The Study of R&D Management on New Product Development Performance in Taiwan’s Hi-Tech Industries

Due to the progress in manufacturing technology, rapid changing business environment, and shorter product life cycle, hi-tech industries must place greater effort in increasing their R&D technologies to meet customer demands and achieve new product development performance. This research examines Taiwan’s hi-tech companies by conducting a series of R&D management activities. The influences of these activities on new product achievement is determined and analyzed. Two intermediate variables for corporate status and R&D tendency are considered in discussing the relationship between R&D management and new product development. The former belongs to the influence factor for exterior strategy, while the latter is related to interior organization. Since Taiwan’s hi-tech industries has gradually entered the age in which core technologies and R&D competence are starting to determine a business’s competitive advantages, this study will focus on R&D management for hi-tech industries, which is very meaningful both academically and practically. Some of this research findings are: (1) New product development performance is significant when R&D management ability is stronger; (2) New product development performance is significant when R&D tendency is higher; (3) Enterprise scale is not a key factor for new product development; (4) New product development performance is significant when technology status is superior.

R&D management plays a vital role in a corporation’s growth and development. In the past literature research on the success factors of new product development, some researchers concentrated on researching the phases and flows of the product development process, while other studies used a single viewpoint to draw into other specific research topics such as the impacts of technology innovation on the organizational climate and structure and resource allocation etc. However, although related product development and annual sale figures are as important in the hi-tech industry, the ability of R&D management may be of more significance. Due to the lack of comprehensive research studies on the influences of integrated technology planning and R&D on new product development, this research will focus on R&D management. The study will examine and discuss the influences of R&D management on new product development performance in Taiwan’s hi-tech industries. The specific nature of different organizational structures and the business environment will be used as the two intermediate variables when conducting the research. Based on the research motives stated above, this study has generalized three research questions shown below: (1) Will strong and weak R&D management cause significant impacts on new product development performance in Taiwan’s Hi-tech industries? (2) Will the difference in corporate R&D tendency cause different R&D management impacts on new product development performance? (3) Will the difference in industry and corporate status cause different impacts on R&D management new product development performance?

A review of the relevant literature on the Taiwan’s hi-tech industry, R&D management and its influence on new product development performance will be examined below:

Gould & Keeble (1984) suggested that hi-tech industry players should consider three indicators: the ratio of research and development spending on organizational output, the speed of technology innovation, and the relative significance of the research and development staff. Shanklin & Ryans (1984) contended that a hi-tech industry player must have these three characteristics: a solid scientific technological base, the ability to replace its current technology with new technology, and the ability to develop and change market needs with the application of its new technology. Thus, with planned promotional assistance from the government and alignment with the market’s movement, the industries in Taiwan are moving towards developing hi-tech products. Furthermore, there is a hope that Taiwan will become a country that is strategically led by hi-tech industries. This study will categorize the hi-tech industries in Taiwan into six major categories: (1) Semiconductor Manufacturers; (2) Computer and Peripheral Manufacturers; (3) Telecommunications; (4) Optoelectronics; (5) Precision Machinery Manufacturers; (6) Bio-technology. These six categories are the research targets for this study.

According to the presentation by Arthur D. Little, an international management consulting group, there are mainly three ages in R&D management, i.e. (1) The first generation (1950~1960) - which is short of strategic structure in their objectives; (2) The second generation (1970~1980) – which possesses only a partial strategic structure, and having the capability of matching up enterprise’s overall development strategy when managing a project; (3) The third generation (after 1980) – which possesses a complete strategic structure. Brown & Svenson (1988) treated the activities of R&D management including input, processing, and throughput as a system to evaluate the productivity of R&D management.

Karagozoglu & Brown (1993) proposed that customer participation at early stage of R&D could have beneficial effect on new product development, and consequently reduce the time needed to enter the market. Millett (1990) pointed out that both periodic communication upward and downward inside the organization and quick response to customer demands would have positive effect on R&D management capability. Ellis & Curtis (1995) indicated that R&D management would affect customer’s satisfaction. Clausing (1994) concluded that the content of R&D management must include quick response to customer demands, design feasibility, powerful function, successful integration, and strategy influence. McDonough (1993) indicated the time spending in technology transfer is much less than in-house R&D. Karagozoglu (1993) pointed out that proper utilization of technology transfer by the enterprise would significantly decrease the time for R&D. DeMott (1990) indicated that strategic alliance with other companies, sharing equipment, and exchanging of information, could increase the R&D management capability. Rosenau (1998) indicated that the top management participation could increase the R&D management capability due to their assistance in resource supplying and supporting. Mabert et al. (1992) found that R&D team with a feeling of competition threatening from other companies would significantly decrease the time spending in R&D. Gordon & Anne (2001) concluded that the project team leader should understand the psychological conditions and personality characteristics of each member when improving R&D performance. By literature review, five dimensions of factors for measuring Taiwan’s hi-tech R&D management are proposed as follows:

