Int. J. Production Economics 132 (2011) 186–196

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Int. J. Production Economics

0925-52

doi:10.1

n Corr

E-m

journal homepage: www.elsevier.com/locate/ijpe

Knowledge sharing and strategic fit in integrated product developmentproejcts: An empirical study

Paul Hong a,n, William J. Doll b, Elena Revilla c, Abraham Y. Nahm d

a Department of Information, Operations and Technology Management, College of Business Administration, The University of Toledo, 2801W. Bancroft St., Toledo,

OH 43606, USAb Department of Management, University of Toledo, USAc Department of Operations, Instituto de Empresa, Spaind Department of Management and Marketing, University of Wisconsin—Eau Claire, USA

a r t i c l e i n f o

Article history:

Received 5 August 2010

Accepted 4 April 2011Available online 12 April 2011

Keywords:

Knowledge sharing practices

Strategic fit

Product development projects

Project outcomes

73/$ - see front matter & 2011 Elsevier B.V. A

016/j.ijpe.2011.04.004

esponding author. Tel.: þ1 419 530 2054; fax

ail address: Paul.Hong@Utoledo.Edu (P. Hong

a b s t r a c t

While product strategy has been approached from a variety of perspectives, the role of strategic fit as a

critical linkage of knowledge sharing practices and new product development outcomes have not been

adequately explored. This paper discusses how strategic fit is instrumental for cross-functional teams to

integrate product development outcomes. This paper identifies critical knowledge sharing components that

enhances the extent of strategic fit that in turn improves the success of product development efforts.

Strategic fit or alignment requires knowledge sharing practices of the product development team. Teams

with a shared knowledge base are more capable of thinking strategically, adapting their actions to their

project environment and accordingly engaging in innovative problem-solving while ultimately achieving

project goals of time, cost and value. This paper presents and tests a research model using a sample of 285

product development projects of firms from USA, Canada and Spain. The results suggest that strategic fit is

associated with greater knowledge sharing and enhance product development outcomes in both small and

large firms as well as diverse regions (i.e., USA, Canada and Spain).

& 2011 Elsevier B.V. All rights reserved.

1. Introduction

While product strategy has been approached from a varietyof perspectives, the role of strategic fit as a critical linkageof knowledge sharing practices and new product developmentoutcomes have been mostly in the program level but notnecessarily in the project level (Zajac et al., 2000; Hughes andMorgan, 2008; Carmeli et al., 2010). Strategic fit is a criticallinkage that connects the productivity of projects and its ultimateoutcomes (Smith and Reece, 1999; Murray and Kotabe, 2005;Katsikeas et al., 2006). For projects that involve value creation anddelivery through innovative problem solving requires knowledgesharing practices of the product development team (Fernie et al.,2003; Fedor et al., 2003. Hong et al., 2005).

The resource-based view (RBV) of the firm assumes that firmscan be conceptualized as bundles of valuable, rare, inimitable andnon-substitutable resources through which they achieve sustain-able competitive advantages (Wernerflet, 1984; Prahalad andHamel, 1990; Barney, 1991; Teece et al., 1997). Increasingly, RBVis extended to dynamic markets, where the utilization of knowledge

ll rights reserved.

: þ1 419 530 2290.

).

resources is especially regarded as critical strategic resources offirms (Grant, 1996; Kogut and Zander, 1992; Rauniar et al., 2008a;Adenfelt, 2010). Firms with superior resources (e.g., knowledgeresources and absorptive capacity) may have better chances ofsustaining their competitive advantages. A few papers suggestempirical grounding particularly on the strategic process mechan-isms by which knowledge resources are utilized for competitiveadvantages in dynamic markets (Williamson, 1999; Priem andButler, 2001; Eisenhardt and Martin, 2000). However, it is still notso clear how firms translate their knowledge resources in the projectlevel to design, develop and deliver products that allow theirproduct advantages.

Key interface issues in engineering and management are toexamine how organizational practices impact business performance.Thus, empirical studies have examined the relationship between:design quality and performance (Fynes and De Burca, 2005),manufacturing strategy gap and business performance (Rho et al.,2001), manufacturing systems, strategic change and performance(Llorens et al., 2005), innovation, quality management and perfor-mance (Sadikoglu and Zehir, 2010), product modularity and perfor-mance (Lau Antonio et al., 2007), shared knowledge and productdesign glitches (Rauniar et al., 2008b), lean manufacturing andbusiness performance (Yang et al., 2011), and supply chain flexibilityand firm performance (Merschmann and Thonemann, 2011).

