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Innovation Strategy and Sanctioned Conflict:


A New Edge in Innovation?

Barbara Dyer and X. Michael Song

Teamwork and harmony are worthy objectives, but a healthy dose of conflict also
plays an important role in fostering innovation. In their pursuit of teamwork and
harmony, companies run the risk of suppressing the creative tension that brings
vitality to new-product development (NPD) efforts. Furthermore, a firm’s choice
of innovation strategy may have a significant effect on the organization’s capa-
bility for managing conflict.
Using results from a survey of 290 marketing and R&D managers from U.S.
firms in the electronics industries, Barbara Dyer and X. Michael Song explore the
link between strategy and conflict, and the effect this link has on NPD success.
Their study examines the following issues: the influence of business strategy on
specific conflict-handling behaviors; the relationship between those conflict-
handling behaviors and positive conflict outcomes; and the relationship between
constructive conflict and new-product success. The study classifies firms predom-
inantly pursuing a more aggressive NPD strategy as prospectors and less ag-
gressive firms as defenders. Three conflict-handling mechanisms are identified:
integrating behaviors, forcing behaviors, and avoiding behaviors.
Compared to the prospector firms, the defender firms in this study perceived
significantly higher levels of conflict in their organizations. In handling conflict,
the prospector firms perceived a higher level of integrative behavior than the
defender firms. The defenders perceived higher levels of forcing and avoiding
conflict behaviors. The study identifies a strong, positive relationship between
integrative behaviors and constructive conflict. Positive relationships are also
identified between constructive conflict and the success of cross-functional rela-
tionships, as well as between constructive conflict and NPD business success.
For the firms in this study, the results indicate that strategy is associated with
the conflict-handling mechanisms the firm uses. For example, the results suggest
that an NPD manager in a prospector firm will encounter high use of integrative
behaviors, a high number of complex conflicts, a relatively low level of perceived
conflict, a high level of formalization, and frequent exchanges of written and
verbal communication among the firm’s personnel. The results suggest that
managers may help to create an environment conducive to NPD success by
assessing their firms’ strategies, emphasizing integrative conflict-handling be-
haviors, and employing formalization of organizational procedures. © 1998
Elsevier Science Inc.

J PROD INNOV MANAG 1998;15:505–519


© 1998 Elsevier Science Inc. All rights reserved. 0737-6782/98/$19.00
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506 J PROD INNOV MANAG B. DYER AND X.M. SONG
1998;15:505–519

Introduction in the firm take as much of managers’ time or have as


profound an effect on the NPD process as conflict

R
ichard Pascale [38], p. 263] has observed that, [18,47,48]. As Takeo Fujisawa, one of the founders of
“Creativity and adaptation are born of tension, Honda, has noted, “...you never want too much har-
passion, and conflict”—a fact well illustrated mony. One must cultivate a taste for finding harmony
by the new product development (NPD) process, within discord, or you will drift away from the forces
where new ideas, new products, and new processes that keep a company alive” [38, p. 256]. Or, as Soud-
depend on organization members challenging the sta- er’s “too-good friends” clearly demonstrates, too
tus quo. Thus, it is hardly surprising that few processes much harmony inhibits challenges among team mem-
bers and results in overlooked information and obser-
Address correspondence to X. Michael Song, Department of Marketing vations vital to successful innovation [49].
and Supply Chain Management, The Eli Broad Graduate School of Man- What may come as a surprise, however, is that the
agement, Michigan State University, N334 North Business Complex, East
Lansing, MI 48824-1112. firm’s choice of strategy may have a profound influ-
ence on its ability to handle discord and disagreement
effectively. As Mitchell and Hustad [34, p. 143] state,
“New product decisions are often highly strategic.”
BIOGRAPHICAL SKETCHES
Barbara Dyer is Assistant Professor of Marketing, Scott Fetzer
Today, the competitive nature of the marketplace
Faculty Fellow, and Director of The Sales Centre at Ohio Univer- makes innovation even more important strategically,
sity. She earned her Ph.D. in Marketing and Strategic Management as businesses increasingly turn to NPD for their sur-
at the University of Tennessee and her B.S. and M.S. with honors vival amid rapid market changes. It is important to
from the University of North Carolina at Greensboro. Her business
background includes over a decade of retail management and note that strategic decisions inherently involve a pro-
buying for companies such as Allied Corporation and Crown Cor- cess of negotiation, because they suggest the consid-
poration. Dr. Dyer’s research interests include relationship issues in eration of change in response to environmental shifts
new product development, especially in the international arena, and
in professional sales. Her articles appear in the Journal of Product
[22, p. 59]. Put simply, just as innovation links to
Innovation Management, IEEE Transactions on Engineering Man- conflict, strategy and strategic decision-making also
agement, the Journal of International Business Studies, Research- link to conflict.
Technology Management, and various conference proceedings, in-
cluding the American Marketing Association, the Academy of
Today’s business environment further emphasizes
Marketing Science, and the International Trade and Finance Asso- the strategy/conflict relationship. The old corporate
ciation. She also teaches in the Ohio University MBA Without hierarchical structure has given way in many instances
Boundaries. to project teams, task forces, and other work groups
X. Michael Song is Associate Professor of Marketing and Product
[27]. Specifically in the new product environment,
Innovation in the Eli Broad Graduate School of Management, Pinto and Pinto [40, p. 200] state, “...organizations are
Michigan State University. He received an MS from Cornell Uni- turning to project management and relying to a greater
versity, an MBA and Ph.D. in Business Administration from the degree on project teams for the development and im-
Darden School at University of Virginia.
plementation of new products and programs.” Signif-
Dr. Song received three Best Paper Awards from the Product icantly, recent research has shown that the effective-
Development and Management Association. He was a winner in the ness of teams depends on how well they manage
1992 Marketing Science Institute Research Competition on En- conflict [2]. Mensch and Ramanujam [32, p. 22] con-
hancing New Product Development Process. His primary research
interests include global new product management and joint venture cur, stating that it is “...imperative that we understand
management. His current research projects include a nine-country conditions under which team processes exert a favor-
comparative study of best practices in managing cross-functional able influence on innovation outcomes, and conditions
development teams and improving the new product development
process. Based on a data set consisting of over 3,000 new products
under which they lead to conflict,” because teams are
recently developed and commercialized by major corporations from central to successful innovation.
nine countries, he has developed several global “benchmark mod- Many companies today are reconsidering a histori-
els” of new product development management. His research articles
have appeared in the Journal of Product Innovation Management,
cally negative view of conflict and sanctioning conflict
the Journal of Marketing Research, Marketing Science, the Journal to invigorate, change, and gain a competitive advan-
of Marketing, the Journal of International Business Studies, the tage in innovation [38]. Honda Motor Corporation
Journal of the Academy of Marketing Science, Industrial Marketing exemplifies a company that has proactively and suc-
Management, the Journal of International Marketing, IEEE Trans-
actions on Engineering Management, and Research-Technology cessfully sanctioned conflict, developing and using
Management. waigaya, a contention management system [38] (Ex-
hibit 1). For example, in the 1980s, waigaya led to the
INNOVATION STRATEGY AND SANCTIONED CONFLICT J PROD INNOV MANAG 507
1998;15:505–519