Karagozoglu & Brown (1993) concluded customer participation in new product development could assist R&D division in solving customer’s demands effectively. Kamath & Liker (1994) indicated that supplier participation in new product development could assist the enterprise in decreasing the time spending in R&D.

Karagozoglu (1993) pointed out that a proper utilization of technology could decrease the cost and time for R&D.

Chakrabarti (1991) pointed out that R&D investment growth rate is significantly related with business growth rate since hi-tech companies are investment and labor intensive industries.

Youssef (1994) indicated that any needed adjustment and reevaluation between design and manufacturing could be greatly reduced if early participation is made. Cusumano & Nobeoka (1992) further pointed out the productivity of design and manufacturing and overall quality could have excellent performance for new product development if multi-functional team is involved.

Rosenau (1998) indicated that top management’s involvement in R&D activities could assist in resource supply and support. Karagozoglu & Brown (1993) pointed out top management involvement in new product development could speed up R&D progress. Brown & Eisenhardt (1995) concluded top management support and communication with R&D team could greatly increase R&D capability and speed.

Calanton et al. (1995) adopted these indicators when evaluating new product development performance: the ratio of investment and investment growth rate, ratio of sales, market share and market growth rate. Alternatively, Song & Parry (1997) applied these four indicators when evaluating the comparative level of new product success: (1) the quality of the new products in comparison to that of competitors; (2) the sales level of the new product in comparison to that of competitors; (3) the profitability of the new products in comparison to competitors products; (4) the commercial success rate of the new product in comparison to the planned target rate. This research incorporates the empirical theories and researches discussed above and adopts the following five indicators when evaluating new product development performance: (1) market entry time; (2) quality level; (3) market share; (4) commercialization success rate of the new product; (5) the cost of promoting the new product in the market.

The components of this research design include: questionnaire design and data collection, research framework and hypothesis and data analysis.

The research objective for this study is analyzing and evaluating the influences of R&D management on new product development performance. Taiwan’s hi-tech industries were adopted as the population. The test sample consists of the top six hundred renowned enterprises in the hi-tech industries. Six hundred survey questionnaires were issued and two hundred and forty questionnaires were returned on July 2006. The response rate was 40%. Two hundred and ten questionnaire responses were valid and the effective response rate was 35%. The questionnaire consisted of four major components. The first, second and third components were measured using the Likert 5-point scale. The first component is the R&D management capability. The second component is new product development performance. The third component is the corporation’s R&D tendency. The fourth component is the company’s primary data, including: (1) company’s capital account; (2) business turnover and (3) number of employees.

The conceptual framework for this research is illustrated in Figure 1. The evaluating facets for the “R&D management ability” in the figure include: Customer participation in new product development, The level of technology collaboration, The level of cooperation about venture capital in R&D project, The level of cross-division for R&D project, The level of top management involvement in R&D project. “Organizational R&D tendency” consists of these variables: the level of supportability of organizational communication, the degree of organizational decision-making and authorization and the degree of emphasis placed on the organizational R&D tendency. Furthermore, the variables within the “industry and corporate status” facet include: industry characteristics, the corporation’s technical leadership and scale of the business operations. In addition, the “new product development performance” evaluation facets include: the timing of new product entry into the market, the quality of the new product, the percentage of market share of the new product, the success rate of the new product in the market and the cost of the new products’ entry into the market.

As the topic discussion and theoretical analysis, this study formed the following research hypotheses:

H₁: New product development performance is more significant as the R&D management ability to execute strengthens.

H₂: The organizational R&D tendency will influence the R&D management effects and the new product development performance.

H_2-1a: The difference in organizational communication will lead to a variance in the new product development performance.

H_2-1b: The increase in the R&D management ability and the level of organizational communication will result in a significant improvement in new product development performance.

H_2-2a: The degree of organizational decision-making and authorization has a significant influence on new product development performance.

