Organizational Structure, Cross-functional Integration and Performance of New Product Development Team

Wenxiao Bai; Yicheng Feng; Yunju Yue; Lijie Feng

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Available online at www.sciencedirect.com

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Procedía Engineering 174 (2017) 621 - 629

Procedía Engineering

www.elsevier.com/locate/procedia

13 th Global Congress on Manufacturing and Management, GCMM 2016

Organizational Structure, Cross-Functional Integration and Performance of New Product Development Team

Wenxiao Baia, Yicheng Fengb, Yunju Yuea, Lijie Fenga* aWenxiao Bai, Zhengzhou and 450001,China bYicheng Feng, New York and NY10027,,the USA

Abstract

In the era of global competition, how to improve the performance of new product development team is an important scientific issue. In this study, with the organizational structure of the enterprise as the explanatory variable, the cross-functional integration of the team as the intermediary variable, a cross level conceptual model is constructed to analyze the performance of new product development team, and the survey data of manufacturing industry and hightech industry in China are analyzed by using multilevel linear model. The research results show that the characteristics of organizational structure has impact of cross levels on performance of new product development team, cross-functional integration of the team has a partial mediating effect between the mechanical organization and the performance of the new product development team and a complete mediating effect between the organic organization and the performance of the new product development team. © 2017Published byElsevier Ltd. Thisisan openaccess article under the CC BY-NC-ND license (http://creativecommons.Org/licenses/by-nc-nd/4.0/).

Peer-review under responsibility of the organizing committee of the 13th Global Congress on Manufacturing and Management Keywords: Organizational Structure; Cross-functional integration; Performance of new product development team; Multi layer linear model

1. Introduction

With the rapid development of science and technology and market demand, the development of new products has become the key to the survival and sustainable development of enterprises. The new product development(NPD) team has been regarded as an effective way to deal with the current competitive environment, in order to integrate the enterprise knowledge resources, accelerate the process of product innovation, so as to improve the profitability

* Corresponding author. Tel.: 18236911807; fax: +0-000-000-0000 . E-mail address: 451068991@qq.com

Peer-review under responsibility of the organizing committee of the 13 th Global Congress on Manufacturing and Management doi:10.1016/j.proeng.2017.01.198

and core competitiveness of enterprises. However, because of the complexity and high risk of the new product development process itself, high failure rate of new product development and low efficiency seriously hindered the enterprise product development, how to promote the performance of new product development team has become an important problem of the enterprise needs to be solved.

According to the survey of Chinese Enterprises Association (2012), China's enterprises have excessive levels of organizational structure, rigid mechanism, poor information transfer and so on, which is one of the important factors leading to low innovation ability. At the same time, due to the development of new products is a complex activity which has multi-level overlapping and multi elements existing, a number of departments of product development, manufacturing and marketing will be involved in the process of NPD, so the effective integration and management of these functions has become the key issue for the success of NPD[1]. Many scholars have studied the performance of the NPD team from the perspective of organizational characteristics, corporate culture, knowledge management and so on[2-5]. However, there is still a lack of systematic research on the impact of organizational structure on cross-functional integration, the mediating role of cross functional integration between organizational structure characteristics and the performance of NPD team.

Based on this, this paper intends to use cross level analysis method to study the cross level influence relationship between organizational structure of enterprise level, cross-functional integration capabilities of team level and new product development team performance. We explore that the organizational structure of enterprises is how to effect the performance of NPD team through the intermediary of cross-functional integration by an empirical research on China's manufacturing industry and high-tech enterprises, in order to provide the theory and practice guidance for enterprises to improve the cross-functional integration and management, enhance the performance of NPD team through the organization innovation.