development of the Honda City automobile, a huge hit disharmony state and only 13% under a state of har-
in the Japanese domestic market. Among the first mony [48].
disagreements the project team faced was top manage- Research offers a number of possible benefits for
ment’s objection to initial design ideas because they academic and managerial understanding of the strate-
were too ordinary [38]. However, Honda’s contention gy/conflict relationship. First, most firms want and
management system, through skillful management of need guidance to improve their NPD because of ex-
diverse opinions, led to a very successful new product. treme competitive pressures [9,23]. Also, previous re-
Where disagreement is not well managed, however, search on general disharmony in NPD offers managers
the results can be devastating for the NPD process. In little help with the specific behaviors and mechanisms
NPD, research and development (R&D) and market- needed to manage conflict. Because conflict manage-
ing historically have experienced significant disagree- ment is a controllable managerial variable (possible to
ments [21,47– 49]. For example, marketing can create teach and learn), organizational learning resulting
conflict by pushing R&D for quick product changes to from sanctioned conflict may represent a possible
support short-term marketing decisions such as pric- sustainable competitive advantage [44]. Furthermore,
ing, distribution, or advertising. R&D, on the other research on the strategy/conflict link in NPD helps to
hand, can create conflict by pushing for technological fill a gap, because research about implementation and
product improvements that market research has indi- control of the marketing function is still limited [24].
cated may not be important to customers. Either can Finally, and most importantly for managers, the data
generate conflict by speaking jargon that can’t be from such research may help to improve new product
understood by the other. Souder [48] found that, due to performance.
differences in such things as jargon, time sense, mo- The purpose of this study is to pursue much needed
tives, goals, allegiances, and senses of responsibility, research about the relationship of strategy and conflict
almost 60% of the new product projects he studied within the NPD process. To do so, we conducted a
experienced significant interface conflict. Where a se- survey of 290 R&D and marketing managers in the
vere disharmony state prevailed, 68% of the new prod- electronic industries in the U.S. We addressed the
uct projects failed, compared to 23% under a mild following issues: (1) the influence of business strategy
on specific conflict handling behaviors; (2) the rela-
tionship of those conflict handling behaviors to posi-
tive conflict outcomes, that is, constructive conflict;
and (3) the relationship of constructive conflict to new
Exhibit 1: Honda’s Contention Management product success. The results indicate that both NPD
System
researchers and managers can benefit by better under-
Definition: standing the relationship between strategy and conflict
behaviors in the NPD process.
● Waigaya, a set of conflict management skills and proto-
cols at Honda, provides a forum that supports the creative
expression of employee ideas without regard for rank.

Protocol:
Brief Literature Overview
● Waigaya sessions can be requested by either seniors or Conflict research began with studies on the general
subordinates. Within these sessions employees question, theories of organizational conflict, the general process
challenge, and disagree directly with superiors, co-work-
ers, or subordinates. The company encourages active
of conflict episodes, and the general behavioral ap-
listening, rationale support for arguments, and polite be- proaches to conflict [10,41,50] (See references [29]
havior during the disagreement process. A facilitator is and [53] for recent in-depth reviews of the conflict
often present to help shape thoughts and feelings into literature). More recently, researchers have focused on
constructive suggestions. how organizations handle conflict and how they can
Outcomes: improve their conflict management skills [35,51].
● Ideas coming of these sessions are melded by manage-
Across all research topics, the sum total of conflict
ment into a single plan of action. This provides Honda research is huge, notwithstanding a relatively narrow
with a learning system “that is rare even by Japanese range of topics and disciplinary areas, that is, business,
standards”[38]. economics, psychology, and sociology [29]. However,
despite substantial research and widespread accep-
508 J PROD INNOV MANAG B. DYER AND X.M. SONG
1998;15:505–519

