers, managers need to formulate and implement appropriate new
product development strategies and processes to meet the needs and demands
of international markets. They have to be market-responsive, learning to tap
global resource markets and to build technical and marketing knowledge to
facilitate the creation and commercialisation of innovations for multiple
country markets. They also have to be adept at globally disseminating the new
product development (NPD) effort, leveraging company and third party
resources, assets and capabilities at a global level in order to exploit
internationally dispersed capabilities and to maximise the returns on
commercialising innovations on an international scale.
To a large extent, there is an established knowledge base concerning the
management of new product development. There is an impressive body of
literature on the critical success factors in product, process, or service
innovation (see, for example, Cooper, 1979; Zirger and Maidique, 1990; de
Brentani, 1991, Cooper and Kleinschmidt, 1995). In addition, there are extensive
reviews of product innovation practices and strategies, and their antecedents
and performance consequences across a wide range of industries and countries
(for relevant reviews, see Montoya-Weiss and Calantone, 1994; Griffin and
Page, 1996). Surprisingly, however, and despite the accelerating trend towards
internationalization (globalization), research on international (global) product
innovation management and best practice remains relatively limited and
fragmented. A disproportionate number of past studies have tended to adopt a
domestic market focus and orientation (e.g. Griffin, 1997). Or, data have been
derived primarily from samples of Northern American and Canadian
businesses (e.g. Kleinschmidt and Cooper, 1988). However, there is growing
concern that strategies, structures and processes for developing and
commercialising new technologies and products for domestic markets may
not be entirely suitable to meet the demands of businesses serving international
(global) markets. Also worrying is the dearth of cross-national evidence-based
understanding of the links between firms international diversity and new
product development performance. Are the implied positive associations
between international (global) orientation and innovation performance
generalizable to all firms irrespective of their country of origin? What are the
determinants and outcomes of international (global) product development
strategies and processes and how might this knowledge guide international
product managers new product launch decisions? Bearing in mind that more
firms are interested in launching products in multiple countries or even on a
global basis (Dekimpe et al., 2000, p. 50), this is an important gap in the
literature. Importantly, no matter how effective or efficient the internal product

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development process, unless an appropriate market-led strategy is selected

(and implemented) to roll out the product in its intended geographic
market(s), international new product success may be compromised.
Much current and past research on the management of innovation in an
international context emphasises the generation of new technologies (e.g.
R&D). Research questions have been addressed by scholars from multiple
disciplines, including economics, marketing, international business, R&D
management, strategic management and organisational behaviour.
Collectively, these disparate, though not always unrelated, scholarly streams
have enhanced our understanding of international R&D management. The
economics, R&D and international business literature have addressed the
process of internationalisation of R&D and management of foreign R&D units
(e.g. Hakanson and Zander, 1988; Florida, 1997). Another stream has examined
the characteristics and drivers of national innovation systems and impacts on
productivity and economic growth (e.g. Hoppe, 1993; Kedia et al., 1992).
A third line of enquiry has focused on cross-cultural differences and
similarities in firms new product development processes and performance (e.g.
Song and Parry, 1997; Mishra et al., 1996; Souder et al., 1997). However, with a
few exceptions (Chryssochoidis and Wong, 1998, 2000), these studies have
largely compared new product development practices of firms from different
countries (e.g. the USA, Korea, Japan, Holland, the UK) as opposed to
identifying the content and outcomes of international product innovation
strategies and processes. Nonetheless, some of the fastest growing markets,
such as mobile communication hardware and service products, motor cars, PCs
and Internet services, are found in the emerging and newly industrialising
countries in Asia. International new product developers targeting these
markets would benefit from a deeper understanding of the drivers of
cost-effective commercialisation of innovations in these markets. At the same
time, firms in countries such as China, Taiwan and South Korea are paying
more attention to designing and introducing new products to global markets.
Are there lessons that can be learned from evaluating the new product
practices of international firms in these economies? As mentioned earlier,
although previous authors have examined new product development practices
from a cross-national comparative context, much of this line of investigation
has centred on understanding new product success drivers within the context
of domestic, as opposed to international, market commercialisation outcomes.
In view of the potential value of distinguishing between best practices within
and across national boundaries, research needs to widen the international
comparative evidence base by addressing the antecedents and outcomes of
international (global) new product development approaches of businesses.
A fourth stream examines how multinational enterprises (MNEs) manage
innovation across borders from a broader organisational, as opposed to
functional (e.g. R&D), structural context (e.g. Goshal and Bartlett, 1988; Nohria
and Goshal, 1997). More recently, researchers have begun to address and

characterise the nature of global R&D or new product project teams (e.g.
McDonough et al., 2001). For example, Chiesa (2000) attempts to develop a
taxonomy for global R&D projects based on the extent of specialisation of
project structures and the level of integration across HQ, subsidiaries and
collaborative R&D networks. However, his focus, while empirical, remains
exploratory, with conclusions drawn from observations of practices in a limited
sample of MNCs from the USA, Europe and Japan. In addition, research also
has focused on the global innovation process as a communications process
involving flows of knowledge between players within the product development
team (Moenaert et al., 2000).
Studies addressing the international commercialisation strategies and
implementation processes for innovations are lamentably scarce. There is a
substantial marketing literature on cross-national innovation adoption and
diffusion patterns and why differences occur in the diffusion patterns across
countries. However, this literature is dominated by the econometric modelling
of adoption and diffusion patterns, typically non-linear least squares estimation
of the Bass (1969) model, to estimate internal (interpersonal) and external (mass
media) communications effects. Recently, these models are being questioned
due to their limited focus on coefficients of communication influences, instead
of analysing other salient determinants of market take-up, such as firms
product-market strategies and operational decisions (Mahajan et al., 2000).
Importantly, there is growing concern expressed in the marketing and product
innovation management literature over the gaps in understanding of strategies
and processes for achieving effective international (global) commercialisation
of new products and technologies.
It is against this background that the idea of a special issue on international
new product development research for the IMR was spawned. In our pursuit to
tap current thoughts and the research evidence base relating to this emerging,
but hitherto neglected, new product management field, we are consistent with
the sentiments extolled in recent special issues on Marketing and product
innovation and Internationalization in innovation, published, respectively,
by the Journal of Product Innovation Management (2000) and Journal of
Market Research (1997) there is great need for more systematic research to
advance understanding of the management of international (global) new
product development.
Not all the questions we posed above are addressed in their entirety by the
articles accepted for this special issue. However, we hope that this issue goes
some way towards tackling these questions and stimulates further debate and
research in this critical area. One article examines whether international
diversity is positively associated with new product development performance,
drawing conclusions from a comparative study of US and Chinese businesses.
Two articles tackle an important area the role that national culture plays in
influencing consumer acceptance of new products (technology) on the one
hand, and firms global new product development approach on the other. One

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other article investigates technology transfer as a special case of new

technology adoption in overseas developing markets. We are delighted to note
that two of these articles, and a large number of the manuscripts submitted for
the special issue, address various facets of international new product
development involving China. This reflects the current academic and
practitioner interest in the emerging role of this nation, not just as a
consumer of new products, but as an increasingly powerful player in
developing international product development capabilities. Below, we
introduce the articles and briefly outline their major contributions to
advancing knowledge of international new product development. We hope
you enjoy reading this special issue.
In this issue
In the first article, Insik Jeong addresses an important gap in the literature
the implications of a firms international diversity for new product performance
in overseas markets. This work makes a contribution in drawing attention to
potential cross-national differences in the learning and experiential effects of
multinational expansion on product innovation performance. In a survey of 179
US and 250 Chinese firms, the author assesses the international diversity
among these two groups of firms and new product outcome in terms of
customer acceptance, profitability, sales and technical performance. In addition
to identifying cross-national differences, he also explores the role of firm size in
facilitating the relationship between multinational expansion and new product
performance. The study shows that US firms were more highly diversified with
respect to the proportion of foreign market sales to total company sales than
Chinese firms in the sample. Whereas US firms achieved better new product
performance with a growing level of international diversity, Chinese firms may
expect higher new product performance initially, but will potentially
experience deteriorating performance when they expand beyond a certain
threshold level. This unique international diversity-new product performance
pattern observed for Chinese firms suggest that international diversification
may not always bring about higher performance for firms domiciled in
different countries. The differences in the international diversity-performance
effects observed for US and Chinese firms may be explained by differences in
learning and experience effects which affect the new product efforts of US and
Chinese firms. The article also shows that US firms can incorporate the benefits
of international expansion into their new product development efforts,
irrespective of their size. However, small Chinese firms are less likely than their
larger counterparts to achieve higher new product performance with a growing
level of international diversification.
The second article by Sengun Yeniyurt and Janell Townsend revisits the role
of cultural attributes and socio-economic factors in influencing the adoption of
new products by consumers in a country. Applying Hofstedes four-dimension
cultural framework, the authors examine the effects of power distance,

individualism, uncertainty avoidance and masculinity on the acceptance rates

of personal computers, cellular phones and the Internet by consumers in 56
countries. They argue that, even in the age of globalisation, culture plays a
significant role in influencing new product adoption. Specifically,
individualism has a positive relationship, whereas power distance and
uncertainty avoidance shows a negative association, with new product
diffusion rates. However, masculinity is negatively related to penetration rates,
but the association is not statistically significant. They also show that the
significant relationships between these cultural dimensions and penetration
rates are moderated to a greater or lesser extent by some socio-economic
variables. Economic well-being and urbanisation rates appear to reinforce the
significant effects of culture and diffusion rates. By contrast, literacy levels and
openness of the economy to foreign goods tend to dampen the cultural impacts
on new product acceptance. These findings suggest that managers responsible
for international new product introduction should consider not only the
implications of cross-cultural differences for international market launches, but
also pay greater attention to the potential interactions between cultural and
socio-economic factors when projecting demand and adapting multi-country
launch strategies for new products.
The third article, offered by K. Sivakumar and Cheryl Nakata, also
addresses the effects of national culture on international new product
development outcomes. Unlike the previous article that examines cultural
impacts on consumers adoption of new products, the authors study how
culture dimensions affect the development and launch of new products. The
key question posed is: are there optimal global culture-based new product team
compositions that will maximise new product development success? The
authors generate a series of optimisation models that are subsequently tested
through some 540 simulations characterising different project situations
confronting GNPTs. They show how global new product teams (GNPTs) might
be configured to leverage the heterogeneity and differing individual levels
(intensity) of culture values to achieve new product development success. In
addition, in their analyses, the authors incorporate the conflicting effects of
culture dimensions on the front-end (initiation) and back-end (implementation)
stages of the innovation process and the relative importance of these two stages
in radical versus less radical product development projects. The research
makes an important contribution in positing a new conceptual model for new
product development in an international context. That is, culture dimensions
(individualism, uncertainty avoidance, masculinity, power distance and
long-term orientation) can facilitate or impede the two phases of new product
development (initiation and implementation). Moreover, the framework
suggests that optimality of new product outcomes results from
simultaneously considering the intensity of culture values, heterogeneity of
culture values, consistency of culture effects across the two development

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phases and newness of the innovation to the firm and market, all of which
impact on new product success. In terms of managerial utility, the authors
discuss how the numerical simulations may be used to guide team composition
processes.
In the final article, Anthony Di Benedetto, Roger Calantone and Chun Zhang
investigate international technology transfer to developing nations by
extending and applying the technology acceptance model (TAM).
International technology transfer is an important part of the increasing
capability of firms located in developing countries to develop globally
competitive products. The extended TAM model draws on behavioural
adoption criteria familiar to the product diffusion/adoption literature. In
particular, the authors contend that a persons attitude toward a behaviour
influences their intentions to perform that behaviour and such intentions affect
actual performance of the behaviour. The antecedent variables of ease of use
and anticipated benefits of adoption are usefully added. These are important
dimensions for the specific situation of international product technology
transfer and rapid adoption. The model is tested on a sample of 500 firms in
China. The application to developing countries is a novel and valuable
contribution. The findings support their hypothesised relationships among the
variables, advancing understanding of managerial attitude formation and
behavioural intentions towards technology transfer. In particular the results
emphasise the importance of perceived ease of use, rather than perceived
usefulness, in influencing a managers intention to adopt new technology. In
developing countries, firms concerns are likely to centre on developing
learning capabilities and finding appropriate ways to adopt new technology,
rather than on understanding perceived benefits of the technology, which are
usually well documented and understood. By highlighting the critical
behavioural factors likely to influence managers decision-making processes,
Di Benedetto et al.s study provides useful guidance for managers marketing
new technology to firms in developing countries. It suggests that the latest and
newest technology is unlikely to be embraced easily by overseas firms in
developing countries unless managers make efforts to build in required
features or performance levels that address the adoption criteria considered.
References
Bass, F.M. (1969), A new product growth model for consumer durables, Management Science,
Vol. 15, January, pp. 215-27.
Chiesa, V. (2000), Global R&D project management and organization: a taxonomy, Journal of
Product Innovation Management, Vol. 17, No. 5, pp. 341-59.
Chryssochoidis, G.M. and Wong, V. (1998), Rolling out new products across country markets: an
empirical study of causes of delays, Journal of Product Innovation Management, Vol. 15,
pp. 16-41.
Chryssochoidis, G.M. and Wong, V. (2000), Customization of product technology and
international new product success: the mediating effects of timeliness in product
development and rollout, Journal of Product Innovation Management, Vol. 17, pp. 268-85.

Cooper, R. (1979), The dimensions of industrial new product success and failure, Journal of
Marketing, Vol. 43, Summer, pp. 93-103.
Cooper, R. and Kleinschmidt, E.J. (1995), Benchmarking the firms critical success factors in new
product development, Journal of Product Innovation Management, Vol. 12, No. 5,
pp. 374-91.
de Brentani, U. (1991), Success factors in developing new business services, European Journal
of Marketing, Vol. 25, No. 2, pp. 33-59.
Dekimpe, M.G., Parker, P.M. and Sarvary, M. (2000), Globalization: modeling technology
adoption timing across countries, Technology Forecasting and Social Change, Vol. 63,
pp. 25-42.
Florida, R. (1997), The globalization of R&D: results of a survey of foreign affiliated R&D
laboratories in the USA, Research Policy, Vol. 26, pp. 85-103.
Goshal, S. and Bartlett, C.A. (1988), Innovation processes in multinational corporations, in
Tushman, M.L. and Moore, W.L. (Eds), Readings in the Management of Innovation, 2nd ed.,
Harper Business, New York, NY, pp. 499-518.
Griffin, A. (1997), PDMA research on new product development practices: updating trends and
benchmarking best practices, Journal of Product Innovation Management, Vol. 14,
pp. 429-58.
Griffin, A. and Page, A. (1996), PDMA success measurement project: recommended measures
for product development success and failure, Journal of Product Innovation Management,
Vol. 13, pp. 478-96.
Hakanson, L. and Zander, U. (1988), International management of R&D: the Swedish
experience, R&D Management, Vol. 18, No. 3.
Hoppe, M.H. (1993), The effects of national culture on the theory and practice of managing R&D
professionals abroad, R&D Management, Vol. 23, pp. 313-25.
Journal of Market Research (1997), special issue on Innovation and new products, Journal of
Market Research, Vol. 34, February.
Journal of Product Innovation Management (2000), special issue on the subject of
Internationalization of innovation, Journal of Product Innovation Management, Vol. 17
No. 5.
Kedia, B.L., Keller, R.T. and Julian, S.D. (1992), Dimensions of national culture and the
productivity of R&D units, High Technology Management Research, Vol. 3, pp. 1-18.
Kleinschmidt, E.J. and Cooper, R. (1988), The performance of international orientation on
product innovation, European Journal of Marketing, Vol. 22, No. 1, pp. 56-71.
McDonough, W., Kahn, K. and Barczak, G. (2001), An investigation of the use of global, virtual
and relocated new product development teams, Journal of Product Innovation
Management, Vol. 18, No. 2, pp. 110-20.
Mahajan, V., Muller, E. and Wind, Y. (2000), New-product diffusion models: from theory to
practice, in Mahajan, V., Muller, E. and Wind, Y. (Eds), New-product Diffusion Models,
Kluwer Academic Publishers, Boston, MA, pp. 3-24.
Mishra, S., Dongwook, K. and Hoon, L.D. (1996), Factors affecting new product success:
cross-country comparisons, The Journal of Product Innovation Management, Vol. 13,
No. 6, pp. 530-50.
Moenaert, R.K., Caeldries, F., Lievens, A. and Wauters, E. (2000), Communication flows in
international product innovation teams, Journal of Product Innovation Management,
Vol. 17, No. 5, pp. 360-77.

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Montoya-Weiss, M.M. and Calantone, R. (1994), Determinants of new product performance: a

review and meta-analysis, Journal of Product Innovation Management, Vol. 11,
November, pp. 397-417.
Nohria, N. and Goshal, S. (1997), The Differentiated Network, Jossey-Bass, San Francisco, CA.
Song, X.M. and Parry, M.E. (1997), A cross-national comparative study of new product
development processes: Japan and the United States, Journal of Marketing, Vol. 61, pp. 1-18.
Souder, W.E., Buisson, D. and Garrett, T. (1997), Success through customer-driven new product
development: a comparison of U.S. and New Zealand small entrepreneurial high
technology firms, Journal of Product Innovation Management, Vol. 14, pp. 459-72.
Wong, V. (2002), Antecedents of international new product rollout timeliness, International
Marketing Review, Vol. 19, pp. 120-32.
Zirger, B.J. and Maidique, M.A. (1990), A model of new product development: an empirical test,
Management Science, Vol. 36, July, pp. 867-93.
About the Guest Editors
Dr Helen Perks (BA, MBA, PhD, MCIM, FRSA) is with the Marketing Group at the Manchester
School of Management, UMIST, UK. She is Chair of the Product Development Management
Association (PDMA) UK and Ireland, the international affiliate of the global US-based PDMA.
Previous to her academic career, she held international marketing positions with Olivetti, Italy
and Acorn Computers, UK and spent several years as a European marketing consultant for the
IT industry with the PA Consulting Group. Her research interests focus on new product and
service development, behavioural aspects of inter-firm collaboration and international product
management. She has published widely in academic journals such as Industrial Marketing
Management, Journal of Business and Industrial Marketing and European Management Journal.
Veronica Wong (BSc, MBA, PhD, FCIM, FRSA, ILTM) is Professor of Marketing and Head of
the Marketing Research Group at Aston Business School. Her research interests lie in product
management, international new product development and global launch strategies, with
particular emphasis on high-technology sectors. She has written over 60 articles for refereed and
professional journals as well as contributions to research and managerial books. Her work has
appeared in Journal of International Business Studies, Journal of Product Innovation
Management, Industrial Marketing Management, International Marketing Review and
European Journal of Marketing, among others. She has also written Europes best-selling
marketing text, Principles of Marketing (3rd European edition), co-authored with John Saunders
at Aston Business School and American colleagues, Philip Kotler and Gary Armstrong. The text
has been translated into seven other languages including German, Dutch, Spanish, Greek,
Ukrainian, Polish and Russian. Veronica is also a member of the ESRC Virtual Research College
for Management, Psychology, Linguistics, and Education (MPLE College), the European
Marketing Academy Executive Board and Chair of the European Marketing Academy Doctoral
Colloquium Organising Committee.
Special issue referees
Dr Roger Bennett (London Guildhall University, UK)
Jeff Butler (Manchester Business School, UK)
Professor Paul Chao (University of Northern Iowa, USA)
Professor Dale Littler (UMIST, UK)
Professor K. Sivakumar (Lehigh University, Pennsylvania, USA)
Professor Joe Tidd (University of Sussex, UK)
Professor Nikolaos Tzokas (University of East Anglia, UK)
Professor Ursula Weisenfeld (University of Cambridge, UK)
Dr Uno Yamin (UMIST, UK)

The Emerald Research Register for this journal is available at

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The current issue and full text archive of this journal is available at
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A cross-national study of the

relationship between
international diversification
and new product performance

Diversification
and performance

353

Insik Jeong
Department of Business Administration, Hankuk University of
Foreign Studies, Seoul, South Korea
Keywords International marketing, Globalization, Product development, National cultures,
United States of America, China
Abstract Does multinational expansion affect product innovation performance? If so, does such a
relationship between international diversification and performance vary depending upon the size of
the firm? Focusing on the learning and experiential advantages associated with international
diversification, we attempt to find answers to these critical questions from a cross-national
perspective. Based on a survey of 179 US and 250 Chinese firms, we find that international
markets are important for both US and Chinese firms, but to a greater extent among US firms.
The results also indicate that new product performance can vary significantly depending upon
international diversity. While US firms can generally expect better new product performance with a
growing level of international diversification, Chinese firms may experience deteriorating
performance after a certain threshold level. Finally, the firm size effects appear to be significant
among Chinese firms, but not in the US sample.

Introduction
Over the past decades, both managers and academicians have witnessed an
irreversible trend toward globalization of economic activities. Some even
argued that national markets have become so homogenized that firms can
market identical products and services around the globe (Levitt, 1983; Ohmae,
1990). Spurred by the homogenization of consumer tastes across countries, the
abolition of trade and non-trade barriers, the rapid technological advancement
in communication and transportation, and the rising economic standard in
many countries, todays firms increasingly seek product-market opportunities
beyond the domestic market.
These environmental changes underscore the need for researchers to further
take a global perspective in their new product development (NPD) research. It
appears, though, the globalization issue has not gained sufficient momentum to
make an empirically drawn conclusion with respect to the utility of a firms
multinational expansion for product innovation (Douglas and Craig, 1992). We
The author gratefully acknowledges the funding provided by the Center for International
Business Education and Research at the University of South Carolina and the Strategic Research
Grant #7000825 of the City University of Hong Kong.

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started our investigation from a very simple, yet crucial, question for both
managers and academic researchers, i.e. whether diversification across
national markets helps the firm improve its new product performance.
Across disciplines, academic research has long included ideas that relate a
firms international expansion to organizational performance (Ayal and Jif,
1979; Behrman and Fischer, 1980; Hymer, 1976; Keegan, 1969; Vernon, 1971).
The key advantages for a firm of engaging in global markets, as opposed to
purely domestic markets, derive from its ability to leverage various resources
and proprietary assets across multiple markets (Bartlett and Ghoshal, 1989;
Craig and Douglas, 2000; Kogut, 1985). Further, recent research points out that a
firms expansion into international markets will help the firm accrue substantial
benefits and advantages from its multinationality, which in turn should enhance
organizational performance (Geringer et al., 2000; Hitt et al., 1997). In other
words, the firms international diversity per se matters, positively.
The objective of this study is to explore the implications of international
diversification for product development and management. To our knowledge,
no prior study has specifically investigated the impact of multinational
expansion on new product performance. Based on large-scale surveys of
manufacturing firms in the USA and China, we first examine the importance of
international markets by assessing the extent of international diversity among
the sampled firms. Second, we examine whether multinational expansion
relates to superior performance of new products in the global market. Across
varying levels of international diversity, we compare new product performance
on four different dimensions. We particularly highlight the learning and
experiential advantages associated with multinational expansion as an
important means to enhancing the performance of new products. Next, we
explore the role of firm size in facilitating the international
diversification-performance relationship. We compare whether small and
large firms can achieve similar results through diversifying into international
markets. Finally, we examine if any significant cross-national differences exist
in terms of the linkage between international diversification and performance.
Background
The globalization imperative in product development and management
In the NPD literature, the globalization issue in general has received a limited
amount of attention until recently (De Meyer and Mizushima, 1989; Moenaert
et al., 2000). An implicit assumption has been that new products are typically
developed for, and then marketed within, a single national market. Such a
domestic-market orientation is evidenced, for instance, in the review of the
literature by Calantone and di Benedetto (1990), in which very few studies were
found to deal with product innovation issues related to international markets.
In parallel with the globalization of markets and also given the increasing
number of firms seeking overseas market opportunities (Levitt, 1983; Ohmae,

1985), an important question remains concerning the implications of going

Diversification
international for product innovation. Specifically, whether multinational and performance
expansion would bring significant benefits to a firms innovation efforts.
Recent research has shown a growing interest in exploring the international
dimension in the context of innovation management.
First, a number of studies have directed their efforts toward examining the
355
relevance of extant NPD theories in cross-national contexts. In fact, our
understanding of new product practices tends to be based predominantly on
North American firms (Golder, 2000). A central question for both managers and
researchers, then, is whether extant theories are applicable only within the
American context in which they were developed (Griffin, 1997). Recently, for
instance, Song and his colleagues have examined various NPD issues in a
cross-national context (e.g. Calantone et al., 1996; Song and Parry, 1997; Song
and Xie, 2000; Xie et al., 1998). Additional efforts are needed to further explore
to what extent and under what conditions our current knowledge on NPD
management will be transferable into markets across borders.
Another stream of research has evolved attesting to the increasing
internationalization of various functional activities, such as marketing and
R&D, which are important in successful product development (Cheng and
Bolon, 1993; Kuemmerle, 1999; Zou and Ozsomer, 1999). In addition, the
management of global NPD processes has also received a significant attention
in the recent literature. A series of studies by Bartlett and Ghoshal (Bartlett and
Ghoshal, 1989, 1990; Ghoshal and Bartlett, 1988a, b) and other subsequent
research (Asakawa, 2001; Gassmann and von Zedtwitz, 1998; Nobel and
Birkinshaw, 1998; Reger, 1999) deal with the importance of managing product
innovation in multinational corporations. Several other studies have
emphasized how to effectively manage global R&D and global product
innovation teams (e.g. Chiesa, 2000; McDonough et al., 1999; Moenaert et al.,
2000; Zou and Ozsomer, 1999). Moreover, several recent studies specifically
deal with the development of new technologies and their impact on new
product development among globally dispersed teams (Boutellier et al., 1998;
McDonough et al., 2001; Maznevski and Chudoba, 2000). Spurred by the
emergence of information technologies and the spread of the Internet, a
growing number of firms are relying upon global and virtual teams in order to
effectively integrate their NPD resources that are geographically dispersed
across countries. For firms venturing into the global market, the objectives of
innovation can vary. Innovation can be managed in different ways as well.
These studies suggest how a firm can utilize various resources across borders
to improve the effectiveness of their NPD efforts.
A related stream of research suggests that an increasing number of firms
have begun to develop global products. Such globally oriented NPD efforts
are apparently evident in small firms as well as large multinationals,
attempting to design and develop products aimed at the worldwide market

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(Ayal and Raban, 1990; Cooper and Kleinschmidt, 1985; Karagozoglu and
Lindell, 1998; Subramaniam et al., 1998; Subramaniam and Venkatraman,
2001). After in-depth case studies of large Japanese multinationals, for instance,
Takeuchi and Porter (1986, p. 136) found that products were developed with
the global market in mind from the start in more than three-quarters of the
product categories examined. Indeed, the rapid advancement in information
and communication technology will greatly facilitate the development of global
products. Empirical evidence suggests a growing number of companies are
attempting to develop global products by adopting global virtual teams
(Boutellier et al., 1998). Such a global perspective in product development is
summarized succinctly in the global product road pursued by a major
multinational manufacturer of household products, Black & Decker:
The global product road is . . . geared toward identifying common product needs and
opportunities across the various regions of the world. By having a global product road and
encouraging our people to think, plan, and act on a global basis, we have proven we can
accelerate our speed to market, reduce our investment cost, enhance quality, reduce product
costs, and eliminate overhead redundancies (Graber, 1996, p. 485).