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196 187

Strategy literature adequately discusses the role of strategic fitin organizational level (Zajac et al., 2000; Kim and Finkelstein,2009; Yin and Zajac, 2004; Murray and Kotabe, 2005; Naesenset al., 2009). However, in what context (i.e., antecedents anddrivers) and to what extent (i.e., outcome effects) strategic fitoperates in project level is unclear. Nothing in the prior literatureon product development focuses so carefully with a large samplestudy on strategic fit at the project level. No other study supportsthe mediating or partially mediating role of project strategic fitwith such a large and multi-country sample. In view of thiscritical research gap, this paper explores the following specificresearch questions: (1) how critical is strategic fit in the inte-grated product development projects?; (2) what are the essentialknowledge components that enhance the strategic fit which inturn improve the success of product development efforts? and(3) what are the key performance outcomes that measure theeffectiveness of strategic fit? Cross-functional teams need toutilize an adequate shared knowledge base by thinking strategi-cally, adapting their actions to their project environment and thusengaging innovative problem-solving while achieving integrativeproject goals in terms of time, cost and value. Thus, this study isto highlight the critical linkage and coordinating mechanismof strategic fit in the increasing knowledge intensive, innovativeproject management.

This paper provides a unique and rich research context.Previous research by Hong et al. (2004b) has discussed the impactof shared knowledge of customers on clarity of project goals,knowledge sharing on process performance (Hong et al., 2004a),role changes of design engineers (Hong et al., 2005) and manu-facturability (Doll et al., 2010) upon product development out-comes. This paper is different from these previous papers in that:(1) we examine a comprehensive set of shared knowledge, whichincludes shared knowledge of customers, suppliers, competitorsand internal capabilities; (2) we present a research model thatexplains how firms within dynamic markets utilize knowledgeresources through strategic fit as an important value-creatingproject linkage mechanism; (3) we also explore how theseknowledge capabilities, via strategic fit, impact performance out-comes of new product development (i.e., time-to-market, value-to-customers and manufacturing cost) and (4) the data baseincludes USA, Canada and European data (n¼285) in contrast toall the previous papers (n¼205) which is based on the datacollected only from firms of USA/Canada (Hong et al., 2004a,2004b; Hong et al., 2005; Doll et al., 2010).

This paper is organized as follows. The next section discusses aconceptual framework that provides a theoretical perspective ofstrategic fit for effective project management, particularly in theknowledge intensive innovative environment. Then, this paper pre-sents a research model that defines the different aspects of sharedknowledge components that enhance the extent of strategic fit. Thevalue of strategic fit is articulated in the critical project outcomes interms of customer values, time to market and cost effectiveness (i.e.,create and deliver highly valued products in a short time at lowcosts). Research methods are described and the research results basedon 285 projects from USA, Canada and Spain are presented in details.Theoretical and managerial implications of this study are discussedalong with the future research issues.

2. Conceptual framework

We derive our main theoretical basis of this paper from twostreams of theory sources: (1) project level view of strategic fitthrough the integration of project environment, project resourcesand project goals; and (2) the enactment process of information(i.e., knowledge, strategic fit and project performance).

2.1. Project level view of strategic fit

Complex environment requires enactment of the perceivedenvironment through dissonance reduction, strategic profilingand assessment of alignment, which becomes the basis for projectstrategy (Weick, 1964; Hill and Brown, 2007; Rauniar et al.,2008b). Enacted sensemaking requires unequivocal informationsharing and shared sense of legitimacy for authoritative action(Wagner and Gooding, 1997; Ericson, 2001; Weick, 2010). Productdevelopment team members discuss customer expectations,competitors’ offerings, product lines, internal capabilities andsuppliers capabilities. Business environment is quite complexand the nature of information is volatile, changing, uncertainand ambiguous. As cross-functional project team membersengage in goal-directed behaviors (e.g., successful new productdevelopment), it is critical for them to enact the knowledge fromexternal environment, internal context and goal articulation.Strategic fit is the alignment of the project goals (targets) withthe project’s competitive situation (e.g., customer expectationsand competitive offerings), the project resources available(e.g., internal design and manufacturing capabilities as well assuppliers’ design and manufacturing capabilities) and the firmsoverall business strategy.

Fig. 1 shows how strategic fit is derived through integrativeprocesses of enactment of knowledge from project external envir-onment, project internal resources and project team goals. In thecontext of cross-functional team, new product development teammembers need the enacted information (i.e., knowledge) aboutexternal entities (i.e., knowledge about competitors, customersand suppliers), internal resources (i.e., knowledge about internalcapabilities) and product development goals in terms of time, costand value. As shown in Fig. 1, strategic fit is the critical linkage of theabove three categories of enacted knowledge.

2.2. Process view of knowledge, strategic fit and project performance

From process point of view, the enactment of information isthe foundation of knowledge sharing and exploitation. Projectteam, as knowledge sharing communities, needs knowledgesources (e.g., competitors, suppliers, customers, internal resourcesand goals) (Ruuska and Vartiainen, 2005). Project team membersperceive the extent of knowledge through enactment processes(i.e., cognition, categorization and goals) that overcome thederailment of projects and instead work toward project progress(Drabek, 1994; Sonuga et al., 2002; Danneels, 2003; Jones, 2005).Fig. 2 shows how this processes of information enactment resultin defining strategic fit, which in turn direct the knowledgeoutcomes in new product development.