tance of its importance, organizational conflict re- ogy has been successfully used in previous cross-
mains poorly understood [16]. functional interface studies [31,33,44,46].
Relatively few studies have explored the relation- The Miles and Snow [33] typology classifies firms
ship of strategy and conflict, and those studies have into one of four strategic types: (1) prospectors, that
covered a wide variety of contexts [1,15,16,33,44]. move quickly to seize opportunities in the market
Amason [1] approached the paradox of conflict in top place through new products, new markets, and new
management team strategic decision-making, where technologies; (2) defenders, that find and keep secure
conflict can improve the quality of decisions but at the niches in a stable product or service area, not looking
same time hurt group consensus and acceptance. Dyer beyond their current product domain; (3) analyzers,
and Song [15] compared conflict behaviors of Japa- that mix an aggressive new product and domain ap-
nese and U.S. firms following different strategic ap- proach in one business with a stable approach in a
proaches. Eisenhardt and Zbaracki [16] explored how second business; and (4) reactors, that lack a true
conflict affects general strategic decision-making, strategic perspective and allow themselves to be buf-
while Miles and Snow’s [33] multiple industry/multi- feted by environmental elements. In sum, Miles and
ple company studies looked at the conflict behaviors Snow [33] depicted two “polar” strategic types, pros-
associated with particular strategic types. Ruekert and pectors that choose aggressive market development
Walker [44, p. 234] focused on implementation issues, and defenders that pursue non-aggressive market de-
stating that variations in the nature of interactions velopment. In this study, reactors, because they are
between R&D and marketing based on strategic posi- a-strategic, that is, reactive instead of proactive, and
tion “may have important implications for the effec- fail to link to a proactive strategy, have been dropped
tive implementation of those strategies.” from further discussion and data analyses. Also, for
More research is needed, however, on the issue of purposes of clarity we present the hypotheses in terms
the strategy/conflict relationship in general. It is espe- of the polar strategic positions.
cially needed within the context of NPD, because Miles and Snow’s [33] descriptions suggest that
conflict plays such a critical role in strategic decision- prospectors should have higher levels of conflict than
making and the innovation process. While each of the defenders, due to environmental complexity and struc-
above studies has addressed an important aspect of tural differences. On the other hand, based on research
strategy and conflict, only Dyer and Song [15] and of the social perception of conflict approaches, the
Ruekert and Walker [44] have done their research in described hierarchical structure of defender firms
the context of the NPD process. could be perceived as conducive to high levels of
conflict [5,52]. The limited research done on this ques-
Hypotheses Development tion has had mixed results. For example, Ruekert and
Walker [44] using an American sample predicted and
Strategy and Conflict found prospectors to have higher levels of conflict.
Dyer and Song [14], using a Japanese sample, found
This study looks at the relationship between innova- defenders to have higher conflict levels. Thus, we
tion strategy, defined as the new product and market hypothesize that:
development plans of the firm, and task conflict, de- H1: The perceived level of conflict between R&D
fined as non-personal disagreements over work goals, and marketing will be greater in defender
objectives, and methods. In order to study this rela- firms than in prospector firms.
tionship, we chose the Miles and Snow typology to
assess strategic position, because it classifies firm Strategy and Conflict Handling Mechanisms
strategy based on the firm’s approach to innovation
and adaptation to market changes. Furthermore, Miles Research has identified two major approaches to con-
and Snow [33] also observed that firms pursuing dif- flict handling, behavioral and structural [43]. The most
ferent innovation strategies used different conflict han- recognized and respected behavioral measures of con-
dling methods, possibly because of the different per- flict handling are based on the tradeoff managers make
sonnel selection criteria used, the different market between self-interest and interest in others [10,42,52].
environments faced, the different functional goals pur- This study defines the three fundamental approaches
sued, the different skills and abilities needed, or the to handling conflict (integrating, avoiding, and forcing
different structures used by each strategy. Their typol- behaviors) in the following fashion: (1) integrating
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behavior reflects a significant interest in considering nature and high interaction across functional bound-
the needs of the other party; (2) forcing behavior aries. Given this and the fact that previous empirical
reflects low interest in others and high interest in self work has not entirely supported Miles and Snow’s [33]
(one party maximizes his own concern at the expense claims about formalization and centralization of the
of the other party); and (3) avoiding behavior reflects strategic types [14,44], we expect that:
low interest in self as well as others (both parties in- H4: In conflict situations between R&D and mar-
volved in the conflict fail to address anyone’s concerns). keting, prospector firms will rely on formal-
Miles and Snow [33] in their studies found that, ization more than defender firms.
during conflict, prospectors engage in high levels of H5: In conflict situations between R&D and mar-
interaction in response to frequent cross-functional keting, prospector firms will rely on central-
contact in multiple, complex situations, that is, they ization more than defender firms.
use an integrative approach. Defenders interact infre- If managers are to handle conflict situations skillfully,
quently and on a routinized basis, seeking timely and they need to understand the relationships among con-
simple conflict resolution, that is, they use a non- flict handling methods, constructive conflict out-
integrative approach. Prospector emphasis on multiple comes, and performance. In this study, constructive
functional areas, cooperative behavior, and high levels conflict is defined as personnel working harder, feel-
of interaction is indicative of a high level of interest in ing energized by the conflict exchange, and seeing
others, as well as in self, or an integrating conflict positive change. Performance is defined in two ways,
handling behavior approach. Defender emphasis on as both the quality of cross-functional relationships
minimal interaction, reduced time investment, in- and business performance, that is, overall marketplace
creased efficiency, and hierarchy is indicative of high performance and new product program success.
interest in self, or a forcing or avoiding conflict han- Thomas and Kilmann [52] found that conflict behavior
dling behavior approach. Therefore, we predict that: styles have a distinct social desirability ranking. The
H2: In conflict situations between R&D and mar- ranking in descending order is integrating, forcing, and
keting, prospector firms will use integrating avoiding. Based on this ranking, people in organiza-
conflict handling behaviors more than de-
tions respond more favorably to cooperative conflict
fender firms.
H3: In conflict situations between R&D and mar-
behavior (other-oriented) than non-cooperative (or
keting, defender firms will use forcing and self-oriented) conflict behavior. In examining interde-
avoiding conflict handling behaviors more partmental conflict, Lawrence and Lorsch [28] and
than prospector firms. Burke [11] found that the more collaborative styles of
Organizations use two structural methods to reduce the conflict behavior produced positive, functional results.
chance of conflict and to facilitate resolution: formal- Also, Barker et al [5] found that positive outcomes of
ization and centralization [30,44,45]. This study de- conflict correlate with new product project success. It
fines formalization as the codification of organiza- should be noted that these positive outcomes are not to
tional procedures, that is, the written policies, be mistaken for the “too-good friends” situation in
procedures, standards, and processes of the firm. For- which surface harmony glosses over and suppresses
malization reduces complexity, uncertainty, and role disagreement, effectively forestalling true conflict res-
ambiguity, thereby reducing conflict. The study de- olution [49]. This suggests that:
fines centralization as hierarchical authority, or
H6: In conflict situations between R&D and mar-
whether decisions must be approved by superiors be-
keting, a positive relationship will be found
fore being carried out. Centralization simplifies and between integrating conflict handling behav-
speeds conflict handling by providing a known process iors and constructive conflict.
for conflict resolution. It also acts to suppress conflict H7: In conflict situations between R&D and mar-
through the exercise of authority. Miles and Snow [33] keting, a negative relationship will be found
clearly state that defenders have high levels of formal- between forcing and avoiding conflict han-
ization and centralization, while prospectors have low dling behaviors and constructive conflict.
levels of formalization and decentralized structures. H8: In conflict situations between R&D and mar-
However, the support for Hypothesis 2 suggests that keting, a positive relationship will be found
formalization may be more needed, and therefore seen between constructive conflict and NPD suc-
more, in prospector firms because of their complex cess.
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1998;15:505–519