A consistent conclusion from these studies is that product innovations are

central in securing a firms competitive advantage in international markets,
and also that global expansion can offer significant advantages to the firm. In
addition to presenting greater opportunities for its products (i.e. a broader
market scope), international expansion also offers to the firm significant
advantages to enhance its performance from being exposed to diverse and
heterogeneous customers, technologies, cultures, competitive practices, and
other environmental contingencies (see, for example, Craig and Douglas, 2000).
Therefore, it was exactly along these perspectives on which we initiated our
investigation to explore the consequences of international diversification.
Previous research on international diversification
Geographically diverse operations are thought to bring significant
performance benefits to organizations because of a variety of reasons.
Previous research suggests that international diversity itself should confer
advantage over domestic and less internationally diversified firms (Barkema
and Vermeulen, 1998; Gomes and Ramaswamy, 1999). The positive impacts are
expected to originate mostly from the firms ability to access new technologies,
the ability to leverage scale economies, and the potential to take advantage of
arbitrage opportunities in factor cost differentials across multiple locations
(Bartlett and Ghoshal, 1989; Grant, 1987; Kogut, 1985). Increased international
diversity may increase a firms ability to share activities of different geographic
areas (Geringer et al., 1989), providing greater opportunities to achieve
economies of scale in critical functions such as R&D and manufacturing over a
broader base. In addition, internationally diversified firms have greater
opportunities to leverage strategic resources while simultaneously diversifying

market risks, thus raising their performance (Kim et al., 1993). They can
Diversification
arbitrage across factor markets and leverage their market power to reduce and performance
input costs (Kogut, 1985).
Recent research has shown an increasing interest in examining the
international diversification agenda. While previous studies differ widely in
terms of research thrusts, sample, measures and findings, the emphasis has
357
been placed on uncovering the impact of international diversification on
organizational performance. Unfortunately, the findings of past empirical
research have been mixed (Sullivan, 1994). Some studies have found a negative
relationship (e.g. Shaked, 1986) or no relationship at all (e.g. Tallman and Li,
1996). On the other hand, a few recent studies have demonstrated a non-linear
linkage between international diversification and performance (e.g. Gomes and
Ramaswamy, 1999; Hitt et al., 1997). Nonetheless, the majority of previous
studies have proposed and/or empirically demonstrated a positive relationship
(see, for instance, Sullivan, 1994; Gomes and Ramaswamy, 1999). We thus build
upon the rich theoretical basis in the literature to extend the international
diversification agenda to the domain of new product management. The
following conclusions can be drawn from a careful analysis of previous studies.
First, past research has clearly shown a tendency to sample large firms. The
samples were predominantly multinational corporations (MNCs), which
presumably were more diversified compared to small firms (Tallman and Li,
1996). However, recent research suggests that an increasing number of small
firms are diversifying into international markets (Karagozoglu and Lindell,
1998; Liesch and Knight, 1999; Yip et al., 2000). Further, many small and
medium-sized firms are developing, and marketing, their products for the
worldwide market (Ayal and Raban, 1990; Cooper and Kleinschmidt, 1985;
Karagozoglu and Lindell, 1998).
Second, nearly all of the studies have sampled firms from Western countries
such as the USA and Europe. A notable exception is Geringer et al. (2000), who
recently examined the diversification strategies of Japanese multinationals. As
the sample has been biased toward developed economies, our understanding is
lacking in the context of developing countries. Another related concern is the
lack of cross-national examination of the focal phenomenon as most studies
have been conducted in single-country contexts. A cross-national comparison is
thus an important step toward understanding the consequences of
multinational expansion. Comparative research including both developed and
developing countries is also necessary for examining the generalizability of our
knowledge drawn primarily from the context of developed Western economies.
Third, past studies have exclusively relied upon secondary data sources.
Such a tendency led these studies to examine the implications of international
diversification on the basis of financial performance measures only (e.g. ROI,
ROS, ROE). This is understandable as most secondary databases (e.g.
COMPUSTAT) provide little information on the performance of new products.
The dominance of secondary data, however, offers little evidence concerning if

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international diversification enhances innovation performance because the

most commonly used financial performance measures include the performance
of old as well as new products. Further, the use of accounting return as a
measure of a firms performance has been a subject of considerable debate
because, for instance, they can be subject to management manipulations (Aaker
and Jacobson, 1987; Grant et al., 1988). Accounting measures reflect present and
past performance, but they do not necessarily consider the future potential of
the firm (Gomez-Mejia and Palich, 1997). On the other hand, new products can
certainly be viewed as a crucial indicator of an organizations expected
performance in the future.
In summary, we attempt to make a unique contribution to extant research on
the following grounds. First, we include small as well as large firms to enhance
the generalizability of the findings. Second, we draw samples from both
developed (i.e. the USA) and developing (i.e. China) countries. Third, we test our
hypotheses based on surveys of senior managers, rather than secondary data,
to incorporate managerial perspectives specific to new product performance.
International diversification and new product performance
Firm nationality and international diversification
In cross-national research, countries should be selected on a sound conceptual
basis. Above all, the USA and China represent most important economies, one
being the most industrialized and the other a rapidly growing, yet gradually
transforming to a market-based economy. From a recent list of Fortunes global
500, for instance, the USA made up approximately 36 percent of the worlds
largest multinationals (Fortune, 2000).
Based in the worlds largest market, US firms have a long history of
venturing to overseas markets. Decades ago, Vernon (1966) observed, and also
predicted, such developments among US firms through his seminal work on
the international product cycle concept. Multinational expansion is made
possible partly thanks to their superior technological capability and advanced
marketing skills accumulated from the highly competitive domestic market.
Under the assumptions of classical economic theories, firms in developing
nations would have Ricardorian comparative advantages over firms in other
countries. In less industrialized countries, however, the domestic market tends
to be small and underdeveloped (Wells, 1981). The firms also lack resources
and capability to develop innovative products. Rather, they tend to
manufacture goods on the basis of low cost labor assisted by imported
technologies and processes. Therefore, global expansion is a relatively recent
phenomenon for many firms domiciled in developing countries (Hall, 1983;
Lecraw, 1981). Given the unique environmental context and, as a result, the
lack of sources of competitive advantage in developing countries, the firms
would show a relatively low propensity to take advantage of foreign market
opportunities, when compared to other firms from industrialized countries.

Few attempts have been made to directly compare the extent of international
Diversification
diversification between firms from developed and developing countries. Recent and performance
research suggests US firms utilize less global strategies than their counterparts
in other industrialized countries (Johansson and Yip, 1994). For instance,
Makhija et al. (1997) studied the globalization levels of firms in five countries.
Their findings indicate highly differing globalization levels between the
359
countries. The US firms were found to have a relatively low level of
globalization, compared to French, German, UK and Japanese firms. Nonetheless,
we expect that US firms would have diversified internationally to a significant
degree and also that their international diversity will be greater relative to
Chinese firms.
In fact, the propensity to globalize may not be similar between firms of
different nationalities (Bartlett and Ghoshal, 1989; Johansson and Yip, 1994). In
general, one may expect that the variability in country environments may
result in some degree of cross-national differences in international diversity.
For instance, Porter (1990) suggests that a firms proximate environment will
shape the way it competes globally. As long as each country has unique
features in its environment, some countries may be better global platforms than
others (Makhija et al., 1997; Porter, 1986). Significant differences exist between
countries in terms of market size, competitive practices, demand conditions,
factor endowments, and governmental policy (Porter, 1990; Wells, 1981). Then,
a firms nationality is likely to influence its propensity to diversify into
international markets. Therefore:
H1. In general, US firms will show a greater tendency to diversify
internationally relative to Chinese firms.
International diversification and new product performance
Previous studies suggest that international diversification may have a positive
effect on product innovation. This is particularly true in todays global
environment in which increased competition in many markets has placed
more emphasis and importance on innovation as a means to develop and
maintain competitive advantage (Hitt et al., 1997, p. 774). One of the benefits of
operating internationally is the opportunity to transfer learning and
innovations across markets (Craig and Douglas, 2000). Successful product
innovation frequently necessitates the incorporation of diverse inputs and a
variety of perspectives. Internationally diversified firms may be better able to
build their innovation capabilities, as they have access to more and different
resources across markets (Kotabe, 1990). Further, the firms can enhance their
innovation efforts as they are exposed to new and diverse ideas from multiple
market and cultural perspectives (Hitt et al., 1997; Kotabe, 1990; Li et al., 1999).
Operating in multiple national markets triggers new solutions and also
enhances innovation capabilities (Barkema and Vermeulen, 1998). This

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suggests that internationally diversified firms have greater opportunities to

learn from their broader scope of operations across diverse national markets.
Therefore, the primary advantage of an internationally diversified firm lies
in its diversity per se. By operating and selling its products across countries,
the firm enhances the opportunity to expose itself to new sources of technology
and heterogeneous customers and competition. To the extent the firm has to
deal with increased diversity in its environments, it can accumulate expertise
and information that would facilitate its subsequent product innovation efforts
(Craig and Douglas, 2000). As such, increased international diversification
enables the firm to appropriate the benefits of innovations more
advantageously by learning across markets. We postulate, therefore, that
more internationally diversified firms will be able to achieve better
performance from their new products in the global market. In this vein, we
propose the following hypothesis:
H2. New product performance will vary depending upon the level of
international diversification, with highly diversified firms achieving
better performance than less diversified firms.
International diversification, firm size and new product performance
As discussed earlier, the effect of international diversification has been
examined mostly in the context of large multinationals. Relative to larger
counterparts, small firms have a distinctive disadvantage in terms of
organizational resources (Wolff and Pett, 2000). Due to their sheer size, large
firms may be in a better position to explore global markets, utilizing relatively
abundant human, financial, and technological resources (Liesch and Knight,
1999). Large firms can use such resources to engage in global market
intelligence and to develop capabilities to exploit international opportunities.
Large competitors can also use more resources to acquire new technologies and
also to have access to a variety of technological sources across markets.
On the other hand, smaller firms are generally known to have informal
planning and control systems, insufficiently developed administrative
procedures, and unsystematic, often nonrational decision-making processes
(Coviello et al., 2000; van Hoorn, 1979). Small firms thus face unique challenges
in exploring global market opportunities. The resource constraints and
capacity limitations of smaller firms make it harder for these firms to deal with
the challenges of international competition effectively (Liesch and Knight, 1999;
Yip et al., 2000). For instance, after studying internationalization of small and
medium-sized firms in technology-based industries, Karagozoglu and Lindell
(1998) found that 44 percent of the firms lacked managerial experience and
competence to exploit international opportunities, relative to larger global
competitors. Other potential problems included disadvantages in foreign
markets with respect to technological developments (32 percent), lack of
international management experience (44 percent), and limited global

information-gathering capabilities (44 percent). These disadvantages are

Diversification
troublesome for small firms, as the majority of the firms appeared to consider and performance
global market opportunities more promising than domestic market (59 percent).
International competition requires more efficient and effective management of
the innovation process and other functions and activities (Lefebvre et al., 1993).
For instance, Baird and Lyles (1994) found that firms with an international
361
strategy were significantly larger than non-internationally oriented firms. As
such, the resource constraints and capability limitations common to smaller
firms present them with significant challenges to overcome when expanding
their activities to global markets (Wolff and Pett, 2000). Taken together, we
expect the effect of international diversification will be different between small
and large firms. Compared to small firms, large firms will be able to achieve
better performance from international diversification.
H3. The relationship between international diversity and new product
performance will vary depending upon the size of the firm, such that
the positive performance effect of international diversity is greater in
larger firms.
Method
Data collection
To gain insight into the focal phenomenon, we first conducted on-site
interviews with 14 managers in the USA and 12 managers in China. A
questionnaire was then developed for surveys in each country[1]. For China, the
translation was carried out by a team of bilingual Chinese nationals fluent in
English and holding a doctoral degree from North America. Two Chinese
nationals independently translated the questionnaire into Chinese; two others
independently back-translated the Chinese translations into English. After
resolving minor translation discrepancies through meetings, the Chinese
version of the questionnaire was prepared.
The sampling frame in the USA consisted of a random sample of 715
manufacturers listed in the Directory of Corporate Affiliations. We first
identified business executives who held, at a minimum, a vice-presidential rank
(for instance, in product development or related areas) and then, requested
them to either personally complete the survey or designate a senior-level
manager to serve as a key informant. Out of 715 questionnaires mailed, 29
questionnaires were returned undeliverable. Three potential respondents
declined to complete the survey due to company policy. A total of 179 usable
questionnaires were returned, yielding a response rate of 26.1 percent. To test
nonresponse bias, we compared early and late respondents in terms of their
organizational characteristics (annual sales volume, industry type, etc.); no
significant differences were detected.
In China, data were collected through a survey of companies in Guangzhou.
Located in the Guangdong province near Hong Kong, Guangzhou is one of the

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major cities in the country with the largest manufacturing base in southern
China. As noted in previous studies (e.g. Calantone et al., 1996), it is extremely
difficult and time-consuming to collect survey data from companies in China.
While a national survey of manufacturing firms could certainly provide a more
complete picture, such an attempt is not feasible from a practical standpoint,
given the countrys geographical diversity and the amount of resources needed
for a nationwide data collection. As guanxi (that is, establishing connections,
good relationships and trust) is central to obtaining responses from Chinese
businesses, a team of researchers from a major research company in
Guangzhou carried out the survey procedure. The institution has accumulated
significant experience in field surveys and also has well-established
connections with local companies. To increase the response rate, we noted in
the questionnaire the endorsement from a prominent Chinese university and
also promised a summary report of the findings to the respondents.
In Guangzhou, a firm can register in either Guangdong Industrial and
Commercial Bureau or Guangzhou Industrial and Commercial Bureau. So the
sampling frame consists of all of the manufacturing firms registered in either of
these two bureaus and located in Guangzhou, with registered capital over 1
million RMB (1RMB $0:12). Out of a total of 300 firms randomly chosen for
our survey, 11 firms either moved or were no longer in business while 39 firms
declined to participate in the survey. After a maximum of three contacts with
each company, the remaining 250 firms have been successfully interviewed,
resulting an effective response rate of 86.5 percent.
Measure
In the recent literature, international diversification has been measured in
various ways, including the ratio of foreign sales to total sales (FSTS), the ratio
of foreign subsidiary sales to total sales (FSR), and the ratio of foreign assets to
total assets (FATA). Among the various measures employed, the ratio of
foreign sales to total sales has been by far the most commonly used in previous
research (Sullivan, 1994). International diversity is the spread of a firms
activities across markets (Grant, 1987). Measures of international
diversification should reflect the relative size and strategic importance of
foreign operations to the firm (Geringer et al., 2000). Following Grant (1987),
Grant et al. (1988) and Tallman and Li (1996), therefore, we measured
international diversity by the ratio of a companys foreign sales to its total
worldwide sales (FSTS).
Previous studies have either used a continuous measure or relied upon a
categorical variable to describe the degree of international diversification.
Among others, three studies (Daniels and Bracker, 1989; Daniels et al., 1984;
Geringer et al., 1989) have created a categorical variable for international
diversity before examining its relationship with performance or other variables.
Similarly, we developed a categorical variable for degree of international
diversification[2].

New product performance was measured along four different dimensions

Diversification
customer acceptance, sales contribution, technical performance, and profitability. and performance
While these measures are not comprehensive, they nevertheless represent
important aspects of new product performance that have been emphasized in
past research, encompassing customer and technical dimensions as well as
market-based and financial criteria. The utility of these criteria in measuring new
363
product performance is well documented in the literature (Griffin, 1997; Griffin
and Page, 1993; Page, 1993). In the questionnaire, respondents were asked to
indicate the extent to which top management is satisfied with the worldwide
performance of new products over the last three years. Each of the performance
dimensions was measured on a five-point Likert-type scale.
Analysis and results
Firm nationality and international diversity
Following Daniels et al. (1984), we categorized the firms into three groups (least,
moderate and high) according to international diversity. This three-way
categorization is an improvement over previous studies that adopted a simple
dichotomy approach. For instance, Shaked (1986) and Daniels and Bracker
(1989) classified the samples into two groups (i.e. low versus high international
diversity). Unfortunately, no consensus appears to exist in the literature as to
how to define the low versus high international diversity. For this study, we
classified the firms into the following groups:
.
Least diversified (LDs). The firms in this category are domestic market
oriented, with foreign sales accounting for less than 10 percent of total
sales.
.
Moderately diversified (MDs). These firms derive a significant portion of
sales from foreign markets, but the domestic market is still more
important.
.
Highly diversified (HDs). These firms are the most diversified into
international markets, with foreign sales accounting for more than 50
percent of total sales.
Three criteria guided the classification of firms. First, the Financial Accounting
Standards Board and Securities Exchange Commission requires publicly
traded firms to provide information on foreign operations when foreign sales
revenue exceeds 10 percent of a firms overall sales. Further, in previous
research, an implicit criterion was to examine firms with at least 10 percent of
FSTS only (Gomes and Ramaswamy, 1999)[3]. On the other hand, if foreign
sales account for more than half of total revenue, foreign markets can be
viewed more important than, or at least as comparably important as, domestic
markets.
Table I shows the distribution of US and Chinese firms along the three
groups, i.e. LDs, MDs and HDs. The results clearly indicate that there is a

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significant cross-national difference in terms of the distribution across the three

groups (x 2 34:64, df 2, p , 0:001). The majority of the US sample belongs
to MDs while the majority of Chinese firms fall into the LDs category.
It is also apparent from the table that many of the surveyed firms
demonstrate a significant degree of international diversification. In the US
sample, nearly 70 percent of the firms belong to either MDs or HDs, deriving at
least 10 percent of their sales from international markets. Further, it is
noteworthy that, in about 18 percent of the firms, foreign sales account for more
than half of their total sales (i.e. HDs). In the case of the Chinese sample, relative
to the US firms, the importance of foreign markets diminishes. Nonetheless,
about 40 percent of the firms derive at least 10 percent of their sales from
international markets, while 11 percent deriving more than half of their sales
from overseas (i.e. HDs). Taken together, therefore, while foreign markets
appear to be important for both US and Chinese firms, the extent of
international diversification seems greater in the US sample.

International diversity and performance

H2 stated that international diversity would be positively associated with the
performance of new products. We compared performance differences between
the three groups of international diversity, as summarized in Table II.
For the US sample, the results generally support our hypothesis. The last
column in Table II panel A suggests that international diversity is positively
associated with the mean performance (F 4:35, p , 0:05). Further, there is a
statistically significant relationship between international diversity and three
of the performance measures percentage of sales (F 3:69, p , 0:05),
technical performance (F 2:72, p , 0:10), and profitability of new products
(F 4:94, p , 0:01). However, the results are not significant for customer
acceptance of new products (F 0:84, p . 0:10). Therefore, H2 is supported
for the majority of the performance measures. From Table II panel A, it should
be noted that, for all of the performance measures, the performance impact of
international diversification takes a linear, or close to linear, form. Put
differently, the performance of new products tends to increase in a monotonic
USA
International diversity

Table I.
International
diversity: USA
versus China

Least diversified (LDs)

Moderately diversified (MDs)
Highly diversified (HDs)
No response
Total
Notes: x 2 34:64, df 2, p , 0:001

China

54
90
32
3
179

30.7
51.1
18.2

143
69
27
11
250

59.8
28.9
11.3

International
diversity

Customer
acceptance

Performance measure
Percentage
Technical
of sales
performance
Profitability

Diversification
and performance
Mean

A. USA
LDs (n 52)
MDs (n 90)
HDs (n 32)
Total (n 174)
F

3.62
3.72
3.84
3.71
0.84

2.98
3.20
3.56
3.20
3.69**

3.12
3.19
3.59
3.24
2.72*

2.96
3.36
3.63
3.29
4.94***

3.17
3.37
3.66
3.36
4.35**

B. China
LDs (n 143)
MDs (n 69)
HDs (n 27)
Total (n 239)
F

3.50
3.71
3.56
3.56
2.60*

3.35
3.55
2.96
3.36
5.11***

3.25
3.54
3.07
3.31
4.07**

3.04
3.36
3.07
3.14
4.34**

3.28
3.54
3.17
3.34
5.08***

Notes: Highest-performing groups denoted in bold type. * p , 0:10; ** p , 0:05; *** p , 0:01

fashion with a growing level of international diversification. We graphed the

relationship in Figure 1(a).
For the Chinese sample, the statistical results are slightly different, as shown
in Table II panel B. The last column suggests a significant relationship
between international diversity and the mean performance (F 5:08,
p , 0:01). Similarly, the relationship is positive for customer acceptance
(F 2:60, p , 0:10), percentage of sales (F 5:11, p , 0:01), technical
performance (F 4:07, p , 0:05), and profitability (F 4:34, p , 0:05).
Therefore, the performance of new products appears to differ significantly
among firms depending upon the level of international diversity. Regardless of
the performance measure employed, the relationship in Table II panel B takes a
quite consistent pattern, as depicted in Figure 1(b).
From the two graphs, it is important to note that there is a significant
cross-national difference in terms of the pattern of the relationship. For the US
sample, the highly diversified group (HDs) achieves better performance than
the other groups (LDs and MDs), which is apparent across all of the
performance measures. For instance, the mean performance is 3.17, 3.37 and
3.66 for LDs, MDs and HDs respectively. Similarly, customer acceptance (3.62,
3.72, 3.84), percentage of sales (2.98, 3.20, 3.56), technical performance (3.12,
3.19, 3.59), and profitability (2.96, 3.36, 3.63) respectively. For the Chinese firms,
on the other hand, the moderately diversified firms (MDs) achieve the best
performance, a pattern that is observed for all of the performance measures.
For instance, the mean performance increases from 3.28 (LDs) to 3.54 (MDs),
but subsequently falls to 3.17 (HDs). Similarly, customer acceptance (3.50, 3.71,
3.56), percentage of sales (3.35, 3.55, 2.96), technical performance (3.25, 3.54,
3.07), and profitability (3.04, 3.36, 3.07) respectively.

365

Table II.
New product
performance by
international
diversity

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Figure 1.
Relationship between
international
diversification and new
product performance

The results suggest that for US firms, international diversity is associated

linearly with the performance of new products. For the Chinese sample, on the
other hand, the performance implication of international diversity is potentially
nonlinear, with the slope positive at low levels of international diversity but
turning negative from a moderate level of international diversity. Given these
consistent cross-national differences, a further elaboration on the international
diversity-performance relationship is presented in the discussion section.
International diversity, firm size and performance
For an in-depth examination of the relationship, we entered firm size as an
additional explanatory variable into our analysis. As previous studies have
typically sampled large multinationals, the findings might not be directly
applicable to small firms (Gomes and Ramaswamy, 1999). Therefore, we
divided the sample into two groups (i.e. small versus large) based on total
annual sales, a generally accepted measure of firm size in organizational

research[4]. We then examined if any significant differences exist between the

Diversification
sub-samples in terms of the performance implications of international and performance
diversity. The results of the two-way ANOVA test are summarized in Table III.
Contrary to our expectations in H3, the performance implications of
international diversification are not found significantly different between small
and large firms, a conclusion consistent for both US and Chinese samples.
367
Nevertheless, a careful examination of the results reveals an interesting, yet
meaningful cross-national difference in terms of the relationship. For the US
sample, the main effect of firm size is not significant. That is, the performance
of new products does not appear to differ significantly between small and large
firms. Regardless of firm size, therefore, the HDs achieve the highest level of
new product performance.
For the Chinese sample, on the other hand, the effect of firm size is found
significant. Across all of the performance measures, large firms achieve better
performance than small firms do. The firm size effect is positive and

Dependent variable
A. USA
Customer acceptance
Percentage of sales
Technical performance
Profitability
Mean performance
B. China
Customer acceptance
Percentage of sales
Technical performance
Profitability
Mean performance

LDs

International diversity
MDs

HDs

Small
Large
Small
Large
Small
Large
Small
Large
Small (n 134)
Large (n 41)

(n 53)
3.58
3.88
3.02
2.88
3.12
3.13
2.95
3.13
3.17
3.25

(n 90)
3.77
3.60
3.18
3.24
3.28
2.96
3.37
3.32
3.40
3.28

(n 32)
3.79
4.00
3.58
3.50
3.67
3.38
3.58
3.75
3.66
3.66

Small
Large
Small
Large
Small
Large
Small
Large
Small (n 174)
Large (n 63)

(n 142)
3.52
3.42
3.28
3.55
3.24
3.26
3.02
3.08
3.26
3.33

(n 68)
3.67
3.88
3.47
3.82
3.47
3.71
3.28
3.65
3.47
3.77

(n 27)
3.53
3.63
2.84
3.25
2.90
3.50
2.95
3.38
3.05
3.44

Firm size

Notes: Highest-performing groups denoted in bold type. For the US sample, the effect of firm
size is not significant for any of the performance measures; for China, the firm size effect is
significant (p , 0:05) for all performance measures except customer acceptance

Table III.
Performance
comparisons by
international
diversity and
firm size

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368

statistically significant for all but one of the performance measures: customer
acceptance (p . 0:10), percentage of sales (p , 0:01), technical performance
(p , 0:05), profitability (p , 0:05), and the mean performance (p , 0:01). For
both small and large firms, the MDs consistently achieve the highest level of
new product performance. In Figure 2, we summarized graphically the effect of
firm size across the three levels of international diversity a pattern that can
be uniquely observed in the Chinese sample.
Discussion
Using data collected from 179 US and 250 Chinese firms, we examined the
implications of international diversification in developing and managing new
products. Above all, we find the majority of firms, both US and Chinese, seem
to derive a meaningful share of their sales from foreign markets. The result
evidences the fact that international diversification brings an important
opportunity for marketing newly developed as well as existing products.
Several other conclusions can be drawn from our findings. For US firms, first,
the most diversified group of firms tends to achieve the best performance
from its new products in the worldwide market. Further, the effect of
international diversification on performance is not significantly different
between small and large firms. It appears small US firms can successfully
incorporate the benefits of multinational expansion into their NPD efforts
as well as large firms. In the case of Chinese firms, on the other hand, new
product performance does not necessarily vary positively with a growing
level of international diversification. The positive impact of international
diversity is potentially nonlinear the effect being positive initially but
turning negative after a threshold level. In addition, we find the effect of firm
size can be significant in Chinese firms. Compared to small firms, large firms
appear to achieve better results.
A secondary goal in our study was to investigate the implications of
international diversification in a cross-national context. We developed our

Figure 2.
International
diversification and new
product performance: the
effect of firm size in
China

hypotheses based on the theoretical perspectives developed from observation

Diversification
of Euro-American populations of firms, and on the basis of empirical findings and performance
for these same populations. For US firms, our results are largely consistent
with the conclusions drawn from the literature. Through diversifying into
international markets, a firm will be able to accumulate significant learning
and experience, which in turn would facilitate its NPD efforts. Therefore, the
369
results are generally consistent with the findings of previous studies that
examined the implications of international diversification for organizational
performance, measured on the basis of accounting-based criteria derived from
secondary databases, in the context of large multinational corporations.
On the other hand, the hypotheses were only partially supported in the case
of Chinese manufacturers. This is most noticeable for the performance
implications of international diversification. Compared to their US
counterparts, in addition to being less internationally diversified, the Chinese
firms show a unique pattern in terms of the relationship between international
diversity and performance. Therefore, we provide the following rationale to
explain the results associated with the Chinese sample.
First, compared to their Western counterparts, Chinese firms are relatively
inexperienced with the principle of market. Since the 1979 economic reform,
the Chinese government has begun to open its market, gradually embracing the
market principle and encouraging competition among businesses. However,
China is still in its infancy of market economy. Only recently have Chinese
firms begun to accumulate a limited amount of experience in Western
management activities. As such, the technical skills and marketing expertise
among Chinese firms are still lacking compared to US and other Western firms
(Li and Atuahene-Gima, 1999; Song and Parry, 1994). For instance, while the
reforms have introduced some forces of a market economy, marketing
competency is still developing, and marketing is a fairly new phenomenon in
China (Calantone et al., 1996, p. 344). It is plausible, therefore, that many
Chinese firms are relatively inexperienced in translating the benefits gained
from international expansion into actual performance improvements.
Second, in general, firms in developing countries are known to compete
internationally on the basis of their labor-intensive manufacturing technologies
(Hall, 1983; Wells, 1981). These technologies are usually less expensive and do
not require large capital investments. Utilizing their cheap labor, therefore, the
primary source of competitive advantage for many Chinese firms has been
low-cost products, which may appear as a viable strategy initially. However,
such a mere low-cost-based strategy may not necessarily work with increased
international diversification.
Further, relying upon labor-intensive processes and products, firms from
developing countries tend to develop me-too products rather than true
innovations targeted at premium market segments. Typically, products are
developed from the adaptation of technology originally imported from abroad,

