98
The Relationship between Information Technology Capability and New Product Development Success: A Conceptual
Framework
Mohamed Suhaimi Yusof1*, Mohamed Najib Salleh1, Fadhilah Mohd Zahari1
1 School of Technology Management and Logistics, College of Business, Universiti Utara Malaysia, Kedah, Malaysia
*Corresponding Author: [email protected]
Accepted: 1 April 2020 | Published: 15 April 2020
__________________________________________________________________________________________
Abstract: The influence of Information Technology (IT) Capability to enhance the success of New Product Development (NPD) is studied in this paper. A thorough literature review of IT Capability in addition New Product Development success was conducted. In this study, the IT Capability covers three specific areas which are IT Operations, IT Objects, and IT Knowledge. IT Operations which may encompass of business process reduce costs, productivity and revenue. IT Objects may cover of facilitates the acquisition, storing, utilization, processing, and dissemination of information. IT Knowledge may include skills, emotional and recommends. An exhaustive review of literature highlighted the criticality of adequate IT capability to guarantee new product development success. Thus, it is essential to comprehend by what means can NPD control information technology capability in expanding the success of New Product Development. New Product Development cooperates with information technology to raise the economy of a nation. IT Capability is to handle the scattered learning, therefore, improve the success of new product development. IT Capability has a big impact and has become important in increasing the new product development success. Hence, a conceptual framework is formulated in this paper for in order to explore and deliver empirical findings on the relationship that is present between the success of New Product Development and IT Capability.
Keywords: Information Technology Capability, New Product Development
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1. Introduction
The powerful boost observed in the economy’s marketplace can be attributed to globalization. Customers are presented with various selections of goods and services that are cheaper in addition to good value. It can be quite challenging to grasp the lead to satisfy the request for innovative, excellent, and inexpensive goods and services. Thus, to lead the pack of the competitive race, trend-setters are presently taking a shot at the improvement of a whole system for new items.
According to Johansen (2005), New Product Development (NPD) is the procedure that begins with designing a product, creating level of product introduction and is followed by the initiation of production. Handbook of New Product Development Management characterizes NPD as the exercises of a firm that prompts a surge of new or changed item market offerings after some time (Loch and Kavadias, 2008). New items are key to the survival and longevity of any firm (Ramasehan et al., 2002). Hence, organizations are constantly trying to upgrade
themselves by acquiring and developing brand new technologies (Rashidi Md Dom & Murad Ahmad, 2019).
The New Product Development (NPD) success has continuously considered as an important fragment of the business practices conducted by an organization. NPD is the chief driving force in ensuring the competitiveness of a company. Driven by the market globalization, technical developments and dynamic needs of the buyers, product advancement is made a priority of many organization’s tactical platforms which started in 2000 by Cooper (as cited in Ismail et al., (2012)).
In attaining the similar competitiveness and innovative capability as the global standard, there are on-going, nonstop development efforts from the manufacturing sector in Malaysia.
Malaysia also has become one of the countries known to manufacture a high technology and value-added, sophisticated products and services for the future (Latib, 2011). The 11th Malaysia plan (2016 – 2020), manufacturing targeted a growth rate of 5.1 per cent annual (Kasava, Yusof, Zameri, & Saman, 2020, Cheong et al., 2019).
In fact, in the twenty-first century, it is observed that there is surge in the demand for environmentally-friendly items and requirement for greener products, in such as a way environment-friendly process must take precedence over the organization profit (Nunes &
Bennett, 2010). For the automotive industry, the environmental impact began from the source of material which could be the major impacts on production of the vehicle (Mildenberger &
Khare, 2000). It is for this reason the Malaysian automotive industry posed a level of challenges to the industry itself in the future (Rosli, 2006).
Malaysia is one of the fastest developing economies in Asia, with Gross Domestic Product (GDP) at a normal rate of 5% in the 1980s and over 7% in the 1990s (MIDA, 2010). The GDP development rate in 2012 was reported at 5.6% (Ministry of International Trade and Industry, 2013). A standout amongst the most critical areas in driving Malaysian economy is the manufacturing industry.
The car business in Malaysia has contributed essentially to the monetary exercises in which it provides a livelihood to more than 200,000 people (Ragayah & Shahadan, 2009). Although, automotive products may have contributed to the economy, the processes of making the automotive products have a significant impact on the environment (Nunes & Bennett, 2010).