Methodology satisfied the study’s desired criteria: (1) firms produc-


ing physical products; and (2) firms with departmen-
Research Instrument Development talization of the marketing and R&D functions. Be-
cause information was incomplete in the trade
We developed our measurement scales using a four- association listing for 631 of these firms, pre-survey
phase iterative procedure [17]. First, scales designed to calls were made to these companies to verify address,
measure the constructs of interest were drawn from the location of manufacturing, existence of both a market-
literature, and an initial research instrument was de- ing and R&D department, and/or the name of the
veloped using standard psychometric techniques [36]. marketing director as the contact person for the study.
Second, we conducted 16 group interviews in nine Adjusted for company mortality, personnel attrition,
companies to identified unique subsets of measures incorrect or unusable addresses, and subsequent fail-
that possessed “different shades of meaning” to infor- ure to meet the study criteria, the final sample frame
mants [17]. Third, we submitted a list of constructs included personnel from 727 eligible member compa-
and corresponding measurement items to a panel of nies of the Electronic Industries Association (EIA).
academic experts for evaluation of clarity, specificity, In administering the mail survey, we followed the
and representativeness, requesting appropriate addi- Total Design Method recommended by Dillman [13].
tional measures. The questionnaires were sent to both R&D and mar-
Fourth, based on the first three phases, we prepared keting managers in the 727 firms. After the initial
a new draft of the questionnaire and pretested it with mailing and three follow-ups, 176 companies returned
five Ph.D. students in a measurement and research a single survey, 52 companies returned both surveys,
doctoral seminar from a well-regarded U.S. business and one company returned a single survey without
school. Based on feedback from these interviews, the functional area identification. Totally, 290 usable re-
instrument was modified and professionally drafted. sponses were received from 229 companies, resulting
To further test the questionnaire, we administered the in a 31% response rate at the company level. To test
questionnaire to 26 employees and conducted focus for possible non-response bias, a multivariate analysis
group interviews using a semi-structured format in of variance analysis (MANOVA) of the first- and
four companies. We also pretested the final question- second-wave respondents was performed on all vari-
naire with 82 marketing, R&D, and engineering per- ables used in this study [3]. No significant differences
sonnel from two major chemical companies and a were found at a 5 .05 for all variables, suggesting that
computer company. non-response biases did not pose a major problem for
We conducted exploratory factor analysis to analyze subsequent analyses.
the pretest data and computed coefficient alpha to
assess the reliability. The results indicated that all
Measures
scales exceeded .70 (the minimum level recommended
by Nunnally), except the avoiding and forcing conflict Innovation strategy was measured using an 11-item
behaviors scales. Consequently, six additional items of scale adapted from Conant et al’s [12] Miles and Snow
“equal kind and quality” were added to these scales typology scale. The study classifies firms predomi-
[26]. The final version of the questionnaire reflected nantly pursuing a more aggressive NPD strategy as
the necessary modifications suggested by the analyses. prospectors and those firms predominantly pursuing a
Appendix A contains the details of the measures. Most less aggressive NPD strategy as defenders. A 12-item
measures used a seven-point Likert-type agree– dis- scale was used to measure conflict levels consisting of
agree rating scale, where 1 is “strongly disagree” and five items from the market orientation study by Jawor-
7 is “strongly agree.” ski and Kohli [23], five items from the business strat-
egy study by Ruekert and Walker [44], and two new
items suggested by pre-test focus group interviews.
Sample Design and Response Rate All of the items used to measure conflict behavior
came from scales developed by Rahim [42]. The five-
Our sampling frame included member firms listed in item formalization scale and the five-item centraliza-
the Electronic Industries Association’s 1994 Trade tion scale used in this research come from a study by
Directory and Membership List. Random selection Hage and Aiken [20] and have been used by many
from this list resulted in 800 firms in the U.S. that cross-functional interface studies, for example, Gupta
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et al [19] and Song and Parry [46]. Constructive con- study focus of contrasting the three conceptually dis-
flict was measured by a five-item scale developed by tinct conflict behaviors, integrative, forcing, and
Barker et al [5]. Quality of cross-functional relation- avoiding. Thus, a 13-item scale measuring integrating
ships was measured with a six-item scale adapted from conflict handling behavior was developed and used to
organizational measurement scales developed by test those hypotheses addressing integrative conflict
Barker et al [5]. The business performance scale mea- handling behaviors.
sured the overall marketplace performance and new Second, we conducted confirmatory factor analyses
product program success, using a ten-item scale de- (CFA) through LISREL to assure unidimensionality,
veloped from the pre-test interviews and a review of convergent validity, and discriminant validity using
the PIMS studies [46] (see Table 1 for a sample of the covariance matrix of the remaining items as input
measurement items or Appendices A and B for the [25]. The overall fit of the measurement models is
complete scale items used in the study). excellent, with the normed fit index (NFI), non-
normed fit index (NNFI), and comparative fit indices
Analysis and Results (CFI) [7,8] for the model exceeding the critical level
(.90) cited by Bearden et al [6]. In addition, all items
Measurement Validation had a significant loading to their respective constructs
and all loadings were significant (p , .05), demon-
We conducted a series of statistical analyses to vali- strating that the scales for the constructs have conver-
date the measurement model. First, we performed ex- gent validity. Examination of the Phi matrix further
ploratory factor analysis to assess the construct valid- indicates that the correlation between constructs is
ity of the scales used in the study [26]. The results significantly different from one, establishing discrimi-
validated all scales, but suggested that a single scale nant validity.
for integrative conflict behaviors was superior to using Third, we classified the responses into the dominant
a separate scale for each of the different levels of strategic type (prospectors or defenders) using SAS’s
integrative behaviors. Furthermore, this supported the FASTCLUS procedure. As an additional check, a