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370

or simply from specialization in techniques which were used abroad earlier but
have now been superseded and cannot be efficiently sold by the developed
country (Hall, 1983, p. 5). As new products result from the adaptation of
proven technologies and existing products in the market (Wells, 1981), new
products may be new-to-the-firm, but not necessarily new-to-the-world.
Again, such a me-too product strategy could be a viable option initially but
may prove ineffective with a growing degree of international diversification,
which necessarily involves an increased level of competition in a greater
number of markets. On the other hand, firms in developed countries are
reluctant to enter markets without suitably differentiated products (Golder,
2000, p. 330). These firms are aware of the potential problems associated with
introducing me-too products; competition tends to be fierce and profit margins
will be small hurting profitability. As such, firms in developed countries are
more likely to work toward big breakthroughs in product development (Golder,
2000) innovations that can help sustain their competitive advantage for a
longer time horizon.
Fourth, in diversifying into overseas markets, firms from developing
countries generally rely upon exporting rather than foreign direct investment
(FDI). As their primary competitive advantage lies in low-cost labor, these
firms tend to prefer manufacturing products domestically and then exporting
them rather than setting up production facilities overseas (Hall, 1983). The
learning advantages associated with exporting-based diversification (i.e. low
foreign involvement) may be rather limited compared to FDI-based
diversification (cf. Barkema and Vermeulen, 1998).
Due to these limitations inherent in Chinese firms, they are seemingly not
effectively translating the benefits of international diversification into practical
improvements in new product performance. Despite the initial positive impact
of international diversification, new product performance tends to deteriorate
beyond a certain threshold level. It appears that, unlike in US firms, excess
international diversification in Chinese firms can potentially harm
performance.
Study limitations and further research
Drawing upon previous studies on international diversification, we examined
its implications in the specific context of new products. We sampled
manufacturing firms from two maximally different, yet most important
economies. To the extent country environments influence the firms NPD
efforts and its propensity to diversify internationally, a logical extension of this
study is to examine the implications of international expansion with an
additional set of developed and developing countries. For instance, Golder
(2000) reports several significant differences between US and Japanese firms in
terms of managing product development and marketing new products across
borders. Further, US firms, traditionally, tended to derive a larger percentage of

their sales and profits from their domestic market (Daniels et al., 1984). They
Diversification
are generally known as less internationally oriented than firms from smaller and performance
home markets and newly industrialized countries such as Korea and Taiwan.
Therefore, is international diversification positively associated with new
product performance in these firms from different national contexts? Are there
any meaningful variations in the nature of the relationship in a linear,
371
curvilinear or any other form?
At the same time, it should be noted that international diversification can
bring significant management challenges to the firm (Daniels and Bracker,
1989; Gomes and Ramaswamy, 1999; Hitt et al., 1997). As Geringer et al. (1989,
p. 112) suggest, regional differences, and the increased cost of coordinating
geographically dispersed operations, can reduce or negate potential benefits
associated with increased scope. Certainly, further research is needed to
systematically examine the unique challenges in managing product innovation
for the global market. For instance, what procedures and mechanisms are
employed to enhance the benefits and learning advantages derived from global
markets and also how firms deal with the potential problems that may arise in
developing and marketing new products across borders.
Third, the cross-sectional nature of our study enforces us to exercise caution
in interpreting the results. A two-way causation is plausible between
international diversification and new product performance. That is, superior
new product performance (through, for instance, technological breakthroughs,
innovative product design and well-known brand names) in the domestic
market can encourage overseas expansion, and expansion in turn can help
improve innovation capability and performance (Grant et al., 1988).
Fourth, it should be acknowledged that the way to measure international
diversity was not the state-of-the-art. This was partly due to the difficulty of
collecting survey data in China. As Sullivan (1994) suggests, international
diversity can be measured in various ways, including sales-based (the ratio of
foreign sales), equity-based (the ratio of foreign assets), profit-based (the
percentage of foreign profits), subsidiary-based (the number of foreign
subsidiaries), and market-based (the number of foreign markets) criteria. In
addition, extant research tends to oversimplify the notion of international
diversification. That is, when diversifying across borders, firms will differ
significantly in their approaches, which can vary in terms of the number of
markets (e.g. small to many), the types of markets (e.g. industrialized versus
developing countries), the primary means of international operations (e.g.
exporting, sales or manufacturing subsidiaries), and so on[5].
Additionally, a company may generate a large portion of its sales from
abroad, but its foreign markets would be limited to one or two nearby
culturally similar countries. On the other hand, another firm might derive a
small percentage of its sales from overseas, but from many diverse countries.
Further, a firms performance can vary from market to market. Ideally, a

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measure of international diversification should be able to capture the diverse

approaches taken by companies when diversifying across markets. Further
research may be directed at examining the implications of international
expansion while using different, and preferably multiple, measures.
In addition to these limitations, our study also employed a single informant
per surveyed organization, seeking self-assessments of organizational behavior
from senior managers. To a certain extent, therefore, the findings are prone to
perceptual bias on the part of the managers. Unfortunately, objective financial
figures concerning new product performance are not readily available, which is
the case in the USA and more so in developing countries. To overcome these
potential biases, an alternative for future studies may be to seek and
incorporate managerial input from multiple informants from each sampled
organization, e.g. managers from diverse functional backgrounds. Finally, the
sample only represents manufacturing firms in the USA and China, that are
producing tangible products; the findings may not be generalizable to service
industries and firms outside the sampled populations.
Given that myriad other factors can potentially influence new product
performance in international markets, our findings render further support to
the importance of multinational expansion offered in the literature. Hopefully,
this study provides a stepping stone upon which further research efforts can be
directed toward exploring the implications of international diversification for
managing product innovations.
Notes
1. The questionnaire also included a set of other items that are not reported in this article.
Further information on the sampling and data collection procedures can be furnished upon
request.
2. Our decision to create a categorical variable was partly influenced by the Chinese managers
reluctance to directly reveal their organizations FSTS. We learned from the field interviews
that, for various reasons, many Chinese firms would not easily open or provide detailed
information on organizational statistics such as FSTS and financial performance.
3. Gomes and Ramaswamy (1999, p. 176) argue that it is only after the level of foreign
operations becomes large that most companies tend to adopt complex and costly structures
to handle foreign operations. As long as foreign sales are low as a portion of total sales, the
firms will handle foreign operations as an appendage to existing product or functional
divisions (Daniels et al., 1984). Therefore, Gomes and Ramaswamy (1999) suggest that
foreign markets become significant when foreign sales exceed 10 percent of overall
revenue.
4. Firm size is a relative term across countries. For each country, about three-quarters of the
sample belong to small and the rest to large. Specifically, for the US sample 23.2 percent
of the firms are classified as large firms, with annual sales greater than $1 billion; and for
China 25.6 percent of the firms are classified as such, with annual sales above 100 million
Yuan (RMB). We also employed slightly different classification criteria to divide the firms,
yet achieving similar results.
5. We are grateful to an anonymous reviewer for offering this additional insight.

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The Emerald Research Register for this journal is available at

http://www.emeraldinsight.com/researchregister

The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0265-1335.htm

Does culture explain

acceptance of new products in
a country?

Culture and new

products

377

An empirical investigation
Sengun Yeniyurt and Janell D. Townsend
The Eli Broad Graduate School of Management, Michigan State
University, East Lansing, Michigan, USA
Keywords Culture (sociology), Product development, Social economics
Abstract This paper investigates the role of cultural differences in the acceptance of new
products, as moderated by socio-economic variables. In order to assess the relationship, an analysis
utilizing Hofstedes cultural dimensions, along with secondary data representing socio-economic
structure and the penetration rate of new products was undertaken. The results demonstrate that
power distance and uncertainty avoidance hinder the acceptance of new products. Also found is
that individualism has a positive effect but the masculinity dimension has no significant effect on
the diffusion of new products. The findings regarding the moderation effects of the socio-economic
variables are mixed.

The business environment has evolved in response to the continued

globalization of world markets as there appears to be an increasing speed,
frequency and magnitude of competitors entering a broader and more diverse
set of markets (Wolf, 2000). In this setting, firms are ever more dependent on
new products to generate revenues and market share as they search for a
competitive advantage and a profitable return (Steenkamp et al., 1999).
Moreover, in order to maintain momentum, and relative position, firms must
enter a broader and more diverse set of markets. The success of a new product
introduction in a foreign market is dependent on a series of factors, some of
which are fundamentally controllable, while others are not (Takada and Jain,
1991) and must be considered when formulating marketing strategy. Hence, as
an intrinsic variable specific to the market, culture remains a significant factor
in international marketing research (Dunning, 1997).
There are scholars who argue that globalization has created a progressively
more homogenized world market, with an increasing number of consumers
from diverse geographic locations and cultural backgrounds sharing the same
preferences (Levitt, 1983). This perspective is a function of the development of
international linkages and infrastructure, and holds that an increased
interconnectedness among the worlds nations has resulted in decreased
differentiation due to socio-economic factors, with people around the world
living in a more uniform pattern (Elinder, 1965; Hannerz, 1990). This
phenomenon has facilitated the emergence of global brands (Aaker and

International Marketing Review

Vol. 20 No. 4, 2003
pp. 377-396
q MCB UP Limited
0265-1335
DOI 10.1108/02651330310485153

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Joachimsthaler, 1999) with relatively standardized marketing strategies

employed across cultural and geographic boundaries (Zou and Cavusgil,
2002). The primary underlying assumption of this view is that standardized
marketing strategies are feasible in homogenized socio-economic
infrastructures and that economic development has led to a convergence in
global markets (Jain, 1989). While there is some support regarding the influence
of mass media in creating a global consumer culture (Walker, 1996), there is
also some evidence that firms have begun to position their products to a global
consumer culture (Alden et al., 1999).
Yet, there is a paucity of empirical evidence to support the notion that the
development of national socio-economic infrastructures has facilitated the
homogenization of world cultures; rather there is actually evidence of increased
divergence, especially among industrialized countries (Usunier, 1997; Craig
et al., 1992). Even in Europe, with economic union and a progression toward the
standardization of the political and social infrastructure, national cultural
values are strongly rooted in history, and appear to be stable over time (De
Mooij, 2000). Further, it has been found that even after tremendous exposure to
globalization, consumers from different cultures have different attitudes,
perceptions, tastes, preferences and values, and remain reluctant to purchase
foreign products (Suh and Kwon, 2002). Therefore, the argument which follows
is that consumer behavior remains diverse, consumers are not always rational
and they are not willing to change their consumption habits in favor of cheaper
products that are increasingly available on the world market (Kotler, 1986).
Hence, it can be posited that cultural differences remain an important aspect
of international marketing research because cultural norms and beliefs are
powerful forces shaping peoples perceptions, dispositions and behaviors
(Markus and Kitayama, 1991; Triandis, 1989). In order to understand the
impact of these variables on product choice decisions, cultural differences have
been considered from a range of different perspectives, including their impact
on attitudes and persuasion (Aaker, 2000), as well as their role in the diffusion
of new products (Yaveroglu and Donthu, 2002; Takada and Jain, 1991;
Steenkamp et al., 1999). Yet a gap in the literature exists which explains the
relationship between cultural attributes, socio-economic factors, and the
diffusion of new products and technologies.
In order to help reconcile the seemingly paradoxical perspectives in the
literature, this article contributes to the extant knowledge in cross-cultural
marketing research by providing additional empirical evidence regarding the
role of cultural differences in the acceptance of new products. Socio-economic
variables are considered as moderators of this relationship, providing
additional evidence in the globalization debate. The remainder of this study
is organized into five major sections. In the first, the theoretical background
and the research hypothesis are presented. Then the research design, along
with the resulting empirical evidence is offered. The investigation concludes

with a discussion and section regarding limitations and directions for future Culture and new
research.
products
Theoretical background and hypotheses
The effects of both the controllable endogenous and uncontrollable exogenous
factors impacting on the introduction of new products have been investigated
in the literature (Takada and Jain, 1991). Controllable factors such as
proficiency in developing marketing activities (Calantone et al., 1987), market
knowledge processes (Li and Calantone, 1998), and R&D capabilities (Hill and
Snell, 1989) have a significant impact on new product success. On the other
hand, environmental factors that cannot be controlled, but can be managed
with the appropriate strategy, include national culture (Steenkamp et al., 1999;
Clark, 1990) and other country based differences (Takada and Jain, 1991).
Culture remains an elusive, multi-faceted dimension that is difficult to
harness and understand completely; in the most simplistic of terms, it is
typically considered as a shared set of values and beliefs. The most frequently
utilized and cited framework for analyzing and assessing culture is that of
Hofstede (1980, 1991), who views it as the mental programming of a society,
resulting in a definition of the interactive aggregate of common characteristics
that influences a groups response to its environment (Hofstede, 1980). Culture
is common to members of cultural groups or clusters with well defined
boundaries (Hall, 1966) and distinguishes the member of one group from those
of another (Hofstede, 1991).
Nationality may be considered a proxy for culture, since all members of a
nation tend to share similar language, history, and religion (Dawar and Parker,
1994). At least one study has shown that a significant amount of the variation
in product and service usage can be attributed to the home country of the
respondent (Zaichkowsky and Sood, 1989). Although some nations such as
Malaysia and Belgium have diverse cultural groups within their borders, it has
been pointed out that there must be some common foundations upon which
there is general agreement, or else the survival of the nation would be in doubt
(Gannon, 2001). In these cleft cultures (Huntington, 1996), ideals can exist
where individuals are able to maintain their own unique cultural identities
while adopting values that are supportive of the larger cultural group (Berry,
1990). Nationality remains a viable proxy for culture since the members of the
society share an understanding of the institutional systems, a bond for identity,
and experiential understanding of the world (Hofstede, 1983).
Hofstedes original analysis, supported theoretically by the work of Inkeles
and Levinson (1969), found a set of four distinct factors that represented the
dimensions of culture in the workplace; however, these original dimensions
have been extended to other applications for the study of various national and
geographic groups. This framework remains the dominant cultural paradigm
(Sivakumar and Nakata, 2001), and forms the basis for a significant proportion

379

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of the cross cultural studies undertaken in the literature. Previous research has
shown the prevalent cultural system in a country has a significant impact on
consumer innovativeness (Steenkamp et al., 1999) and the diffusion patterns of
new products (Takada and Jain, 1991). Since consumers attitudes and
behaviors are significantly influenced by the cultural context of the market
(Triandis, 1989), it is expected that there is a strong effect of national culture in
the adoption of new products in a country.
Power distance is the extent to which people accept that power is distributed
unequally, and is related to conservatism and maintaining the status quo
(Steenkamp, 2001). In societies with a high degree of power distance, status and
age are very important; generally, people tend to be less innovative. In one
study considering the effects of culture on the diffusion of new products, the
coefficient of innovation was found to be significantly lower in countries with
high power distance (Yaveroglu and Donthu, 2002). Since in such cultural
environments customers are less open to new ideas and products, the
penetration rates of new products is expected to be lower:
H1. Power distance has a negative effect on the acceptance rates of new
products.
The individualism/collectivism dimension appears to be the most extensively
employed dimension in cross-cultural consumer behavior research (Kim et al.,
1994; Triandis, 1989; Triandis et al., 1988; Zhang and Gelb, 1996). Members of
individualistic cultures tend to see themselves as independent, unique persons
separate from others. In individualistic cultures, people tend to give more
importance to their own and their immediate familys well being. On the other
hand, people in collectivistic cultures feel they belong to a group, whose overall
well being supersedes the needs of the individual. In such cultures, identity is
based on the social network to which one belongs. Attitudes towards
differentiation and uniqueness tend to be more favorable for members of
individualist cultures, while attitudes toward building relationships tend to be
more favorable in collectivistic cultures (Aaker and Maheswaran, 1997).
Previous empirical results indicate that countries which have higher scores in
the individualist dimension have higher coefficients of innovation (Yaveroglu
and Donthu, 2002), and a positive impact on the innovativeness of consumers
(Steenkamp et al., 1999). Therefore, in contrast with power distance,
individualism is expected to have a positive effect on penetration rates:
H2. Individualism has a positive effect on the acceptance rates of new
products.
Uncertainty avoidance is the extent to which people feel uncomfortable in the
presence of vagueness and ambiguity. Cultures with low uncertainty avoidance
scores have a high tolerance for improbability and ambiguity; generally, people
tend to be more innovative and entrepreneurial. People of these cultures are

more tolerant to take risks and are more willing to try new things (Yaveroglu Culture and new
and Donthu, 2002). Alternatively, in cultures where there is a high degree of
products
uncertainty avoidance there is an innate need for clear rules, and a formality to
the structure of life. It has been found that cultural uncertainty avoidance has a
negative impact on consumer innovativeness (Steenkamp et al., 1999).
Therefore, it is expected that the uncertainty avoidance dimension has a
381
negative effect on penetration rates of new products:
H3. Uncertainty avoidance has a negative effect on the acceptance rates of
new products.
The masculinity dimension indicates the degree to which a culture values
assertiveness, achievement, and the acquisition of wealth (Hofstede, 1991). In
masculine cultures, achievement and success are more important than caring
for others, and improving the overall quality of life (Hofstede, 1980). A largely
symbolic means of demonstrating achievement is by having the latest and
most novel possessions. This essentially serves as a proxy for success,
reflecting a given level of status in a society (Rogers, 1983). Therefore, the
implication is that this dimension has an apparent connection with the
acceptance of new things in a society. This position is further supported by
previous research which found a positive effect of masculinity on the
innovativeness of consumers in a given market (Steenkamp et al., 1999):
H4. Masculinity has a positive effect on the acceptance rates of new
products.
The socio-economic infrastructure of a country plays a major role in the
manifestations of culture on consumer behavior. Previous research has led to
conflicting expectations: improved infrastructure facilitating the
homogenization of consumer behavior across cultures and decreasing the
effect of cultural dimensions (e.g. Hannerz, 1990), versus enabling consumers to
more freely exhibit the behaviors rooted in their cultural values (e.g. Kotler,
1986). Thus:
H5. The socio-economic structure moderates the effect of cultural
dimensions on the acceptance rates of new products.
Typically, in countries with enhanced economic conditions, customers have
higher incomes and have more freedom in initiating behaviors according to
their cultural values. This is reflected in the academic view which purports that
globalization will only serve to increase the divergences existing in consumer
behavior across countries (Kotler, 1986). The basic premise is that higher
incomes will drive different consumption patterns, shaped by the cultural
characteristics of each nation (Kotler, 1986; De Mooij, 2000). Additionally,
increasing economic conditions, particularly the systematic change in

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purchasing power, and demographic changes, are related to the velocity of new
product diffusion rates (Van Den Bulte, 2000):
H6. In countries with more developed economic structures (i.e. higher gross
domestic product (GDP) purchasing power parity (PPP) per capita
values), the effects of cultural dimensions on the penetration rates of
new products are stronger than in countries with less developed
economic structures (i.e. lower GDP (PPP) per capita values).
Urbanization has been used as an indicator of the market potential for
American companies exporting abroad (Cavusgil, 1997). The urban population
is broadly defined by the share of the total population living in areas specified
as a city in each country (World Bank, 1999) and has been employed
extensively as an indicator of the socio-economic structure of the country,
particularly in the economics literature (e.g. Rodrik, 1998). From a marketing
perspective, this is an important variable because previous research suggests
that urban respondents seem to be less partial to culture specific
advertisements (Khairullah and Khairullah, 1995). Additionally, results from
a model of product introductions across multiple markets suggest significant
findings related to cosmopolitanism and diffusion patterns (Gatignon et al.,
1989). Therefore, cultural characteristics are expected to have lower effects on
consumer choice decisions, and subsequent penetration rates in countries that
have higher urbanization rates:
H7. In countries that have higher urbanization rates, the effects of cultural
dimensions on the penetration rates of new products are weaker than
in countries with a lower urbanization rate.
The literacy rate is the percentage of adults ages 15 and above who can, with
understanding, read and write a short, simple statement about their everyday
life (World Bank, 1999) and is widely accepted as an indicator of the strength of
the educational structure of a country (e.g. Williamson, 1996; DuBois et al.,
1993). Cultural values are deeply rooted in social memories, customs and habits
(De Mooij, 2000). Yet, education can facilitate peoples awareness and
understanding of other cultures. Under these circumstances, it is reasonable to
expect members of a society to be more cognizant of, and have a better
appreciation of consumer preferences in other parts of the world. It is expected
that in the nations with more developed educational systems, customers will
give less importance to their national cultural values than in countries with less
developed educational systems:
H8. In countries that have lower literacy rates, the effects of cultural
dimensions on the penetration rates of new products are stronger than
in countries that have higher literacy rates.

One of the main consequences of globalization is the increase in international Culture and new
trade. Therefore, the argument can be made that the total international trade of
products
a country, in terms of its relative proportion of GDP, can be used as an indicator
of the overall openness of the economy (Cavusgil, 1997). In order to remain
consistent with previous research, we define openness as the ratio of imports
and exports of goods and services to the GDP of the country (e.g. Rodrik, 1998).
383
The consumers of countries with economies that have a higher degree of
openness are exposed to a wider variety of foreign products and services;
hence, a greater pressure of globalization. Therefore, we hypothesize that
openness has a negative moderation effect on the relationship between cultural
dimensions and the penetration rates:
H9. In countries that have a higher degree of openness, the effects of
cultural dimensions on the penetration rates of new products are
weaker than in countries that have a lower degree of openness.
Research design and empirical evidence
There are essentially two different approaches to performing cross-cultural
analysis: those utilizing primary data, and those using secondary information
sources. Early research studies used random samples from several countries to
perform mean and variance tests in order to demonstrate the similarities and
differences in consumer behavior (e.g. Green and Langeard, 1975; Hempel,
1974; Lorimer and Dunn, 1968). This approach was heavily criticized for not
being adequate when studying cross-cultural differences since factors other
than culture, such as economic and demographic differences, may engender the
observed discrepancies in behavior (e.g. Katona et al., 1973; Clark, 1990; Dawar
and Parker, 1994).
In order to overcome these criticisms, other studies have used secondary
data to employ ordinary least squares analyses to test hypotheses
regarding cross cultural differences (e.g. De Mooij, 2000). We utilize a similar
approach, with secondary data and multiple regression analyses. In addition to
Hofstedes cultural dimension scores for 56 countries (Hofstede, 2001), the GDP
per capita (World Bank, 1999) adjusted for the purchasing power parity, the
urbanization rates (percentage of population living in urban areas) (World
Bank, 1999), the literacy rates (percentage of population being literate) (World
Bank, 1999), the openness rates (total foreign trade divided by the GDP) (World
Bank, 1999), the Internet penetration rates (Internet users per 10,000
inhabitants) (International Telecommunication Union, 2001), the cellular
phone penetration rates (cellular phones per 100 inhabitants) (International
Telecommunication Union, 2001) and the PC penetration rates (PCs per 100
inhabitants) (International Telecommunication Union, 2001) were gathered for
each country. GDP (PPP) per capita is the gross domestic product converted to
international dollars using purchasing power parity rates and divided by the
midyear population of the country (World Bank, 1999). This is a more accurate

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Table I.
Multiple regression
results including all
countries

Figure 1.
Conceptual model

gauge of comparative wealth, as it takes into account social services and

subsistence requirements, which can vary substantially across countries (Craig
and Douglas, 2000). The long-term/short-term orientation dimension was
available only for 30 countries and was dropped due to concerns regarding the
sample size. The list of countries included in this study can be found in the
Appendix.
The multiple regression results with penetration rates as the dependent
variable and the cultural dimensions as the independent variables can be seen
in Table I. In all three regressions, the coefficient for power distance is negative
and significant, supporting H1. Similarly, in all three regressions the coefficient
of individualism is positive and significant, supporting H2. The coefficient for
uncertainty avoidance is negative and significant only for PC ownership, but
negative and insignificant for Internet usage and cellular phone ownership,
providing partial support for H3. The coefficients for the masculinity
dimension are insignificant and negative in all three regressions, failing to
provide support for H4. Therefore, three of the first four hypotheses are
supported, with the overall findings consistent with both theory and previous
empirical research (Figure 1).