The history of Malaysian automotive industry began in 1983 when the first national car, Proton was introduced. The establishment of the national car was a strategic plan of the government of Malaysia to brand manufacturing sector as the backbone of the nation’s financial development (Abdulsomad, 1999). Furthermore, the establishment of the second national car company, Perodua was a national agenda for the automotive industry which can be traced in 1993. To affirm its commitment to building sustainable automotive industry, the government announced the National Automotive Policy (NAP) in 2006. NAP was reviewed in 2009 to enhance the result of the sector (Wad and Govindaraju, 2011).
The automotive industry has played an important role to boost improvements of the Malaysia’s manufacturing business (Kari and Rasiah, 2008). The first nation car project was successful. Proton as a company expanded its business by venturing into the international market. However, to become a leader in a highly competitive industry, players in automotive and other manufacturing sectors must enhance their competitiveness especially in product
100 and market development (Usman, Hashim, Salim, Shariff, & Bakar, 2019; Wad, P., &
Govindaraju, 2011)
Table 1 provides a glimpse on the importance and the updated status in Malaysian automotive industry. By looking at the milestones and achievements made so far, it can be concluded that the sectoe is a significant supplier to the Malaysian economy (Kari and Rasiah, 2008; Noor Hasmini, 2012). Hence, this research on Malaysian automotive industry is extremely important.
Table 1: Current Status of Malaysian Automotive Industry
No Industry Achievements Outcomes
1 2 3 4
Total number of new passenger cars registered in 2012
Total number of new passenger cars produced and assembled in 2012
The percentage increase in total number of new passenger cars registered in last 5 years (2008 – 2012) The percentage increase in total number of new passenger cars produced and assembled in last 5 year (2008 – 2012)
552,189 509,621 About 10%
About 5%
Sources: Malaysia Automobile Association (2013)
5 6
7 8
9
Number of manufacturing licenses issued Number of assembly plants and manufacturers
Total production capacity Spare parts manufacturing
Total Employment Generated
77
Currently 35 licensed motor vehicle assembly plants and manufacturers in operation.
More than 80,000 units
More than 700 component parts manufacturers producing more than 5,000 parts.
More than 300,000 workers
Sources: Asia-Pacific Economic Cooperation (2012)
The year 2015 had been extremely challenging and precarious year for Malaysia. There were a few issues that significantly affected the development of the nation's economy. The key ones were the stoppage in worldwide economy especially China, the fall of raw petroleum cost and items, and the debilitating of the Malaysian Ringgit versus significant world monetary standards particularly against the US Dollar (Malaysian Automotive Association, 2015).
Based on the latest available statistic in Figure 1, Malaysia's economy grew 4.7% in the second from last quarter of 2015, its slowest rate in more than two years. Development had been on a downtrend a year ago, having extended by 5.6% in the principal quarter and 4.9%
in the second quarter of 2015. The authorities have yet to announce the fourth quarter 2015 Gross Domestic Product (GDP). Nonetheless, the government forecasted the full year Gross Domestic Product (GDP) in the range of 4.5% to 5.5% for 2015.
Figure 1: GDP 2015 versus 2014, by quarter Source: Malaysia Automotive Association (2015)
Besides the weak external economic environment, the nation confronted a few household issues which had hosed business certainty and additionally general buyers' opinion. Among the issues were the difficulties emerging from the execution of the Goods and Services Tax (GST), increasing average cost for basic items, and deteriorating Ringgit versus the major outside monetary forms especially US Dollar.. In spite of the different issues and challenges, and as opposed to the prospects communicated by a few experts, the resident car industry stayed versatile and had performed moderately well in the year under survey.
The Total Industry Volume in 2015 extended to 666,674 units, overshadowing the past 2014 deals record of 666,487 units. In contrast with the year 2014, the enrolment of new engine vehicles for the year 2015 hopped 187 units or a development of just 0.03%. The trend is illustrated in Figure 2. Regardless of such a little development, it is in any case another unequaled high record accomplishment for the nearby car industry.