As enacted knowledge is shared among cross-functional teammembers, this shared knowledge becomes the basis for importantdecision making. One of the most important decisions criteria isto assess the strategic fit of a particular project, which is criticalfor fulfilling specific project goals. Without adequately assessingand assuring the overall compatibility and realistic possibility of aproject’s success, team efforts would not be effectively directedtoward the project goals.

2.3. The research model

Product development routines are regarded as a dynamiccapability in knowledge intensive work environment for valuecreation through innovative problem solving. Product develop-ment is also a strategic process in that it utilizes knowledgecapabilities within firms for numerous projects on a continuousbasis (Clark and Fujimoto, 1991; Brockman and Morgan, 2003;Schroeder et al., 2002). We examine the mechanisms of delivering

Knowledge Sources Shared knowledge base

ProductStrategic Fit Project outcomes

Fig. 2. Process view of knowledge, strategic fit and project performance.

Project Resources Shared knowledge of internal design and

manufacturingcapabilities

Project Environment Shared knowledge of customer expectations

and competitive offerings

Project Goals (time, cost and value) and product

strategy

ProductStrategy

Fit

Fig. 1. Project level view of strategic fit.

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196188

high value products and services through strategic linkage pro-cess. We specify a model that depicts four specific shared knowl-edge components that reflect the enacted knowledge of internaland external environment requirements.

A model of how shared knowledge practices through strategicfit impact outcomes (manufacturing cost, value to customers andtime to market) is depicted in Fig. 3. Table 1 defines each variableand provides the relevant literature base.

2.4. Hypotheses development

Greater customer involvement is generally positively asso-ciated with setting project goals (Lin and Germain, 2004; Honget al., 2004b; Brady et al., 2005). In the project level, seniormanagers are quite conscious about the potential contribution ofthe projects for better serving changing customer requirements(Lin and Germain, 2004; Rauniar et al., 2008b). As informingpractices help the product development team members translateobjective customer attributes into a richer appreciation of inher-ently subjective customer needs (Schultze, 2000), they are betterable to anticipate and articulate the organizational alliancerequirements with the project characteristics (i.e., strategic fit)(Santala and Parvinen, 2007). Therefore,

Hypothesis 1. As shared knowledge of customers increases,strategic fit is enhanced.

Greater internal/external supplier involvement is generally posi-tively associated with the overall product development goal attain-ment (Hartley et al., 1997; Song and Di Benedetto, 2008). Suppliers’involvement may enhance product and process design details(Wasti and Liker, 1997). Shared knowledge of internal/externalsupplier capabilities enables the product development team toidentify a set of project portfolios and product strategy implementa-tion details (Ragatz et al., 1997; Wynstra and Pierick, 2000).Involving suppliers also enhances the collaborative partnershiparrangements and overall project role fit requirements of cross-functional teams (Chung and Kim, 2003; Walter, 2003). Therefore,

Hypothesis 2. As shared knowledge of suppliers increases, stra-tegic fit is enhanced.

Greater knowledge of competitors is generally positively asso-ciated with setting product strategy in the project level (Fahey,2002; Nwokah, 2009; Tseng, 2009). Shared knowledge about com-petitors’ offerings enhances product and process design goals(Hussey, 1998; Liu and Wang, 2008; Im et al., 2008). A clear and

SK Customers

SK Suppliers

SK Competitors

SK of Internal Capabilities

Strategic Fit Mfg Cost

Value to Customer

Time to Market

H1

H6

H4

H3

H2

H9

H8

H7

H5

Fig. 3. Research model.

Table 1Constructs, definitions and literature base.

Constructs Definitions Literature

Shared knowledge of competitors The extent of shared understanding among product

development team members of the strengths, weaknesses,

products and process technologies of competitors.

Cordero et al., 1998; Ettlie, 1995; Hackman and

Oldham, 1980; Spreitzer, 1996; Tatikonda and

Rosenthal, 2000.

Shared knowledge of customers The extent of a shared understanding among product

development team members of the current customer needs

and future value to customer creation opportunities.

Day, 1990, 1994; Clark and Wheelwright, 1993; Dolan,

1993; Slater and Narver, 1995; Cordell, 1997.

Shared knowledge of suppliers The extent of a shared understanding among product

development team members of the suppliers’ design, process

and manufacturing capabilities.

Hahn et al., 1990; Slade, 1993; Ragatz et al., 1997;

Evans and Lindsay, 1999; Hartley et al., 1997.

Shared knowledge of internal

capabilities

The extent of a shared understanding among product

development team members of the firm’s internal design,

process and manufacturing capabilities.

Clark and Wheelwright, 1993; Garvin, 1993; Adler

et al., 1996; Numata and Toshiharu, 1996; Kim and

Mauborgne, 1997; Moorman and Miner, 1997.

Strategic fit The extent of alignment of the project goals (targets) with the

project’s competitive situation, the project resources available

and the firms overall business strategy.

Cooper, 1983, 1985; Cooper and Kleinschmidt, 1987;

Lilien and Rangaswamy, 1999; Rosenthal and

Tatikonda, 1992, 1993.; Englund and Graham, 1999.

Time to market Product development time (e.g., product introduction on

schedule or ahead of competitors) required from concept

generation to market introduction.