Cultural dimension

Internet usagea
Std beta p-value

Power distance
Individualism
Uncertainty avoidance
Masculinity

20.275
0.415
2 0.072
2 0.167

0.061
0.007
0.512
0.116

PC ownershipb
Std beta
p-value

Cellular phone
ownershipc
Std beta
p-value

2 0.246
0.516
2 0.171
2 0.138

2 0.323
0.411
2 0.094
2 0.082

0.048
< 0.001
0.068
0.123

Notes: a R 2 0:459, F 10:837 (p , 0:001); b R 2 0:616, F 20:473 (p , 0:001);

c
R 2 0:431, F 9:666 (p , 0:001)

0.033
0.009
0.402
0.447

In order to test the moderation effects of GDP (PPP) per capita, urbanization, Culture and new
literacy and openness, a median split was employed, resulting in groups with
products
significantly different means (all p-values less than 0.001; see Figure 2). The
resulting sets of 28 countries were used in several multiple regressions; with
the dependent variables being the penetration rates for Internet, PC and cellular
phone, and independent variables being the cultural dimension scores. As
385
illustrated in Tables II-V, the results indicate a moderation effect by all three
variables tested as the socio-economic conditions for the countries in the study.
The median splits created significant changes in the sign and magnitude of the
coefficients of cultural dimensions, providing support for H5. Yet the effect is
not consistent across all the cultural dimensions and dependent variables.
According to these results, GDP (PPP) per capita has a different moderation
effect on the relationship between each cultural dimension and the penetration
rates. Generally, in countries with higher GDP (PPP) per capita values, the
regressions are significant at 0.05 confidence level for Internet usage and PC
ownership. All other regressions are insignificant. These results provide partial
support for H6. Interestingly, the results suggest that while in countries with
better economic conditions uncertainty avoidance is negatively related to the
penetration rates of new products, this relationship tends to be positive under
poorer economic conditions.
The urbanization rates have a moderation effect similar to the economic
conditions of the country, with all regressions being significant at a 0.001
confidence level for the countries with higher urbanization rates. Uncertainty
avoidance has a negative effect in highly urbanized countries, and a positive
relationship in less urbanized ones. Overall, the multiple regressions executed
using a median split on the level of urbanization failed to provide support for H7.
All the multiple regression models which test the effects of lower
literacy rates on new product penetration rates are significant at 0.05

Figure 2.
The moderation effect

20.108
0.486 20.345
0.127
0.366 0.033
0.330
0.164
2 0.476 0.001
0.532 0.051
20.127
0.327
0.252
0.277

20.198
0.157
20.086
20.076

0.375
0.507
0.654
0.678

20.126
0.191
0.400
0.263

0.602
0.454
0.170
0.300

Notes: a R 2 0:286, F 2:797 (p 0:045); b R 2 0:122, F 0:624 (p 0:651); c R 2 0:576, F 9:497 (p , 0:001); d R 2 0:269, F 1:654
(p 0:204); e R 2 0:129, F 1:038 (p 0:405); f R 2 0:118, F 0:603 (p 0:666)

0.298
0.884
0.223
0.643

Power distance
Individualism
Uncertainty avoidance
Masculinity

2 0.253
2 0.037
0.352
0.116

20.095
0.637
0.178
0.406
2 0.364 0.044
20.178
0.288

Cultural dimension

Table II.
The moderation
effect of GDP (PPP)
per capita
PC ownership
Cellular phone ownership
High GDP per
Low GDP per
High GDP per
Low GDP per
capitac
capitad
capitae
capitaf
Std beta p-value Std beta p-value Std beta p-value Std beta p-value

386

Internet usage
High GDP per
Low GDP per
capitaa
capitab
Std beta p-value Std beta p-value

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20,4

PC ownership
High
Low
urbanizationc
urbanizationd
Std beta p-value Std beta p-value

Cellular phone ownership

High
Low
urbanizatione
urbanizationf
Std beta p-value Std beta p-value

Power distance
2 0.285 0.132
0.068 0.774
2 0.100
0.487
2 0.217 0.314
2 0.382 0.059 2 0.061 0.785
Individualism
0.234 0.208
0.636 0.047
0.462
0.003
0.647 0.026
0.235 0.231
0.574 0.057
Uncertainty
avoidance
2 0.372 0.014
0.137 0.597
2 0.488 < 0.001 2 0.007 0.977
2 0.225 0.146
0.513 0.047
Masculinity
2 0.074 0.585
2 0.562 0.078 2 0.024
0.822 2 0.519 0.069 2 0.017 0.906 2 0.104 0.720
Notes: a R 2 0:533, F 7:984 (p , 0:001); b R 2 0:286, F 1:805 (p 0:172); c R 2 0:722, F 18:210 (p , 0:001); d R 2 0:431,
F 3:404 (p 0:031); e R 2 0:478, F 6:420 (p 0:001); f R 2 0:362, F 2:553 (p 0:075)

Cultural
dimension

Internet usage
High
Low
urbanizationa
urbanizationb
Std beta p-value Std beta p-value

Culture and new

products

387

Table III.
The moderation
effect of
urbanization

Table IV.
The moderation
effect of literacy

Power distance
2 0.179 0.379
0.038 0.842
2 0.117 0.439
2 0.112 0.513 2 0.199 0.367
2 0.067 0.758
Individualism
0.286 0.182
0.266 0.201
0.457 0.007
0.324 0.089
0.272 0.241
0.378 0.120
Uncertainty avoidance 2 0.260 0.130
2 0.265 0.156
2 0.427 0.002 2 0.159 0.336 2 0.037 0.840
2 0.088 0.676
Masculinity
2 0.104 0.521 2 0.592 0.001 2 0.068 0.573
2 0.569 0.001 2 0.019 0.914 2 0.409 0.036
Notes: a R 2 0:316, F 3:232 (p 0:027); b R 2 0:595, F 6:602 (p 0:002); c R 2 0:620, F 11:412 (p , 0:001); d R 2 0:672,
F 9:216 (p , 0:001); e R 2 0:191, F 1:650 (p 0:190); f R 2 0:459, F 3:812 (p 0:020)

PC ownership
Cellular phone ownership
High literacyc
Low literacyd
High literacye
Low literacyf
Std beta p-value Std beta p-value Std beta p-value Std beta p-value

388

Cultural dimension

Internet usage
High literacya
Low literacyb
Std beta p-value Std beta p-value

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20.252 0.253 20.274 0.130

2 0.264 0.152 20.178 0.298 2 0.364 0.113 2 0.180
0.302
0.309 0.170
0.606 0.004
0.426 0.027
0.715 0.001
0.302 0.192
0.754 < 0.001
20.119 0.467
0.249 0.069 2 0.245 0.078
0.122 0.341
0.028 0.869
0.508
0.001
2 0.303 0.071
0.212 0.094 2 0.232 0.092
0.117 0.326 2 0.121 0.467
0.178
0.147
b
c
d
2
2
2
4:609 (p 0:007); R 0:705, F 13:771 (p , 0:001); R 0:621, F 9:410 (p , 0:001); R 0:730,
e
R 2 0:413, F 4:043 (p 0:013); f R 2 0:721, F 14:856 (p , 0:001)

Cultural dimension

Power distance
Individualism
Uncertainty avoidance
Masculinity
Notes: a R 2 0:445, F
F 15:538 (p , 0:001);

PC ownership
Cellular phone ownership
High opennessc
Low opennessd
High opennesse
Low opennessf
Std beta p-value Std beta p-value Std beta p-value Std beta p-value

Internet usage
High opennessa
Low opennessb
Std beta p-value Std beta p-value

Culture and new

products

389

Table V.
The moderation
effect of openness

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390

confidence level, and explain more variance in the dependent variable than
the results from the countries with higher literacy rates. These results
parallel expectations and provide support for H8. It is also important to
note the significant negative effect of masculinity in countries with lower
literacy rates.
Similar to literacy, openness has a negative moderating effect on the
relationship between the cultural dimension scores and new product
penetration rates. In countries with high openness rates the cultural scores
explain more than 70 percent of the variation in the dependent variables, with
all three regressions having an overall significance at confidence levels less
than 0.001, providing support for H9. Additionally, while uncertainty
avoidance and masculinity tend to be negatively related to the penetration
rates in countries with open economies, these relationships are positive in more
closed countries.
Taken as a whole, the findings related to the moderation effects of the
socio-economic variables differ across cultural dimensions. Yet, the effects on
the overall significance of the multiple regressions tend to be consistent across
socio-economic variables and dependent variables studied.
Discussion and managerial implications
The purpose of this research is to contribute to the body of empirical evidence
regarding the relationship between cultural dimensions and new product
acceptance rates with the addition of socio-economic variables as moderators.
Although multiple regression does not prove that a causal relationship exists
between the dependent and independent variables (Wooldridge, 2000), the
results of this study indicate a strong association between the cultural
dimensions and the penetration rates of new products, moderated by some of
the socio-economic variables tested. The results are consistent to a great extent
with previous studies in cross-cultural consumer behavior, diffusion of
innovation and globalization. The results are similar to the findings from
previous studies (Steenkamp et al., 1999; Takada and Jain, 1991), where a
significant relationship between the cultural dimensions and penetration rates
of new products was found across the 56 countries included in the analysis.
While previous research regarding the penetration rates of new products did
not include power distance as a predictor (Steenkamp et al., 1999), we find this
dimension to have a significant negative effect. According to our empirical
results, individualism has a significant positive relationship and uncertainty
avoidance has a significant negative relationship with the diffusion rates. In the
light of the extant literature (e.g. Steenkamp et al., 1999), masculinity has been
hypothesized to be positively related to the diffusion of new products.
Nevertheless, the results failed to provide support to this hypothesis, with a
possible explanation being the differences existing in the dependent variable, the
data collection method, or the set of cultural dimensions included in the study.

Additionally, the findings contribute to the extant literature by providing Culture and new
significant evidence regarding the moderation effects of socio-economic factors.
products
The findings are mixed, socio-economic factors providing different moderating
effects across cultural dimensions. The results indicate that the economic,
educational and urbanization structures of a particular country have different
effects on the role of cultural dimensions in the penetration of products. The
391
economic wellbeing, expressed in terms of GDP (PPP) per capita has a weak
positive moderation effect on the relationship between culture and the
penetration rates. While urbanization rate has a strong positive moderation
effect, literacy rate and market openness have a strong negative moderation
effect. Therefore, the results indicate that while economic wellbeing enables
customers to reflect their cultural values in their purchasing behavior, a strong
educational infrastructure and an open market structure act as suppressors of
the cultural differences existing among nations.
New product introduction is one of the most complex decisions that the
managers of multinational companies face (Talukdar et al., 2002). Cultural
differences add a significant degree of complexity and perceived uncertainty to
the international business environment, and have an important impact on all
aspects of marketing activities (Takada and Jain, 1991). Therefore,
understanding their effect on the acceptance of new products in a specific
country will help management in the projection of demand, by decreasing the
perceived uncertainty of foreign cultural environments. Considering that the
results of this study indicate a significant relationship between power distance,
individualism, uncertainty avoidance and the penetration rates of new
products, managerial teams in charge of new product introductions have
additional parameters, which can be added to the launch, forecast equation.
Countries that have similar scores in these three dimensions are expected to
have similar new product penetration rates. Additionally, ceteris paribus,
companies with new products and technologies should first target countries
with higher individualism, but lower power distance and uncertainty
avoidance scores. Furthermore, sequential introduction timing conducted in
conjunction with consideration of cultural values would be consistent with
previous findings (Takada and Jain, 1991).
While some researchers argue that standardization across markets is an
appropriate strategy in a global environment (Levitt, 1983), others posit that
there must be a balance between standardization and adaptation (Jain, 1989).
Our study indicates that even in the age of globalization, culture remains a
significant factor in the acceptance of new products. Nevertheless, the
socio-economic factors need to be taken into consideration when developing
marketing programs. Factors such as literacy and openness restrain the
cultural effects on the penetration rates of new products. Therefore, in countries
that have less developed educational systems and a relatively closed economy,
it is likely that a greater degree of adaptation of the marketing mix elements

IMR
20,4

will be a more effective strategy. A more standardized approach will be more

viable in societies with a greater degree of openness and a more advanced
educational system. The adaptation efforts should be centered on the cultural
differences existing among countries, particularly the power distance,
individualism and uncertainty avoidance dimensions.

392
Limitations and future research directions
Perhaps the most important limitation of this study lays in the use of secondary
data, which is criticized for being inconsistent and unreliable. Yet, there are
studies in extant cross-cultural research that used similar approaches (e.g. De
Mooij, 2000). Additionally, due to data availability constraints, only 56
countries were included in the study. More robust findings may be possible
with the use of a larger sample set. Similarly, Hofstedes fifth cultural
dimension, long term versus short term orientation, was not included in the
study because of its negative impact on the studys overall sample size.
Additionally, Hofstedes dimensions are based on work related values of the
employees of one company, which may not necessarily represent the entire
national population, and may not overlap to other applications such as
consumer behavior (Steenkamp et al., 1999). Furthermore, since Hofstedes
dimensions are based on macro, national level cultural traits, there could be a
potential for confounding effects due to the fact that some nations have
multiple sub-cultures and social groups. Yet, in this study, only a few societies
in the data set are multi-ethnic in nature and it is not expected that this would
have a significant impact on the results.
A further caution is that urbanization may be defined differently by different
countries, based on local interpretation of what measures of density are used to
classify a city from a rural area (Craig and Douglas, 2000). In the case of this
research study, it is not expected that this ambiguity would have an impact on
the outcome of the analysis. This is because the urbanization variable is
employed as a median split, and not as an exogenous or endogenous variable in
the regression analysis.
Future research should consider the effect of socio-economic variables on
cultural dimensions by analyzing the changes in time series data. However, the
challenges of such studies are obvious, with data availability being a basic
concern. Also, other variables and interactions should be accounted for in
future research in order to further differentiate the effects of specific variables.
The antecedents of the cultural dimensions can also be included in the model,
especially in order to test for a precedence of socio-economic factors on cultural
dimensions in the long run. Time series analyses utilizing structural equation
models such as latent variable growth curve modeling have the potential to
develop our understanding of the globalization and socio-economic variable
effects on the cultural variations across countries over time. This approach
could also be employed to assess the impact of how various marketing

variables interact with the cultural and socio-economic factors to understand Culture and new
under what circumstances, which activities are most successful over time.
products
Considering that cultural dimensions have a significant effect on the
penetration rates of new products, it is recommended that managerial teams
take into consideration the cross-cultural differences between groups when
designing marketing plans for new product introductions. Future studies
393
should explore the effect of perceived cultural differences of the target markets
on the new product development process and the adaptation of the marketing
mix elements during the launch. Within this context, the moderation effects of
the socio-economic variables and the globalization extent of customers need
further investigation.
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Appendix

Argentina
Australia
Austria
Belgium
Brazil
Canada
Chile
Colombia
Costa Rica
Croatia
Denmark
Ecuador
Egypta
Finland
France
Germany
Greece
Guatemala
Hong Kong
India
Indonesia
Iran
Ireland
Israel
Italy
Jamaica
Japan
Kenyab
Table AI.
Countries included
in the study

Korea, South
Malaysia
Mexico
The Netherlands
New Zealand
Nigeriac
Norway
Pakistan
Panama
Peru
Philippines
Portugal
Salvador
Senegal
Singapore
Slovenia
South Africa
Spain
Sweden
Switzerland
Syria1
Thailand
Tunisia1
Turkey
United Kingdom
Uruguay
USA
Venezuela

Notes: a Cultural dimension scores of the Arab region used as proxy. b Cultural dimension
scores of the East African region used as proxy. c Cultural dimension scores of the West African
region used as proxy

The Emerald Research Register for this journal is available at

http://www.emeraldinsight.com/researchregister

The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0265-1335.htm

Designing global new product

teams
Optimizing the effects of national culture
on new product development

Global new
product teams

397

K. Sivakumar
Lehigh University, Bethlehem, Pennsylvania, USA, and

Cheryl Nakata
University of Illinois at Chicago, Chicago, Illinois, USA
Keywords Product development, Globalization, Team working, Culture (sociology)
Abstract Companies are increasingly bringing personnel together into teams from different
countries, physically and/or electronically, to develop products for multiple or worldwide markets.
Called global new product teams (GNPTs), these groups face significant challenges, including cultural
diversity. Differing cultural values can lead to conflict, misunderstanding, and inefficient work styles
on the one hand, and strong idea generation and creative problem solving on the other. A study was
conducted to identify team compositions that would optimize the effects of national culture so that
product development outcomes are favorable. This began by developing a theoretical framework
describing the impact of national culture on product development tasks. The framework was then
translated into several mathematical models using analytical derivations and comparative statics.
The models identify the levels and variances of culture values that maximize product development
success by simultaneously considering four relevant dimensions of GNPT performance. Next, the
utility of these models was tested by means of numerical simulations for a range of team scenarios.
Concludes by drawing implications of the findings for managers and researchers.

Introduction
There is a growing trend among companies to develop new products by
tapping into expertise and resources in multiple countries, both within and
outside their own firms (e.g. Hardy, 1998; Kinni, 1994). Realizing that products
may be designed with the world, a region, or several markets in mind,
companies like Black & Decker, Intel, IBM, Toshiba, Siemens, AT&T, Kodak,
and Glaxo-Wellcome (Fenton et al., 1993; Graber, 1996; Young, 1994) are
bringing personnel together, physically and/or electronically, from distant sites
into global new product teams (GNPTs).
GNPTs are a relatively new phenomenon, constituting the next wave of
corporate development (McCalman, 1996; Solomon, 1995, p. 50). A recent
survey of firms found that nearly three-fifths are using global teams for a range
of tasks, and almost two-thirds claim these teams have led to innovations in
The authors appreciate funding from the Center for Research in Human Resource Management
at the University of Illinois at Chicago. They are grateful for the guidance of Professor Rob
Morgan in improving the article.

International Marketing Review

Vol. 20 No. 4, 2003
pp. 397-445
q MCB UP Limited
0265-1335
DOI 10.1108/02651330310485162

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398

product and service offerings (Axel, 1997). Several trends will contribute to
growing use of GNPTs:
.
increasing costs of new product development (favoring spreading
innovation costs among several business units);
.
shortening new product life cycles (forcing companies to introduce
innovations faster and better);
.
rising technological competencies in countries outside the traditional
triad (e.g. India is now the second largest exporter of software programs);
.
increasing complexity of new products (causing firms to source expertise
from subsidiaries, suppliers, and strategic partners);
.
rising use of global or shared product platforms (reducing product design,
factory retooling, and materials sourcing costs); and
.
improved information technology (easing cross-national, inter- and
intra-company communications and collaboration) (Rafii, 1995; Snow
et al., 1996).
Like their domestic-only counterparts, GNPTs are typically cross-functional,
commissioned to design and launch new products, and face significant budget,
time, and other resource constraints. However, GNPTs are distinct in that
members usually come from a range of countries and cultures. Values,
orientations, and assumptions may radically differ among members. Also,
members may not be equally comfortable in the chosen lingua franca, typically
English. As a consequence, misunderstandings and conflicts easily arise,
impeding work and threatening outcomes (Adler, 1991; Smith and Berg, 1997).
In some cases, communications are made even more difficult because members
are dispersed across several continents, meeting face to face only periodically.
Given the complex nature and tasks of GNPTs, managers and researchers alike
may be interested in knowing how to design these groups, i.e. assemble the
right individuals, so that the national cultures represented are synergistic and
constructive rather than debilitating and unproductive. Culturally diverse
groups have the potential for greater levels of creativity and problem solving
than homogeneous groups (Adler, 1991; Guzzo and Dickson, 1996; McCalman,
1996), but how can this potential be tapped for new product development?
The purpose of this article is to address this issue by exploring a method of
designing GNPTs so that the effects of national culture on team performance
are optimized. The method is based on a conceptual framework of how national
culture impacts on the key stages of new product development. From this
framework, we develop mathematical models using analytical derivations and
comparative statics to calculate the levels and variances of culture values that
if present in GNPTs maximize their development outcomes. The utility of these
models is then demonstrated via numerical simulations in which team
performance scores are estimated for various group cultural compositions and
new product project scenarios.

This research aims to make both managerially and theoretically relevant

contributions. For managers who are organizing global teams, this study will
help point the way to enhancing the effectiveness and new product
development outcomes of these complex work groups. Given the recent
emergence of this new work form, managers have few guidelines to follow in
ensuring that these teams achieve their goals. This study will provide not only
a useful conceptual framework for understanding the impact of cultural values
on new product development tasks, but also a decision path to follow in
forming GNPTs, better ensuring that cultural values enhance rather than
impede the innovation process. Moreover, this study provides actual indexes
that can be used to select persons for GNPTs under various project scenarios,
with the aim of maximizing new product development success. For
academicians, the study will be of interest since it appears to be one of the
first formal examinations of this new work form. Additionally, it offers a
theory-based framework for understanding the role and impact of cultural
values on the differing stages of new product work, and perhaps a novel
method for estimating team performance based on mathematical derivations
and comparative statics.
We acknowledge that there are other factors besides national culture to
consider in assembling effective teams, including required technical or
functional expertise, availability of personnel, costs of staff relocation, project
priorities, and workers physical proximity. However, we examine national
culture given evidence of its significant impact on a wide range of
organizational, group, and individual behaviors (Adler and Bartholomew,
1992), and its strong explanatory power as a theoretical construct in
international marketing (Clark, 1990). We also note that our focus is on team
design and specifically member selection, because group composition is known
to be a key determinant of collective performance (Guzzo and Dickson, 1996;
Volkema and Gorman, 1998). At the same time, we recognize that there are
other means of building high performing global teams, such as training,
leadership, and group process management. Future research may incorporate
these other avenues.
The rest of this paper is structured as follows: first we review the relevant
literature, then outline the conceptual framework and the method of
determining team compositions for new product development. Next we
elaborate the mathematical derivations for the optimization models, and
discuss the numerical simulation results. We conclude by drawing implications
of the method for global new product development managers and researchers.
Literature review
Current understanding of global new product teams is largely anecdotal.
Companies using this emerging work form, such as Texas Instrument, Hewlett
Packard, Digital Equipment, Maxus Energy, and NEC, have been reported by

Global new
product teams

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400

the business press. These articles outline salient characteristics of GNPTs,

including their reliance on electronic tools for communications, correspondence
with distributed R&D and design centers, exploitation of geographically
distributed human resources, and rising use by companies wanting products
for worldwide markets (Axel, 1997; Graber, 1996; Peet and Hladik, 1989;
Solomon, 1995). Because of their newness, it appears that scholarly research on
GNPTs and, more broadly, global teams has been limited. A search in the
ABI-Inform and Wilson Business databases yielded no published conceptual or
empirical study in scholarly journals. Due to the dearth of studies, we turned to
related bodies of work for potential insights, namely past research on new
product development, project teams, workplace diversity, and group design.
Several conclusions were drawn from this review:
.
Teams can be an efficient and effective means of developing new products
and conducting other complex tasks. New product teams are involved in
non-repetitive tasks and draw on knowledge and judgment from different
disciplines and functional units, such as marketing, engineering, finance,
and manufacturing. Because of their capacity to tap into specialized
expertise and perform multiple activities simultaneously, they save time
and enhance overall project success (Cohen and Bailey, 1997; Eisenhardt
and Behnam, 1995). Teams enhance the quality of new product
development, particularly when they are focused on one project at time,
have frequent update meetings, communicate efficiently with other
parties, use a defined and accountable leader, are given clear project
responsibility, and are composed of dedicated, assigned members
(Cooper, 1996). Teams in general whether devoted to developing new
products or improving quality on the assembly line improve overall
organizational performance based on a range of cost, efficiency, quality,
participation, worker and customer satisfaction, and productivity
measures (Applebaum and Blatt, 1994; Cohen and Ledford, 1994;
Cordery et al., 1991; Cotton, 1993; Kirkman and Shapiro, 1997; Levine and
DAndrea, 1990; Wellings et al., 1990).
.
Team composition affects new product success. In perhaps the most
comprehensive review of the new product development literature, Brown
and Eisenhardt (1995) concluded that empirical evidence is overwhelming
that the composition of new product teams affects project success.
Composition the collective attributes of members influences the
information, resources, and problem-solving style of new product teams,
which in turn ultimately impacts on group performance (e.g. speed and
productivity). However, research on new product team compositions has
been limited to the attributes of tenure, function, and gate-keeping in
other words, national culture has yet to be investigated. New product
teams that are more cross-functional, have members of moderate tenure,
and incorporate active gatekeepers are known to be most effective

(Ancona et al., 1990; Clark and Fujimoto, 1991; Dougherty, 1992; Katz and
Tushman, 1981; Katz, 1982). It is also recognized that composition is a key
determinant of decision making in and performance of teams (Guzzo and
Dickson, 1996; Volkema and Gorman, 1998). Almost all models of group
effectiveness incorporate composition variables (e.g. Hackman, 1987;
Gladstein, 1984).
Cultural values impact on team performance. The majority of empirical
studies on group efficacy have been conducted within a single culture.
Consequently, there is limited understanding about the role of national
culture per se on group, much less new product team, processes and
performance (Bento, 1995; Daily et al., 1996). The few comparative,
cross-cultural studies suggest that cultural values, in particular
individualism-collectivism, significantly influence group dynamics and
results. Earley (1989) compared managers from the USA and the Peoples
Republic of China on a series of individual and group tasks, and
determined that, consistent with their dominant cultural value of
individualism, American managers were more apt to engage in social
loafing than their collectivist Chinese counterparts in group exercises. In
another study, Earley (1993) examined the group behaviors of American,
mainland Chinese, and Israeli managers, and found that, as hypothesized,
Americans performed best when working individually, whereas the
Chinese and Israelis did best in in-groups rather than alone or in an
out-group context. Erez and Somech (1996) studied the individual and
group behaviors of mid-level Israeli managers from kibbutz versus urban
backgrounds. The researchers concluded that group performance
suffered less in the collectivist kibbutz groups than the individualistic
urban groups.
Cultural heterogeneity positively and negatively affects teams. Cultural
heterogeneity refers to the variance or diversity of national cultural
values within a group. It is generally believed that heterogeneity is a
two-edged sword, generating both benefits and liabilities for groups
compared to cultural homogeneity. Since greater heterogeneity means
that a wider range of beliefs, attitudes, behaviors, perceptions, skills, and
motivations exist, conflict, turnover, communications breakdowns, and
unproductiveness are more likely. Homogeneous teams have the
advantages of shared assumptions and work processes, making for
greater efficiency. On the other hand, it also believed that heterogeneity
generates more and better ideas. Divergent views lead to multiple
solutions for a single problem, avoiding the pitfalls of group-think.
Diversity serves teams well when they are charged with cognitive,
creativity demanding tasks, but may be impeding for more routine
activities (Adler, 1991; Bento, 1995; Cox, 1991; Guzzo and Dickson, 1996;
McCalman, 1996).

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There is only a handful of published studies on the effects of cultural

heterogeneity on work groups and none specific to new product teams (studies
exist on racial diversity and group processes, but race and national culture are
distinct). These studies underscore the difficulties faced by diverse groups as
well as their strengths in producing more alternative, innovative solutions.
Watson et al. (1993) studied culturally heterogeneous and homogeneous groups
in a college management course. They found that initially heterogeneous
groups performed much worse than homogeneous groups, hampered by
differences in assumptions about leadership and work styles. Midway through
the study, the former caught up with the latter. By the end, overall performance
was still equal between the two, but the heterogeneous groups generated a
larger number and more diverse set of solutions than the homogeneous groups.
Daily et al. (1996) examined how culturally heterogeneous and homogeneous
teams in a company used group decision support systems. The researchers
observed that while both types of teams actively used the systems and
experienced increased idea generation, the former developed significantly more
realistic and unique solutions to problems.
A significant body of literature exists on the impact of non-cultural
heterogeneity on work groups. Heterogeneity is one of the most frequently
studied team characteristics (Keck and Tushman, 1993). Age, tenure, education,
temperament, and functional expertise are some of the non-cultural factors
examined. Like cultural heterogeneity, non-cultural heterogeneity is linked to
greater group process problems. Conflicts, miscommunications, differences in
objectives and work procedures arise (Bantel, 1998; Bettenhausen, 1991; Hare,
1976; Shaw, 1981). On the other hand, higher creativity, flexibility, planning
openness, and quality of decision making are associated with greater
heterogeneity (Bantel, 1994; Bantel and Jackson, 1989; Guzzo and Dickson,
1996; Jackson et al., 1991; Katz, 1982; Murray, 1989; Volkema and Gorman,
1998; Wanous and Youtz, 1986). Heterogeneity has also been found effective if
the competencies needed on a project are varied and tasks are disjunctive
(Campion et al., 1993; Gladstein, 1984; Hackman, 1987; Shaw, 1981; Wall et al.,
1986). In comparison, homogeneous teams have the benefits of lower conflict
and turnover, as well as higher consensus, cohesiveness, commitment to
courses of action, and continuity in decision making (Back, 1951; Dutton and
Duncan, 1987; Pearce and Ravlin, 1987; Jackson et al., 1991; Janis, 1972; Reed,
1978). But these groups face the disadvantages of reduced receptivity to
information and lower ability to fully use information (Whitney and Smith,
1983). Therefore, it appears that heterogeneity, whether culture-based or not,
both positively and negatively influences team processes and performance.
In summary, the review of the literature indicates no formal research on
GNPTs and little work on the impact of cultural composition, cultural values,
and cultural heterogeneity on group performance. Research does suggest that
these factors are important, but in what ways they are important and the

nature of their influence on new product development are not known.