Figure 2: TIV Trend from 2009 to 2015 Source: Malaysia Automotive Association (2015)
Problem Statement
NPD success is an interlinked arrangement of data handling assignment where the comprehension of client needs are converted into a final item achievement (Meybodi, 2003).
With a specific end goal to build the likeliness for a task to be fruitful, it is vital for the association to comprehend what are the issues concerning the NPD success. These variables must be deliberately and quantitatively surveyed by envisioning conceivable certainties and selecting fitting techniques for managing them (Mobe and Parker, 2002).
The opening of the market because of the ASEAN Free Trade Agreement (AFTA) has influenced national autos local market of the overall industry to under 60% (Industry
102 Malaysian-German Chamber of Commerce, 2012). National auto strength is required to gradually decrease with more progression sooner rather than later. Life cycles of items are diminishing each year. Conversely, the demand by the clients is prone to be expanded drastically. Choosing the correct arrangement of NPD is basic for the to ensure long-term accomplishment of the business with the need to react rapidly to client necessities and with expanded many-sided quality of item achievement and quickly evolving advancements (Chen et al., 2008).
Claudio and Manzur (1998)Claudio and Manzur (1998) hypothesize that information technology capability as a good defence in the application of business policy. An effective implementation of IT capability would reduce the vulnerability by lowering the cost of anticipated project failures and improving the adaptability by lowering the adjustment cost ( Malhotra, A., Gosain, S., & El Sawy, 2005; Ozer, 2000) contended that IT can surge and advance productivity, speed collaboration, coordination and communication to achieve NPD success. From the organizational viewpoint, a great pressure is imposed on almost every organization to ensure their operational, tactical, and strategic activities are more effective and efficient. The increasingly attractive ways of enhancing these practices lie in the wide selection of IT-based solutions.
The achievement of another item is subject to effective application of these exercises. One approach to encourage the execution of these exercises is to utilize the media of data innovation capacity. All in all, data innovation ability incorporates PC equipment, programming, and correspondence frameworks, and in addition individuals off camera and assets devoted to help these capacities. Data innovation ability was utilized to encourage the gathering, investigation perspective, and distribution of task-related data (Stump et al., 1997).
competitiveness Organizations put intensely in data innovation capacity to upgrade their budgetary execution and enhance their market aggressiveness with new products success (King et al., 1989). For example, information technology (IT) capability has been used in purchasing (Stump et al., 1997), manufacturing (Weill, 1992), and sales (Goldstein, 1990).
Information technology (IT) capacity is essential to the success of new product development (NPD). The expanded rivalry requires speedier new item prologue to the market, globalization of new item abilities makes it harder to get new item groups in a single area for creation, and along these lines, utilizing electronic information sources are required to be disseminated knowledge among new item groups (Langham, 1995). IT capability is useful to forecast potential pitfalls while gearing it for success. New product development is important to raise the economy of information technology in a country. Information technology capability is used to accomplish the disseminated information and in so doing increase new product development success (Pavlou and El Sawy, 2006; Nambisan s, 2003).
Firms spend a lot of cash on data innovation (IT) to enhance their procedures, along these lines lessening costs, upgrading quality and getting their goods and services to the market quicker. Thus, understanding the successful connection between the new product development (NPD) groups and IT division can demonstrate whether firms receive the normal rewards from their IT. Henceforth, the motivation behind this paper is to give an underlying perception that aides in perceiving the distinct relationship between the IT division and NPD groups.
2. Literature Review IT Capability
The IT Capability is probably a crucial discovery of the 21st century which is essential in every aspect of daily life, industry, and economy. business associations put many billions of dollars in Information Technology (IT) (Barua, Kriebel, and Mukhopadhyay, 1995). The execution of the Malaysia Industrialization Plan in 1985 had transformed the country’s economic structure away from agricultural-based economy (Nazar, Nurhidayah, Roslen, &
Sahlan, 2019). Schnitt (1993) found that the spending on IT represent approximately 33% of all uses and it is the solely biggest item in the capital spending plan of US enterprises because information technology capability plays a major role in development. Indeed, IT has become the most effective tool that could generate extremely invisible capability in all areas of competitiveness in this era of a knowledge-based economy (K-economy). Based on previous studies, IT is recognized for its part in producing competitive and initial advantage and long- term sustained competitive advantage (Bakar, Z. A., Yaacob, N. A., Udin, Z. M., Hanaysha, J. R., & Loon, 2019).
