Platform Strategy for New Product Development: The Mediating Effect of Product Platform Strategy in the Korean High Technology Industry

Platform Strategy for New Product Development: The Mediating Effect of Product Platform Strategy in the Korean High Technology Industry

Sang-Wuk Ku (Pai Chai University, South Korea)
DOI: 10.4018/978-1-7998-1125-1.ch006

Abstract

This chapter proves the mediating effect of product platform strategies on the relationship between a firm's subject, environment, and resources and the performance of new product development in the perspective of platform leadership. The author analyzed the mediating role of product platform strategy by considering CEO propensity, competition and customers, and competitiveness of retained resources. Compared to the past, in the perspective of platform leadership, the product platform strategy has a critical effect on the relationship between the business scope of a platform leader, the external relationship with complementors, and the internal organization of a platform leader impact on the performance of new product development. As a result of hierarchical regression analysis with the data of Korean high technology companies, the product platform strategy would be mediating the relationship between the antecedents such as CEO propensity, competition and customers, and competitiveness of retained resources and NPD performance.
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Introduction

Who has the highest company value in the high technology industry? What are the strategically competitive advantages for industry leaders? Are they own specific platforms? How do their platform effect on their new product development?

Nowadays, there are exploding number of new technology and products and increasing customer demands in many industries. Especially, current industry situation tells us the platform strategy as one of the key determinants of success for today’s high-technology companies. Many platform leaders such as Apple, Google, Samsung, etc. focus on the new product development as a growth strategy. For this, high technology companies should use product platform strategy for competitiveness, profitability, and growth.

Couple of decades ago, information technology as an industry platform has started to be discussed by Cusumano and several researchers. In the perspective of platform, Cusumano and Gawer (2002) proposed scope of the firm, external relationships with the complementors, internal organization, and platform technology as the determinants of platform leadership. This industry platform provides the concept of complementarity that the marginal profit of an activity is impacted by other activities, assets and activities. Complementors participate in the market cooperatively and are the subjects producing complements (Turnbull & Djoundourian 2003; Kubartz, Lu & Roeder, 2001; Tiwana 2008) such as customers, suppliers, and alliance partners (Cusumano & Gawer 2002).

This article investigates whether (1) CEO propensity, (2) competition and customers, and (3) competitiveness of retained resources leads to the improved product development performance. Especially, in the perspective of platform leadership, I intend to prove the mediating role of product platform strategy for the relationship between the above antecedents and NPD performance of the high technology companies. Even though new product development has been studied for a long time, very few studies on new product development related to product platform has been studied as a new paradigm on new product development in the high technology industry.

BACKGROUND

Key Terms in this Chapter

Network Externality: Network externalities are the effects a product or service has on a user while others are using the same or compatible products or services.

Platform Leadership: The determinants of platform leadership include scope of a firm, external relationship with complementors, internal organization, and platform technology.

Transaction Costs: The cost associated with exchange of goods or services and incurred in overcoming market imperfections. Examples of transaction costs are legal fees, informational costs, transportation costs, etc.

Complementary: When the marginal profit of an activity is increased by other increased activities, these are complementary each other.

Product Platform: A firm’s core product, a common basic product within family products, a product possibly generating derivative products, the hub in the value chain in high technology industry, and a product retaining technology platform.

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