2. Theoretical basis and research hypothesis

2.1. Definition of concept

a. Organization structure. Organizational structure refers to the formal arrangement of work roles in an organization and the mechanism of management and integration for work which includes Inter Organizational activities. It refers to a means to achieve business goals. Corporate goals can be reflected to many aspects concretely. But it can be concluded in two categories including efficiency in stable operation and innovation in dynamic adaptation. Correspondingly, there are two typical forms in organizational structure which include mechanical structure and organic structure. Mechanical organization structure is also called bureaucratic administrative organization structure. Enterprises have a high degree of labor division and functional division for the work, and choose the qualified staff to meet the requirements of the job specification in the way of objection and not to subject to individual emotional impact. And they implement the strict level of control on the specialized work which is divided and develop a number of procedures, norms and standards at the same time. Organic organizational structure is also called adaptive organizational structure. Under this kind of organization structure, the enterprises do not set the permanent fixed position and the functional boundary to strictly determine the department. Grassroots personnel have the right to decide on the action that should be taken according to their own skills and information mastering. Direct, horizontal and oblique communication and coordination between members replace the vertical communication and level control to become the main means to achieve the goals.

b. Cross-functional integration. In order to overcome the barriers and conflicts between functions, cross-functional integration has been highly concerned by many scholars. According to the definition of Troy[6] and other scholars, cross-functional integration refers to information sharing, communication and level of innovation participation of departments of research and development, marketing and manufacturing in the process of product development, production and commercialization and so on, belonging to the concept in team level. The existing researches on the cooperation across function of NPD team mostly develop around the perspective of information processing theory and resource dependence theory. Information processing view looks at the interface activities of departments of research and development, marketing and manufacturing from the perspective of information exchange, and thinks that successful development of new product requires inter departmental information integration[7]. Therefore the high degree of information transfer between functions will have a positive impact on decision making and innovation performance in the process of product development[8]. Resource dependency

theory thinks that because of the lack of the sufficient resources to complete the new product development project independently in the departments of research and development, marketing and manufacturing, the success of new product development in a large extent depends on the knowledge sharing between the various departments of the enterprise and the ability to effectively solve the task interdependence of the research and development across-functional team facing [9].

c. Performance of new product development team. The NPD team mentioned in this study belongs to the working group, locates at the output of new knowledge or applys a new approach to the application of knowledge to achieve significant, novel and creative innovation. The study adapts the view of Faraj and Sproull to define the performance of the NPD team[10]. It divides NPD team performance into task related outputs and employee related outputs, in which task related outputs include process performance and outcome performance.

2.2. Research hypothesis

2.2.1 Influence of organizational structure on cross-functional integration

Each department in the mechanical organization structure has the relatively formal roles and responsibilities, the relatively concentrative programs and the functional structure, efficiency-oriented enterprise culture, highly specialized operation process, strong manufacturing and sales skills, and relatively homogeneous, older, and experienced human resource base. When building a cross-functional team in a mechanical organization, the organizational structure is distinct hierarchy and strictly follows the unified command chain, which caused that the information sharing among the members of the NPD team from different functional departments is limited by the fixed vertical communication channels, and information transfer efficiency is low, therefore it is difficult to form an effective integration. At the same time, the members in the cross-functional integration team are faced with the task interdependence and outcome interdependence in a high degree[11]. Because of the clear roles and functional focus in each department of mechanical structure, the boundary permeability between the various functional departments is poor, organization members are lacking of mobility and the adaptability to interdependence with high degree is poor.

Organic organizational structure, with the pioneering spirit and encouraging innovation, is a kind of loose and flexible form which has high adaptability, which can quickly make adjustments according to the needs. Its ability, structure and culture have the consistency of high degree with the original organization. And it is not affected by the mainstream business customers and integrates themselves into another type of customers. When performing cross-functional integration in an organic organization, the multi-dimensional, horizontal and vertical interaction and communication in the organization can effectively improve the knowledge sharing and integration among different functional departments. At the same time, the interaction among the members of the organization is high, the cooperation relationship is good, and the boundary permeability is high which performs as accessing information with multi-channel and multi-way so it is able to obtain and capture external resources more widely. Based on this, the study proposes the following hypotheses:

H1a: Mechanical organization has a significant negative impact on cross-functional integration.

H1b: Organic organization has a significant positive impact on cross-functional integration.

2.2.2 Effects of cross-functional integration on the performance of new product development team

Cross-functional integration of research and development, manufacturing and marketing has a very important role in promoting the performance of new product development. The research of Barczak, Sultan and hulink[13] finds that occasional communication among the members of research and development and marketing departments often has high connection with the failure of the product development, while close communication and information sharing among team members will contribute to the success of product development. Empirical studies of Atuahene and Evangelista[14] have found that effective cross functional integration can accelerate the timing of new product development, shorten the period of listing, and enhance the collaboration degree of product line. Souder and Moenaert[15] conducted a longitudinal study for 289 new product development projects, and concluded that interface integration of the research and development and marketing is closely related to the success of and product innovation. Based on this, the study proposes the following hypotheses:

H2: Cross-functional integration has a significant positive effect on the performance of new product development team.