H_2-2b: An increase in the R&D management ability and the degree of organizational decision-making and authorization will result in a significant improvement in new product development performance.

H_2-3a: The degree of emphasis placed on organizational R&D has a significant influence on new product development performance.

H_2-3b: The increase in R&D management ability and the degree of emphasis placed on organizational innovation will result in a significant improvement in new product development performance.

H₃: Industry and corporate status will influence new product development performance.

H_3-1a: The industry characteristics have a significant influence on new product development performance.

H_3-1b: Under different industry characteristics, an increase in the R&D management ability will lead to a variance in new product development performance.

H_3-2a: The corporation’s technical leadership has a significant influence on new product development performance.

H_3-2b: Higher corporation technical skills will lead to an increase in R&D management ability, resulting in a significant influence on new product development.

H_3-3a: The scale of business operation has a significant influence on new product development performance.

H_3-3b: Under different business scales, an increase in R&D management ability will lead to a variance in new product development performance.

The research subjects in this study were hi-tech industry players in Taiwan. The test sample consists of famous business enterprises with experiences in new product development. The questionnaire participants must have extensive knowledge on the new product development process. To increase the questionnaire validity, the focus was placed on the following job titles; New Product Development Project Manager, Senior Product Planning Personnel, Senior R&D Manager, and R&D Management Supervisors. The Cronbach’s α index was used when measuring the reliability of all questions in each facet. A larger Cronbach’s α coefficient indicates a higher level of consistency and reliability for the items in each facet. Nunnally (1978) indicated that in primary research, a reliability level of 0.7 is acceptable. Since the reliability coefficient for ability innovation management, organic innovation tendency, and new product development performance were 0.88, 0.87, 0.93 for this study, one can conclude that the reliability level of this research was above 0.7 and hence is acceptable. This research study adopted the SPSS 12.0 for Windows analytical tools to assist in data analysis and evaluation. The statistical analysis used in this research included the t-test, One-Way ANOVA and Two-Way ANOVA analysis.

T-test of the Relationship between the Ability of R&D Management and Performance on New Product Development

According to the mean value for R&D management ability in the four facets of R&D management mentioned above, this study separated the hi-tech industries in Taiwan into two independent groups; “strong ability in R&D management” (mean value above 0.5) and “weak ability in R&D management” (mean value below 0.5). The T-test was used to determine the influences of technology R&D on new product development. As illustrated in Table 1 (P= 0.000), there was a high significance level in R&D management ability in Taiwan’s hi-tech industries and new product development performance. The research findings confirm that strong R&D management ability in hi-tech industries in Taiwan had positive influences on new product development performance. This supports research hypothesis H₁.

Table 1: T-test of the influences on the ability of R&D management in new product development

T-Test of the influences of Organizational R&D Tendency on New Product Development

As illustrated in Table 2 (P= 0.000), new product development performance is influenced by the level of organizational communication, the degree of organizational decision-making and the degree of emphasis placed on new product development. High organizational R&D tendency has a significant influence on new product development performance. The findings support research hypotheses H_2-1a, H_2-2a, and H_2-3a.The research results provide empirical evidence to the research theory by Thomas (1993), Damanpour (1991) and Cooper (1994) on organizational R&D.

Table 2: T-test of the Influences of Support for organizational communication, the Degree of emphasis placed on the Organizational R&D and Organizational decision-making and authorization and their influences on New Product Development Performance.

Two-Way ANOVA Analysis on the Influence of Organizational Support and Communication and R&D Management on New Product Development

As the organization’s “R&D tendency” is an intermediate variable in this research study and the R&D management ability separated into strong and weak groups, Two-Way ANOVA analysis was conducted on new product development performance based on the level of support and communication within the organization. The result (P = 0.56) in Table 3 indicated that differences in organizational communication support will not affect the R&D management ability on new product development. There is a high positive significance level in the main and overall effects. This is the same as the finding results mentioned above.

Table 3: Two-Way ANOVA Analysis of Organizational Communication Support and R&D Management Ability on New Product Development Performance

One-Way ANOVA Analysis on the Influence of organizational communication support and R&D Management ability on New Product Development

With the aim of gaining further understanding on the differences in new product development performance, this study categorized the strength in a firms’ R&D management ability and organizational communication support into four sample groups for One-Way ANOVA analysis. A comparison to Schefee’s Multiple-Comparison was also made. As illustrated in Table 4, the result reveals that there is a significant difference among A-C, A-D and B-D. This suggested that strong R&D management ability and a high level of organizational communication support leads to a significant influence on new product development performance. Due to the significant differences between B, D and A, C and the lack of difference between C and D, new product C performance was less. There is also a significant difference among A and D, C which indicated that the R&D management ability and the level of organizational communication support have value-adding effects. This result provides empirical evidence for research hypotheses H_2-2band H_2-3b.