Youssef, 1995; Cohen, 1996; Haddad, 1996; Zirger and

Hartley, 1996; Hartley et al., 1997; Datar et al., 1997;

Griffin, 1997; Dyer et al., 1999.

Manufacturing cost Cost of materials, labor and overhead for producing new

products.

Cooper and Kleinschmidt, 1987; Ittner and Macduffie,

1995; Banker et al., 1995; Cooper and Slagmulder,

1999.

Value to customers Value of new products in terms of meeting customer needs,

requirements and expectations.

Gale, 1994; Clark and Fujimoto, 1991; Clark and

Wheelwright, 1993; Slater and Narver, 2000.

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196 189

shared understanding of competitors focuses project goals directedto essential tasks (Bailetti and Litva, 1995; Hong et al., 2004b; Linet al., 2006; Nwokah, 2009.). It helps eliminate unnecessary activ-ities in the project team which further allows teams to focus on theessential goals aligned with the project contribution potential. Thisenhanced focus enhances strategic fit. Therefore,

Hypothesis 3. As shared knowledge of competitors increases,strategic fit is enhanced.

Shared understanding of internal capabilities in terms ofdesign and manufacturing capabilities help project teams todetermine their project targets in light of larger mission of thefirm (Rauniar et al., 2008a; Hong et al., 2004b). As productdevelopment team members understand their international cap-abilities in terms of design and manufacturing, senior manage-ment and project team leaders have better assessment of theproject’s overall contribution potential for the creation of valuesfor the larger goals of the firm. Therefore,

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196190

Hypothesis 4. As shared knowledge of internal capabilitiesincreases, strategic fit is enhanced.

Greater shared knowledge of customers is generally positivelyassociated with value to customers. Shared knowledge of customersmay enable the cross-functional teams to design and configureproducts that better fit to the overall requirements of customers(Hong et al., 2005; Rauniar et al., 2008b). Thus, shared knowledge ofcustomers enhances customer value components and therefore, itwill enhance the value of customers. Therefore,

Hypothesis 5. As shared knowledge of customers increases, valueto customer increases.

As knowledge of internal capabilities are shared among projectmembers, product development efforts are focused on what theorganizations can do rather than pursuing development effortsinto irrelevant areas (Hong et al., 2004a; Tseng, 2009). Suchconcerted process work focus by new product development teamssaves time for completion of projects. Therefore,

Hypothesis 6. As shared knowledge of internal capabilitiesincreases, time-to-market improves.

Value-to-customer is the quality of new products in terms ofmeeting customer needs, requirements and expectations. It ismeasured in terms of quality (customer perceived value), satisfy-ing customer expectations and success in the marketplace.Strategic fit improves customer values. The role of strategic fit isto direct particular projects to serve the organization’s largerpurpose (i.e., better serve customers for competitive advantage)and thus it tends to direct projects to better fit the customerneeds (Santala and Parvinen, 2007). Strategic fit provides theflexibility to accommodate specific customer value drivers(requirements/desires) within price and delivery time expecta-tions (Santala and Parvinen, 2007; Smith and Reece, 1999;Tatikonda and Rosenthal, 2000). Therefore,

Hypothesis 7. As strategic fit is enhanced, value-to-customerincreases.

Manufacturing cost is defined as the dollar value of materials,labor and overhead for the product (Prasad, 1998; Hong, 2000).Strategic fit simplifies manufacturing processes as the project isstreamlined according to the larger organizational and opera-tional effectiveness needs (Murray and Kotabe, 2005; Ruuska andVartiainen, 2005). Thus, strategic fit reduces the overall costs ofoperational processes including manufacturing and assemblyprocesses. Specifically, fewer parts by the simplified processesreduce product development and manufacturing costs (Zajacet al., 2000). As the manufacturing processes are simplified,manufacturing costs decrease. Therefore,

Hypothesis 8. As strategic fit is enhanced, manufacturing costdecreases.

Time-to-market refers to whether products are developed andintroduced on or before the scheduled market introduction (Clarkand Fujimoto, 1991; Tersine and Hummingbird, 1995). Strategicfit may enable firms to design, produce and deliver products thatmeet specific customer needs in a timely manner (Twigg, 1998;Smith and Reece, 1999). With the reduction in the numbers ofparts, the time required to develop and manufacture productcomponents decreases. As the manufacturing processes are sim-plified, the time required for manufacturing setup and executionis reduced. Therefore,

Hypothesis 9. As strategic fit is enhanced, time-to-marketimproves.

In brief, this research model enables us to explore, in a newproduct strategic fit context, the above hypotheses that examinethe complex relationships of the drivers (i.e., shared knowledgeabout customers, suppliers, competitors and internal capabilities)and outcomes (i.e., manufacturing cost, time-to-market andvalue-to-customers) of strategic fit.

