Leadership Styles and Strategy on Co-development Post the author(s) and title of the article on leadership style(s) that you found interesting. Provide a p

Leadership Styles and Strategy on Co-development Post the author(s) and title of the article on leadership style(s) that you found interesting. Provide a paraphrased summary, in your own words, of what the article says about leadership style(s), why you chose it, and what you learned from it, relative to what you have studied this week and throughout the course to date about leadership in business settings.Article attached. J PROD INNOV MANAG 2017;34(2):201–222
C 2016 Product Development & Management Association
V
DOI: 10.1111/jpim.12332
How Do Strategy and Leadership Styles Jointly Affect
Co-development and Its Innovation Outcomes?*
Ruth Maria Stock, Nicolas A. Zacharias, and Armin Schnellbaecher
Co-development with customers attracts considerable interest as a means to improve companies’ product innovativeness and performance. Forward-thinking companies integrate co-development within their business models,
but many remain uncertain about which levers best foster its implementation. This study therefore takes a topdown perspective on ways to stimulate co-development with customers. Relying on boundary theory and its wider
contextualization in relation to resource dependence theory, the authors argue that an innovation-oriented strategy, combined with transformational and transactional leadership, represents senior management levers for driving
general openness and providing strategic directions for innovation, which then helps bridge the boundary with
customers and facilitate the co-development of new products. Data from 135 managers and 415 subordinates
reveal that some senior management levers can foster co-development. Specifically, the results of the hierarchical
regression analyses confirm the hypothesized positive interaction effect of innovation-oriented strategy and transformational leadership, whereas the combination of innovation-oriented strategy and transactional leadership is
not beneficial. The strength of innovation-oriented strategy as an important senior management lever differs for
goods and services, which is not the case for the other two levers. Finally, this study provides a more finegrained perspective on the new product frequency outcomes of co-development, by relying on organizational
learning theory. Most research is restricted to linear relationships, but the current investigation unveils an
inverted U-shaped relationship between co-development and companies’ new product frequency. Hence, companies can profit from co-development at lower and medium levels, but the common notion of “the more, the better”
does not apply to an unlimited degree for co-development.
Practitioner Points
Senior managers should implement an innovationoriented strategy to provide guidance regarding the
company’s innovation generation goals in codevelopment projects.
Companies need to support organizational members
with adequate freedom and flexibility in terms of
co-development projects, instead of focusing on
fixed goals, expectations, or rewards.
If they offer services in particular, companies should
initiate appropriate training and coaching for senior
managers, to help them better motivate and lead
organizational members with a transformational
leadership style.
Address correspondence to: Ruth Maria Stock, Technische Universit€at Darmstadt, Hochschulstraße 1, 64289 Darmstadt, Germany.
E-mail: rsh@stock-homburg.de
*The authors express gratitude for financial support from the
F€orderverein f€ur Marktorientierte Unternehmensf€
uhrung, Marketing und
Personalmanagement e.V (Association of Supporters of Market-Oriented
Management, Marketing, and Human Resource Management). They
also thank Sebastian Dreher, Ines Reiferscheid, and Florian Totzauer for
their helpful comments on previous drafts of this article.
Co-development can be fostered by senior managers
from the top but also should be tracked, using management tools and key performance indicators, to
recognize negative efficiency trends as early as
possible.
Introduction
C
o-development with customers to generate
new goods and services has become a strategic topic on virtually every company’s agenda (Matthing, Sanden, and Edvardsson, 2004; Payne,
Storbacka, and Frow, 2008; Prahalad and Ramaswamy,
2000), because it can contribute to better product–market fit and increase the chances of product success in
the market (Gruner and Homburg, 2000; Neale and
Corkindale, 1998). Furthermore, co-development—or
the joint development of new products with customers
through interaction and participation at various stages
of the new product development process (Athaide,
Stump, and Joshi, 2003; Carbonell, RodrıguezEscudero, and Pujari, 2009; Hsieh and Chen, 2005)—
can shorten new product development cycles and
increase the speed to market, which eventually benefits
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2017;34(2):201–222
downstream variables, such as company performance
(Lau, Tang, and Yam, 2010; Sherman, Souder, and
Jenssen, 2000). Forward-thinking companies thus integrate co-development into their business models.