Table 1. Sample of Measurement Itemsa

Construct Items
Conflict level When R&D and Marketing work together . . .
there is little or no interdepartmental conflict.
People conflict on how to proceed on tasks.
Integrating behavior When Conflicts Arise Between R&D and Marketing, Generally We . . .
try to bring all issues into the open in order to resolve them in the best way.
Encourage others to express their feelings and views fully.
Avoiding behavior When Conflicts Arise Between R&D and Marketing, Generally We . . .
believe it is better to keep feelings to ourselves rather than create hard feelings.
Try to smooth over conflicts by trying to ignore them.
Forcing behavior When Conflicts Arise Between R&D and Marketing, Generally We . . .
tenaciously argue the merit of initial positions when disagreements occur.
Want the other to make concessions, but don’t want to make concessions ourselves.
Formalization Written procedures and guidelines are available for most work situations.
Formal communication channels have been established.
Centralization There is little action taken here until a supervisor approves a decision.
Even small matters have to be referred to someone higher up for a final answer.
Constructive conflict When Conflicts Arise Between R&D and Marketing, Generally We . . .
know each other better because of the way conflicts are handled.
Are more sensitive to one another because of the way that conflicts are handled.
Cross-functional In general . . .
relationship quality all things considered, we feel highly pleased with the way in which we work together
on a new product development.
We have a high degree of trust in each other.
Business performance Compared to our major competitiors, our overall new product program is far more successful.
Our overall performance of our new product program has met our objectives.
a
Responses were on a seven-point Likert-type agree–disagree rating scale, where 1 5 “strongly disagree” and 7 5 “strongly agree.”
512 J PROD INNOV MANAG B. DYER AND X.M. SONG
1998;15:505–519

MANOVA analysis was performed using all 11 strat- and the results of the Duncan multiple range test for all
egy measures to confirm the appropriateness of the hypotheses. The data support all of the predictions of
classification. the study, with the exception of Hypothesis 5, which
Fourth, we computed construct reliability using co- predicted that prospector firms would rely on central-
efficient alpha. The results indicated that the coeffi- ization more than defender firms.
cient alphas for the study’s constructs ranged from .77 Conflict level. Defender firms were found to per-
to .94, exceeding the .70 level considered acceptable ceive significantly higher levels of conflict in their
for studies of this nature [36,39]. Examination of the organizations than prospector firms (p , .01; 4.21 for
patterns of item-to-item correlations and item-to-total Ds and 3.62 for Ps). This finding contradicts both the
correlations indicated that there were no deviations findings of Miles and Snow [33] and Ruekert and
from the internal consistency and external consistency Walker [44]. One explanation might be that behavior
criteria. during conflict episodes affects perceptions of conflict
more than the number of conflict episodes experi-
Hypothesis Testing enced. If this is the case, it might be good news for the
firm, because controlling the number of conflict situ-
Following McKee et al [31] and Song and Dyer [45],
ations may be far less doable than controlling the ways
this study tests hypotheses H1 through H5 using
that firm members behave once disagreements arise.
MANOVA and Duncan’s multiple range test. The
An alternative explanation might be that, in defender
Duncan method, one of the oldest multiple-stage tests
firms, which focus more on technology according to
in current use, controls for the Type I comparisonwise
error rate and provides greater power than Tukey’s. Hy- Miles and Snow [33], R&D has more influence in the
potheses were accepted or rejected at significance level a organization than marketing, leading to conflict based
5 .05 for both the F-tests and Duncan tests. Wilks’ on power struggles between the two areas. Further
Lambda, Pillai’s Trace, and Hotelling-Lawley’s Trace research is needed to clarify the relationship explored
also were used to test the relationship between strategic by this research question.
types and the variables of interest. Hypotheses 6, 7, and Behavioral conflict handling. As predicted in Hy-
8 predicted simple associations between two interval, potheses 2 and 3, prospector firms perceived a higher
continuous, and linear variables and were tested using level of integrative behavior in conflict handling than
Pearson product-moment correlation. defender firms (p , .01, 5.29 for Ps and 4.69 for Ds),
and defender firms perceived higher levels of forc-
Results ing and avoiding conflict behavior than prospector
firms (p , .01, 3.93 for Ds and 3.46 for Ps; 3.46 for
Tables 2 and 3 present the mean responses of pros- Ds and 3.03 for Ps). These findings support previous
pector and defender firms, the associated F-statistics, research in other conflict contexts. It is difficult to

Table 2. Hypothesis Testing Results: H1–H5 Conflict Level and Conflict Handling Mechanisms

Mean Value by Strategy Type


ANOVA
Hypothesis Construct Prospectors (P) Defenders (D) F-Statistic

H1: Ds will have a higher perceived level of


conflict than Ps. Conflict level 3.62 4.21 25.21a
H2: Ps will use integrating conflict handling
behaviors more than Ds. Integrating behavior 5.29b 4.69b 32.62a
H3: Ds will use forcing conflict behaviors more
than Ps (a). Forcing behavior 3.46b 3.93b 18.02a
H3: Ds will use avoiding conflict behaviors
more than Ps (b). Avoiding behavior 3.03b 3.46b 12.90a
H4: Ps will rely on formalization more than Ds. Formalization 4.41c 3.89c 11.83a
c
H5: Ps will rely on centralization more than Ds. Centralization 2.47 3.01c 24.88a
a
Significant at a level of .01.
b
Means of behavioral mechanisms.
c
Means of structural mechanisms.
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1998;15:505–519

Table 3. Hypothesis Testing Results: H6 –H8 Conflict Handling Mechanisms, Constructive Conflict, and NPD
Success