3. Research methods

This study develops valid and reliable scales to measure theSKCUST, SKSUPPL, SKCOMP, SKINTCP, STRFIT, VALCUST, MFTCOSTand TIMEMKT, which are essential for testing the model in Fig. 1.The process followed the recommendations of Churchill (1979)and Nunnally (1978), beginning with an extensive literaturereview, followed by structured interviews with product develop-ment executives, pre-testing and pilot testing of the instruments.Details of item generation, the pretest/pilot test and the largescale method (n¼205) are described in previous publications(Hong et al., 2004b, 2005). In this paper, we have added additional80 responses from Spain. We have taken necessary validatingprocesses to combine the two sets of data (n¼205 from USA/Canada and n¼80 from Spain), which included testing both setsof data in terms of: (1) process integrity of survey questionnairedistribution and collection; (2) data characteristics (e.g., reliabil-ity, unidimensionality, patterns of factor loadings, construct anddiscriminant validity) and (3) the respondent and industry char-acteristics (i.e., project manager level and manufacturing firms).

3.1. Measurement model results

Confirmatory factor analysis was performed for the purpose oftesting unidimensionality of the scales and estimating overallmodel fit (Gerbing and Anderson, 1988). The model has goodmodel–data fit (w2

¼631.67, 377 degrees of freedom, w2 perdegree of freedom of 1.68, RMSEA¼0.049, NNFI¼0.97 andCFI¼0.97) (Hair et al., 1995). Appendix A shows the items forthe constructs along with the item mean and standard deviation.The completely standardized coefficients (item-factor loadings) ofthe resulting model (see Table 2) ranged from 0.55 to 0.93, whichwere all statistically significant at po0.01, indicating convergentvalidity.

Descriptive statistics, correlations, composite reliabilities,average variance extracted and the discriminant validity testresults are given in Table 3. Composite reliability, which is amore accurate method of measuring measurement reliability thanCronbach’s alpha (Tenko, 1998), ranged from 0.72 to 0.91,indicating sufficient level of reliability (Hair et al., 1995). Compo-site reliabilities are shown in the diagonal of Table 3. Discriminantvalidity was assessed in two ways: (1) structural equationmodeling methodology (i.e., Bagozzi and Phillips, 1982), in whichw2 differences were examined between models where correlationbetween the latent variables fixed at 1.0 and with the correlationbetween the latent variables freed to assume any value (Koufteroset al., 1998; Koufteros, 1999); and (2) by comparing the averagevariance extracted with the squared correlation between con-structs (Fornell and Larcker, 1981). Both methods have demon-strated evidence of discriminant validity.

3.2. Structural model results

After assessing the measurement model, the structural modelwas examined. The results indicate that there is adequate model-to-data fit (w2

¼684.58, 390 degrees of freedom, w2 per degree offreedom of 1.76, RMSEA¼0.053, ECVI¼2.98, NNFI¼0.97 andCFI¼0.97) (Hair et al., 1995). No problems were revealed among

Table 3Descriptive statistics, correlations, composite reliabilities, average variance extracted and discriminant validity tests.

Constructs Mean Standard

deviation

SKCUST SKSUPPL SKCOMP SKINTCP STRFIT VALCUST MFTCOST TIMEMKT

Shared knowledge of customers

(SKCUST)

3.83

(3 items)

.76 .78a [.55]b

Shared knowledge of suppliers

(SKSUPPL)

3.24

(5 items)

.83 .222nn

(224.83)c

.89 [.62]

Shared knowledge of competitors

(SKCOMP)

3.26

(4 items)

.88 .307nn

(224.60)

.278nn

(1060.59)

.91 [.71]

Shared knowledge of internal

capabilities (SKINTCP)

3.81

(4 items)

.68 .429nn

(181.73)

.395nn

(283.26)

.279nn

(372.26)

.81 [.53]

Strategic fit (STRFIT) 3.73

(3 items)

.72 .382nn

(121.06)

.340nn

(136.69)

.395nn

(118.78)

.336nn

(157.94)

.72[.47]

Value to customers (VALCUST) 3.84

(4 items)

.81 .491nn

(158.85)

.319nn

(606.76)

.243nn

(640.62)

.388nn

(316.61)

.472nn

(109.95)

.87[.63]

Manufacturing cost (MFTCOST) 3.00

(4 items)

.80 .155nn

(244.27)

.233nn

(1079.22)

.054(835.87) .163nn

(390.90)

.138n(167.69)

.346nn

(596.28)

.89[.67]

Time to market (TIMEMKT) 3.43

(3 items)

.96 .362nn

(222.06)

.173nn

(288.45)

.161nn

(287.48)

.396nn

(245.78)

.291nn

(154.18)

.419nn

(230.26)

.240nn

(279.05)

.82[.61]

n Correlation is significant at the 0.05 level (2-tailed t-test, df¼N).nn Correlation is significant at the 0.01 level (2-tailed t-test, df¼N).a Composite reliabilities are on the diagonal.b Average variances extracted are on the diagonal in brackets.c w2 differences are indicated in parentheses. All differences in w2 for 1 degree of freedom are significant at 0.005.

Table 2Summary data for indicators and sub-constructs.