2.3.3 The mediating role of cross-functional integration

Comprehending above analysis, this study thinks that the reason why the mechanical organization structure inhibits the promotion of the performance of the new product development team while the organic organization structure promotes the promotion of new product development team is that under the background of knowledge economy, the organic organization structure flattening and the flexible organization structure will facilitate the information sharing, knowledge integration and teamwork of new product development team, and further enhance the effectiveness of cross-functional integration, and help the NPD team to improve the performance of product development innovation. Iansiti[16] think that it is an inevitable trend to integrate the innovative products through cross-function. And the higher the integration degree is in the organization, the higher the efficiency of the new product development will be, and the products created are more in line with market demand. According to the relevant research, this paper tries to further explore the influence relationship cross levels between the organizational structure, cross-functional integration and the performance of the new product development team. It thinks that different organizational structures can promote or restrict the cross-functional integration of the team, and influence the performance of the new product development team of through cross-functional integration. Based on this, the study proposes the following hypotheses:

H3: Cross-functional integration has an intermediary role between organizational structure and the performance of new product development team.

3. Research design

3.1 Research method

This paper use HLM statistical methods and test the regression coefficients in order to test the mediating effect of cross functional integration on the organizational structure and the innovation performance of the new product development team, and the cross functional integration and new product development team innovation performance is the level-1 team level variables, organizational structure dimension is -2 level enterprise layer variable as is shown in figure 1.

Fig. 1 Research hierarchy framework

3.2 The selection of study sample and data collection

In order to meet the representative sample, this research sample enterprises must be manufacturing and hightech industries, and the enterprise which is asked to fill out a questionnaire must developed the new production at least one in the past three years successfully , and the questionnaire must be filled by the enterprise senior managers or project managers .The official data collection program is based on a key university alumni EMBA platform and the network of research team of enterprise , and it also received the help of a national high tech Industrial Development Zone in the acquisition process, the organizational level were collected 39 effective questionnaires, 229 valid questionnaires of team level, and there are 39 questionnaires valid in organization level and 229 valid in

the team level. The basic statistical characteristics of the sample is shown in Table 1. Table 1 Descriptive statistics of sample enterprises

Number of Number of

Attribute enterprises / Team ratio % Attribute enterprises / Team ratio %

Enterprise nature Enterprise scale

belong to the state 8 20.5 <100 people 2 5.1

collective 5 12.8 101~500 people 9 23.1

private 17 43.6 501~1000 people 7 18.0

joint venture 2 5.1 1001~2000 people 13 33.3

foreign capital 7 18.0 >2000 people 8 20.5

Owned industry Team size

Electronic

information 17 43.6 5~15 people 156

Biological medicine 7 18.0 >15 people 73

machine building 8 20.5 Team setup time

new material 3 7.7 Six months 31 13.5

agricultural technique 2 5.1 Half a year to 1 years 90 39.3

other 2 5.1 More than 1 years 108 47.2

3.3 The measurement of research variables

In this study, the variables of the questionnaire are measured by Likert 5 point method: "1" means "totally disagree", "5" means "totally agree". The organization structure scale is answered by the enterprise management. The organization structure scale is adapted based on the study of Miller and Droge[17] and so on, and the scale has a total of 12 items. The scale of mechanical organization includes: (A1)even if it is a very small matter, the staff also have to ask for instructions from their superiors, (A2)actions taken within the scope of their duties must also be agreed in advance by the superior, (A3)employees are unable to decide on their own way to deal with the special circumstances of their work, (A4) most of the business of the company has a formal process, and the formation of a written provision, (A5) the company has perfect rules and regulations, (A6) the company is strictly in accordance with the provisions of the procedures.(B1) between the enterprise management level is less the most senior leaders and employees, (B2) the views of staff transferred to business leaders quickly, (B3) market information of the products can be quickly feedback to the enterprise decision-making, (B4) the company was able to break departmental boundaries to collaborate in order to respond to changes in the market quickly, (B5) the company can rapidly respond to market integration of resources required, (B6) the company to promote team collaboration, in order to enhance the ability to cope with change.