Moreover, the specific question of how to design GNPTs so that national
culture enhances new product development success has not been addressed.
Companies that are increasingly global desire guidance in configuring GNPTs
so that members cultural strengths are drawn upon and cultural weaknesses
minimized. Managerial scholars need a theory of cultures role in new product
teams, especially in light of the rising importance of new product development,
self-managed teams, and global business. This research aims to help meet these
needs.
Conceptual framework
The conceptual framework for this study is based on a model of national
culture and new product development (Nakata and Sivakumar, 1996). In this
model national culture is said to impact on new product development, and does
so via specific cultural values that facilitate or impede the different phases of
development. National culture is defined as the collective programming of the
mind distinguishing members of one nation-state from those of another
(Hofstede, 1994, p. 4). The collective programming is manifest as a set of values,
which are universally present but vary in intensity by country. The values,
which were identified by Hofstede (1980) and Bond et al. (1987), are
individualism, uncertainty avoidance, masculinity, power distance and
long-term orientation. (Given how well known these factors are, they are not
elaborated here.) New product development is defined as the process of
conceiving, creating, and launching a product new to the company, a market, or
the world (Crawford, 1991; Urban and Hauser, 1993). The key phases in this
process are initiation, which covers idea generation, screening, and concept
testing, and implementation, which includes product design, test marketing,
and market introduction. These two stages are also referred to as the front
end and back end (Zaltman et al., 1973), and are essentially distinguished by
the first focusing on conceptualizing the product, and the latter fulfilling that
concept.
To this initial model with two broad constructs, national culture and product
development stages, we add several sub-constructs to form the conceptual
framework for our paper. The first sub-construct is the strength or intensity of
culture dimensions. We posit that each culture dimension influences new
product development success, but the effect can range from positive to negative
depending on its strength. For instance, low uncertainty avoidance may
generate more and better new product ideas a positive effect by
encouraging risk taking and active information search. High uncertainty
avoidance may, on the other hand, lead to an unwillingness to introduce an
innovation until it is already proven successful in the marketplace a negative
effect (Chakrabarti and Rubenstein, 1976; Goldhar et al., 1976; Johne, 1984). To
the degree that people embody national culture, they act as conduits of such

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facilitating or dampening values. Forming effective teams, then, may rest in

part on selecting persons representing culture value levels that propel rather
than impede new product development.
Not only may the strength of the culture dimensions matter to new product
development, but so can the variance or heterogeneity. As concluded from the
literature review, cultural heterogeneity seems to influence team processes and
performance. One way to think of cultural heterogeneity is in terms of the range
of cultural values present in a GNPT. Suppose a low level of power distance is
known to enhance product development activities. A team can be designed in
two ways to achieve this low level of power distance. One way would be to
choose individuals only with that low level of power distance. Another way
would be to choose some individuals with very low and others with moderately
low levels, averaging out to the targeted level of power distance for the group.
In the first case, cultural variance is small, and in the latter it is large. Either
way, the desired level of uncertainty avoidance for the group as a whole is
achieved. Therefore, the degree of variance has implications for how a team is
composed, and should be included as another sub-construct for our framework.
Culture dimensions may differentially impact on the two stages of
development and thereby overall new product development success. For
example, high degrees of individualism may facilitate the initiation step
(Chakrabarti and Rubenstein, 1976). At this stage there is a need to generate a
wide range of alternative product concepts, and the greater creativity and
entrepreneurism that often accompany high levels of individualism may be
particularly helpful. However, high individualism may be counterproductive
during implementation, when plans have been finalized and the team is rapidly
working toward market introduction. At this phase, new concepts or
approaches to product development cannot be introduced without seriously
jeopardizing budgets, schedules, and company commitments. Instead there is a
need for unified, cohesive, and well-orchestrated movement toward product
launch (Gupta et al., 1985; Johne, 1984; Nakata and Sivakumar, 1996). Low
levels of individualism, i.e. collectivism, may be far more helpful. Therefore, the
potentially differing effects of culture factors on the two distinct stages of new
product development are important to consider, forming another sub-construct
in our framework.
Finally, there is the relative importance of the two stages, which may differ
for any given project and depends on the newness of the product to be
developed. Product newness is recognized as a determinant of innovation
project outcomes (Olson et al., 1995). Products can be placed on a continuum of
newness. On one end of that spectrum are products called radical innovations,
which are new to both the firm and market. These products often involve
emerging technologies, and can create entirely new categories or industries.
Here initiation may be more important than implementation, since it is critical
to conceive the right, breakthrough concept, ensuring the end product departs

significantly from current offerings. On the other end of the newness spectrum
are routine innovations, which are new only to the firm (they have already been
introduced by competitors) or are only slightly new to the market (represent
minor changes to currently available products). These include line extensions,
imitations of competitive offerings (me-too products), and small modifications
of existing products (Booz, Allen, and Hamilton, 1982). In such cases
implementation may be the more important of the two stages, because the
project already has known parameters, and market success depends primarily
on quickly getting a familiar product into the hands of buyers. We therefore
incorporate relative importance of development stages as a final element of our
framework.
The four factors just described the intensity of culture values, heterogeneity
of culture values, the nature of their effect on the two stages, and relative
importance of the two stages all impact on the overall new product
development success, as shown in our conceptual framework in Figure 1.
Identifying optimal team compositions is a matter of simultaneously
considering the four factors and their contributions to development outcomes.
This is not a straightforward exercise. For instance, since any given level of a
culture variable, such as high individualism, has contradictory effects when
moving from initiation to implementation, determining the right group
composition is not simply a matter of choosing individuals to represent degrees
of culture variables with uniformly positive impact on new product
development there are no such variables. Instead, the opposing effects of
culture variables on the two development phases need to be considered, the
relative importance of these phases identified based on product type, and the
variance of culture values assessed. We now propose a method to handle the
complexity of these factors and arrive at group compositions that optimize
product development results.

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Overview of method
The method of identifying optimal culture-based team compositions closely
follows the conceptual framework presented in the previous section, and rests

Figure 1.
Conceptual framework

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on two simplifying assumptions. These assumptions are necessary in order to

develop the initial mathematical models. Later research may develop models
resting on more elaborate assumptions. One assumption is that individuals
reflect their national culture. Thus an American, consistent with the US
national culture, is high in individualism, low in power distance, high in
masculinity, and low in uncertainty avoidance. Note that this assumption is
implicitly or explicitly made in the vast majority of national culture studies
found in the international business and management literature. Clearly, not all
Americans have this profile, so for purposes of team selection an instrument
would be used to assess and confirm an individuals levels of culture values.
Dorfman and Howell (1988) have developed such scales, which are applicable to
the individual or micro unit of analysis such as teams. In assembling an
effective GNPT, a company selects persons based on their individual levels of
culture values but aims for certain levels for the collective.
We also assume that all the optimization models apply to a single culture
factor, whether it is individualism, power distance, masculinity, uncertainty
avoidance, or long-term orientation. This has two implications. First, the
models presented are broadly descriptive of any culture values impact on new
product development. Though we use the values proposed by Hofstede and
Bond as the basis of our framework due to its popularity among international
marketing researchers, the method we propose can be applied to any culture
factor, so long as it can be reduced to a quantitative indicator to enable
mathematical treatment. Another implication is that more effective groups are
those with the targeted levels of however many culture dimensions are
considered. Thus, if it is determined that x level of a culture factor is optimal
for y type of new product project, that level should be aimed at for all five
culture values if Hofstede and Bonds culture paradigm is adopted.
Optimizing the intensity or strength of a culture factor requires first
considering its opposing effects on initiation versus implementation, and how
these effects combine to impact on overall new product development success.
The effects may simply be linearly additive, i.e. overall new product
development success is a combination of the effectiveness of the initiation stage
and the effectiveness of the implementation stage as influenced by national
culture. Alternatively, the overall development success may rest on more
complex effects: multiplicative, exponentially additive, or logarithmically
additive. Since all of these relationships are feasible, we developed optimization
models for these four types using analytical derivations. Although these four
relationships appear to be simply mathematical variants, they reflect important
distinctions in how overall development success may result. For example, an
additive relationship implies that the impact of national culture on the two
stages of NPD can be independently modeled and analyzed, while the
multiplicative relationship reflects a potential interaction between the two
stages. Even in the case of the additive relationship, the three forms linear,
exponential, and logarithmic represent distinct interpretations of the

strength of the effectiveness of each development stage on total development

outcomes. For instance, a linear additive relationship implies constant effects
on total development success for all changes in the effectiveness of the two
stages, whereas exponential additive relationship means increasing marginal
impact.
A second aspect to consider is that the two development stages can differ in
relative importance. As discussed previously, radical innovations may require
more focus on the front end, while routine innovations may need greater attention
to the back end. One way to operationalize this difference between the two phases
is via various weighting schemes. Greater weight would be given to the front-end
stage and lesser weight on the back end for radical innovation projects, whereas
the reverse would be done for routine innovations. Projects judged to be
moderately innovative can have equal weights assigned to the two stages. Even
the degree of relative weights can be specified to reflect distinctions on a
continuum from radical to routine. For instance, an extremely radical innovation
may have the entire weight given to the front end, a somewhat radical innovation
can have three-quarters of the total weight, and a conventional innovation may
have only one-quarter of the weight given to that stage. To understand how these
various weighting schemes may affect group performance, comparative statics of
model parameters were used in the numerical simulation to estimate the impact
of weight changes on optimal solutions.
The first four optimization models presented are for the simple case of
optimizing the strength of a culture dimension to maximize new product
development success. The next four models are for the complex case of
incorporating a culture dimensions heterogeneity in this case, the objective is
to simultaneously optimize the level of a culture dimension and the extent of its
heterogeneity. All models involve analytical derivation of optimal culture levels
and comparative statics. Following presentation of each set of four models,
numerical simulations are performed and discussed. The simulations illustrate
how the models can be used, and provide actual calculations of estimated new
product development outcomes. The calculations can be used directly by
managers to identify culture levels and variance that, if represented by team
members, can lead to stronger team performance and better project results. The
simulations are based on number of team and project scenarios, representing a
fairly comprehensive range of situations that may be encountered by GNPTs.
Determining team composition: optimizing culture factor level
The models use the following notations: X is the culture factor (the independent
variable), N is the initiation stage, M is the implementation stage, f(X ), or f for
short, is the relationship between X and N, g(X ), or g for short, is the relationship
between X and M, and Y stands for overall new product development success
(the dependent variable). u, l, v, and f respectively represent the weight or
importance of the initiation stage (N ) for the additive, multiplicative,
exponential, and logarithmic relationships between M and N in determining

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Y; conversely, (1 2 u), (1 2 l), (1 2 v), and (1 2 f) represent the weights of the

implementation stage. Note also that the analytical derivations presented below
use general functional forms in order to be applicable to a wide variety of
situations. Specific functional forms are used in the numerical simulation.
For each set of derivations below, the following general procedure was
applied. First, the objective function was given to define the dependent variable
Y, the total performance, as a function of effectiveness in initiation and
implementation respectively for the appropriate relationship. Then the first
order condition (FOC) was derived. The optimal value of independent variable
was obtained by equating the FOC to zero. The value of the dependent variable
at the optimal value of the independent variable was obtained by substituting
the value of the optimal independent variable into the objective function. The
second order condition (SOC) was derived next by further differentiating the
FOC with respect to X. Given that the objective was to maximize the dependent
variable, the expression given by the second order condition is negative. The
third step was to derive the comparative static for the relative importance
parameter. Again, consistent with existing approaches to optimization,
comparative statics were obtained by differentiating the expression for FOC
with respect to the relative weight parameter and solving the resulting
expression for the change in optimal value of independent variable for a change
in the value of the parameter. The sign of the comparative static (i.e. whether
the value of optimal independent variable decreases or increases) may depend
on the value of other entities in the model.
Additive relationship between initiation and implementation
Objective function:
y uN 1 2 uM uf 1 2 ug:
FOC:

Y
uf 0 1 2 ug 0 0:
X
SOC:

2 Y
uf 00 1 2 ug00 , 0:
X 2
Comparative statics:

X

g0 2 f 0
00
0 if
u
uf 1 2 ug 00
, 0 if g0 . f 0 :

g0 f 0 ;

.0

if

g0 , f 0

Multiplicative relationship between initiation and implementation

Objective function:

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y N l M 12l f l g 12l :
FOC:

409
Y
f0
g0
l 1 2 l 0:
X
f
g

SOC:

00


00

2 Y
f
f 0 2
g
g0 2
l
2 2 1 2 l
2 2 , 0:
X 2
f
f
g
g
Comparative statics:
0

g
f
X

g 2 f

 00
 0 if
 00
0 2
0 2
l
l ff 2 ff 2 1 2 l gg 2 gg 2

,0

if

f 0 g . fg 0 ;

.0

if

f 0 g fg 0 ;

f 0 g , fg 0 :

Exponential additive relationship between initiation and implementation

Objective function:
y ve N 1 2 ve M ve f 1 2 ve g :
FOC:

Y
ve f f 0 1 2 ve g g 0 0:
X
SOC:

2 Y
ve f f 00 ve f f 0 2 1 2 ve g g 00 1 2 ve g g0 2 , 0:
X 2
Comparative statics:

X

e g g0 2 e g f 0

v
ve f f 00 ve f f 0 2 1 2 ve g g 00 1 2 ve g g0 2 
0 if e g g0 e f f 0 ; . 0 if e g g0 , e f f 0 ; , 0 if e g g 0 . e f f 0 :

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Logarithmic additive relationship between initiation and implementation

Objective function:
y flnN 1 2 flnM flnf 1 2 flng:
FOC:

410

Y
f0
g0
f 1 2 f 0:
X
f
g
SOC:
 00

 00

2 Y
f
f 0 2
g
g0 2
f
2 2 1 2 f
2 2 , 0:
X 2
f
f
g
g
Comparative statics:
0

g
f
X

g 2 f
h
i
h 00
i 0 if

f 00
f 0 2
g
g 0 2
v
v f 2 f 2 1 2 v g 2 g 2

,0

if

f 0 g . fg 0 ;

. 0 if

f 0 g fg 0 ;

f 0 g , fg 0 :

Numerical simulations
The numerical simulations validate the models by showing that they do work,
providing results consistent with expectations. If, say, a manager wants to
know how much new product development success is affected and in what
direction when the slope of the relationship between a cultures intensity and
the initiation stage increases by 10 percent, the simulation provides that
answer. It is assumed that a culture factors impact on initiation is positive and
on implementation negative. The reverse could have easily been assumed, and
the only required change would have been to interchange the signs.
A total of 540 simulations were performed. The large number results from
the need to specify optimal levels and new product success measures for a
fairly comprehensive range of new product project scenarios. Recall that there
are four basic optimization models, each reflecting a unique way of aggregating
the two stages of new product development on the total new product success:
linearly additive, multiplicative, exponentially additive, and logarithmically
additive.
The relationship between the culture factor and a new product development
stage could be specified in three ways: as a straight line relationship to denote a
constant slope (e.g. the effect of change in culture factor from 50 to 51 is the
same as the effect of change in culture factor from 90 to 91), a logarithmic
relationship to denote decreasing slope (the effect of change in culture factor
from 10 to 11 is more than the effect of change from 30 to 31), and an

exponential relationship to denote increasing slope (e.g. the effect of change in

culture factor from 10 to 11 is less than the effect of change from 30 to 31). Once
again, though the different functional forms appear to be just mathematical
variants, they are based on important substantive rationales and intuitive logic.
The three ways, when applied to each stage, initiation (N ) and implementation
(M ), can be represented in the following functional forms:
N 1 a1 b1 x

M 1 a2 2 b2 x

N 2 g1 d1 lnx

M 2 g2 2 d2 lnx

N 3 m1 n1 e x

M 3 m2 2 n2 e x

Since there were three functional forms of N and three functional forms of M,
combining them in order to reflect all possibilities for Y meant nine different
options. The four different aggregation approaches could be combined with nine
combinations of functional forms for a total of 36 scenarios. An aspect of the
functional forms presented above needs brief elaboration here. That aspect is
the positive slopes for initiation and negative slopes for implementation. The
slopes are such because it is assumed that the effects of culture values are
opposing on the two stages. Past research indicates that culture values can have
these conflicting effects on innovation processes (Nakata and Sivakumar, 1996).
High levels of individualism can propel initiation but dampen implementation,
and high levels of uncertainty avoidance can impede initiation but advance
implementation. We chose for simplicity in our models to focus on the
possibility of the impact of culture being positive in the first phase then negative
in the second, though the reverse effects are equally possible.
As alluded to previously, we also incorporated different weights for the
relative importance of the two stages. In some projects, the first stage could be
considered more important, in others the second more important, and in still
others, of equal importance. To reflect these varying situations, we developed
five different weighting schemes. Each stage was given a weight coefficient. A
weight of 0 meant that the initiation stage did not matter at all, a weight of 1.0
meant that it mattered entirely, and other weights (0.25, 0.5, 0.75) suggested
importance weights in between. Combining the five weights for each of the 36
scenarios results in 180 different simulations.
The other dimension incorporated in the numerical simulation was the
individual slope coefficients themselves. The effect of the slopes was ascertained
by assuming three different sets of values for the slopes of initiation and
implementation stages:
(1) the coefficients could be at the base values;
(2) the magnitude of the slope coefficient for initiation could increase by 10
percent while keeping the slope of the implementation stage at the base
level; and

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(3) the magnitude of the slope coefficient of the implementation stage could
increase by 10 percent while the slope of the initiation stage remained at
the base level.
Considering the three value combinations for the slopes for each or the 180
simulations discussed previously, we need to perform a total of 540
simulations.
All values for the independent variable (X, culture strength) were from 1 to
100. The values for the independent variable were chosen in part because
Hofstede (1980) reported indexes of culture values in this same range.
Therefore, for each simulation, 100 calculations were done, and the highest
number representing the best new product development success measure and
the corresponding optimal culture level are reported in Tables I-IV. In other
words, a total of 54,000 computations were performed and each entry in the

Y uN 1  uM
N n1
M m1
N n1
M m2
N n1
M m3
N n2
M m1
N n2
M m2
N n2
M m3
N n3
M m1

Table I.
Optimal X and Y for
additive
relationship
between initiation
and implementation
(culture level only)

N n3
M m2
N n3
M m3

B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2

u0
X
Y
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

0.89
0.89
0.89
0.37
0.37
0.37
0.90
0.90
0.86
0.89
0.89
0.89
0.37
0.37
0.37
0.90
0.90
0.86
0.89
0.89
0.89
0.37
0.37
0.37
0.90
0.90
0.86

u 0:25
X
Y
1
1
1
1
100
1
1
1
1
2
3
2
1
1
1
4
4
4
1
1
1
1
100
1
1
1
1

0.67
0.67
0.67
0.28
0.29
0.28
0.68
0.68
0.65
0.83
0.83
0.83
0.43
0.43
0.43
0.84
0.84
0.81
0.70
0.70
0.69
0.30
0.32
0.30
0.70
0.71
0.67

u 0:50
X
Y
1
1
100
100
100
100
53
60
47
7
8
7
1
1
96
11
12
10
100
100
1
100
100
100
1
100
1

0.46
0.45
0.48
0.46
0.48
0.45
0.50
0.52
0.48
0.79
0.80
0.79
0.50
0.50
0.51
0.81
0.81
0.79
0.50
0.54
0.50
0.50
0.54
0.49
0.50
0.54
0.48

u 0:75
X
Y
100
100
100
100
100
100
100
100
100
21
23
20
100
100
100
27
29
26
100
100
100
100
100
100
100
100
100

0.63
0.62
0.67
0.63
0.67
0.63
0.63
0.64
0.61
0.79
0.80
0.79
0.70
0.70
0.71
0.81
0.82
0.80
0.70
0.77
0.69
0.70
0.77
0.69
0.70
0.77
0.68

u 1:0
X
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

0.81
0.81
0.87
0.81
0.87
0.81
0.81
0.87
0.81
0.90
0.92
0.90
0.90
0.90
0.92
0.90
0.92
0.90
0.90
0.99
0.90
0.90
0.99
0.90
0.90
0.99
0.90

Notes: B0 base slope values; B1 initiation slope increases; B2 implementation slope

increases

Y N l M1l
N n1
M m1
N n1
M m2
N n1
M m3
N n2
M m1
N n2
M m2
N n2
M m3
N n3
M m1
N n3
M m2
N n3
M m3

B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2

l0
X
Y

l 0:25
X
Y

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

27
25
27
22
23
13
34
34
32
3
3
3
1
1
1
5
5
4
15
10
13
1
1
1
28
24
24

0.89
0.89
0.89
0.37
0.37
0.37
0.90
0.90
0.86
0.89
0.89
0.89
0.37
0.37
0.37
0.90
0.90
0.86
0.89
0.89
0.89
0.37
0.37
0.37
0.90
0.90
0.86

0.52
0.51
0.53
0.19
0.19
0.18
0.56
0.57
0.53
0.83
0.83
0.83
0.42
0.42
0.42
0.84
0.84
0.81
0.54
0.57
0.53
0.27
0.29
0.27
0.57
0.59
0.55

l 0:50
X
Y
55
52
55
100
100
100
60
59
55
8
8
7
1
1
1
12
12
11
57
54
51
100
100
100
62
60
56

0.46
0.44
0.47
0.28
0.29
0.26
0.50
0.52
0.48
0.79
0.80
0.79
0.48
0.48
0.48
0.80
0.81
0.79
0.45
0.48
0.44
0.30
0.31
0.27
0.50
0.53
0.47

l 0:75
X
Y
84
78
84
100
100
100
83
83
78
19
21
18
7
5
9
26
27
24
89
89
83
100
100
100
87
87
81

0.52
0.49
0.55
0.48
0.50
0.46
0.55
0.58
0.52
0.79
0.80
0.79
0.57
0.57
0.57
0.81
0.82
0.80
0.54
0.58
0.51
0.52
0.56
0.49
0.57
0.61
0.53

l 1:0
X
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

0.81
0.81
0.87
0.81
0.87
0.81
0.81
0.87
0.81
0.90
0.92
0.90
0.90
0.90
0.92
0.90
0.92
0.90
0.90
0.99
0.90
0.90
0.99
0.90
0.90
0.99
0.90

Notes: B0 base slope values; B1 initiation slope increases; B2 implementation slope

increases

tables represents the maximum Y and the corresponding X from the 100
computations for that particular scenario.
In performing the numerical simulations, the values for the various
coefficients were chosen to constrain the dependent variable measures M and N
approximately between 0 and 1 and the dependent measure Y approximately
between 0 and 1.0. Though the exact scaling of these variables will be case
specific, we need to follow a simple and reasonable calibration mechanism to
illustrate the model results. Clearly, the exact calibration or scaling used for
any of the variables (culture factor, implementation stage, initiation stage, total
performance) will not affect the substantive conclusions discussed below. The
quantitative results will suitably reflect the different scaling mechanisms used
in specific cases. The functional forms and parameter values used in the
simulation are given below:

Global new
product teams

413

Table II.
Optimal X and Y for
multiplicative
relationship
between initiation
and implementation
(culture level only)

IMR
20,4

Y flnN 1  flnM
N n1
M m1

414

N n1
M m2
N n1
M m3
N n2
M m1
N n2
M m2
N n2
M m3
N n3
M m1

Table III.
Optimal X and Y for
logarithmic additive
relationship
between initiation
and implementation
(culture level only)

N n3
M m2
N n3
M m3

B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2

f0
X
Y

f 0:25
X
Y

f 0:50
X
Y

f 0:75
X
Y

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

27
25
27
24
24
14
34
35
32
3
3
3
1
1
1
5
5
4
15
11
13
1
1
1
28
25
24

55
52
55
100
100
100
60
60
56
8
8
7
1
1
1
12
12
11
57
54
52
100
100
100
62
61
57

84
78
84
100
100
100
83
83
77
20
20
18
7
5
9
26
27
24
90
89
83
100
100
100
87
87
81

0.94
0.94
0.94
0.50
0.50
0.50
0.94
0.94
0.93
0.94
0.94
0.94
0.50
0.50
0.50
0.94
0.94
0.93
0.94
0.94
0.94
0.50
0.50
0.50
0.94
0.94
0.93

0.67
0.66
0.68
0.16
0.17
0.14
0.71
0.72
0.69
0.91
0.91
0.90
0.57
0.57
0.57
0.91
0.91
0.90
0.69
0.71
0.69
0.34
0.38
0.34
0.72
0.74
0.70

0.61
0.59
0.62
0.37
0.39
0.32
0.66
0.67
0.63
0.88
0.89
0.88
0.64
0.64
0.64
0.89
0.90
0.88
0.60
0.63
0.58
0.40
0.42
0.35
0.65
0.68
0.62

0.67
0.65
0.70
0.63
0.66
0.61
0.70
0.73
0.67
0.88
0.89
0.88
0.72
0.72
0.72
0.89
0.90
0.89
0.69
0.73
0.66
0.67
0.71
0.65
0.72
0.76
0.68

f 1:0
X
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

0.89
0.89
0.93
0.89
0.93
0.89
0.89
0.93
0.89
0.95
0.96
0.95
0.95
0.95
0.96
0.95
0.96
0.95
0.95
0.99
0.95
0.95
0.99
0.95
0.95
0.99
0.95

Notes: B0 base slope values; B1 initiation slope increases; B2 implementation slope

increases

N 1 0:1 0:008X;

N 2 0:633 0:058lnX;

M 1 0:9 2 0:008X; M 2 0:367 2 0:058lnX;

N 3 20:365 0:465e0:01X
M 3 1:365 2 0:465e0:01X

Given that a variety of functional forms were used (primarily to demonstrate

the applicability of the framework in a comprehensive manner), in some cases,
suitable scaling factors were also assumed to constrain the dependent
variables. The results of the simulations are given in Tables I-IV.
Each table gives simulation results for one functional form of the relationship
between the two stages and total new product development success. The
functional form is indicated by the top-left entry in the table. Thus, Table I gives
the simulation results for linear additive relationship between initiation and
implementation stages, Table II gives the results for multiplicative relationship,

y vexpN
1  vexpM
N n1
M m1
N n1
M m2
N n1
M m3
N n2
M m1
N n2
M m2
N n2
M m3
N n3
M m1
N n3
M m2
N n3
M m3

B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2
B0
B1
B2

v0
X
Y

v 0:25
X
Y

v 0:50
X
Y

v 0:75
X
Y

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

1
1
1
100
100
100
1
1
1
2
2
2
1
1
1
3
4
3
1
1
1
100
100
100
1
1
1

1
1
100
100
100
100
1
100
1
7
7
6
100
100
100
10
11
10
100
100
1
100
100
100
100
100
1

100
100
100
100
100
100
100
100
100
24
27
23
100
100
100
30
32
30
100
100
100
100
100
100
100
100
100

0.81
0.81
0.81
0.48
0.48
0.48
0.82
0.82
0.79
0.81
0.81
0.81
0.48
0.48
0.48
0.82
0.82
0.79
0.81
0.81
0.81
0.48
0.48
0.48
0.82
0.82
0.79

0.69
0.69
0.69
0.46
0.47
0.46
0.70
0.70
0.68
0.77
0.77
0.77
0.52
0.52
0.52
0.77
0.77
0.75
0.70
0.72
0.70
0.48
0.50
0.48
0.70
0.71
0.68

0.58
0.58
0.57
0.56
0.58
0.56
0.58
0.58
0.56
0.74
0.74
0.74
0.59
0.59
0.60
0.75
0.75
0.74
0.59
0.63
0.59
0.59
0.63
0.59
0.59
0.63
0.58

0.65
0.65
0.69
0.65
0.69
0.65
0.65
0.69
0.64
0.74
0.74
0.73
0.71
0.71
0.72
0.75
0.76
0.74
0.71
0.76
0.70
0.71
0.76
0.70
0.71
0.76
0.70

v 1:0
X
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

0.75
0.75
0.79
0.75
0.79
0.75
0.75
0.79
0.75
0.82
0.84
0.83
0.82
0.82
0.84
0.82
0.84
0.82
0.82
0.89
0.82
0.82
0.89
0.82
0.83
0.89
0.82

Notes: B0 base slope values; B1 initiation slope increases; B2 implementation slope

increases

Table III offers the results for logarithmic additive relationship, and Table IV
presents the results for the exponential additive relationship. Each optimal
value entry in the table consists of two parts the culture value from 0 to 100
(X ) to produce maximum performance and the value of the maximum
performance (Y ). Each table offers the results for five different sets of relative
weights for the importance of the initiation and implementation stages. These
values shown are for the relative importance of initiation stage in the total new
product success. Each table also presents the results for all nine combinations of
initiation and implementation functions described previously (these
combinations are indicated in the first column of the tables). The second
column represents the nature of the slopes used in the optimization. B0 means
that the values used are the same values presented in the equations presented
earlier. B1 means the magnitude of the slope in the initiation stage is increased
by 10 percent, while everything else remains the same as the base condition. B2

Global new
product teams

415

Table IV.
Optimal X and Y for
exponential additive
relationship
between initiation
and implementation
(culture level only)

IMR
20,4

416

means the magnitude of the slope in the implementation stage is increased by 10

percent, while everything else is identical to the base condition.
For illustration, let us consider the entry for u 0:75 when N n2 and
M m3. In the base condition (for the equations presented earlier), the
maximum performance (best new product development outcomes) is obtained
when the culture factor level is 27 and the index of total performance is 0.81.
When the magnitude of the slope of the initiation stage goes up by 10 percent,
the optimal culture factor level becomes 29 and the performance index goes up
to 0.82. When the magnitude of the slope of implementation stage increases by
10 percent, the optimal culture factor level becomes 26 and the total
performance index reduces to 0.80. The implication of the relative importance
of the stages is obtained by comparing numbers in any one row. Let us consider
row B0 for the combination N n2 and M m3. It can be seen that as the
importance of the initiation stage increases (i.e. as we move from left to right
across the tables), the optimal culture level increases while the total
performance index itself first decreases and then increases. Similar
interpretations are applicable for other entries in this and other tables.
Determining team composition: simultaneously optimizing culture
factor level and heterogeneity
The analytical derivations and numerical simulations in the previous section
have centered on deriving the optimal culture level, given cultures conflicting
influences on different stages of new product development and the relative
importance of those stages. As discussed previously, another factor that likely
matters to team outcome is cultural heterogeneity. The need for incorporating
this variable arises from two perspectives. One, it is possible to achieve a given
culture level for a GNPT with high or low variance as explained earlier. If the
targeted culture level is high or low, a manager confronts the four choices in
assembling a team as shown in Figure 2.
The question for the manager becomes which option to choose, and on what
basis other than pure judgment to make that decision. This dilemma leads
to the second and related reason to consider cultural heterogeneity, namely that
it may interact with cultural intensity or differentially impact on the two
development stages. If the influence of heterogeneity can be isolated, and it
does not interact with the main effect of cultural intensity, the problem is
simple. We use the models already described to identify not only the optimal
cultural intensity, but also the optimal cultural variance in sequence. Optimal
intensity is identified through the procedures already described. Optimal

Figure 2.
Four choices in
assembling a team

variance is determined by replacing X (strength of culture factor) with the

variance measure (denoted S ), then finding the S which maximizes new
product development success.
However, if there are potential interactions between X and S, the simple
approach would not work, and we need models which recognize the
simultaneous effects of X and S on team performance. An example would be if
the positive impact of high levels of individualism on initiation were
diminished by high variance in individualism. Furthermore, the models must
account for the possibility that the effect of S does not reinforce the effect of X.
For instance, high levels of individualism may favorably influence the
initiation stage, but the variance may have an adverse effect on the same stage,
representing a compensating relationship. Alternatively, high levels of
individualism as well as the variance of individualism may both have a
negative impact on implementation. This is a reinforcing relationship. We do
not know which of these relationships hold, so our conceptual framework
should reflect these possibilities.
In sum, it appears beneficial for cultural heterogeneity to be incorporated
into the optimization models. As with the simple models, the complex models
reflect the four basic ways of combining the effects of a culture factors
intensity on the two development phases: additive, multiplicative, exponential,
and logarithmic. The rationale for these four models is similar to that presented
previously for the simple model. Analytical derivations and comparative
statics were again used to develop the models. The notations used earlier still
apply, except that S has been included to represent cultural variance.
The general procedure followed in the derivations is the same as those for
the previous models but modified to account for the simultaneity in the
optimization modeling. The first order conditions are denoted FOC1 and FOC2
and the optimal values for X and S are obtained by simultaneously solving the
two FOCs. The derivation of the second order conditions is somewhat more
involved. First, FOC1 is further differentiated with respect to X to obtain an
expression denoted as S1. Then, FOC2 is further differentiated with respect to S
to obtain an expression denoted as S2. The expression S3 can be obtained by
either differentiating FOC1 with respect to S or by differentiating FOC2 with
respect to X. There are three second order conditions:
(1) S 1 , 0;
(2) S 2 , 0;
(3) S 1 S 2 2 S 23 . 0.
The comparative statics to examine the changes in optimal solutions for
changes in relative importance parameter are given by differentiating FOC1
and FOC2 with respect to the parameters, and simultaneously solving for the
two expressions for comparative statics.