When Millennium Pharmaceuticals was founded, for
example, senior management chose to focus solely on
the early stages of drug development and foster partnerships with larger customer companies (e.g., Pfizer,
Merck) to handle clinical trials and commercialization.
As it grew, Millennium Pharmaceuticals’ strategic evolution enabled it to leverage these co-development
relationships in other parts of its operations (Chesbrough and Schwartz, 2007).
Despite the strategic relevance of co-development
for practitioners, many companies remain uncertain
about which levers can best foster its implementation.
Extant research provides valuable insights into ways to
organize successful co-development with customers
(e.g., Athaide et al., 2003; Carbonell et al., 2009;
Hoyer, Chandy, Dorotic, Krafft, and Singh, 2010), but
suggestions for fostering co-development from the top
are rare. This gap is surprising, considering the vast
number of studies that highlight the important influence of senior managers on companies’ innovativeness
(e.g., Galasso and Simcoe, 2011; Yadav, Prahbu, and
Chandy, 2007) and performance (e.g., Bertrand and
BIOGRAPHICAL SKETCHES
Dr. Ruth Maria Stock is a Professor of Marketing and Human Resource
Management at Technische Universit€at Darmstadt, Germany. She is
visiting scholar at the Sloan Business School at MIT Boston and founder of the Future Innovation Lab, Darmstadt. She has published in various forums including Journal of the Academy of Marketing Science,
Research Policy, Journal of Product Innovation Management, and Psychology & Marketing. Her primary research areas are innovation management, customer relationship marketing, and future of work.
Dr. Nicolas A. Zacharias is an assistant professor at the Department of
Innovation and Entrepreneurial Marketing at Technische Universit€at
Darmstadt, Germany. He holds a master’s degree in business administration with mechanical engineering and a Ph.D. in marketing from the
same institution. He has published in various journals in the areas of
marketing and innovation management including Journal of the Academy of Marketing Science, Journal of Product Innovation Management, International Journal of Research in Marketing, and Journal of
Business Research. His primary research interests are strategic technology and innovation management, innovation and entrepreneurial
marketing, and open innovation.
Mr. Armin Schnellbaecher is a doctoral candidate in the Department
of Marketing and Human Resource Management at Technische Universit€at Darmstadt, Germany. He received his master’s degree in business administration with mechanical engineering from the Technische
Universit€at Darmstadt, Germany. His research focuses on innovation
management, and in particular the innovation generation in businessto-business relationships.
R. M. STOCK ET AL.
Schoar, 2003; Iaquinto and Fredrickson, 1997).
Although some studies note the influence of senior
managers’ leadership styles on innovation (e.g., Elenkov and Manev, 2005; Osborn and Marion, 2009), to
the best of the authors’ knowledge, no investigations
address how senior managers might strategically support co-development. Yet strategy and leadership both
drive innovation in general (Jung, Chow, and Wu,
2003; Yadav et al., 2007). By combining these concepts, the current study contributes to a deeper understanding of how companies can drive co-development
from the top. Specifically, it addresses the following
research question: How does the interplay of strategy
and leadership styles of senior managers relate to codevelopment?
This study also includes the outcomes of codevelopment for new product frequency, which refers
to the rate of introduction of new products (e.g.,
Katila, 2002; Stock and Zacharias, 2011). On the one
hand, co-development can generate multiple benefits
for companies, such as increased knowledge about customer needs (Fang, 2008; Narver, Slater, and MacLachlan, 2004), heightened efficiency (Hoyer et al.,
2010; Payne et al., 2008), and improved innovation
speed (Carbonell et al., 2009). Therefore, companies
can introduce innovative products more frequently. On
the other hand, companies confront increasing volumes
of customer information when they engage in more
co-development (Hoyer et al., 2010), which may
decrease the speed of innovation and thus new product
frequency. These arguments indicate that a simple logic, such as “the more co-development, the better or
worse,” is insufficient, and a nonlinear influence of codevelopment might exist. Thus, the second research
question asks: How is co-development related to new
product frequency?
Extant research emphasizes significant differences
between goods and services, which may influence codevelopment processes too (e.g., Nijssen, Hillebrand,
Vermeulen, and Kemp, 2006; Stock, 2011). Due to the
unique characteristics of services—intangibility, inseparability, heterogeneity, and perishability (Lovelock
and Gummesson, 2004)—their development process
tends to be less formalized or standardized and thus
requires more intensive information exchanges than
the development process for goods (Ettlie and Rosenthal, 2011). The effectiveness of senior management
levers may vary, depending on whether they are
applied to the co-development of goods or services.