Hypothesis Construct Correlation Probability


H6: A positive association will be found between integrating Integrating/constructive
conflict handling behaviors and constructive conflict. conflict .54 .0001
H7: A negative association will be found between forcing Forcing/constructive conflict 2.35 .0001
conflict behaviors and constructive conflict.
H7: A negative association will be found between avoiding Avoiding/constructive 2.28 .0001
conflict behaviors and constructive conflict. conflict
H8: A positive association will be found between Constructive/cross-functional .53 .0001
constructive conflict and new product development success
success.
H8: A positive association wil be found between Constructive conflict/market .26 .0001
constructive conflict and new product development success
success.

compare these findings, however, to those of the varies with context beyond the difference of strategic
Ruekert and Walker [44] study because their Proposi- type. The finding may be unique to the electronic
tion 4 linked avoidance and integrative behaviors. industries, for example, heavily impacted by an indus-
Because these constructs differ diametrically, as try characteristic such as environmental volatility.
shown by Rahim [42] and by factor analysis in this This can only be settled by further research.
study, the results of Ruekert and Walker’s Proposition Performance. The data support all of the outcome
4 are uninterpretable. This study, then, provides a new hypotheses (H6, H7, and H8). Integrating behaviors
data point. were found to have a strong, positive correlation with
Structural conflict handling. The results on struc- constructive conflict (p , .01, .54), substantiating
tural forms of conflict management were mixed. Ruekert and Walker’s [44] results. Forcing was found
While Hypothesis 4 is supported, the data did not to have a negative correlation with constructive con-
support Hypothesis 5. Prospector firms do perceive flict (p , .01, 2.35), and avoiding was found to have
higher use of formalized organization structure than a negative correlation with constructive conflict (p ,
defender firms (p , .01, 4.41 for Ps and 3.89 for Ds). .01, 2.28). Constructive conflict was found to have a
However, counter to the stated hypothesis, defenders strong, positive correlation with cross-functional rela-
exhibit a higher level of centralization than prospec- tionship success (p , .01, .53). Constructive conflict
tors (p , .01, 3.01 for Ds and 2.47 for Ps). The was also found to have a positive correlation with
Ruekert and Walker [44] study predicted higher for- NPD business success (p , .01, .26). The data show
malization in defenders, but found the differences be- that the association of conflict handling behaviors with
tween strategic types practically nil, with the results constructive conflict within firms is strong. In the
not significant. Song and Dyer’s [45] results on for- interest of comparison to prior studies, we have pro-
malization, based on a Japanese sample, support the vided the means by strategic type for the business
results found in this study. performance variable in Table 4. As will be noted, the
When Ruekert and Walker [44] proposed that de- means of the prospectors are higher than the means of
fenders would use centralization more than prospec- the defenders.
tors as a conflict handling mechanism, their finding
was statistically significant, but with the means re-
versed—that is, prospectors used centralization more
Table 4. Business Performance Results by Strategic
than defenders. Dyer and Song [14] found the same,
Type
concluding that the higher complexity of prospector
NPD demands multiple methods of conflict manage- Performance Variable Prospector (m) Defender (m)
ment. Thus, given the extant findings on this construct Quality of cross-functional
in the NPD conflict literature, the results for Hypoth- relationships 5.12 4.15a
esis 5 are surprising. Certainly, it appears that the use Business performance 4.78 3.97a
of centralization as a conflict handling mechanism a
Prospector and defender means significantly different at a 5 .05.
514 J PROD INNOV MANAG B. DYER AND X.M. SONG
1998;15:505–519

Discussion ent thoughts and ways of doing things, the creative


process in these firms may suffer irrevocable damage.
Implications An NPD manager in a defender firm, on the other
hand, based on Miles and Snow [33] and this study,
Although managers today understand that the firm’s will likely find a baseline including high use of forcing
strategy molds an NPD approach, few consider that and avoiding conflict handling behaviors, a relatively
strategy may also mold a conflict handling climate that low number of conflicts, a relatively high level of
affects new product success. Two decades ago, Souder perceived conflict, high centralization, and less fre-
[47– 49] began a series of important studies dealing quent cross-functional interaction involving verbal
with the effect of general conflict, or disharmony, on communication and written communication. On the
the NPD process. A decade ago, Ruekert and Walker positive side, these less aggressive new product devel-
[44] investigated the relationship between strategy and opers need fewer conflict handling mechanisms and
specific conflict mechanisms in the NPD process using have efficient mechanisms built into their firm struc-
three divisions of a single Fortune 500 company. ture [33]. On the negative side, based on our results,
Ruekert and Walker [44] predicated their hypotheses centralization, forcing, and avoiding have negative
upon the strategic descriptions developed by Miles and associations with constructive conflict. Because con-
Snow [33]. Since that time, little has been done in the structive conflict has a positive association with per-
NPD area to verify or challenge earlier findings, de- formance, although forcing and avoiding may be ap-
spite the importance of the strategy/conflict link to propriate behaviors in other decision areas of the firm,
successful innovation [5,18]. This study provides im- these behaviors may not be appropriate in all instances
portant data that represents 290 new product managers in the inherently cross-functional atmosphere of NPD.
across the U.S. electronics industries and ties the strat- Managers raised in the school of scientific manage-
egy/conflict relationship to new product performance. ment may never have considered that “forcing
Our results suggest that strategy is associated with through” solutions can lead to negative results in terms
the conflict handling mechanisms used by the firm, of conflict handling and new product success. They
providing an opportunity for managers to generate a often see their actions as “getting things done.” Yet,
baseline for understanding those mechanisms. As in- the use of force (which is frequently sanctioned) may
dicated by our findings and in some instances on Miles have a very negative impact on new product success.
and Snow’s [33], an NPD manager in a prospector Another concern for some firms may be the desire
to change their innovation strategy from defender to
firm, for example, will likely find a baseline that
prospector. Miles and Snow [33] suggest that either
includes high use of integrative conflict handling be-
strategy can be successful if the firm remains consis-
haviors, a relatively high number of complex conflicts,
tent in carrying out the correct engineering and admin-
a relatively low level of perceived conflict, high for-
istrative support. While both prospectors and defend-
malization, and personnel that exchange verbal and
ers may be successful, our results show that
written communication frequently. This suggests that prospectors perceive higher levels of both the quality
managers in prospector firms should go with their of cross-functional relationships and new product suc-
firms’ strengths in integrative behaviors and in formal- cess. Furthermore, our results indicate that strategy
ization, because these are strongly associated with changes would likely be associated with changes in the
constructive outcomes and, therefore, with new prod- ways firms handle their disagreements. Our under-
uct success. However, because formalization may not standing of empirical findings in this area of research,
be a mandated part of organization structure for these however, depends on some basic underlying assump-
firms [33], new product managers may want to make tions. Miles and Snow [33] conceptualize innovation
special efforts to ensure effective formalized rules and strategy from a quantitative perspective, that is, num-
communications within the NPD process. Also, al- bers of new product projects and numbers of markets.
though prospector firms frequently interact, managers The conflict handling approaches described in the
still must work to assure the quality of those interac- typology support those goals. The relationships among
tions. While a prospector strategy appears to encour- innovation strategy, conflict handling, and the quality
age good conflict management habits, prospector of new product efforts and outcomes needs to be more
firms must never forget that they also have greater fully explored. If the relationships differ based on
need and greater risk. Without open forums for differ- changed assumptions, then managers might have to
INNOVATION STRATEGY AND SANCTIONED CONFLICT J PROD INNOV MANAG 515
1998;15:505–519