Global new
product teams

417

IMR
20,4

Additive relationship between initiation and implementation

Objective function:
y uN 1 2 uM uf 1 2 ug:
FOCs:

418

FOC1 :

Y
uf 0x 1 2 ug 0x 0:
X

FOC2 :

Y
uf 0s 1 2 ug 0s 0:
S

S3

S1

2 Y
uf 00x 1 2 ug00x :
X 2

S2

2 Y
uf 00s 1 2 ug00s :
S 2

2 Y
2 Y

uf 00xs 1 2 ug00xs :
X S S X

SOCs:
SOC1 : S 1 , 0; SOC2 : S 2 , 0; SOC3 : S 1 S 2 2 S 3 . 0:
Comparative statics:

X
S 2 g0x 2 f 0x 2 S 3 g 0s 2 f 0s

0 if
u
S 1 S 2 2 S 23
,0

if

S 2 g 0x 2 f 0x , S 3 g0s 2 f 0s ; . 0

S 2 g0x 2 f 0x S 3 g 0s 2 f 0s ;
if

S 2 g 0x 2 f 0x . S 3 g0s 2 f 0s :

S
S 1 g0s 2 f 0s 2 S 3 g0x 2 f 0x

0 if S 1 g0s 2 f 0s S 3 g0x 2 f 0x ;
u
S1S2 2 S3
, 0 if S 1 g 0s 2 f 0s , S 3 g 0x 2 f 0x ; . 0 if S 1 g0s 2 f 0s . S 3 g0x 2 f 0x :
Multiplicative relationship between initiation and implementation
Objective function:
y N l M 12l f l g 12l :

Global new
product teams

FOCs:
FOC1 :

Y
f0
g0
l x 1 2 l x 0:
X
f
g

FOC2 :

Y
f0
g0
l s 1 2 l s 0:
S
f
g

419

 00

 00

2 Y
f x f 0x 2
g x g 0x 2
S1
l
2 2 1 2 l
2 2 :
X 2
f
f
g
g
 00

 00

2 Y
f s f 0s 2
gs g0s 2
S2
l
2 2 1 2 l
2 2 :
S 2
f
f
g
g
 00

 00

2 Y
2 Y
f xs f 0x f 0s
g xs g0x g 0s
S3

l
2 2 1 2 l
2 2 :
X S S X
f
f
g
g
SOCs:
SOC1 : S 1 , 0; SOC2 : S 2 , 0; SOC3 : S 1 S 2 2 S 23 . 0:
Comparative statics:
0

0

gx
f 0x
gs
f 0s

0


0



S
2
2
2
S
2
3
g
f
g
f
X
gx f 0x
gs f 0s

0 if S 2
2
S3
2
;
l
g
f
g
f
S1S2 2 S3

0




g
f0
g0 f 0
. 0 if S 2 x 2 x . S 3 s 2 s ;
g
f
g
f

0


0

0
gx f x
gs f 0s
2
, S3
2
:
, 0 if S 2
g
f
g
f

S1

. 0 if
, 0 if

g 0s
g

f 0s
f

2 S3

g 0s
g

f 0s
f

0 if S 1
S1S2 2 S3

0


0

gs f 0s
gs f 0s
2
. S3
2
;
S1
g
f
g
f

0


0

g
f0
g
f0
S1 s 2 s , S3 s 2 s :
g
f
g
f

g0s f 0s
2
g
f

S3


g0s f 0s
2
;
g
f

IMR
20,4

Exponential additive relationship between initiation and implementation

Objective function:
y ve N 1 2 ve M ve f 1 2 ve g :

420

FOCs:

S3

FOC1 :

Y
ve f f 0x 1 2 ve g g 0x 0:
X

FOC2 :

Y
ve f f 0s 1 2 ve g g 0s 0:
S

S1

2 Y
ve f f 00x ve f f 0x 2 1 2 ve g g00x 1 2 ve g g0x 2 :
X 2

S2

2 Y
ve f f 00s ve f f 0s 2 1 2 ve g g 00s 1 2 ve g g0s 2 :
S 2

2 Y
2 Y

ve f f 00xs ve f f 0s f 0x 1 2 ve g g00xs 1 2 ve g g0x g 0s :

X S S X

SOCs:
SOC1 : S 1 , 0; SOC2 : S 2 , 0; SOC3 : S 1 S 2 2 S 23 . 0:
Comparative statics:

X
S 2 e g g 0x 2 e f f 0x 2 S 3 e g g 0s 2 e f f 0s

S1S2 2 S3
v
g 0
0 if S 2 e g x 2 e f f 0x S 3 e g g0s 2 e f f 0s ;
.0

if

S 2 e g g0x 2 e f f 0x . S 3 e g g0s 2 e f f 0s ;

,0

if

S 2 e g g0x 2 e f f 0x , S 3 e g g0s 2 e f f 0s :

S
S 1 e g g 0s 2 e f f 0s 2 S 3 e g g0x 2 e f f 0x

S1S2 2 S3
v
g 0
0 if S 1 e g s 2 e f f 0s S 3 e g g 0x 2 e f f 0x ;
.0

if

S 1 e g g0s 2 e f f 0s . S 3 e g g 0x 2 e f f 0x ;

,0

if

S 1 e g g0s 2 e f f 0s , S 3 e g g 0x 2 e f f 0x :

Logarithmic additive relationship between initiation and implementation

Objective function:
y flnN 1 2 flnM flnf 1 2 flng:
FOCs:
FOC1 :

Y
f0
g0
f x 1 2 f x 0:
X
f
g

FOC2 :

Y
f0
g0
f s 1 2 f s 0:
X
f
g

 00

 00

2 Y
f x f 0x 2
g x g0x 2
S1
f
2 2 1 2 f
2 2 :
X 2
f
f
g
g
 00

 00

2 Y
f s f 0s 2
gs g0s 2
f
S2
2 2 1 2 f
2 2 :
S 2
f
f
g
g
 00

 00

2 Y
2 Y
f xs f 0x f 0s
g xs g0x g 0s
S3

f
2 2 1 2 f
2 2 :
X S S X
f
f
g
g
SOCs:
SOC1 : S 1 , 0; SOC2 : S 2 , 0; SOC3 : S 1 S 2 2 S 23 . 0:
Comparative statics:
0

0

gx
f 0x
gs
f 0s

0


0



S
2
2
2
S
2 g
3 g
f
f
X
gx f 0x
gs f 0s

0 if S 2
2
S3
2
;
f
g
f
g
f
S 1 S 2 2 S 23

0


0

g
f0
g
f0
. 0 if S 2 x 2 x . S 3 s 2 s ;
g
f
g
f

0


0

0
gx f x
g s f 0s
2
, S3
2
:
, 0 if S 2
g
f
g
f

Global new
product teams

421

IMR
20,4

422

S1

.0

if

,0

if

g 0s
g

f 0s
f

2 S3

g 0s
g

f 0s
f

0 if

S 1 S 2 2 S 23

0


0

g s f 0s
g s f 0s
2
2
S1
. S3
;
g
f
g
f

0




g
f0
g0 f 0
S1 s 2 s , S3 s 2 s :
g
f
g
f

S1

g0s f 0s
2
g
f

S3


g0s f 0s
2
;
g
f

Numerical simulation
Numerical simulations of the complex optimization models were performed to
validate and illustrate the models usage. There were many different ways of
interpreting and operationalizing the models for simulation. Rather than
exhausting all possibilities, we chose representative scenarios to explore the
impact of cultural heterogeneity on new product outcomes (primarily to
conserve space). Future research may encompass other simulations.
Mirroring the simple models, we began with the four basic models, each of
which could be interpreted in nine ways, for a total of 36 scenarios, to reflect the
differing functional forms of initiation and implementation. Next we turned to
detailing the potential main and interaction effects of cultural heterogeneity.
This resulted in 16 distinct possibilities as shown in Table V.
If we interpreted each of the 36 scenarios in these 16 ways, that would have
resulted in 576 scenarios (as opposed to the 36 demonstrated in the previous
section). Since the primary purpose at this point was to illustrate the impact of
cultural heterogeneity if incorporated, we chose to perform a smaller though
reasonable number of simulations. Akin to a Latin square design, in which a
subset of relationships is examined to gain insight on the total set, we decided
to examine just 36 scenarios. Specifically the four basic models were examined
in terms of the three functional forms. Instead of focusing on all 16 possible

Table V.
The potential main
and interaction
effects of cultural
heterogeneity

Initiation
(main effect of
x positive)

Implementation
(main effect of
x negative)

Nature of effect of
S to that of x

Main effect of S

Positive
Negative
Positive
Negative

Negative
Positive
Positive
Negative

Reinforcing
Counterbalancing
Consistently facilitating
Consistently inhibiting

Interaction effect of S and x

Positive
Negative
Positive
Negative

Negative
Positive
Positive
Negative

Reinforcing
Counterbalancing
Consistently facilitating
Consistently inhibiting

effects of heterogeneity on each of the three functional forms, only limited

manifestations of heterogeneity main and interaction effect were examined.
These 36 scenarios still resulted in 540 different simulations. The functions
used in the numerical simulation are given next:
N 1 a1 a2 X 2 a3 S 2 a4 XS

M 1 b1 2 b2 X b3 S b4 XS

N 2 g1 g2 lnX g3 lnS g4 lnXS

M 2 d1 2 d2 lnX d3 lnS d4 lnXS

N 3 m1 m2 e X 2 m3 e S 2 m4 e XS

M 3 n1 2 n2 e X 2 n3 e S 2 n4 e XS

The simulations were performed with the same assumptions as the earlier
ones, namely that the dependent variable (new product development success)
was constrained to fall between 0 and 1, the independent variable, cultural
intensity, falls between 1 and 100. Additionally, the second independent
variable, cultural variance, fell between 1 and 100 (as before, note that the
exact indices will depend upon the specific case and preference of the
managers but the nature of the conclusions will be similar). For each
simulation, 100,000 calculations (corresponding to the 100 values of X
multiplied by the 100 values of S ). The functional forms and the parameters
values used are given below:
.
N 1 0:74993 0:00158X 2 0:00145S 2 0:00006632XS.
.
N 2 0:1 0:05lnX 0:04lnS 0:04lnXS.
.
N 3 1:133 0:00103e0:05X 2 0:001e0:05S 2 0:38e0:0001XS .
.
M 1 0:56307 2 0:005598X 0:002482S 0:00004285XS.
.
M 2 0:3988 2 0:07532lnX 0:0306lnS 0:07674lnXS.
.
M 3 0:96387 2 0:00271e0:05X 2 0:002032e0:05S 2 0:058883e0:0001XS .
The results are presented below in Tables VI-IX, which show the highest new
product performance measure for each simulation and the associated levels of
cultural intensity and variance. A manager can use these tables to guide team
composition.
The interpretation of the tables is similar to that of Tables I-IV, though there
are important differences in terms of specific inferences. Each table represents
a particular pattern of relationship between initiation and implementation on
overall performance, and this is indicated by the top left entry in each table.
Accordingly, Table VI presents the results for the linear additive relationship,
Table VII corresponds to the multiplicative relationship, Table VIII represents
the logarithmic additive relationship and Table IX represents the exponential
additive relationship. As before, the tables provide the results for five different
sets of weights for the relative importance of the initiation and implementation
stages. Each table also provides results for nine different combinations of the
functional forms for M and N. However, there are also importance differences

Global new
product teams

423

N n1
M m3

N n1
M m2

N n1
M m1

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

Table VI.
Optimal X, S and Y
for additive
relationship
between initiation
and implementation
(culture level and
heterogeneity)

1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

u0
S
0.8999
0.9000
0.9000
0.9000
0.8994
0.9248
0.9004
0.8997
0.8990
0.8997
0.8997
0.8931
0.9138
0.9703
0.9000
0.9000
0.9000
0.9000
0.8997
0.8998
0.8941

Y
1
1
1
1
1
1
1
1
1
1
1
1
1
5
26
28
26
26
24
26
26

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

0.8249
0.8250
0.8213
0.8248
0.8245
0.8436
0.8253
0.8198
0.8198
0.8162
0.8196
0.8198
0.8304
0.8522
0.8665
0.8676
0.8665
0.8665
0.8658
0.8664
0.8621

u 0:25
S
Y
1
1
1
1
1
1
1
1
1
1
1
1
1
100
48
50
48
48
46
48
48

X
100
100
100
100
100
100
100
71
71
65
70
71
73
14
1
1
1
1
1
1
1

0.7499
0.7500
0.7427
0.7496
0.7496
0.7623
0.7501
0.7501
0.7502
0.7452
0.7499
0.7501
0.7566
0.7695
0.8469
0.8508
0.8468
0.8468
0.8455
0.8468
0.8440

u 0:50
S
Y
1
1
1
1
1
1
1
100
100
100
100
100
100
100
70
72
70
70
68
70
70

X
1
1
1
1
1
1
1
4
4
4
4
4
5
5
1
1
1
1
1
1
1

0.7250
0.7251
0.7249
0.7250
0.7249
0.7251
0.7250
0.7952
0.8071
0.7948
0.7932
0.7866
0.7964
0.8071
0.8440
0.8524
0.8429
0.8437
0.8418
0.8439
0.8425

u 0:75
S
Y

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

424

Y uN
+ (1-u )M

Y
1
0.8998
1
0.9156
1
0.8997
1
0.8992
1
0.8994
1
0.8998
1
0.8998
1
0.8998
1
0.9156
1
0.8997
1
0.8992
1
0.8998
1
0.8998
1
0.8998
1
0.8998
1
0.9156
1
0.8997
1
0.8992
1
0.8994
1
0.8998
1
0.8998
(continued)

u 1:0
S

IMR
20,4

N n2
M m3

N n2
M m2

N n2
M m1

Y uN
+ (1-u )M

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

u0
S
0.9000
0.9000
0.9000
0.9000
0.8994
0.9248
0.9004
0.9000
0.9000
0.8997
0.8997
0.8931
0.9138
0.9703
0.9000
0.9000
0.9000
0.9000
0.8997
0.8998
0.8941

Y
23
24
23
24
16
23
34
100
100
100
100
100
100
100
33
33
33
33
32
33
32

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
34
34
35
35
34
33
34

0.8410
0.8449
0.8456
0.8487
0.8330
0.8596
0.8498
0.8955
0.9012
0.9001
0.9047
0.8694
0.9060
0.9485
0.8288
0.8331
0.8323
0.8358
0.8278
0.8279
0.8238

u 0:25
S
Y
69
72
69
72
48
69
100
100
100
100
100
100
100
100
48
49
48
49
47
48
48

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
51
51
50
49
50

0.8301
0.8407
0.8393
0.8478
0.8141
0.8425
0.8478
0.8913
0.9028
0.9005
0.9097
0.8739
0.8983
0.9266
0.7979
0.8076
0.8057
0.8135
0.7964
0.7967
0.7941

u 0:50
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
66
65
66
64
65
65

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
67
68
68
68
66
67

0.8547
0.8719
0.8685
0.8823
0.8407
0.8609
0.8654
0.8871
0.9043
0.9009
0.9147
0.8784
0.8906
0.9074
0.7953
0.8110
0.8080
0.8205
0.7936
0.7939
0.7930

u 0:75
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
0.8829
100
0.9059
100
0.9013
100
0.9197
100
0.8829
100
0.8829
100
0.8829
100
0.8829
100
0.9059
100
0.9013
100
0.9197
100
0.8829
100
0.8829
100
0.8829
100
0.8829
100
0.9059
100
0.9013
100
0.9197
100
0.8829
100
0.8829
100
0.8829
(continued)

u 1:0
S

Global new
product teams

425

Table VI.

Table VI.

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

u0
S
0.9000
0.9000
0.9000
0.9000
0.8994
0.9248
0.9004
0.9000
0.9000
0.8997
0.8997
0.8931
0.9138
0.9703
0.9000
0.9000
0.9000
0.9000
0.8997
0.8998
0.8941

Y
1
1
1
1
1
1
1
1
1
1
1
1
1
8
1
1
1
1
1
1
1

X
100
100
98
100
100
100
100
86
86
85
86
86
87
86
1
1
1
1
1
1
1

0.8254
0.8255
0.8218
0.8158
0.8250
0.8440
0.8258
0.8270
0.8270
0.8252
0.8174
0.8270
0.8372
0.8610
0.8632
0.8633
0.8632
0.8537
0.8630
0.8631
0.8588

u 0:25
S
Y
1
1
1
1
1
1
1
1
1
1
1
1
1
4
1
1
1
1
1
1
1

X
78
78
76
78
78
80
78
68
68
67
68
68
69
68
1
1
1
1
1
1
1

0.7731
0.7731
0.7707
0.7539
0.7728
0.7829
0.7732
0.7866
0.7867
0.7852
0.7675
0.7866
0.7931
0.8053
0.8265
0.8264
0.8264
0.8075
0.8264
0.8264
0.8236

u 0:50
S
Y
1
1
1
1
1
1
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100

X
56
56
54
55
56
57
56
9
9
8
8
9
9
9
1
1
1
1
1
1
1

0.7488
0.7489
0.7477
0.7202
0.7487
0.7524
0.7489
0.8117
0.8231
0.8116
0.7808
0.8030
0.8134
0.8247
0.8008
0.8122
0.8007
0.7720
0.7907
0.8007
0.7993

u 0:75
S
Y

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

u 1:0
S

Notes: B1 base slope values; B2 initiation slope1 increases; B3 initiation slope2 increases; B4 initiation slope3 increases;
B5 implementation slope1 increases; B6 implementation slope2 increases; B7 implementation slope3 increases

N n3
M m3

N n3
M m2

N n3
M m1

426

Y uN
+ (1-u )M

0.9010
0.9163
0.9009
0.8626
0.9010
0.9010
0.9010
0.9010
0.9163
0.9009
0.8626
0.9010
0.9010
0.9010
0.9010
0.9163
0.9009
0.8626
0.9010
0.9010
0.9010

IMR
20,4

N n1
M m3

N n1
M m2

N n1
M m1

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

Y
N l M 1l

l0
S
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

0.9000
0.9000
0.9000
0.9000
0.8994
0.9248
0.9004
0.8997
0.8997
0.8997
0.8997
0.8931
0.9138
0.9703
0.9000
0.9000
0.9000
0.9000
0.8997
0.8998
0.8941

Y
1
1
1
1
1
1
1
1
1
1
1
1
1
3
28
30
28
28
27
28
28

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

0.8132
0.8132
0.8082
0.8129
0.8128
0.8299
0.8135
0.8085
0.8086
0.8036
0.8083
0.8085
0.8181
0.8356
0.8653
0.8666
0.8653
0.8653
0.8646
0.8652
0.8610

l 0:25
S
Y
1
1
1
1
1
1
1
1
100
1
1
1
1
100
49
51
49
49
47
49
49

X
100
100
98
100
100
100
100
57
15
52
56
57
57
15
1
1
1
1
1
1
1

0.7348
0.7349
0.7258
0.7343
0.7345
0.7448
0.7349
0.7442
0.7474
0.7398
0.7440
0.7442
0.7497
0.7692
0.8466
0.8506
0.8465
0.8464
0.8451
0.8465
0.8437

l 0:50
S
Y
1
1
1
1
1
1
1
100
100
100
100
100
100
100
69
71
69
69
67
69
69

X
1
1
1
1
1
1
1
6
6
6
6
7
6
6
1
1
1
1
1
1
1

0.7236
0.7238
0.7235
0.7236
0.7235
0.7237
0.7236
0.7848
0.7956
0.7842
0.7821
0.7733
0.7866
0.8005
0.8438
0.8520
0.8437
0.8435
0.8417
0.8438
0.8423

l 0:75
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Y
1
0.8998
1
0.9156
1
0.8997
1
0.8992
1
0.8998
1
0.8998
1
0.8998
1
0.8998
1
0.9156
1
0.8997
1
0.8992
1
0.8998
1
0.8998
1
0.8998
1
0.8998
1
0.9156
1
0.8997
1
0.8992
1
0.8998
1
0.8998
1
0.8998
(continued)

l 1:0
S

Global new
product teams

427

Table VII.
Optimal X, S and Y
for multiplicative
relationship
between initiation
and implementation
(culture level and
heterogeneity)

Table VII.

N n2
M m3

N n2
M m2

N n2
M m1

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

l0
S
0.9000
0.9000
0.9000
0.9000
0.8994
0.9248
0.9004
0.8997
0.8997
0.8997
0.8997
0.8931
0.9138
0.9703
0.9000
0.9000
0.9000
0.9000
0.8997
0.8998
0.8941

Y
26
27
25
26
19
27
37
100
100
100
100
100
100
100
35
36
35
35
34
35
35

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
37
36
37
37
37
36
37

0.8395
0.8439
0.8444
0.8480
0.8305
0.8574
0.8491
0.8954
0.9012
0.9001
0.9046
0.8694
0.9059
0.9477
0.8254
0.8305
0.8295
0.8336
0.8243
0.8248
0.8206

l 0:25
S
Y
66
68
65
66
48
68
95
100
100
100
100
100
100
100
49
50
49
49
48
49
49

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
52
51
51
50
51

0.8300
0.8401
0.8389
0.8470
0.8141
0.8427
0.8472
0.8912
0.9028
0.9005
0.9096
0.8739
0.8982
0.9256
0.7971
0.8072
0.8053
0.8133
0.7957
0.7959
0.7935

l 0:50
S
Y
100
71
100
100
100
100
100
100
100
100
100
100
100
100
64
64
64
64
63
64
64

X
100
1
100
100
100
100
100
100
100
100
100
100
100
100
66
66
67
66
66
65
66

0.8532
0.8520
0.8665
0.8798
0.8784
0.8600
0.8648
0.8870
0.9043
0.9009
0.9147
0.8784
0.8905
0.9040
0.7948
0.8101
0.8071
0.8193
0.7931
0.7934
0.7924

l 0:75
S
Y

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

428

Y
N l M 1l

Y
100
0.8829
1
0.9156
100
0.9013
100
0.9197
100
0.8829
100
0.8829
100
0.8829
100
0.8829
100
0.9059
100
0.9013
100
0.9197
100
0.8829
100
0.8829
100
0.8829
100
0.8829
100
0.9059
100
0.9013
100
0.9197
100
0.8829
100
0.8829
100
0.8829
(continued)

l 1:0
S

IMR
20,4

l0
S
Y

l 0:25
S
Y
X

l 0:50
S
Y
X

l 0:75
S
Y
X

l 1:0
S
Y

B1
1
100
0.9000
1
94
0.8162
1
75
0.7701
1
54
0.7485
100
1
0.9010
B2
1
100
0.9000
1
94
0.8162
1
75
0.7702
1
54
0.7486
100
1
0.9163
B3
1
100
0.9000
1
92
0.8128
1
73
0.7679
1
52
0.7474
100
1
0.9009
B4
1
100
0.9000
1
93
0.8037
1
74
0.7491
1
53
0.7193
100
1
0.8626
B5
1
100
0.8994
1
94
0.8158
1
75
0.7699
1
54
0.7484
100
1
0.9010
B6
1
100
0.9248
1
95
0.8323
1
76
0.7787
1
56
0.7518
100
1
0.9010
B7
1
100
0.9004
1
94
0.8164
1
75
0.7703
1
54
0.7486
100
1
0.9010
N n3
B1
100
100
0.8997
1
82
0.8225
1
66
0.7840
100
11
0.8057
100
1
0.9010
M m2
B2
100
100
0.8997
1
82
0.8225
1
66
0.7841
100
11
0.8164
100
1
0.9163
B3
100
100
0.9000
1
81
0.8207
1
65
0.7826
100
11
0.8056
100
1
0.9009
B4
100
100
0.8997
1
81
0.8108
1
65
0.7631
100
10
0.7761
100
1
0.8626
B5
1
100
0.8931
1
82
0.8225
1
66
0.7840
100
11
0.7950
100
1
0.9010
B6
100
100
0.9248
1
82
0.8320
1
66
0.7899
100
11
0.8079
100
1
0.9010
B7
100
100
0.9703
6
81
0.8528
100
23
0.8029
100
11
0.8216
100
1
0.9010
N n3
B1
1
1
0.9000
1
1
0.8608
1
1
0.8232
84
1
0.7924
100
1
0.9010
M m3
B2
1
1
0.9000
1
1
0.8608
1
1
0.8233
88
1
0.7979
100
1
0.9163
B3
1
1
0.9000
1
1
0.8607
1
1
0.8232
84
1
0.7922
100
1
0.9009
B4
1
1
0.9000
1
1
0.8497
1
1
0.8022
86
1
0.7645
100
1
0.8626
B5
1
1
0.8997
1
1
0.8605
1
1
0.8231
75
1
0.7885
100
1
0.9010
B6
1
1
0.8998
1
1
0.8606
1
1
0.8231
84
1
0.7923
100
1
0.9010
B7
1
1
0.8941
1
1
0.8565
1
1
0.8205
83
1
0.7907
100
1
0.9010
Notes: B1 base slope values; B2 initiation slope1 increases; B3 initiation slope2 increases; B4 initiation slope3 increases; B5
implementation slope1 increases; B6 implementation slope2 increases; B7 implementation slope3 increases

N n3
M m1

Y
N l M 1l

Global new
product teams

429

Table VII.