According to the research of Nakata and Im[18], this paper use the research and development/production/marketing department in market opportunity analysis stage (C1), product planning stage (C2), the product development stage (C3), production stage (C4), the degree of integration of product commercialization stage (C5) five aspects to measure the research and development / production / Marketing cross functional integration.

According to the resrearch of Barczak, Sultan and Hultink[13], as well as Troy, Hirunyawipada and Paswan[6], the measurement of the performance of new product development is used by the market rate of new products (D1), the number of new products on the market (D2), the product development cost (D3), the performance of the quality of the new product (D4), the profitability of new products (D5) and other five items.

4 Results

4. 1 Reliability and validity test

First, exploratory factor analysis is used to analyze the data of scale item by SPSS17.0, and the results are shown in Table 2. The KMO value of the scale satisfies the condition of factor analysis. Principal component analysis is used to extract factor can get the factor load is in the 0.640~0.882 and the cross factor load is lower than 0.4, so that the factor structure is clear. The Cronbach's coefficient of the scale is higher than 0.7, which indicate that the scale has good reliability. Using AMOS software to verify the scale of the factor analysis, and the main results of the model overall adaptation are shown in Table 3. On the whole, the fitting of the model is better. Table 2 Exploratory factor analysis and reliability analysis

Variable

Organization structure

Mechanical

organization

Organic

organization

Cross functional integration (CFI)

Performance of new product development team (PNPDT)

Item Item load

A1 0.862

A2 0.816

A3 0.882

A4 0.817

A5 0.865

A6 0.747

B1 0.784

B2 0.850

B3 0.859

B4 0.841

B5 0.703

B6 0.829

C1 0.793

C2 0.811

C3 0.728

C4 0.846

C5 0.804

D1 0.803

D2 0.791

D3 0.642

D4 0.795

D5 0.731

Cronbach's ££

Table 3 Results of confirmatory factor analysis of each variable

Fitting index X V df AGFI PGFI NFI RFI CFI RMSEA

NPD team performance 2.88 0.85 0.74 0.94 0.89 0.98 0.031

functional 2.05 0.93 0.81 0.91 0.94 0.97 0.087

integration

Organization structure 2.76 0.87 0.79 0.96 0.91 0.93 0.056

4. 2 Descriptive statistics

In this study, using the mean value of each item in each variable represents the variables. Mean, standard deviation and correlation coefficient of each variable of the enterprise and the team are shown in Table 4. Since the direct effect of the enterprise organizational structure on the performance of the new product development team is

related to the cross level effect of the enterprise layer variables on the team variables, in addition to NPD team performance as the outcome variable, cross functional integration capability as an intermediary variable will also be used as a result variable to be explained by the enterprise layer variables. Therefore, according to the analysis step of the multi level intermediary effect, the correlation coefficient (ILL) of the product innovation team performance and knowledge integration ability variable is calculated, so as to judge the applicability of cross level analysis. Using HLM6 to the test of zero model (random effects ANOVA model) for product innovation team performance variables and knowledge integration ability variables, and calculating ICC values are 0.15 and 0.21 (greater than 0.06) respectively. Indicates that the difference among different enterprises occupies a significant proportion in the variance of two variables, and multi layer linear model is used for analysis. Table 4 Descriptive statistics of two level variables

Variable Sample number Mean value Standard deviation 1 2 ICC

Mechanical 39 39 3.46 2.89 0.76 0.89 1 0.316**

Organization organization structure Organic organization 1

Cross functional integration NPD team performance 229 229 2.82 2.79 0.82 0.79 1 0.602** 1 0.15 0.21