make tradeoffs in their conflict handling methods, influence the handling of conflict within firms. Future
depending on whether the amount or the quality of researchers might want to pursue the points on which
innovation matter more to the firm. Ruekert and Walker’s [44] study and this one diverge.
Finally, this study suggests that a constructive con- There is more to learn, also, about the factors leading
flict goal provides a necessary frame of reference to to constructive conflict, the causes of conflict situa-
help managers move away from a negative view of tions, the issue of conflict history, the consistency of
conflict. Managers may need to promote a planned conflict handling approaches, and the cognitive frames
sanctioning of certain types of conflict and of certain brought to conflict situations. Fine research could be
conflict handling mechanisms to promote positive out- done in the area of conflict and speed to market. A key
comes for cross-functional relationships and NPD suc- goal for conflict researchers might also be the devel-
cess. In a business world buffeted by uncontrollable, opment of an empirically valid instrument to measure
changing conditions, conflict management represents the constructive conflict climate of the NPD process.
a controllable factor that should be viewed as a pro- Such an instrument could establish a quick and accu-
active tool. Thus, managers using appropriate conflict rate baseline, as well as appropriate goals, for organi-
handling approaches may gain constructive conflict zations desiring to implement sanctioned conflict
outcomes resulting in improved new product success training to improve their NPD process. Research on
and an important edge in innovation [38]. market orientation has briefly touched on the issue of
conflict, indicating a need in that area to expand our
Limitations understanding of the relationship among market ori-
entation, conflict, and performance. Finally, as busi-
The limitations of our research should be weighed ness goes global, researchers will need to explore
when interpreting its results. The study does not pre- cross-cultural conflict issues to help firms maximize
tend to address all of the pertinent questions about the their innovation efforts in the increasingly diverse and,
influence of innovation strategy on conflict manage- consequently, highly conflictful work environment of
ment issues. It focuses only on the question of strate- the future.
gy’s association with the firm’s behavioral and struc-
tural conflict handling mechanisms and their
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INNOVATION STRATEGY AND SANCTIONED CONFLICT J PROD INNOV MANAG 517
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Appendix A. Measurement Items and Measurement Validation Using LISREL

Item Construct Loadings T-Test Source


Conflict Level: (Reliability 5 .87)
When R&D and Marketing Work Together . . .
There is little or no interdepartmental conflict.* .87 9.82 [23]
The objectives pursued by the marketing department are incompatible with
those of the R&D department. .67 8.79 [23]
We get along well with each other.* .39 4.49 [23]
People in one department generally dislike interacting with those from the
other department. .32 3.54 [23]
Employees from the two departments feel that the goals of their respective
departments are in harmony with each other.* .86 9.66 [23]
People conflict on how to proceed on tasks. .84 11.69 [44]
People differ on basic goals the two areas should pursue. .67 7.63 [44]
People differ on the best way to accomplish new product goals. .59 7.51 [44]
Employees agree on which tasks are urgent.* .63 7.70 [44]
People conflict over how they should carry out their work. .74 7.86 [44]
Employees from the two departments share the same values.* .92 11.21 Focus group
People in the two areas rate the importance of decisions in the same way.* .52 6.20 Focus group
Integrating Behavior: (Reliability 5 .91)
When Conflicts Arise Between R&D and Marketing, Generally We . . .
Try to bring all issues into the open in order to resolve them in the best way. .72 8.84 [42]
Encourage others to express their feelings and views fully. .64 8.35 [42]
Try to investigate an issue in order to find a solution agreeable to us both. .43 6.02 [42]
Work hard to thoroughly, jointly learn about the issues. .60 7.84 [42]
Exchange complete and accurate information in order to help solve problems. .57 7.69 [42]
Openly share concerns and issues. .58 8.65 [42]
Stress the importance of “give and take.” .71 8.69 [42]
Look for middle ground to resolve disagreements. .63 9.15 [42]
Negotiate to achieve goals. .54 8.42 [42]
Arrive at compromises that both areas can accept. .70 11.13 [42]
Propose compromises in order to end deadlocks. .52 8.43 [42]
Go the “extra mile” to get along with each other. .55 7.86 [42]
Try to meet each others’ schedules whenever we can. .30 3.87 [42]
Avoiding Behavior: (Reliability 5 .84)
When Conflicts Arise Between R&D and Marketing, Generally We . . .
Try to keep differences of opinion quiet. .66 7.87 [42]
Avoid openly discussing disputed issues. .78 9.36 [42]
Try not to get mixed up in conflict. .49 5.47 [42]
Believe it is better to keep feelings to ourselves rather than create hard
feelings. .79 8.73 [42]
Try to smooth over conflicts by trying to ignore them. .78 9.74 [42]
Look for ways to bypass unpleasant exchanges. .60 6.86 [42]
Avoid being put “on the spot” by keeping conflict to ourselves. .62 8.50 [42]
Try to stay away from disagreements. .60 7.59 [42]
Forcing Behavior: (Reliability 5 .81)
When Conflicts Arise Between R&D and Marketing, Generally We . . .
Try to put a single area’s needs first. .60 6.30 [42]
Stick to initial positions to get each other to compromise. .74 9.08 [42]
Tenaciously argue the merit of initial positions when disagreements occur. .80 9.14 [42]
Want the other to make concessions, but don’t want to make concessions
ourselves. .87 11.07 [42]
Look for faults in each other’s initial positions. .27 3.07 [42]
Treat issues in conflict as a win–lose contest. .63 8.04 [42]
Enjoy winning an argument. .18 1.96 [42]
Overstate our needs and positions in order to get our way. .39 4.59 [42]
Are firm in purusing one side of an issue. .29 3.99 [42]
518 J PROD INNOV MANAG B. DYER AND X.M. SONG
1998;15:505–519