Constructs Indicators Completely standardized

coefficients (loadings)

t-Valuesn Constructs Indicators Completely standardized

coefficients (loadings)

t-Valuesn

Shared knowledge of customers A1H .61 – Strategic fit BJ1 .72 –

A2D .78 9.56 BQ1 .54 7.71

A2K .82 9.70 BY1 .77 9.74

Shared knowledge of suppliers A1G .82 – Value to customers C2A .72 –

A1K .79 14.63 C2C .82 12.92

A2C .77 14.15 C2K .81 12.82

A2J .79 14.63 C2M .81 12.75

A3A .78 14.42

Manufacturing cost C2E .81 –

Shared knowledge of competitors A2L .82 – C2G .76 14.11

A3B .79 15.39 C2I .78 14.48

A3K .89 18.10 C2O .91 17.34

A3L .85 17.03

Time to market C1B .77 –

Shared knowledge of internal capabilities A1F .87 – C1E .93 13.30

A1I .85 15.27 C1I .61 10.32

A3E .58 9.99

A3H .55 9.42

The actual indicators that correspond to the coding can be found in Appendix A.w2¼631.67, 377 degrees of freedom, w2 per degree of freedom of 1.68, RMSEA¼0.049,

NNFI¼0.97 and CFI¼0.97.

n All t-values significant at ao0.01 (one-tailed t-test, df¼N).

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196 191

the residuals in the fitted residuals matrix (Hu and Bentler, 1995).Fig. 4 displays the path results, which show that eight of the nineproposed hypotheses were supported.

While encouraged by the results, it was still puzzling to see howhypothesis 4 (the level of shared knowledge of internal capabilitiesleading to the level of strategic fit) was not supported by the data.The result seems to indicate that, while shared knowledge ofcustomers, suppliers and competitors were all instrumental inhaving the new product development plan fit into the overallbusiness strategy, the shared knowledge of internal capabilitiesdid not play such a prominent role. This may be interpreted intwo ways:

First, the result may be an indication that when new productdevelopment teams think of new product development strategy, theirviews are often times externally focused, and thus less attention is

given to their own, internal capabilities. This may stem from the factthat ‘‘strategy formulation’’ in the context of new product develop-ment is often viewed as finding out the various challenges stemmingfrom the external environment of a firm, and what the firm isplanning to do in response to these challenges, while their owninternal capabilities consideration tending to take a back seat.

Second, when examined together with the positive result fromhypothesis 6 (the level of shared knowledge of internal capabilitiesleading to time-to-market), the result seems to indicate that, whilenot so important factor in new product development strategyformulation in a relative sense (note that for our research modelall the shared knowledge factors are compared together for theirimpact on strategic fit), shared knowledge of internal capabilities isnevertheless an important factor for reaching the market in a timelymanner with the newly developed product. Taken together, these

SK Customers

SK Suppliers

SK Competitors

SK of Internal Capabilities

Strategic Fit Mfg Cost

Value to Customer

Time to Market

г=0.37,t=4.50

г=0.35,t=3.94

г=0.28,t=3.89

г=0.22,t=3.23

г=0.05,t=0.62

β=0.43,t=5.12

β=0.26,t=3.63

г=0.27,t=3.50

г=0.34,t=4.68

df=390, χ2=684.58, RMSEA=0.053, ECVI=2.98, NNFI=0.97, CFI=0.97.

Fig. 4. Research model results (n¼285).

Table 4Hypotheses testing, US/Canada versus Spain, and role of firm size.

Relationships Hypothesis All firms

(n¼285)a

US/Canadian

firms (n¼205)

Spanish firms

(n¼80)

Small firms (o500

employees)

(n¼137)b

Large firms (4¼500

employees) (n¼148)b

Shared knowledge of

customers-Strategic fit

H1 0.35c (3.94nnd) 0.49 (3.80nn) 0.00 (�0.03) 0.21 (1.74n) 0.41 (3.21nn)

Shared knowledge of

suppliers-Strategic fit

H2 0.28 (3.89nn) 0.32 (3.63nn) 0.23 (1.67n) 0.29 (2.63nn) 0.28 (2.78nn)

Shared knowledge of

competitors-Strategic fit

H3 0.22 (3.23nn) 0.17 (2.09n) 0.36 (2.45nn) 0.18 (1.53) 0.29 (3.28nn)

Shared knowledge of internal

capabilities-Strategic fit

H4 0.05 (0.62) 0.06 (0.51) �0.01 (�0.04) 0.05 (0.49) 0.08 (0.66)

Shared knowledge of

customers-Value to

customer

H5 0.37 (4.50nn) 0.35 (3.07nn) 0.39 (2.97nn) 0.31 (2.97nn) 0.42 (3.37nn)

Shared knowledge of internal

capabilities-Time to market

H6 0.34 (4.68nn) 0.36 (3.83nn) 0.27 (2.28n) 0.31 (3.18nn) 0.40 (3.52nn)

Strategic fit-Value to

customer

H7 0.43 (5.12nn) 0.49 (4.24nn) 0.31 (2.21n) 0.50 (4.19nn) 0.39 (3.21nn)

strategic fit-Manufacturing

cost

H8 0.26 (3.63nn) 0.37 (4.26nn) �0.13 (�1.02) 0.26 (2.46nn) 0.28 (2.88nn)