Table 4: One-Way ANOVA Analysis on the Combination of the Strength of R&D Management and Organizational Communication Support and Their Influences on New Product Development Performance

The Influence of the Business Operation Scale and Technical Leadership on New Product Development Performance

Although the influences of the business operation scale on new product development performance is a controversial topic, the findings from this research study indicate that the scale of the business operation is not necessary a key success factor for new product development performance. The research result in Table 5 (P = 0.167) implies that there is no significant difference in new product development performance by large and small scale business operations. This research also discovered that the corporation’s technical skill has a positive influence on new product development performance (P= 0.000). The hi-tech industry is one of the most popular industries in Taiwan. With high market growth and attention on Research & Development, there is an active push for product R&D. This research justified that the characteristics of this industry has a significant influence on R&D management. The empirical evidence supports H_3-1aand H_3-2a.

Table 5: T-test on the Scale of Business Operation and Technical Leadership and Their Influences on the New Product Development Performance

Performance of New Product Development	Mean score of Small Business Operation	Mean score of Large Business Operation	t -Value	p -Value
Overall Performance Mean Score	0.2169	0.5536	-1.34	0.167
New Product Development Performance	Low level of Technical Leadership	High level of Technical Leadership	t -Value	p-Value
Overall Performance Mean Score	0.0814	0.5490	-4.85	0.000***

The Two-Way ANOVA Analysis of Industry and Corporate Status and R&D Management Ability on New Product Development Performance

As “industry and corporate status” is an intermediate variable in this research, R&D management ability is separated into strong and weak groups. Two-Way ANOVA analysis was conducted on new product development performance under different business operation scales. The research results in Table 6 (P= 0.362 and P= 0.604) suggests that there is no significant difference between the two variables. This indicates that there is no significant difference between R&D management ability in different business operation scales and new product development performance. Hence, there is no empirical evidence to support H_3-3b.However, under the same methodology, there is a significant difference between the main effects of R&D management ability and the overall effects. This finding provided empirical support for H_3-1band H_3-2b.

Table 6: The Two-Way ANOVA Analysis on the Scale of Business Operation and R&D Management Ability and Their Influences on New Product Development Performance

The R&D management ability consists of five main functions: Customer participation in new product development, the level of technology collaboration, the level of cooperation about venture capital in R&D project, the level of cross-division for R&D project, and the level of top management involvement in R&D project. This study explored the influences of R&D management ability on new product development performance considering two intermediate variables, the “industry and corporate status” and the “organizational R&D tendency”. Through extensive research on empirical theories and topic discussion, a relational theoretical framework was developed to provide empirical evidence and analysis on hi-tech industries in Taiwan. The research findings suggest that R&D management ability has significant influences on new product development performance. Statistical evidence justified the hypothesis that “new product development performance is more significant as the R&D management ability is stronger”. The empirical evidence also indicated that these five variables interact with new product development and have a combination effect on new product development performance: “The level of organizational communication support”, “the degree of organizational decision-making and authorization”, “the degree of emphasis placed on R&D”, “industry characteristics” and “the corporate technical leadership”.

The scale of business operations impact on R&D management ability has been a controversial discussion topic. This research justified that the scale of business operations is not a key success factor for new product development performance. Both large and small business enterprises have strength and there is no significant difference in their new product development performance. Further research is still required on this topic. This study allocated similar measurement scales to the four facets for R&D management ability. However, during the survey questionnaire research process, it was discovered that business enterprises place different emphasis on each facet. In reality, business enterprises with different industry backgrounds and corporate status will apply different technology R&D management. Hence, their focuses on each of the facets for R&D management ability will naturally vary. The benefit of R&D management influences new product development performance and also has a close relationship with the core technologies in hi-tech industry development in Taiwan.

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	Volume 1, Issue 1, 2007

	The Study of R&D Management on New Product Development Performance in Taiwan’s Hi-Tech Industries

	Pang -Lo Liu, alo@thit.edu.tw and Chih-Hung Tsai, ietch@thit.edu.tw, Ta-Hwa Institute of Technology, Taiwan