‘Down-Stream’ Network Characteristics, Broker Functions and New Product Development Success

Abstract

Success of product development measured by new product introductions to the market is a key performance indicator for business today. Often internal processes are mentioned in relation to product development optimization. However, the external environment is also critical for product development success. Insights from the alliance and network literature point to benefits such as access to knowledge and capabilities, which enable the firm’s innovative processes. In particular, effects of network relations are analyzed focusing front-end discovery phases of NPD processes. Here, it is observed that small entrepreneurial start up company’s supply knowledge to network alliances with well-established and financially strong companies. However, in the later stages of development the main influence of external partnerships is described as financial support and joining distribution efforts, rather than knowledge sharing as main motivator for engaging in cooperative network or alliance efforts. Extending this perspective, not the least the user-driven innovation research has emphasized the important input to new product development provided by users. While integration with this ‘down-stream’ partner can provide valuable information for the early stages of product development – even triggering substantial innovation – forming relations to customers and users can in many industries have the character of not only a knowledge input, but also knowledge sharing through a community of practice of professional peers. Such network formations between firms and its customer base may then also contribute to later stage product development tasks. It is the main proposition of this research that characteristics of the network between the focal firm and its customer or market partners will impact the performance of later stage product development tasks. While networks can be characterized by a number of measures like breadth, density, and structural characteristics, more recent developments in network and alliance management need to be specifically accounted for. In particular, it is observed that companies today often integrate a ‘mediator partner’, brokering the external relations, including connection to customers. This study will explore this field of research focusing on the pharmaceutical industry. As such, this study addresses a gap in the literature concerning the relation to hospital partners influencing the later stages of development. Hospitals and medical centers are the main costumers of new drugs, and they also form a collaborative partnership in the product development phases of clinical trials, where new products are tested before obtaining market approval. Hospitals and medical centers have unique knowledge of the therapeutic area of the new products, and relations to a large number of patients, which is essential for clinical trial recruitment. The relations between hospitals and pharmaceutical companies have however been changing over the last years, as brokering agents are becoming an increasingly important part of the system, the so-called Contract Research Organizations (CROs). Therefore, the pharmaceutical industry is an interesting case for exploring the influence of multilevel network relation’s influence on product approvals. In this paper, the connection between network alliances and development success is studied through a systemic literature analysis. We review the network and alliance management literature and combine it with research from the industrial marketing field focusing on downstream cooperation management to develop research propositions. To add richness to our conceptual model, we further include qualitative case studies supporting grounded theory building. In sum, this paper contributes to the literature by the following: (1) We develop a systematic overview over network characteristics shown to have impact for new product development. (2) We discuss how recent developments of management practice, with respect to integrating broker functions in network and alliance management, alter the relationships between network characteristics and new product development and performance, and (3) We focus ‘down-stream networks’ and, thus, develop research propositions for effective customer input in later stage product development.