Therefore, the third question this study seeks to answer
is: Are strategy and leadership styles differentially
SENIOR MANAGEMENT LEVERS AND CO-DEVELOPMENT
associated with the co-development of goods and
services?
In addressing these research questions, this study
offers multiple contributions for research and managerial practice. First, it takes a top-down perspective on
the senior management levers of co-development.
Relying on boundary theory (Aldrich and Herker,
1977) and its wider contextualization in relation to
resource dependence theory (Pfeffer and Salancik,
1978), this study investigates how senior management
levers foster co-development. An innovation-oriented
strategy, as “the degree to which a company’s strategy
focuses on driving innovativeness” (Stock and Zacharias, 2011, p. 873), provides guidance for appropriate
company behavior (Gatignon and Xuereb, 1997). In
addition, senior managers might open their companies
by providing transformational leadership, which
involves intellectual stimulation, individualized consideration, and charisma (Bass, Avolio, Jung, and Berson,
2003; Howell and Avolio, 1993), or transactional leadership, which represents the extent to which senior
managers clarify what they expect from employees
(Jansen, Vera, and Crossan, 2009; Vaccaro, Jansen,
Van Den Bosch, and Volberda, 2012). By investigating
these senior management levers and their interactions,
this article enriches the co-development field with
knowledge about these largely neglected antecedents.
Second, this study provides a richer understanding
of the new product frequency outcomes of codevelopment and sheds light on the underlying mechanism for the nonlinear relationship between codevelopment and the frequency of new product introductions. New product frequency is a particularly valuable measure in this context, because it augments the
scientific discourse with a portfolio perspective on
innovative products. In line with organizational learning theory (Levitt and March, 1988; March, 1991),
new knowledge and the difficulty of disseminating this
knowledge, by transforming it into new product development projects, results in a nonlinear impact of codevelopment.
Third, goods or services provide contingency factors that can alter the effects of senior management
levers on co-development. The results reveal that the
association of an innovation-oriented strategy with codevelopment is weaker in a service compared with a
goods context. The related implications may be particularly useful for managerial practice, because across
industries, companies constantly face pressures to
develop new goods and services (Ali, Krapfel, and
LaBahn, 1995; Atuahene-Gima, 1996).
J PROD INNOV MANAG
2017;34(2):201–222
203
Conceptual Background
Resource Dependence Theory
This study relies on resource dependence theory
(Pfeffer and Salancik, 1978), according to which
“organizations are not able to internally generate . . .
all the resources or functions required to maintain
themselves” (Aldrich and Pfeffer, 1976, p. 83). Rather,
companies are open systems that depend on their environments to acquire important resources for their value
creation process, such as through customers (Pfeffer
and Salancik, 1978). A common approach companies
use to handle external dependence is to establish cooperative relationships with resource owners (i.e., customers), which helps reduce their dependence and
increase their effectiveness and performance (Eggert,
Ulaga, and Hollmann, 2009). Gruner and Homburg
(2000) refer to such cooperative relationships as
“bridging strategies.” Hillman, Withers, and Collins
(2009) point out that the boundary conditions of
resource dependence theory have been poorly examined. Co-development may represent a particularly
important boundary condition for companies to bridge
with customers, because with co-development, “the
customer may also become active and cross the boundary into the provider sphere” (Gr€onroos and Voima,
2013, p. 141). Co-development helps ensure resource
and information flows between partners, and it shifts
tasks that were formerly conducted by suppliers to
customers (Athaide and Klink, 2009; O’Hern and
Rindfleisch, 2010).