N n2

N n1
M m3

N n1
M m2

N n1
M m1

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1

Table VIII.
Optimal X, S and Y
for logarithmic
additive
relationship
between initiation
and implementation
(culture level and
heterogeneity)
1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1
1

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1
100

f0
S
0.39
0.39
0.39
0.39
0.39
0.42
0.40
0.39
0.39
0.39
0.39
0.39
0.41
0.47
0.39
0.39
0.39
0.39
0.39
0.39
0.39
0.39

Y
1
1
1
1
1
1
1
1
1
1
1
1
1
3
28
30
28
28
27
28
28
26

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
100
1
1
1
1
100

0.29
0.29
0.29
0.29
0.29
0.31
0.29
0.29
0.29
0.28
0.29
0.29
0.30
0.32
0.36
0.36
0.33
0.36
0.35
0.36
0.35
0.33

f 0:25
S
Y
1
1
1
1
1
1
1
1
100
1
1
1
1
100
49
51
49
49
47
49
49
66

X
100
100
98
100
100
100
100
57
15
52
56
57
57
15
1
1
1
1
1
1
1
100

0.19
0.19
0.18
0.19
0.19
0.21
0.19
0.20
0.21
0.20
0.20
0.20
0.21
0.24
0.33
0.34
0.33
0.33
0.33
0.33
0.33
0.31

f 0:50
S
Y
1
1
1
1
1
1
1
100
100
100
100
100
100
100
69
71
69
69
67
69
69
100

X
1
1
1
1
1
1
1
6
6
6
6
7
6
6
1
1
1
1
1
1
1
100

0.18
0.18
0.18
0.18
0.18
0.18
0.18
0.26
0.27
0.26
0.25
0.24
0.26
0.28
0.33
0.34
0.33
0.33
0.33
0.33
0.33
0.34

f 0:75
S
Y

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

430

Y flnN
1  flnM

Y
1
0.39
1
0.41
1
0.39
1
0.39
1
0.39
1
0.39
1
0.39
1
0.39
1
0.41
1
0.39
1
0.39
1
0.39
1
0.39
1
0.39
1
0.39
1
0.41
1
0.39
1
0.39
1
0.39
1
0.39
1
0.39
100
0.38
(continued)

f 1:0
S

IMR
20,4

N n2
M m3

N n2
M m2

M m1

Y flnN
1  flnM

B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

X
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

f0
S
0.39
0.39
0.39
0.39
0.42
0.40
0.39
0.39
0.39
0.39
0.39
0.41
0.47
0.39
0.39
0.39
0.39
0.39
0.39
0.39

Y
27
25
26
19
27
37
100
100
100
100
100
100
100
35
36
35
35
34
35
35

X
100
100
100
100
100
100
100
100
100
100
100
100
100
37
36
37
37
37
36
37

0.33
0.33
0.34
0.31
0.35
0.34
0.39
0.40
0.39
0.40
0.36
0.40
0.45
0.31
0.31
0.31
0.32
0.31
0.31
0.30

f 0:25
S
Y
68
65
66
48
68
95
100
100
100
100
100
100
100
49
50
49
49
48
49
49

X
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
52
51
51
50
51

0.33
0.32
0.33
0.29
0.33
0.33
0.38
0.40
0.40
0.41
0.37
0.39
0.42
0.27
0.29
0.28
0.29
0.27
0.27
0.27

f 0:50
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
64
64
64
64
63
64
64

X
100
100
100
100
100
100
100
100
100
100
100
100
100
66
66
67
66
66
65
66

0.36
0.36
0.37
0.32
0.35
0.35
0.38
0.40
0.40
0.41
0.37
0.38
0.40
0.27
0.29
0.29
0.30
0.27
0.27
0.27

f 0:75
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
0.40
100
2 1.89
100
0.42
100
0.38
100
0.38
100
0.38
100
0.38
100
0.40
100
0.40
100
0.42
100
0.38
100
0.38
100
0.38
100
0.38
100
0.40
100
0.40
100
0.42
100
0.38
100
0.38
100
0.38
(continued)

f 1:0
S

Global new
product teams

431

Table VIII.

Table VIII.

f0
S
Y

f 0:25
S
Y
X

f 0:50
S
Y
X

f 0:75
S
Y

f 1:0
S

B1
1
100
0.39
1
94
0.30
1
75
0.24
1
54
0.21
100
1
B2
1
100
0.39
1
94
0.30
1
75
0.24
1
54
0.21
100
100
B3
1
100
0.39
1
92
0.29
1
73
0.24
1
52
0.21
100
1
B4
1
100
0.39
1
93
0.28
1
74
0.21
1
53
0.17
100
1
B5
1
100
0.39
1
94
0.30
1
75
0.24
1
54
0.21
100
1
B6
1
100
0.42
1
95
0.32
1
76
0.25
1
56
0.21
100
1
B7
1
100
0.40
1
94
0.30
1
75
0.24
1
54
0.21
100
1
N n3
B1
100
100
0.39
1
82
0.30
1
66
0.26
100
11
0.28
100
1
M m2
B2
100
100
0.39
1
82
0.30
1
66
0.26
100
11
0.30
100
1
B3
100
100
0.39
1
81
0.30
1
65
0.25
100
11
0.28
100
1
B4
100
100
0.39
1
81
0.29
1
65
0.23
100
10
0.25
100
1
B5
1
100
0.39
1
82
0.30
1
66
0.26
100
11
0.27
100
1
B6
100
100
0.41
1
82
0.32
1
66
0.26
100
11
0.29
100
1
B7
100
100
0.47
6
81
0.34
100
23
0.28
100
11
0.30
100
1
N n3
B1
1
1
0.39
1
1
0.35
1
1
0.31
84
1
0.27
100
1
M m3
B2
1
1
0.39
1
1
0.35
1
1
0.31
88
1
0.27
100
1
B3
1
1
0.39
1
1
0.35
1
1
0.31
84
1
0.27
100
1
B4
1
1
0.39
1
1
0.34
1
1
0.28
86
1
0.23
100
1
B5
1
1
0.39
1
1
0.35
1
1
0.31
75
1
0.26
100
1
B6
1
1
0.39
1
1
0.35
1
1
0.31
84
1
0.27
100
1
B7
1
1
0.39
1
1
0.35
1
1
0.30
83
1
0.27
100
1
Notes: B1 base slope values; B2 initiation slope1 increases; B3 initiation slope2 increases; B4 initiation slope3 increases;
B5 implementation slope1 increases; B6 implementation slope2 increases; B7 implementation slope3 increases

N n3
M m1

432

Y flnN
1  flnM

0.40
0.41
0.40
0.35
0.40
0.40
0.40
0.40
0.41
0.40
0.35
0.40
0.40
0.40
0.40
0.41
0.40
0.35
0.40
0.40
0.40

IMR
20,4

N n1
M m3

N n1
M m2

N n1
M m1

Y vexpN
1  vexpM

B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6

v0
S
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1

X
1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1

0.93
0.93
0.93
0.93
0.93
0.96
0.93
0.93
0.93
0.93
0.93
0.93
0.94
1.00
0.93
0.93
0.93
0.93
0.93
0.93

Y
1
1
1
1
1
1
1
1
1
1
1
1
1
8
24
26
24
24
22
24

X
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1

0.87
0.87
0.87
0.87
0.87
0.89
0.87
0.87
0.87
0.86
0.87
0.87
0.88
0.90
0.90
0.90
0.90
0.90
0.90
0.90

v 0:25
S
Y
1
1
1
1
1
1
1
1
1
1
1
1
1
3
47
1
47
47
45
47

X
100
100
100
100
100
100
100
93
93
84
93
93
99
98
1
93
1
1
1
1

0.81
0.81
0.81
0.81
0.81
0.82
0.81
0.81
0.81
0.80
0.81
0.81
0.81
0.83
0.88
0.81
0.88
0.88
0.88
0.88

v 0:50
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
71
74
71
71
69
71

X
1
1
1
1
1
1
1
3
3
3
3
3
3
4
1
1
1
1
1
1

0.80
0.81
0.80
0.80
0.80
0.80
0.80
0.85
0.86
0.85
0.85
0.84
0.85
0.85
0.88
0.89
0.88
0.88
0.88
0.88

v 0:75
S
Y
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Y
1
0.93
1
0.95
1
0.93
1
0.93
1
0.93
1
0.93
1
0.93
1
0.93
1
0.95
1
0.93
1
0.93
1
0.93
1
0.93
1
0.93
1
0.93
1
0.95
1
0.93
1
0.93
1
0.93
1
0.93
(continued)

v 1:0
S

Global new
product teams

433

Table IX.
Optimal X, S and Y
for exponential
additive
relationship
between initiation
and implementation
(culture level and
heterogeneity)

Table IX.

N n2
M m3

N n2
M m2

N n2
M m1

B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7
B1
B2
B3
B4
B5
B6
B7

1
1
1
1
1
1
1
1
100
100
100
100
1
100
100
1
1
1
1
1
1
1

X
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1
1
1
1
1
1
1

v0
S
0.93
0.93
0.93
0.93
0.93
0.93
0.96
0.93
0.93
0.93
0.93
0.93
0.93
0.94
1.00
0.93
0.93
0.93
0.93
0.93
0.93
0.93

Y
24
20
22
20
22
13
19
31
100
100
100
100
100
100
100
30
31
30
31
29
30
30

X
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
32
32
33
33
32
31
31

0.90
0.88
0.88
0.88
0.89
0.87
0.90
0.89
0.93
0.93
0.93
0.94
0.90
0.94
0.98
0.87
0.87
0.87
0.88
0.87
0.87
0.87

v 0:25
S
Y
47
72
79
73
79
48
70
100
100
100
100
100
100
100
100
47
48
47
48
46
47
47

X
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
49
49
50
50
49
48
49

0.88
0.87
0.88
0.88
0.89
0.85
0.88
0.88
0.92
0.93
0.93
0.94
0.91
0.93
0.96
0.84
0.85
0.85
0.85
0.84
0.84
0.84

v 0:50
S
Y
71
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
68
67
68
65
67
66

X
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
69
69
70
70
69
67
69

0.88
0.89
0.91
0.90
0.92
0.88
0.90
0.90
0.92
0.94
0.93
0.95
0.91
0.92
0.94
0.84
0.85
0.85
0.86
0.84
0.84
0.84

v 0:75
S
Y

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

434

Y vexpN
1  vexpM

Y
1
0.93
100
0.92
100
0.94
100
0.93
100
0.95
100
0.92
100
0.92
100
0.92
100
0.92
100
0.94
100
0.93
100
0.95
100
0.92
100
0.92
100
0.92
100
0.92
100
0.94
100
0.93
100
0.95
100
0.92
100
0.92
100
0.92
(continued)

v 1:0
S

IMR
20,4

v0
S
Y

v 0:25
S
Y
X

v 0:50
S
Y
X

v 0:75
S
Y

B1
1
100
0.93
1
100
0.87
1
81
0.82
100
1
0.80
B2
1
100
0.93
1
100
0.87
1
81
0.82
100
1
0.81
B3
1
100
0.93
1
100
0.87
1
79
0.82
100
1
0.80
B4
1
100
0.93
1
100
0.87
1
82
0.81
1
57
0.78
B5
1
100
0.93
1
100
0.87
1
81
0.82
1
57
0.80
B6
1
100
0.96
1
100
0.89
1
84
0.83
1
59
0.80
B7
1
100
0.93
1
100
0.87
1
81
0.82
100
1
0.80
N n3
B1
100
100
0.93
2
90
0.87
1
71
0.83
100
7
0.86
M m2
B2
100
100
0.93
2
90
0.87
1
71
0.83
100
7
0.87
B3
100
100
0.93
2
88
0.87
1
69
0.83
100
7
0.86
B4
100
100
0.93
2
90
0.86
1
71
0.82
100
6
0.83
B5
1
100
0.93
1
90
0.87
1
71
0.83
100
6
0.85
B6
100
100
0.94
2
90
0.88
1
71
0.84
100
7
0.86
B7
100
100
1.00
10
91
0.90
4
72
0.85
100
8
0.87
N n3
B1
1
1
0.93
1
1
0.90
1
1
0.87
100
1
0.86
M m3
B2
1
1
0.93
1
1
0.90
1
1
0.87
100
1
0.87
B3
1
1
0.93
1
1
0.90
1
1
0.87
100
1
0.86
B4
1
1
0.93
1
1
0.89
1
1
0.85
100
1
0.83
B5
1
1
0.93
1
1
0.90
1
1
0.87
100
1
0.85
B6
1
1
0.93
1
1
0.90
1
1
0.87
100
1
0.86
B7
1
1
0.93
1
1
0.90
1
1
0.87
100
1
0.85
Notes: B1 base slope values; B2 initiation slope1 increases; B3 initiation slope2 increases; B4 initiation slope3
B5 implementation slope1 increases; B6 implementation slope2 increases; B7 implementation slope3 increases

N n3
M m1

Y vexpN
1  vexpM
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

v 1:0
S

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
increases;

0.93
0.95
0.93
0.90
0.93
0.93
0.93
0.93
0.95
0.93
0.90
0.93
0.93
0.93
0.93
0.95
0.93
0.90
0.93
0.93
0.93

Global new
product teams

435

Table IX.

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436

in the nature of entries in Tables VI-IX compared to those in Tables I-IV. First,
each optimal result consists of three entries: the optimal X, the optimal S and
the optimal Y. Second, as there are more slope coefficients for these set of
equations, the tables also represent more detailed results. B1 represents the
base case slopes presented earlier. B2 represents the results when the
magnitude of the first slope in the equation for the initiation stage increases by
10 percent. Similarly, B3 and B4 represent results when the magnitudes of the
second and third slopes in the initiation equation increase by 10 percent
respectively. In an analogous manner, B5, B6, and B7 present the results when
the magnitudes of the three slopes in the implementation equation increase by
10 percent. As before, movements from left to right indicate increasing
importance of the initiation stage in the overall new product development
success.
Discussion
The GNPT is a relatively new work form that is being adopted by
multinational firms and strategic alliances interested in tapping into
geographically distributed expertise and resources. Telecommunications
advances, the growth of global markets, and rising technical competencies
outside the triad are just a few of the reasons businesses are looking to GNPTs
to produce the next generation of innovations. However, knowledge is limited
on this nascent form, and in particular how to design high-performing teams.
Extant literature suggests that teams in general can be effectively used to
develop new products, team composition i.e. the collection of individual
members attributes has a pronounced impact on performance, and among
compositional traits cultural values may be especially important. Nonetheless,
the literature indicates little about how culture influences team outcomes,
leaving researchers without theories, and managers without practical
guidance, on structuring GNPTs so that culture enhances rather than
ameliorates the many known benefits of teams.
This study attempts to fill this knowledge gap by first of all providing a
theory of cultures role in the process and outcomes of new product
development (represented by Figure 1). The theory posits that culture values
(individualism, uncertainty avoidance, masculinity, power distance, and
long-term orientation) can facilitate or impede the two phases of new product
development (initiation and implementation). Four factors bear upon NPD: the
intensity of culture values, the heterogeneity of culture values, the consistency
of cultures effects across the two development phases, and the newness to the
market and firm of the innovation being developed. Our theory suggests that
all four factors impact on the success of the NPD effort, and that optimal results
come from considering their effects simultaneously. This theory contributes to
understanding not only about GNPTs, but also more broadly global innovation
management. Theorization on NPD in the international context has not been

voluminous, and our hope is that this model will be a useful thrust, and perhaps
more representative of the complexity of the development process.
Our study also complements extant knowledge by proposing a method of
identifying better team compositions by considering the interactive dynamics
of culture, product newness, and NPD phases. The method operationalizes the
above theory via analytical derivations and comparative statics. For example,
the relationship between the effects of culture in the two NPD phases is
represented as linearly, multiplicative, exponential, and logarithmically
additive. The method led to mathematical models optimizing GNPT results
by detailing the levels of culture factors that should be present. This may be a
relatively novel approach for translating a theory for further examination.
What it affords in this case is specification of levels of contributing factors,
representation of multiplex relations among those factors, and estimations of
expected team performance in a range of NPD scenarios, i.e. greater complexity
and detail than would be permitted by most alternative approaches. We thus
believe this method, albeit non-traditional and the first-time application to such
an issue, adds significantly to current understanding of GNPT processes and
consequences, which is largely speculative to date.
Finally, this study tested the method using numeric simulations, producing
results consistent with theoretical expectations. The simulations were
performed on a limited, though still large, subset of possible representations
of the variables and their combinations. Assumptions were specified in
deriving parameters for the simulations, and then 1,000+ simulations were
conducted involving more than 150,000 calculations. The primary results were
presented in a series of tables showing the levels of a culture factor that
correspond with optimal performance given certain assumptions about the
NPD context. Therefore, not only did the numeric simulations help validate and
illustrate the method, but they also produced indexes that can be used directly
to target cultural compositions of GNPTs in a wide range of project scenarios.
The latter should be of particular interest to managers assembling GNPTs,
who can draw upon the tables in selecting individuals for teams. It is likely that
this use of numeric simulations is also relatively novel for a research issue of
this kind, and yet its value is quite apparent. Importantly, knowledge on global
teams is expanded through this specific application since previously, insight on
team compositions based on culture values has been minimal.
All in all, this study appears to make several new contributions. First, it
presents a new theory or conceptual framework in which culture and other
relevant factors impact on NPD outcomes in a team context is described.
Second, it elaborates this theory via mathematical derivations and comparative
statics, i.e. it generates optimizations models. Finally, it illustrates the validity
and utility of these models through numeric simulations, producing indexes
that can be used in team formation processes to ensure higher performance. In

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438

the next section, we discuss further the practical, or managerial, implications of

this study.
Managerial implications
Although the mathematical derivations provide qualitative conclusions on the
role of national culture and other model parameters on the effectiveness of
NPD, the numerical simulations offer concrete numbers to managers,
reinforcing the findings of the mathematical models. As the simulations were
based on more specific functional forms, it is possible to illustrate using specific
numbers. These numbers will change if a particular manager wants to
operationalize the model entities differently. For example, if the manager has a
preference to calibrate performance on a scale of 0 to 100 (instead of 0 to 1
adopted in our work), the numbers in the table will be suitably adjusted to
reflect the new scaling factor. Similarly, if a manager wants to score culture on
a scale of 0 to 1 (instead of the 100 point scale we adopted) and/or wants to
measure heterogeneity in terms of the standard deviation or the coefficient of
variation (instead of the 100 point scale we adopted), the calculations can be
modified in a straightforward manner. Other mechanisms such as measuring
performance in terms of dollar values or time to market and other indicators
can also be easily accommodated because our basic framework is not
constrained by the scale used for measurement.
Although national culture is posited to be an important factor in global new
product team selection, it will not be the only consideration in team
composition; nonetheless, since it is a major determinant of processes and
performance of cross-cultural work groups, it should be weighed in member
selection. The team design process can be conceived from start to finish as a
series of decisions as depicted in Figure 3. The manager begins with an
analysis of the development project, determining whether it is for a radical or
routine innovation and how much it leans one way or the other. This would
have implications for the relative weights of the two stages of new product
development and thereby lead to distinct paths for optimization. Next the
manager decides whether cultural heterogeneity must be considered or not.
While ideally heterogeneity is considered, if the manager believes that there is a
limited pool of personnel available for selection and the cost of ensuring
heterogeneity while maintaining the optimal culture level is too difficult or too
expensive, heterogeneity may be ignored. Depending on this decision, the
manager takes one path over the other. Next the optimal culture level (and
variance if applicable) is chosen by identifying the highest index in the
respective table. If this level is not possible because once again only certain
individuals are available or because some individuals have been pre-selected
for team participation, then the manager can select the next best level (as
described earlier, each entry in the table represents the best outcome from the
100 computations performed) or move to another relevant table. Needless to

Global new
product teams

439

Figure 3.
Decision framework for
global new product
team design

say, the framework could be easily adapted to suit the specific needs of a given
project and/or organization. Though the standardized indices are available for
culture factors, the other model elements (such as slopes, importance of
different stages, heterogeneity, etc.) could be arrived at using past empirical
results, managerial preference, intuition, or a combination of these as
represented in the decision calculus approach proposed by Little (1976).
With respect to the exact selection of persons, the manager may choose
individuals assuming Hofstedes country scores are indicators of individual
cultural orientations or by having prospective members complete an individual
culture instrument. If cultural heterogeneity is considered a factor, and optimal
variance is low, then the manager would choose individuals with the targeted
culture level; on the other hand, if optimal variance is high, individuals with a
range of culture levels aggregating at the targeted level would be chosen. In
cases where heterogeneity is not a factor, either approach will do.
The mathematical derivations presented and the numerical results offered
could be directly used by managers in team selection if they follow the same

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440

variable operationalization that we have adopted in our paper. However, if the

manager wants to consider different operationalizations (such as using dollar
values for performance measures), tables can be constructed based on the
procedures we have outlined. The nature of qualitative conclusions drawn will
be the same irrespective of the operationalization of the variables, although the
quantitative results will differ. By examining the tables, a manager will be able
to answer such questions as If my project becomes more radical, should we
increase/decrease the mean culture level? Should we increase/decrease the
cultural heterogeneity? If I have underestimated the slope of the effect of
national culture on initiation stage due to a flaw in the estimation/measurement
mechanisms, what kind of correction must I make in arriving at the optimal
culture levels and variance?
Future research directions
There are several directions that can be taken for future research. Perhaps the
most obvious is for the interaction of culture factors to be incorporated into the
optimization models. As demonstrated here, just dealing with one culture factor
in isolation from the others is a complex exercise in and of itself. Interaction
effects, though, would be of keen interest to scholars and managers alike since
national culture is a composite of the five dimensions. To date nearly all of the
research on national culture has examined them singly, perhaps because
Hofstede (1980) has presented the factors in an atomistic fashion.
Another direction is to empirically test the range of relationships depicted in
the optimization models. This would assist in focusing researchers and
managers on the models that are most relevant. For instance, we have
presented models where the relationship of the two stages to overall new
product development outcomes is additive, multiplicative, exponential, and
logarithmic. Perhaps one of these most accurately describes the relationship or
describes it for most projects, and therefore that model should be used, studied
further, or elaborated. Determining which model requires empirical testing, it
should be noted that empirical research on national culture and new product
development has been very limited, underscoring not only the need for such
work but also the value of studies like this which uses numerical simulation
and a theory-based conceptual framework.
A third path for future work is to expand the models to reflect better the new
product development process and team variables. We have simplified the
process into two steps, but others believe that the process involves three, four,
five, or six identifiable phases (Ancona et al., 1990; Cooper, 1996; Lester, 1998).
Potentially, national culture can affect most if not all these stages. Modeling the
role of national culture in this detailed fashion may be an involved endeavor,
but worth the while for highly complex projects. Such projects are more likely
in global new product development, where the financial stakes are typically
high (perhaps hundreds of millions of dollars) many persons involved (such as

several hundred staff), and the time horizon is elongated (five to ten years). An
example would be Boeing or Airbus designing a new commercial jet plane,
which can run into the billions of dollars and several years of development
effort.
Adding other team variables may enhance the models. As noted earlier,
there are clearly other factors important to team performance and outcomes,
and we have chosen in this study to focus only on national culture under the
ceteris paribus assumption. While this approach is consistent with the
procedures followed in existing research, future research can incorporate these
other factors. Leadership is considered a major factor in team performance, and
the congruence of leadership style with the makeup of the team may be
important. For a highly multi-cultural team, leadership will likely need to be
sensitive to and broadly encompass a range of cultural values in order to be
effective (Hurn, 1997). Besides leadership, there is the factor of time-based
membership. While we may think of members as permanent once chosen, the
reality is that members may be replaced or re-assigned over time. The impact
of these changes is not understood, and there may be reason to change a teams
cultural composition deliberately via transitional membership, such as when
moving from one phase of development to another. These variables and others
may be incorporated into future models.
Finally, the simulations may be done in other ways, and as noted, we have
not exhausted all possibilities. Future work may develop other simulation
scenarios, so that the models become even more comprehensive of different
project and team situations than they already are. Another possible next step
that may enhance the managerial utility of future simulations is to replace the
fine grain indexes used in our models with categorical results. It may be that
managers are not interested in knowing that the optimal level of uncertainty
avoidance should be 27 rather than 32 unless in going from 27 to 32 there is a
pronounced decline in new product development success. Future work may
focus on specifying critical break-off points or basing simulations on groups of
culture levels, such as high, moderate, and low. This may simplify decision
making on team compositions. Another advantage of this extension may be its
applicability when only approximate measurement of culture factors is
possible.
Conclusion
In this article, we have presented a conceptual framework and series of
optimization models for identifying preferable levels of national culture factors
in global new product development teams. We developed a theoretical
framework describing the impact of national culture on product development
tasks. The framework was then translated into several mathematical models
using analytical derivations and comparative statics. The models identify the
levels and variances of culture values that maximize product development

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success by simultaneously considering four relevant dimensions of GNPT

performance. We tested the utility of these models using numerical simulations
for a range of team scenarios. As firms continue to expand use of GNPTs, they
are seeking guidance on assembling and managing these units so that their
products indeed have the desired market and financial impact. We hope that
this study is a contribution to this need, and that other researchers will likewise
respond to a call for greater theoretical and practical understanding of these
new complex work forms.
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http://www.emeraldinsight.com/0265-1335.htm

International technology
transfer
Model and exploratory study in the
Peoples Republic of China
C. Anthony Di Benedetto
Fox School of Business and Management, Temple University,
Philadelphia, Pennsylvania, USA

Roger J. Calantone and Chun Zhang

Michigan State University, East Lansing, Michigan, USA
Keywords Product technology, Transfer processes, Behaviour, China
Abstract Adoption of foreign-developed technology by firms in developing nations will accelerate
the speed by which they become globally competitive in new product development. In this study, we
build and empirically test an extension of the technology acceptance model (TAM) the extended
TAM applied to the study of international transfer of product technology. The extended TAM
model derives from the TAM of Davis et al., extensively used in information technology
applications. The extended TAM is built on the premise that a persons attitudes toward a behavior
influence their intentions to perform that behavior, and behavioral intentions influence the actual
performance of the behavior. In the extended TAM, perceived ease of use is operationalized as two
independent variables, technological compatibility and ease of adoption, and anticipated benefits of
adoption are operationalized in terms of technical and economic benefits to the adopting firm. These
antecedents have direct and indirect effects on attitudes toward the adoption of foreign-developed
technology by managers from developing countries, and on behavioral intentions to adopt such
technology. We conduct an exploratory empirical test of the model using a convenience sample of
respondents representing several industries in the Peoples Republic of China (PRC). Strong support
is found for all hypotheses in the model. We conclude with research and managerial implications
regarding international technology transfer and new product development.