Li, Chen and Huang (2006) suggested that the capability has been recognized in creating significant influence on the performance of an organization. Therefore, it is important for managers to make a deliberated effort toward developing a performance-driven organizational culture (Shaari, 2019). Several studies have revealed that an organization’s capabilities are more difficult to be replicated or imitated than the organization’s resources because they would have created a new approach. Hence, these studies proposed an “IT Capability” concept to explain the value of IT as an element of the organization’s capabilities in intelligence and skill (Bharadwaj, 2000). In this study, we will investigate the technology capability from a different angle by investigating the influence of IT Capability on the success of new product development with top management support as moderating variable due to the large cost and effect of such involvement.
The idea of IT Capability was first presented by Ross, Mathis, and Dale (1996). They contend that the firms’ accomplishment are not to be ensured by only it, but rather by utilizing data innovation ability and utilizing data innovation in help of the dynamic business opportunities.
As it were, associations must not just depend on obtaining data innovation foundation. Thus, in order to gain the competitive advantage, the acquisition and nurturing internal capabilities is probably the most effective way to manage the infrastructure which is operated by highly skilled information technology human resources (Jacks, T., Palvia, P., Schilhavy, R., &
Wang, 2011).
Based on previous studies, IT is recognized for its part in producing competitive and initial advantage and long-term sustained competitive advantage (Barney, 1991; Feeny, D. F., &
Ives, 1990). However, IT could not stand by itself to assure sustained competitive advantage.
It has to work with other elements such as complementary human involvement intangible business resources to achieve the objective (Powell and Dent-Micallef, 1997).
In this paper, information technology competency denotes to IT Capability are consisted of three key constituents; IT operations, IT objects and IT knowledge (Tippins, M. J., & Sohi, 2003).
104 IT Operations
Mitcham and Mackey (1983), stated that the technical operations include events that are carried out to attain a specific positive objective. Noel Capon and Glazer (1987) postulate that conceptualization tallies with the notion of process technology that refers to a series actions utilized to achieve the intended goal. The technical operations are also deemed as an indicator of technical knowledge that will influence technical operation or expertise. In turn, it will increase the performance of work which would indirectly and positively influence the new product development success. Nonetheless, all these are only possible with capable operatives.
IT Objects
According to Reardon, Hasty and Coe (1996), IT object is relatively easy to be measured as suggested by previous studies. IT objects generally functioned as the enablers and are mostly responsible for the present growth of production and distribution of information (Glazer, 1991). In addition, (Martin, 1999) describes IT objects as a tool which facilitates the acquisition, processing, storing, utilization and dissemination of information. To fulfil the aim of this paper, the conceptualization of IT objects For purpose of research, the conceptualization of IT objects signifies software, IT-based hardware, software, human resource support, and network components since without human intellect involvement, nothing is possible and new product development is unattainable.
IT Knowledge
With the assumption that information combined with experience, reflection, understanding context, it holds a tacit element which is challenging to be measured (Davenport, Long, and Beers, 1998). Noel Capon and Glazer (1987) postulate that information technology knowledge is unique as a component of the wider formation of knowledge when compared with other domains of knowledge. IT principles are described as a set of values and practices beneficial in stimulating revolution towards anticipated objectives with inputs from principle user.
IT knowledge is also defined as situation based know-hows which given certain exact circumstances, the appropriate series of activities and management of right choice may direct to foreseeable results (Tippins and Sohi, 2003). For purpose of this research, information technology knowledge is conceptualized as the degree to which a firm is armed with technical information concerning matters such as IT-based information systems. Bassellier, Reich, and Benbasat (2001) address the concept of IT knowledge to include not only limited to skills but also emotional and recommends that it has two primary dimensions namely tacit and explicit knowledge. In addition, with the rapid pace of development around the world, emphasis must not only be on content knowledge but also on developing soft skills with an emphasis on critical thinking (Choy, Yim, & Tan, 2020). The approach or method use in the knowledge sharing process must be appropriate with the learners’ learning style (Noor, Othman, Anom, Rashid, & Ismail, 2019).