Strategic fit-Time to market H9 0.27 (3.50nn) 0.31 (3.23nn) 0.25 (1.89n) 0.23 (2.18n) 0.26 (2.37nn)

a For the structural sample (n¼285) w2¼684.58 per 390 degrees of freedom which equals 1.76, RMSEA¼0.053, NNFI¼0.97 and CFI¼0.97.

b Analysis by firm size is based on the full sample (N¼285).c Numbers are standardized coefficients.d Numbers in parentheses are t-values. * Significant at ao0.05 and ** significant at ao0.01 (one-tailed t-test, df¼N).

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196192

results seem to show that the level of shared knowledge of externalfactors (i.e., customers, suppliers and competitors) is an importantindicator for effective new product development strategy formula-tion, whereas the level of shared knowledge of internal capabilitiesis an important indicator for the efficiency of such strategy imple-mentation and execution.

After examining the hypotheses with an overall sample ofn¼285, the sample was divided into US/Canadian firms (n¼205)

versus the Spanish firms (n¼80) to see the effect of nationality onthe relationships among constructs. The sample was also dividedinto small-to-medium size firms (o500 employees, n¼137) andlarge firms (4¼500 employees, n¼148) in order to see the effect offirm size on the relationships. The results are shown in Table 4.

When the results from US/Canadian firms were comparedwith that from Spanish firms, an interesting difference emerged.US/Canadian firms had a strong correlation between shared

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196 193

knowledge of customers and strategic fit (g¼0.49, t¼3.80), whereasSpanish firms (g¼0.00, t¼�0.03) had no such correlation. Spanishfirms, on the other hand, had a stronger correlation between sharedknowledge of competitors and strategic fit (g¼0.36, t¼2.45) com-pared to US/Canadian firms (g¼0.17, t¼2.09). The results alsoshowed that for Spanish firms, how their new product developmentplan fits into their overall business plan (i.e., strategic fit) was a poorindicator on the improvement of manufacturing cost (b¼�0.13,t¼�1.02), whereas in US/Canadian firms, it was a strong indicator(b¼0.37, t¼4.26). Taken together, these results seems to indicatethat Spanish firms are strongly interested in forming a new productdevelopment strategy based on their knowledge of what theircompetitors are doing but not so much based on their knowledgeof their customers, and their new product development strategyimplementation does not necessarily lead to reducing manufactur-ing cost; whereas in US/Canadian firms, shared knowledge ofcustomers was a stronger factor than anything else in formulatingnew product development strategy that is fitting with the overallbusiness strategy, and the level of strategic fit often times lead toreduction in manufacturing cost.

As shown in the last two columns of Table 4, firm sizes (i.e.,number of employees) do not seem to have any major impact onthe relationships between constructs, although small-to-mediumsize firms (g¼0.18, t¼1.53) seem to be less inclined to considershared knowledge of competitors in their new product develop-ment strategy formulation than large firms (g¼0.29, t¼3.28). Itwas also interesting to see that the relationship between sharedknowledge of internal capabilities and strategic fit was almostnon-existent throughout all four categories of firms (US/Canadianand Spanish firms, small-to-medium size firms and large firms).

4. Discussion

The interpretations of the exploratory results should behandled with a due care. The data are based on a single-method(survey) and a single-informant from each firm, which may resultin common method variance and informant bias. The responsesare perceptual in nature. This subjectivity for performance data isserious if respondents from different cultural contexts may beunwilling to admit poor performance. Careful follow-up inter-views on the selective respondents from USA, Canada and Spaindo not suggest such bias. In spite of these inherent limitations ofsurvey methods, this study provides valuable insights on howresources of shared knowledge among project team membersimprove strategic fit and project performance.

First, shared knowledge is created in the team by a process ofenactment. To enact is to establish by authoritative action. Thismeans that the cross-functional team needs to nurture a sense ofautonomy and empowerment. The team processes should enableto process divergent information about customers, competitor’sofferings, internal capabilities and suppliers’ capabilities andestablish a shared understanding for collaborative action. Thissuggests that the cross-functional team needs some degree ofautonomy and independence from top management. It alsosuggests that team building processes in fuzzy front end shouldfocus on sharing knowledge, integrating perspectives and evol-ving their common knowledge base.

Second, in contrast to the view that strategy and strategic fit istop down phenomenon dictated by top management, this studysuggests that shared knowledge of customers, competitive offer-ings, internal and supplier design and manufacturing capabilitiesamong the cross-functional team members working on theproject are essential to the actual execution or realization ofstrategic fit for a particular project. Project goals set by topmanagement for a project may still be met, but how these goals

are achieved in the context of a project’s dynamic environmentand resources available for the project may require some adapta-tion by the product development teams. A shared knowledge baseenables the project team to adapt to emerging problems andopportunities while still keeping the focus on the larger organiza-tional goals and specifically move the project towards the desir-able the project outcomes in terms of time, cost and quality. Thus,the shared knowledge base helps keep the project on target whilemaintaining strategic alignment in a changing context.