Notes: **present p<0.01, *present p<0.05 4. 3 Hypothesis test

The first step to test the mediating effect of HLM is to examine whether the low level of intermediate variables and outcome variables (cross functional integration and NPD team performance) can be explained by the high level of explanatory variables (organizational structure). The model does not have any level of explanatory variables called variable model (intercept-as-outcome model), which takes intercept for result. As shown in table 5. From the data of table 5, it can be known that the mechanical organization has a significant negative impact on cross functional integration ( y = —0.116, p < 0.01), and has a significant negative correlation on the performance of NPD team. So assume H1a is supported. It can be also known that the organic organization has a significant positive impact on cross functional integration( y = 0.112, p < 0.01), and has a significant positive correlation on the performance of NPD team. So assume H1b is supported. At the same time, the above model intercept variance were significant, which means after the respective explanations of enterprise organizational structure for the NPD team performance and the average number of cross functional integration of the two variables, there are still significant differences between enterprises and the difference between the average value of the enterprises needs to further increase the enterprise level variables to be explained.

The second step of multi level intermediary model is to test whether the team level explanatory variables, as the intervening variable (cross functional integration), on outcome variables (NPD team performance) is significantly correlated. The model does not add explanatory variables to the enterprise level. When the slope coefficient of the model is fixed in HLM, the model is called the covariance analysis model with random effects (Random ANCOVA). When the slope coefficient of the model is set to random effect in HLM, the model is called the random coefficient model (random coefficient models). From the analysis of table 5, we can know that the 7 coefficient of the random effects covariance model has reached a significant level ( y = 0.485, p < 0.01), that is, cross functional integration has a significant positive impact on the NPD team performance. The results of random coefficient model are similar to the results of the covariance analysis model of random effects( y = 0.467, p < 0.01),and the slope variance is not significant, which also means that the cross functional integration of intermediary variables has a significant positive correlation with NPD team performance. Therefore, this study assumes that H2 is supported.

Table 5 The estimated results of intercept model, analysis of covariance model and random coefficient model of HLM6

Fixed effect

Random effect

7 Value . Slope variance

variance

M11 MO^CFI /01 -0.116** 0.254** —

M12 MO^PNPDT f021 -0.117** 0.167* —

M21 OO^CFI 0.112** 0.269** —

M22 OO^PNPDT rrà 0.175** 0.271** —

M3 CFI^PNPDT /10 0.485** 0.288** —

M3 CFI^PNPDT /10 0.467** 0.293** 0.103

Notes: **present p<0.01, *present p<0.05

The third step to test the mediator effect model of HLM is to bring the enterprise level explanatory variables and intervening variables into multi-layer linear model, then test the interpretation of each of the variables to discriminate intermediary effect. According to the intermediary effect of the discriminant method of Hayes, from the

table 6, the /01 and y10 coefficients of model M41 are significant, which shows the cross functional integration in

the mechanical organization and NPD team performance has a partial mediating effect. The y01 and y10 coefficients of model M42 are not significant, which shows that cross functional integration in organic organization and NPD team performance has a complete mediating effect. In summary, this study assumes that H3 is supported. Table 6 The estimated results of multi layer mediator effect model of HLM6

Model Fixed effect Random effect

Y Value /10 Intercept variance

M41 MO> CFI^PNPDT -0.143** 0.385** 0.219**

M42 OO, CFI^PNPDT rh 0.135 0.463 0.203**

Notes: **present p<0.01, *present p<0.05 5 Conclusions and discussion

This paper investigates the front driving factors of cross-functional integration of the research and development/production/marketing and promotion mechanism of performance of new product development team, a cross level conceptual model is constructed, in which the organizational structure is regarded as exogenous variables, cross-functional integration as the intermediary variable, NPD team performance as endogenous variables. The empirical results based on the survey data show that: the characteristics of enterprise organization structure are important antecedents which impact cross-functional integration mechanism of team layer whether can play an important role or not. Cross-functional integration significantly improves performance of the NPD team. Cross-functional integration has a partial mediating effect between mechanical organization and performance of NPD teams and has a complete mediating effect between organic organization and performance of NPD team.

This study also has some shortcomings, mainly reflected in two aspects. First, the empirical data of this paper belongs to the cross section data. In the future, we can collect the data of time series to explore the causal

relationship between variables. Second, the research sample of this paper only includes the successful NPD project,

not including the failed project, which may make the research conclusions are affected by the Bias Effects

Survivorship. In the case of research funding and research conditions permitted, we can also collect the failed NPD

projects and form the control group in order to enhance the robustness of the conclusions of this study.

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