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Navigating the purchasing power gap in new product development in multinational corporations

Navigating the purchasing power gap in new product development in multinational corporations
Navigating the purchasing power gap in new product development in multinational corporations
Multinational corporations (MNCs) face a significant purchasing power gap of customers between developed and emerging economies. In R&D intensive industries making physical products, MNCs can benefit from economies of scale. Therefore, managers strive to achieve a product standardization–adaptation (S-A) balance when navigating the purchasing power gap. Through focusing on five MNCs headquartered in developed countries, I examined how MNCs can achieve such a balance through new product development (NPD). I found that (1) an S-A balance can be achieved through three NPD strategies (product simplification, product retaining, and reverse innovation); (2) managers need to take into account five key factors when choosing NPD strategies (product complexity, product modularity, brand strategy, position in local competition, and internal technical standards); and (3) the NPD strategies can be implemented through structural separation, temporal separation, and a shared value. This research reveals the complexity of achieving an S-A balance when managers navigate the purchasing power gap in NPD. Different NPD strategies have certain advantages and shortcomings. High product complexity and product modularity can serve as favorable conditions for a product simplification strategy. A brand strategy of leading-edge technologies can serve as an adverse condition for a product retaining strategy. Strong local competitors in emerging markets can be a motivation for a reverse innovation strategy, while stringent internal standards for safety can be an adverse condition. This research also reveals the nuances of implementation of NPD strategies in terms of managing innovation and refinement activities. MNCs may need temporal separation when adopting both downhill and uphill NPD strategies.
0033-6807
819-834
Liu, Yang
77b48647-5646-4aec-8c3d-cc9d9bd02f4e
Liu, Yang
77b48647-5646-4aec-8c3d-cc9d9bd02f4e

Liu, Yang (2019) Navigating the purchasing power gap in new product development in multinational corporations. R&D Management, 49 (5), 819-834. (doi:10.1111/radm.12384).

Record type: Article

Abstract

Multinational corporations (MNCs) face a significant purchasing power gap of customers between developed and emerging economies. In R&D intensive industries making physical products, MNCs can benefit from economies of scale. Therefore, managers strive to achieve a product standardization–adaptation (S-A) balance when navigating the purchasing power gap. Through focusing on five MNCs headquartered in developed countries, I examined how MNCs can achieve such a balance through new product development (NPD). I found that (1) an S-A balance can be achieved through three NPD strategies (product simplification, product retaining, and reverse innovation); (2) managers need to take into account five key factors when choosing NPD strategies (product complexity, product modularity, brand strategy, position in local competition, and internal technical standards); and (3) the NPD strategies can be implemented through structural separation, temporal separation, and a shared value. This research reveals the complexity of achieving an S-A balance when managers navigate the purchasing power gap in NPD. Different NPD strategies have certain advantages and shortcomings. High product complexity and product modularity can serve as favorable conditions for a product simplification strategy. A brand strategy of leading-edge technologies can serve as an adverse condition for a product retaining strategy. Strong local competitors in emerging markets can be a motivation for a reverse innovation strategy, while stringent internal standards for safety can be an adverse condition. This research also reveals the nuances of implementation of NPD strategies in terms of managing innovation and refinement activities. MNCs may need temporal separation when adopting both downhill and uphill NPD strategies.

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Accepted/In Press date: 30 June 2019
e-pub ahead of print date: 8 July 2019
Published date: 22 October 2019

Identifiers

Local EPrints ID: 455872
URI: http://eprints.soton.ac.uk/id/eprint/455872
ISSN: 0033-6807
PURE UUID: 1531885c-2e9b-4279-978c-3367b32260b4
ORCID for Yang Liu: ORCID iD orcid.org/0000-0002-9540-9719

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Date deposited: 07 Apr 2022 16:37
Last modified: 08 Apr 2022 04:01

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