Appendix A. (continued)

Item Construct Loadings T-Test Source


Formalization: (Reliability 5 .77)
Written procedures and guidelines are available for most work situations. 1.15 10.73 [20]
Formal communication channels have been established. .96 10.34 [20]
Written documents, such as budgets, plans, and schedules, are an integral
part of the job. .83 8.34 [20]
Performance appraisals in our organization are based on written performance
standards. .48 4.32 [20]
Duties, authority, and accountability of personnel are documented in policies,
procedures, or job descriptions. .87 8.58 [20]
Centralization: (Reliability 5 .90)
Any decision I make has to have my boss’ approval. 1.04 12.09 [20]
There is little action taken here until a supervisor approves a decision. 1.14 12.89 [20]
Even small matters have to be referred to someone higher up for a final
answer. 1.15 13.80 [20]
A person who wants to make his own decision would be quickly discouraged
here. .99 12.69 [20]
I have to ask my boss before I do almost anything. 1.05 14.81 [20]
Constructive Conflict: (Reliability 5 .80)
When R&D and Marketing Work Together, Generally We . . .
See constructive changes occur on projects because of conflicts. .62 8.03 [5]
Know each other better because of the way conflicts are handled. .75 10.91 [5]
Are more sensitive to one another because of the way that conflicts are
handled. .86 11.22 [5]
Feel energized and ready to get down to work after a conflict. .66 7.67 [5]
Feel hostile toward each other after a conflict.* .42 5.01 [5]
Quality of Cross-Functional Relationships: (Reliability 5 .94)
In General . . .
We feel very satisfied in our work with each other. .73 10.51 [5]
We feel a strong commitment to working with each other on new product
development. .74 11.56 [5]
We have a high degree of trust in each other. .78 10.84 [5]
The way we work together inspires all of us to better job performance. .72 11.11 [5]
We feel highly committed to joint work with each other on new product
development. .76 11.76 [5]
All things considered, we feel highly pleased with the way in which we
work together on new product development. .99 14.24 [5]
Business Performance: (Reliability5 .85)
Overall, our company is one of the most successful in the industry. 1.21 13.50 [46]
Our overall performance of our new product program has met our objectives. 1.07 13.17 [46]
From an overall profitability standpoint, our new product development
program has been successful. .89 10.49 [46]
Compared to our major competitors, our overall new product program is far
more successful. 1.28 15.35 [46]
Compared to our major competitors, our new product development cycle
time has been relatively less. .76 8.17 [46]
Our product-line breadths are much broader than those of our competitors. .86 8.24 [46]
The overall price of our new products is higher than that of our competitors. .57 7.17 [46]
The timing of our product introduction is good. .69 8.40 [46]
Our company has relatively high market shares. 1.03 10.36 [46]
Our new product development costs generally stay within our budgeted costs. .59 6.48 [46]
Overall Fit Indices:
Normed Fit Index (NFI): .96
Non-Normed Fit Index (NNFI): .99
Comparative Fit Index (CFI): .99
Incremental Fit Index (IFI): .99
Relative Fit Index (RFI): .96
*Item reverse scored.
INNOVATION STRATEGY AND SANCTIONED CONFLICT J PROD INNOV MANAG 519
1998;15:505–519

Appendix B. Strategy Measurement Items


In this section, we are interested in perceptions of firm strategy. The following statements describe how a firm
might strategically approach new product development. To what extent do you disagree or agree with the
following statements in reference to your firm? (Here: 1 5 “strongly disagree” and 7 5 “strongly agree”; and
numbers between 1 and 7 indicate various degrees of agreement or disagreement).

Item Construct Loadings T-Test Source


Strategic Type: (Reliability: .88)
In comparison to our competitors, the products we provide our customers are more innovative
and continually changing. 1.07 13.08 [12]
In contrast to our competitors, my organization has an image in the marketplace as a firm
with a reputation for being innovative and creative. 1.05 12.12 [12]
My firm spends significant amounts of time continuously monitoring the marketplace for
changes and trends. 1.03 10.78 [12]
In comparison to our competitors, the increases or losses in demand which we have
experienced are due most probably to our practice of aggressively entering new markets
with new types of products. .92 9.80 [12]
One of this firm’s key goals relative to its competitors is availability of the people, resources,
and equipment required to develop new products and markets. .89 9.92 [12]
In contrast to our competitors, our managerial employees exhibit competencies (skills) that
are broad, entrepreneurial, diverse, and flexible—enabling change to be created. 1.06 11.83 [12]
The one thing that protects my organization from its competitors is that we are able to
consistently develop new products and new markets. 1.22 15.49 [12]
Our management staff concentrates on developing new products, new markets, and new
market segments more than many of our competitors. 1.30 16.07 [12]
In contrast to many competitors, my organization identifies marketplace trends and
opportunities that can result in product offerings new to the industry or able to reach new
markets. 1.04 12.21 [12]
In comparison to our competitors, the structure of my organization is product or market
oriented. .88 10.64 [12]
Unlike our competitors, our company procedures to evaluate performance are decentralized
and participatory, encouraging many company members to be involved. .63 6.71 [12]
Overall Fit Indices:
Normed Fit Index (NFI): .95
Non-Normed Fit Index (NNFI): .97
Comparative Fit Index (CFI): .97
Incremental Fit Index (IFI): .97
Relative Fit Index (RFI): .94