New Product Development (NPD) Success
There is a great deal of elements that add to the success of new product development in any industry, and these components will be inspected in this investigation. Montoya-Weiss and Calatone (1994) in their past observational research on new product performance has given extensive confirmation that a wide assortment of forerunner variables can impact the results of new product development process and cause adequate outcomes.
The discoveries from the past examination proposed that capability in new product development can add to the accomplishment of many organizations and lift overall revenue.
Poolton and Barclay (1998) contended that organizations can enhance their adequacy when propelling new items to achieve a greater market and they can twofold their primary concern.
It is a region with the enormous potential for control and change. Wherein the previous decades, a great deal of studies have concentrate on the failure or success of new product development associated with critical success factors (CSFs).
Associations which spend their assets on factors recognize their failure and success (Bullen and Rockart, 1981). According to (Freund, 1988) critical success factors (CSFs) must be taken into consideration to have a successful company and several other things that organizations need to apply perfectly to expand their industry (Leidecker and Bruno, 1984).
Even though satisfying critical success factors does not guarantee success to sustain competitive advantage, there is risk of competitive failure in some cases if they are not satisfied in view of fulfilment of corporate objective (Freund, 1988).
Relation between IT Capability and NPD Success
New product development success is assumed to be important for the long-term survival of the industry (Cooper, 1996). However, at the same time, it is a risky and time-consuming due to complexity arising from the work performed, which would increase costs (Stalk, 1998;
Coleman, 1998). It also necessitates the teamwork, communication, and organization of cross-functional and cross-regional teams (Graber, 1996).Also, new product development includes numerous actions such as the initiation of preliminary detailed investigation, followed by developments, testing and validation, full production, and finally market launch (Cooper, 1996). Other requirements include knowledge creation, sharing (Lynn, 1998) and involvement of difficult decisions (Markowitz, 1997). The new product development process needs to generate superior products that will bring benefits and success (Brentani et al., 1996;
Cooper, 1996).
New product development (NPD) success is an arrangement of related and group based undertakings. New items for the most part represent 33% of every one of organizations' deals and benefits (Pavlou and El Sawy, 2006). NPD exercises expend 3% of the U.S. Gross domestic product (OECD, 2012) and they are progressively upheld by IT ability (Barczak et al., 2007; Pavlou and El Sawy, 2006; Nambisan, 2003). For instance, Microsoft spends more than 45% of its data innovation spending plan to help new item product development activities and as the answers to promote development (Durmusoglu, 2009). In this way, it is critical to see how NPD groups can be utilized to use data innovation capacity to enhance new item improvement achievement (Addas and Pinsonneault, 2014). Information technology (IT) has become the most effective tools that could generate extremely invisible capability in the competitive era of K-economy.
With the fast technological changes occurring and particularly with the appearance of Web 2.0, such information procedures may likewise cross limits and brings helpful components.
For example, new product development in an association generally utilizes Web 2.0 apparatuses to source learning from clients in every aspect of the new product development process. The production of ideas for designing product, support, and testing it with the group's information to enhance the success of new product development conveys new idea for observation.
106 In view of past investigations of 71 product development groups crosswise over different ventures, it was discovered that the execution of collective programming upgrades participation recurrence with power in the groups, which thus enhances item quality and accelerates improvement time (Banker et al., 2006). An investigation of 69 programming development groups in an extensive association found that product development execution is upgraded for the most part by two measurements of mastery coordination; the first is knowing the expertise area and bring the expertise to produce great outcomes (Faraj and Sproull, 2000).
Similarly critical, a contextual analysis of a Brazilian organization manufacturing industry materials demonstrated that the business' databases and Intranet upheld the stream of information between new item product development experts and enhanced new product development success (Laurindo and De Carvalho MM, 2005). Table 2 depicts the information technology capability and new product development success.
Table 2: Summary of Selected Studies on IT Capability towards NPD success
Methodology Key Findings Source
Survey of 184 virtual NPD team members from three global Fortune 500 industries
Survey: 212 PDMA practitioner members covering various industries in the U.S.A and
Canada; 118 Dutch NPD members in engineering, R&D, and
marketing
Survey of 212 PDMA practitioner members covering various
industries in the U.S.A, and Canada
Survey of 21 IT manager and 21 new product development (NPD) manager from various
manufacturing SMEs
NPD team success varies with different patterns of information technology capability used
IT capability used has a positive influence on market performance only for the U.S. sample, and a positive influence on cycle time only for the Dutch sample
IT capability use in new product development has a positive effect on market success, but no effect on cycle time
Have a relationship with information technology capability towards new product development (NPD) success whereby IT capability supports the New product development (NPD) success.