Valuable insights (e.g., exchange norms, information processing, external representation for resource
acquisition, adaption to influential environmental contingencies, and constraints) about how to bridge the
boundary between suppliers and their customers come
from boundary theory (Aldrich and Herker, 1977),
which thus appears in prior research (e.g., Friedman
and Podolny, 1992; Santos and Eisenhardt, 2005;
Stock, 2006). Boundary theory suggests companies
and organizational members should maintain interfaces
with their suppliers, to obtain resource inputs from
customers, such as information about their needs, ideas
for new products, or support during the new product
development process (Lau et al., 2010; Lysonski,
1985; Tushman, 1977). According to resource dependence theory in general and boundary theory in particular, proactively involving customers in new product
development through co-development is an important
activity for companies (Fang, 2008; Lau et al., 2010),
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enabling them to interact with customers beyond the
scope of basic market research (Carbonell et al., 2009;
Hsieh and Chen, 2005). Boundary theory also identifies various factors that make it easier for companies
to open themselves to co-development; strategy and
leadership likely are important levers that support
boundary roles (de Jong, de Ruyter, and Lemmink,
2004; Miller, 1987).
Strategy provides insights into the company’s
objectives, which can be broken down to a specific
boundary condition (Aldrich and Herker, 1977). Leadership displayed by managers may provide openness in
accordance with the company’s overall goals, such as
by guiding the organization to respond adequately to
environmental requirements (Jemison, 1984; Osborn
and Marion, 2009). In the current study context, strategy and leadership should create the organizational
openness required to bridge the boundary to customers
during co-development. These levers represent guidance from the top (Jemison, 1984; Osborn and Marion,
2009), supporting the company’s openness to new perspectives and ideas from the customer (instead of
exclusively internal insights; Emden, Calantone, and
Droge, 2006). Finally, strategy and leadership help
deal with the multiple interests of the involved parties
and constructively solve any conflicts.
Study Framework
The proposed conceptual framework links three important senior management levers—innovation-oriented
strategy, transformational leadership, and transactional
leadership—and their interactions to co-development,
which in turn are associated with new product frequency (see Figure 1). A company’s long-term direction,
with regard to its innovations, provides the general
openness needed to bridge the boundary to customers
through co-development. These long-term strategic
goals constitute an innovation-oriented strategy. Companies following such a strategy focus on driving innovation generation and being first in new markets with
their products (Miles, Snow, Meyer, and Coleman,
1978; Stock and Zacharias, 2011). This innovationoriented strategy supports the generation of innovations through active searches for new opportunities
and continuous creations of new products (Gatignon
and Xuereb, 1997). Hence, highly innovation-oriented
companies may be more likely to co-develop with
their customers to gain insights into their needs and
ideas and generate new products frequently.
R. M. STOCK ET AL.
By providing guidance from the top through leadership, companies also can open themselves to new
insights, environmental requirements, perspectives,
overall goals, and ideas from the customer, instead of
exclusively considering internal insights (Emden et al.,
2006; Jemison, 1984; Osborn and Marion, 2009).
Senior managers’ transformational leadership style
may provide openness by expressing their vision,
allowing individual development, and leveraging subordinates’ motivation to develop promising new innovative products creatively with customers, in an
environment of multiple (sometimes contradictory)
interests (Bass et al., 2003; Boerner, Eisenbeiss, and
Griesser, 2007; Fang 2008; Howell and Avolio, 1993;
Pieterse, Van Knippenberg, Schippers, and Stam,
2009; Stock, 2006). Thus, senior managers’ transformational leadership style can stimulate subordinates’
openness to idea generation, performance beyond
expectations, independent thinking, and willingness to
take on more responsibility (Bass, 1990; Boerner
et al., 2007), which should support co-development.
In addition, openness can stem from senior managers’ transactional leadership (Jansen et al., 2009; Vaccaro et al., 2012), in which they promote an open,
feedback-based relationship by clearly expressing
expectations, setting goals, and clarifying the link
between performance and rewards (Bass, 1990; Bass
et al., 2003; Jansen et al., 2009). Senior managers providing transactional leadership constantly monitor
organizational members’ actions, to anticipate mistakes
before they arise and take corrective actions when
required (Howell and Avolio, 1993). They also do not
hesitate to punish organizational members for deviating from those standards or missing performance targets (Bass et al., 2003). Senior managers providing
transactional leadership thus convey a clear understanding of what is expected of organizational members during co-development with customers, such that
transactional leadership may represent a lever to
emphasize companies’ openness and provide direction
in co-development projects.
In the next stage of the framework, co-development
connects with new product frequency, defined as the
rate of introduction of new products (e.g., Katila,
2002; Stock and Zacharias, 2011). The choice of this
depen…
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