Third, strategic fit or alignment is something that needs to bemaintained by a cross-functional project team throughout the life ofthe project. Strategic fit is an important value-creating project linkagemechanism. It is not just an initial concept in the early productconcept development stage. Rather, it is an understanding on howproject environment forces and internal capabilities need to continueto be recrafted to maintain alignment in a dynamic developmentprocess. Teams with a shared knowledge base are more capable ofthinking strategically, adapting their actions to their project environ-ment and accordingly engaging innovative problem-solving whileultimately achieving project goals of time, cost and value.

Fourth, increasingly, cross-functional teams need to manageinnovative projects that deliver customer values, in short timeframe and cost constraints. The results of this paper suggest thatteams with a shared knowledge base are more capable of thinkingstrategically, adapting their actions to their project environmentand accordingly engaging in innovative problem-solving whileultimately achieving project goals of time, cost and value. Thispaper presents and tests a research model using a sample of 285actual product development projects of firms from USA, Canadaand Spain. Replication studies are needed to advance engineeringand operations management (OM) research. In fact, several recentpapers have called for more studies of this type (Singh, 2003;Frohlich and Dixon, 2006). Importantly, Roth et al. (2008) foundthat relatively few of the published multi-item measurementscales had sufficient reliability and validity. More cross-cultural,empirical research with relatively large samples (instead ofanecdotal evidence or relatively small samples) is called forrigorous examination and theory building (Rosenzweig et al.,2011). By using multi-country data set and multi-items with highlevel of reliability and validity, this article thereby examinescontextual differences (e.g., regional difference and firm size) onperformance. The empirical results suggest that strategic fit isassociated with greater knowledge sharing and enhance productdevelopment outcomes in both small and large firms as well asdiverse regions (i.e., USA, Canada and Spain).

This empirical study has highlighted the critical linkage valuein the increasingly knowledge intensive, innovative project man-agement. Thus, the results of study further clarify additionalresearch needs in innovative project management. First, it isworthy to examine the complex process dimensions of determin-ing strategic fit in relation to other variables (e.g., projectenvironments, fuzzy front end planning practices, leadershipstyles and team characteristics). Second, in view of expandingproject scopes of global cross-functional teams the use of socio-technological mechanisms for the effective knowledge sharingand value creation and delivery mechanisms may further beexamined. Future studies may also explore how strategic fit as adynamic value creation linkage mechanisms for managing bothroutine projects and radical innovations in different industriesand diverse cultural settings.

Appendix

See Table A1 for more details.

Table A1Measurement items entering large-scale survey (n¼285).

Constructs Measurement items Mean S.D.

This product development team shared knowledge abouty

Shared knowledge of customers A1H How well we were doing on customer satisfaction ratings. 3.62 0.89

A2D Which features were most valued by target customers. 3.91 0.93

A2K Current customer needs. 3.95 0.93

Shared knowledge of suppliers A1G Our suppliers’ process capabilities. 3.24 0.97

A1K Our suppliers’ capabilities to meet cost targets. 3.14 1.01

A2C Our suppliers’ design capabilities. 3.11 0.98

A2J Our suppliers’ capabilities to meet time requirements. 3.39 1.01

A3A Our suppliers’ capabilities to meet quality requirements. 3.32 1.02

Shared knowledge of competitors A2L Strengths of our competitors. 3.33 1.00

A3B Competitors’ product technologies. 3.19 0.97

A3K Competitors’ products. 3.36 1.01

A3L Weaknesses of our competitors. 3.15 1.01

Shared knowledge of internal capabilities A1F The capabilities of our engineering staff. 3.89 0.85

A1I The strengths of our engineering design capabilities. 3.88 0.87

A3E The strengths of our manufacturing facilities. 3.78 0.80

A3H The capabilities of process technologies we used. 3.71 0.87

Strategic fit BJ1 Project targets were consistent with our firm’s overall business strategy. 3.86 0.93

BQ1 Our firm’s overall product strategy guided the setting of project targets. 3.80 0.86

BY1 Project targets reflected the competitive situation. 3.52 0.94

Value to customer C2A This product had a high quality. 4.02 0.88

C2C This product exceeded customer expectations. 3.60 1.02

C2K This product created a high customer value. 3.93 0.91

C2M This product was successful in the marketplace. 3.82 1.03

Manufacturing cost C2E The material cost of this product is considerably lower than the industry average. 2.98 0.96

C2G The overhead cost of this product is considerably lower than the industry average. 2.91 0.91

C 2I The labor cost of this product is considerably lower than the industry average. 3.05 0.90

C2O The overall Manufacturing Cost of this product is lower than the industry average. 3.06 0.94

Time to market C1B Met its deadline for market introduction. 3.65 1.13

C1E Developed product on schedule. 3.55 1.09

C1I Reduced the product development time. 3.09 1.17

P. Hong et al. / Int. J. Production Economics 132 (2011) 186–196194

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