International Marketing Review

Vol. 20 No. 4, 2003
pp. 446-462
q MCB UP Limited
0265-1335
DOI 10.1108/02651330310485171

Introduction
International technology transfer can be defined as the (international) transfer
of systematic knowledge for the manufacture of a product, for the application
of a process, or for the rendering of a service (UNCTAD, 1979). The
international transfer of technology from developed to developing countries
continues to be an important stimulus to industrialization and economic
growth for the latter. Firms located in developing countries stand to gain from
successful international technology transfer in at least three ways:
(1) improved product and service quality and reduced prices, resulting in
greater domestic and international competitiveness;
(2) diversification into new products or markets, resulting in expanded
business activity; and

(3) learning by doing, resulting from cooperation with technologically

advanced foreign firms (Calantone et al., 1988, 1990; Phillips et al., 1994).
International technology transfer can be effected in many ways, ranging from
turnkey operations to direct technology-licensing agreements, joint ventures,
and direct foreign investment. In short, firms from developing countries can
accelerate the speed by which they can produce globally competitive products
through rapid technology transfer from developed nations.
The technology acceptance model (TAM) was originally presented by Davis
(1986; see also Davis et al., 1989) to describe the antecedents to the adoption and
use of information technology (IT). Suitably modified, TAM may also be used
as a behavioral model describing and enlightening the adoption of
foreign-developed product technology by firms located in developing
countries. The TAM model derives from the theory of reasoned action (TRA)
(Fishbein and Ajzen, 1975; Ajzen and Fishbein, 1980), a general model that
describes the psychological antecedents of behavior. TRA has been widely
adopted in a variety of settings, including charitable giving (Konkoly and
Perloff, 1990), mammography examinations (Montano and Taplin, 1991),
exercise (Hausenblas et al., 1997), alcohol consumption (OCallaghan et al.,
1997), and many others. Also, there are parallels between the adoption of
technology and the product adoption literature familiar in new product
development. It is expected that adoption of the new technology by the firm
will be more rapid if the technology is perceived to be compatible and easy to
adopt, and if there are greater perceived technological and economic benefits.
The TAM model is built on the premise, borrowed from TRA, that a
persons attitudes toward a behavior influence their intentions to perform that
behavior, and behavioral intentions influence the actual performance of the
behavior. TAM differs from TRA, however, in that it was designed to be
applicable only to the adoption and use of IT systems. The TAM model
considers only two antecedents to attitude toward IT adoption: the perceived
usefulness of the system (the degree to which using the system would improve
performance), and the perceived ease of use (the degree to which using the
system is expected to be effortless). While both of these antecedents have a
direct impact on attitude, perceived usefulness is also hypothesized to affect
behavioral intentions directly (i.e. individuals may form their intentions
directly from their beliefs, in addition to whatever attitudes they may have
formed).
As was noted several years earlier (Warshaw, 1980), a model tailored more
specifically to a particular purchase situation and its unique features is likely to
be better in predictive ability than the general TRA model. This would appear
to be the case in IT adoption, as TAM has been widely, and successfully, used
over the last ten years. Davis et al. (1989) report high predictive accuracy for IT
system adoption using the TAM model, and also find evidence that perceived
usefulness and perceived ease of use are key determinants of intentions to use

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IT systems. TAM, and extensions of it, has been widely used in IT applications
since then (Davis, 1989; Adams et al., 1992; Taylor and Todd, 1995; Davis and
Venkatesh, 1996; Venkatesh and Davis, 1996, 2000; Venkatesh and Morris,
2000; Lucas and Spitler, 1999, 2000; Straub et al., 1997).
In this study, we build and empirically test the extended TAM, a model that
relates several antecedent variables to adoption of foreign-developed
technology by firms in a developing nation. Our model, shown in Figure 1,
is based on the extant literature in technology acceptance and the literature on
product diffusion/adoption. The extended TAM is specifically designed to be
applied to the study of international transfer of product technology from
developed to developing countries. The specific application (i.e. to developing
nations) has not been tried before, and we seek evidence supporting the
relationships identified in our model via an exploratory empirical study. We
use the TAM model as a starting point for model development, but in keeping
with Warshaw (1980), we add antecedent variables that we believe are of
importance in the specific situation of the transfer of product technology across
international borders. In particular, perceived ease of use is redefined as two
independent variables, technological compatibility and ease of adoption.
Furthermore, anticipated benefits of adoption are explicitly included in the
model, and defined in terms of technical and economic benefits. The
exploratory test of our model is conducted in the Peoples Republic of China
(PRC), arguably one of the most prominent developing economies in the world
today. Chinas economy is currently undergoing rapid expansion, and
technology transfer for product innovation is likely to be an important engine
for economic development in China on a global scale. We use a convenience
sample of respondents representing over 500 firms across several industries in
the PRC: coal mining, petroleum, electronics, aerospace, automobiles, steel, and
transport related industries. The specific behavior being modeled, then, is the
adoption of foreign-developed product technology by managers of PRC-based
companies in these industries.
The extended TAM model is presented in Figure 1. The hypothesized
relationships in Figure 1 are explained in the following section.
Hypothesis development
Antecedents to behavioral intentions
In his influential early research on product adoption and diffusion, Rogers
(1962) identified five factors that affected the speed of adoption of an innovative
product by the market:
(1) Relative advantage: the extent to which the innovation is superior to
competitors.
(2) Compatibility: the extent to which the innovation fits with customers
experiences and activities.

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Figure 1.
Proposed model of
international technology
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(3) Complexity (or lack thereof): how easy or straightforward the use of the
innovation is.
(4) Divisibility, or trialability: how easily the innovation can be purchased,
tried, and/or used.
(5) Communicability: how observable the benefits of the innovation are to
the adopter, or to potential adopters.
Higher levels on each of these factors generally leads to a more rapid rate of
diffusion, first through the so-called innovator and early adopter market
segments, then through the rest of the population (Rogers, 1962).
Many attempts have been made to model the process of innovation diffusion
(see, for example, Mahajan et al., 1983; Teotia and Raju, 1986; Mahajan et al.,
1990; Mort, 1991; Waarts et al., 2002). The best known of these is the Bass model
for forecasting the diffusion of non-durable products (Bass, 1969; for extensions,
see Mahajan et al., 1990; Kohli et al., 1999). Some authors have attempted to
identify which situational factors affect the adoption of an innovation. Gatignon
and Robinson (1989), for example, found that industry concentration, lack of
price intensity, supplier incentives, and vertical linkages to buyers were
significant precursors to adoption. Meyer and Goes (1988) studied how
technological innovations were assimilated into organizations, finding that
contextual attributes were as important as the attributes of the innovation in
determining the speed of adoption. Waarts et al. (2002) found that the factors
that drove early adoption differed from those affecting later adoption. While
cross-national diffusion has been relatively less studied, there is some evidence
that country- or culture-specific factors (such as cosmopolitanism and mobility)
lead to differences in diffusion patterns across countries (Kumar et al., 1998).
Still, this research is focused on the adoption of innovations, not a technology
designed to increase competitiveness with new products.
According to the TRA, other things being equal, a positive attitude toward a
behavior tends to lead to a greater intention to perform that behavior (Fishbein
and Ajzen, 1975; Ajzen and Fishbein, 1977, 1980), for example, to adopt an
innovative product. The technology acceptance model (TAM) (Davis et al.,
1989) applies this relationship specifically to the case where the behavior under
study is the adoption of a new technology. TAM also hypothesizes that other
constructs particular to the technology acceptance situation also affect
behavioral intention. In particular, perceived usefulness has a direct positive
effect on behavioral intention in TAM, while perceived ease of use has a direct
positive effect on both perceived usefulness and attitude toward adoption, both
of which have direct effects on behavioral intention.
The extended TAM model hypothesizes a significant positive relationship
between attitude toward adoption of foreign-developed technology and
intention to adopt the technology. In this regard, it is consistent with both TAM
and TRA. In addition, it is hypothesized that perceived ease of use should also

be significantly related to greater behavioral intentions. If a foreign-developed

product technology is perceived to be easy to adopt and transfer, the expected
costs and time involved in its implementation should be reduced, leading to
greater intention to adopt (and, ultimately, to more competitive products in
terms of cost or performance). Similarly, if the foreign-developed technology is
seen to be compatible with existing processes, the more easily the technology
transfer will be accomplished, again with competitive benefits accruing to the
firm. Perceived ease of use and compatibility are benefits that parallel two of
Rogers factors affecting diffusion of product innovation: product complexity
and compatibility with previous experiences. A total of three hypotheses
relating antecedent variables to behavioral intentions can be expressed:
H1. A positive attitude toward adoption of foreign-developed technology is
associated with greater intentions to adopt the technology.
H2. Greater perceived ease of adoption of foreign-developed technology is
associated with greater intentions to adopt the technology.
H3. Greater perceived technology compatibility of foreign-developed
technology is associated with greater intentions to adopt the technology.
Effects of perceived ease of use on attitude toward adoption
In the extended TAM model, it is expected that greater perceived ease of use
should influence behavioral intention directly, and also indirectly through its
influence on attitude. That is, the greater the perceived ease of adoption and the
greater the compatibility of the foreign-developed technology, the more positive
the attitude of the adopting firm, since cost and time of implementation are
reduced and the more easily the technology transfer will occur. Ultimately, the
cost or performance benefits to the adopting firm will be seen as more easily
obtained if the adopted technology is perceived to be easy to use. Two
hypotheses are developed, again with antecedent variables paralleling those in
Rogers model of innovation diffusion:
H4. Greater perceived ease of adoption of foreign-developed technology is
associated with more positive attitudes toward the adoption of the
technology.
H5. Greater perceived technology compatibility of foreign-developed
technology is associated with more positive attitudes toward the
adoption of the technology.
Effects of perceived benefits on attitude toward adoption
As noted by Rogers (1962), innovation diffusion is affected not only by
perceived ease of use and compatibility, but also by relative advantage (i.e. the
benefits obtained by adopting the innovative product in place of a competitive
product). Similarly, attitude toward adoption of the foreign-developed

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technology is affected by both perceived technology benefit and perceived

economic benefit. If the outcome resulting from the adoption of the technology
(technology-related benefits such as improved product quality, production
quantity, worker productivity, or minimized production problems) is viewed as
being of positive value, the attitude (or affect) toward the adoption itself is
likely to be more positive. This is consistent with the TAM model in which the
relationship between perceived usefulness and attitude develops through
learning and affective-cognitive consistency mechanisms (Davis et al., 1989). A
similar increase in attitude toward the adoption would be expected if the
perceived economic benefits of its adoption are viewed as positive
(improvements to the companys future, improved competitiveness, or
increased performance). Therefore, two hypotheses directly linking perceived
benefits to attitudes toward the adoption are suggested:
H6. Greater perceived technology benefit of foreign-developed technology
is associated with more positive attitudes toward the adoption of the
technology.
H7. Greater perceived economic benefit of foreign-developed technology is
associated with more positive attitudes toward the adoption of the
technology.
Antecedents to perceived benefits
Increased technology compatibility should also have a significant positive
impact on perceived benefits of technology adoption. Improving technology
compatibility increases the utilization of the technology and achievement of
greater technological benefits of the types listed in the preceding paragraph.
These benefits ultimately result in lower transfer costs, quicker transfer times,
and overall improved technology transfer. Similarly, technological
compatibility allows the firm to reap the economic benefits (such as
increased competitiveness) more quickly. Finally, ease of adoption of the new
technology will also improve the amount of technology benefits derived by the
adopting firm. The following three hypotheses are derived:
H8. Greater perceived technology compatibility of foreign-developed
technology is associated with greater perceived technology benefit.
H9. Greater perceived technology compatibility of foreign-developed
technology is associated with greater perceived economic benefit.
H10. Greater perceived ease of adoption of foreign-developed technology is
associated with greater perceived technology benefit.
Methodology
Questionnaire design
Based on a review of the literature, a multi-item scale was identified for each of
the six constructs in the extended TAM model, and modified to suit the

research purpose and particular study context. All measurements were made
using Likert-type scales ranging from one to five (1 positive extreme,
5 negative extreme). All scale items used are reported in Table I.
As in any study of this type conducted in the PRC, there is the danger that
specific respondents are not familiar with survey research instruments or
processes. Therefore several steps were taken to bridge this potential gap.
Professor colleagues from the PRC were engaged to evaluate the instrument
and, after editing of the instrument, these experts pre-tested the instrument
with several managers whom they knew. These managers were subjected to a
post-questionnaire inquiry to critique the instrument and suggest further edits
to ensure lack of ambiguity and increase clarity of meanings. Finally, the
instrument was appropriately back-translated (Adler, 1984) by several fluently
bilingual Chinese nationals studying in graduate business programs in the
USA to ensure that transliteral meaning was intact, and to correct any
discrepancies in translation.

Operational definitions
The extended TAM model was designed to determine the influence of
perceived ease of use and perceived benefits on attitudes and behavioral
intentions. The operational definitions of these cognitive processes, and the
measurement procedures used, are outlined below.
Perceived ease of use constructs. Perceived ease of use was measured by two
separate constructs, ease of adoption and technology compatibility. Ease of
adoption is operationally defined as the extent to which adoption of the
technology is perceived to require effort. The four-item scale used measured
difficulty of technology transfer, time requirements for transfer, problems in
application in existing production facilities, and time required to learn to use
the technology. Technology compatibility is defined as the compatibility with
the adopting firms existing conditions, and was measured using three items:
compatibility with other manufacturing equipment, with raw materials, and
with the production environment.
Perceived benefits constructs. Perceived benefits were also measured by two
constructs: technology and economic benefits. Field interviews with Chinese
managers revealed that three technological benefits are of prime importance:
increases in product quality, improvements in productivity, and reductions in
production process problems. A four-item scale measuring these perceived
benefits was used to operationalize the technology benefit construct. The field
interviews also suggested that new, foreign-developed technologies provide
economic benefits, as they help to increase production levels and to build global
competitiveness. Perceived economic benefit was operationalized using a
five-item scale measuring long-term economic benefit for the company,
increased competitiveness, and increased performance.

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Behavioral intention to adopt (a 0:8999)

1. I intend to push for adoption of the new technology in our company
2. If I were asked to express my opinion regarding adoption of the new technology, I intend to
say something favorable
3. I intend to recommend adoption of the new technology to our company
4. If I could make the decision for our company, I would adopt the new technology
Attitude toward adoption (a 0:8990)
1. Adopting the new technology from the foreign company is a good practice
2. I would feel good if our company does decide to adopt the new technology from the foreign
company
3. It is appropriate to adopt the new technology from a foreign company into our current
production facilities
4. It will be beneficial to our company if we decide to adopt the new technology from a foreign
company
5. My opinion, at this moment, about adopting the new technology is favorable
Technology benefits (a 0:7353)
1. Our companys product quality will be improved
2. Our companys total production quantity will be increased
3. Workers productivity in our company will be increased
4. The new technology can be the answer to some production problems we found in our current
production
Economic benefits (a 0:7105)
1. The new technology is good for the future of our company
2. Our products will be more competitive in the international market
3. Our products will be more competitive in the domestic market
4. The overall performance of our company will be improved
5. The new technology will be helpful to my job performance
Easy to adopt (a 0:6488)
1. It is difficult to transfer that particular technology from the foreign company
2. It takes a long time to transfer the new technology into our company
3. I can foresee that some problems would happen when the new technology is used in our
current production facilities
4. I have to spend a lot of my time to learn to use the new technology or equipment
Technology compatibility (a 0:6411)
1. The new technology can be utilized with other manufacturing equipment our company is
currently using
2. The new technology is suitable for the current raw materials our company is acquiring
3. The new technology is compatible with our current production environment

Table I.
Construct measures
and reliability

Notes: Confirmatory fit statistics: Chi-square = 498.14 based on 147 degrees of freedom;
x 2 =df 2:72; CFI 0:891; RMSEA 0:072; 90 percent confidence interval of RMSEA (0.065,
0.078)

Attitude toward adoption. Davis et al.s (1989) definition of attitude toward

adoption is slightly modified for the extended TAM model to account for the
fact that the adopted technology is foreign-developed. The operational
definition of attitude used in this study is the adopters feelings about adoption

of the new technology from a foreign company. Consistent with Ajzen and
Fishbein (1977), several elements of attitude are captured, which is
operationalized using a five-item scale. The scale gathers opinions on
whether adoption of the foreign technology is a good practice; whether it is
appropriate to adopt the technology into existing production facilities; whether
the adoption of the technology would be beneficial to the firm; and whether the
respondent would feel good about the adoption decision.
Behavioral intention to adopt. Again following Davis et al. (1989), behavioral
intention to adopt is defined as the strength of the adopters intention to
support the adoption decision (see Ajzen and Fishbein, 1977). The construct
was operationalized using a four-item scale, which asked opinions on intention
to support and recommend the technologys adoption, and on whether the
decision to adopt the new technology would be supported.
Data collection
Due to the difficulties encountered in obtaining data from the PRC, we relied on
a convenience sample for this early, exploratory study. The data used in this
study were collected by the authors contacts, all professors currently teaching
at prominent universities in the PRC, who distributed the questionnaire to
colleagues, collaborators, former students, friends, and so forth. Thanks to the
efforts of our Chinese contacts, hundreds of respondents were identified and
requested to complete the questionnaire. All respondents were managers and
engineers, based in the PRC, working in industries such as petroleum, coal
mining, electronics, aerospace, automobiles, steel, and transport industries.
Each respondent was to some degree involved with the technology acquisition
decisions in his or her firm. In all cases, respondents considered the decisions
important to their firms and to their jobs. Since we were relying on our PRC
contacts to develop the base of respondents, a proportionate sampling
procedure was not used; however, the procedure resulted in extremely high
response rates. In total, 506 usable questionnaires were obtained, with only a
few nonresponses or unusable questionnaires[1].
Analysis and results
The analysis for testing the proposed hypotheses was carried out in two stages.
In the first stage, reliability and the construct validity of independent and
dependent constructs were evaluated using Cronbachs alpha coefficients and
confirmatory factor analysis (CFA). After reliability and construct validity
were established, composite scores were used to reflect the underlying
construct dimensions and to test the hypotheses using structural equation
modeling (SEM).
Reliability
For all six multiple item scales, the coefficient alpha for each set of items was
computed to examine the reliability of measures. All these scales demonstrate

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acceptable reliability and are reported in Table I. The four-item scale for
behavioral intention achieved a reliability of 0.8999 and the five-item attitude
scale obtained reliability of 0.8990. The four-item and five-item scales for
constructs on perceived usefulness, including technology benefits and
economic benefits, obtained reliabilities of 0.7353 and 0.7105 respectively.
Two constructs on perceived ease to use, ease of adoption and technology
compatibility are measured by four-item and three-item scales and achieved
reliabilities of 0.6488 and 0.6411, which are adequately high for exploratory
research.
Measurement validity
Construct validity was then examined using CFA for all the construct measures
included in this study. The results are reported in Table I. The model provides
an acceptable fit (x2 147 498:14, CFI 0:891, RMSEA 0:072 and CI for
RMSEA 0:065; 0:078). All factor loadings were statistically significant at
the 5 percent level, and most of the factor loadings exceed the arbitrary 0.5
standard. Thus, these measures demonstrate adequate convergent validity. All
of the cross-construct correlations were significantly different from 1.0, which
suggests that discriminant validity was present. In general, these results
provide support for construct validity for the measures employed in the study.
Structural equation model
Once the unidimensionality of the measure was established, composite scores
of each construct were used to test a structural equation model. Table II
presents the correlation matrix for the constructs in the model, and Figure 2
provides the parameter estimates and associated t-statistics of the model.
The overall fit statistics indicate an adequate fit of model to data
(x2 3 7:465, CFI 0:99, RMSEA 0:05 CI for RMSEA 0:000; 0:0105.
As expected, the hypothesized relationship between attitude to adopt and
behavioral intention to adopt an international technology transfer is positive
and significant (b 0:540, p # 0:01), which supports H1. Perceived ease of use
is captured by ease of adoption and technology compatibility in the study and

Variables

Table II.
Correlation matrix
and descriptive
statistics

1. BEHAVINT
2. ATTADOPT
3. TECHBEN
4. ECONBEN
5. EASADOPT
6. COMPAT
Mean values
Standard deviation

1.000
0.600
0.279
0.302
0.237
0.327
4.597
0.677

1.000
0.283
0.421
0.208
0.355
4.153
0.446

1.000
0.360
0.149
0.198
4.401
0.575

1.000
0.073
0.305
4.134
0.445

1.000
0.245
2.879
0.618

1.000
3.835
0.534

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Figure 2.
Hypothesized model with
composite measures

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also has a strong positive effect on behavioral intention to adopt. Ease of

adoption has a significant and positive effect on behavioral intention
(b 0:097, p # 0:05), and technology compatibility also significantly
increases behavioral intention to adopt in international technology transfer
(b 0:111, p # 0:05). H2 and H3 are therefore also supported.
Besides the direct effect on behavioral intention, perceived ease to use also
has indirect effect on behavioral intention mediated by attitude to adopt. Ease
of adoption of technology strongly increases attitude to adopt (b 0:117,
p # 0:05) and technology compatibility also significantly contributes to the
positive attitude to adopt technology (b 0:210, p # 0:01). H4 and H5 are
thus supported. Perceived usefulness, as represented by technology benefits
and economic benefits in the study, also has the expected effect on the attitude
to adopt technology. Technology benefits strongly favor a positive attitude to
adopt (b 0:113, p # 0:05), and economic benefits also significantly increase
attitude to adopt (b 0:308, p # 0:01). These findings support H6 and H7.
Furthermore, as theorized, perceived ease of use (ease to adopt and
technology compatibility) proves to have strong positive effect on perceived
usefulness (technology benefits and economic benefits). Technology
compatibility increases both technology benefits (b 0:172, p # 0:05) and
economic benefits (b 0:305, p # 0:01), which is consistent with our
hypotheses H8 and H9. Ease to adopt technology, on the other hand, has a
positive and significant effect on technology benefits (b 0:108, p # 0:05).
H10 is thus supported.
Discussion and conclusions
The TAM model was conceived as a specialized version of the TRA, applicable
in the special case of information technology adoption. We believed that,
suitably modified, the TAM model could be successfully extended and applied
to the case of international technology transfer to firms located in developing
nations. Managers seeking to adopt foreign-developed technology to improve
their firms products and production processes to increase their global
competitiveness with new products need to weigh several factors (perceived
ease of use, perceived usefulness, and potential technology and economic
benefits). In the extended TAM model, these antecedent factors have direct
and/or indirect impacts on managers attitudes toward the foreign-developed
technology, as well as on their intentions to adopt (i.e. allow the technology
transfer to occur). As was the case with TAM, certain specific antecedents to
attitudes and behavioral intentions were hypothesized in order to specialize the
model and improve its predictive ability.
Our findings support the hypotheses of the extended TAM. All of the
hypothesized relationships were found to be significant and in expected
directions. Our results therefore suggest that the extended TAM is potentially a
useful model for understanding international technology transfer, and

managerial attitude formation and behavioral intentions leading to this

transfer. Our findings are also relatively consistent with the original TAM
model (Davis et al., 1989), except for the lack of direct relationship between
perceived usefulness and behavioral intention, and the existence of direct
linkage between perceived ease of use and behavioral intention. Consistent
with the extended TAM model, attitude is shown to mediate the influences of
perceived usefulness and perceived ease of use on behavioral intention to
adopt. The extended TAM model further distinguishes technology benefits
from economic benefits to capture perceived usefulness in the context of
international technology transfer. Managers evaluate both technology and
economic benefits before forming their attitude toward adopting a new
technology. This attitude further leads to the formation of behavioral intention
and eventually actions of adopting a new technology.
Interestingly, the findings highlight the importance of perceived ease of use
on managers behavioral intention to adopt new technology (as predicted by the
extended TAM), rather than the significance of perceived usefulness (as
predicted by the original TAM). Ease of adoption and technology compatibility
not only indirectly influence managers behavioral intention to adopt a new
technology through influencing their attitude toward adoption, but also
directly increase managers behavioral intention. Davis et al. (1989) also find a
similar effect of perceived ease of use on behavioral intention of user adoption
of computer technology. They argue that when people are just starting to learn
to use computer systems, they tend to emphasize the possibility of learning
success (perceived ease of use), which can directly affect their behavioral
intentions to use a computer system. In the context of the current study
(international technology transfer), managers in overseas markets are likely to
be more concerned about their firms ability of learning and using a new
technology than the benefits of the technology when making decisions of
technology adoption. The benefits of adopting a new technology or perceived
usefulness are more likely to be well-documented and standard across firms.
The ease of adoption and technology compatibility or perceived ease of use,
however, tend to be more firm-specific and are more likely to have direct effect
on overseas managers behavioral intention of adopting a new technology.
Manufacturers and marketers of new technology, therefore, should carefully
research the ease of adoption and technology compatibility of target firms in
overseas markets when carrying out their marketing plans. Their marketing
effort can be more effective when they recognize the concerns of overseas firms
on the ease of adopting a new technology beside the benefits of the technology.
For example, the results suggest that managers from developing countries may
be very receptive to foreign-developed technologies. Knowing the most critical
factors in the managers decision processes, the firm exporting the technology
will be in a better position to build in required features or performance levels,
and to stress these characteristics in the supporting promotional efforts. As a

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cautionary note, it is clear that the managers decision processes are very
complex, and perceived usefulness, ease of use, and benefits to the firm are all
considered. Firms seeking to export technology should understand that a
dazzling new technology will not necessarily be blindly accepted, especially
in an increasingly competitive global environment. Understanding the
antecedents to behavior formation should provide firms with an advantage
in marketing technology to firms in developing countries.
A limitation of this study, of course, is the empirical test in only one
developing nation, the Peoples Republic of China. The Chinese emerging
business and technology environment, and the Chinese cultural environment,
may be different enough from those of other developing nations that the
generalizability of the model may be questioned. To more fully understand the
empirical generalizability of the extended TAM model, additional research in
other markets worldwide would need to be conducted. Further, the antecedent
variables may need to be refined, or better operational definitions may need to
be developed, in order to better understand the effects of these variables on
attitude formation and the adoption decision. By conducting studies across
several culturally different developing countries, a better understanding of the
cultural, economic, and political impacts on the international technology
transfer decision can be obtained.
Another major limitation is our use of a convenience sample. While
appropriate for an early, exploratory study, one must regard the results
obtained in this study as preliminary. A replication of the study with a more
systematic, probability-based sample would provide greater empirical support
for the findings described above, and would be strongly advised. The strong
support for the extended TAM in this initial application, however, suggests
that it provides a useful starting point in further research of the adoption of
foreign-developed technology by managers from developing countries.
Note
1. We used a large sample size (506) in our structural equation model, which raises the issue of
whether we obtained statistically significant findings for all our hypotheses due to sample
size. Actually, the power issue is two-sided. If the sample size is large, then the overall fit
statistics should be at greater risk of indicating poor fit, while the t-tests would be biased
towards finding significant differences, due to shrinking standard errors. The p-level used
for significance (p , 0:05) can be interpreted as the level of a type I error, and our statistical
analysis indicated satisfactory levels of power in the tests. We acknowledge and thank the
reviewer who asked us about this point.
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Call for papers

International Marketing Review
Special issue on

Services research in a cross-national context

International Marketing Review announces a call for papers for a
special edition of the journal focusing on services research in a
cross-national or cross-cultural context.

mix, and qualitative and quantitative tools and methods for

services research.

Deadline for submission: 31 January 2004

Purpose of the special issue
The growth of the services sector in a global context has been
and continues to be phenomenal. While excellent quantitative
as well as qualitative research is ongoing in many individual
country settings, there is little which has been published in a
cross-national or cross-cultural context. Service companies are
facing important questions about the applicability of home
market service experiences in new international markets. Do
customers have the same expectations in mind for service
offerings? What are important strategic implications for service
marketers looking at new foreign markets? With the economic
pressures to standardize service offerings, are there similar
service expectations that can be found in multi-country settings?
With the importance of service quality and customer
satisfaction, do assessment mechanisms hold up in
cross-country contexts? Are service recovery strategies
applicable in multi-country settings? This special edition of
International Marketing Review will focus on all aspects of
services research in a cross-national/cross-cultural context,

Potential manuscript topics

Topics for this special issue should focus on such crossnational/cross-cultural issues as: service design and
development, customer service expectations, service recovery
strategies, the applicability of assessment tools such as
SERVQUAL, SERVPERF and blueprinting, service personnel in
multi-country settings, strategic issues involving the services

Papers submitted must not have been published, accepted for

publication, or presently be under consideration for publication
elsewhere.
The submitted manuscripts should follow the format as
suggested in the Notes for Contributors found in any recent
issue of International Marketing Review. Of particular note is that
four copies of the manuscript should be submitted, the paper
should be double-spaced with wide margins, and the length
should be no longer than 4,500 words. Also please be sure to
include a 150-word abstract of the article along with the
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Authors may submit manuscripts at any time prior to the
31 January 2004 deadline.
Manuscripts and any questions should be directed to:
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International Marketing Review
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