(Montoya et al., 2009)
(Barczak et al., 2008)
(Barczak et al., 2007)
(Barczak et al., 2007)
(Durmusoglu et al., 2006)
An evaluation of current business distributions demonstrates that organizations are to a great extent utilizing data innovation capacity in their new product development exercises to gain the competitive advantage. Information technology capacity has a major effect and has turned out to be critical in expanding the new product development (NPD).
The accomplishment of a new product is reliant on the effective execution of these exercises.
One method for encouraging the usage of these exercises is to utilize the media of information technology ability. Another expansion to this investigation is analyze IT framework ability and the NPD procedure relationship from an exchange cost financial matters point-of-view (Williamson, 1981). It can be set that a more broad IT framework
ability would diminish the transaction costs between the firm and its providers, and along these lines enhance NPD process efficiency by decreasing the cost of the procedure.
Research Framework and Hypothesis
This paper endeavours to fill the hypothetical and practical gaps by designed a conceptual framework for future research to give exact proof on the connections that exist between IT Capability and New Product Development success. Figure 3 portrays the conceptual framework which signifies the key variables of this investigation.
Figure 3: Conceptual Framework
The connection between IT Capability and New Product Development (NPD) success depends on the Resource Based View (RBV) hypothesis that proposes the execution of an association is impacted by internal assets. A business attains improved performance than its rivals by efficiently employs its internal assets. Nevertheless, in order to promote distinguishing abilities, the assets must be unusual, valued, non-imitable, non-substitutable and non-transferable(Barney, 1991).
According to (Sekaran, 2003), the concept of a conceptual framework is to explain the relationship between the variables in a study. The development of the conceptual framework in this study is based on the outcome of the reviews of literature on theories and concept of IT Capability.
Hypotheses are statements in a quantitative study, where a prediction or a conjecture is formulated about the result of a relationship between the variables or attributes. In a quantitative research, the main focus is mostly on numerical results by limiting human factor influence. The results produced are objective and unbiased by reducing the influence by the researcher (Hussey and Hussey, 1997). (Manheim and Rich (1995) postulate that a quantitative research is a collection of primary data from a set of sample data, which is utilized to make presumption over a larger population. Creswell (2012) states that hypotheses are traditionally used in experimental research and they serve as research questions that narrow the purpose statement to specific predictions. The hypothesis is a clear statement of what is anticipated to be examined. Usually, hypothesis development is established prior to the conduct of the research that identifies the main concepts involved in the research. The high-level hypotheses statements are as follows:
H1: Information technology capability is significantly related to new product development success.
The samples for this study will be selected according to the firms registered in the Directory of MATRADE, Malaysian Automotive Institute (MAI), Proton's directory, Perodua's directory, Toyota’s directory and Honda’s directory. The screening was carried out and only companies that actively and directly deal with the carmakers are selected as the population.
IT Capability IT Operations IT Objects IT Knowledge
New Product Development (NPD) Success
Independent Variable Dependent Variable
108 The calculation provided by Krejcie and Morgan (1970) is employed in this investigation to identify the sample size in accordance with the confidence level desired from a selected population.
The objective of developing the instruments is to obtain measures of the research constructs.
The basis for the instrument development of this study arises from the proposed conceptual framework and existing literature on information technology capability and new product development success. The instrument employed by this study to collect data is in the form of questionnaires. It is considered one of the most appropriate data collection instruments used by survey-based researchers (Sekaran, 2003).
4. Conclusion
This study is focused on establishing the importance of IT Capabilities as an instrument to facilitate operations and enhance capabilities for the development of new products. This study also offers a conceptual framework for future studies to deliver empirical evidence of the existing relationship between IT Capabilities and the of New Product Development success. It is hoped that the findings in this research will help top-level management to justify investments and further efforts to enhance the success of new product development. In addition, this study provides a better understanding to decision-makers on key roles of IT Capabilities in relation to the success of new product development and encourage their participation to be more competitive.
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