Networking capability and new product development

Current research on network theory remains largely focused on structures and outcomes without exploring the capability that firms need to build efficient and effective networks to their advantage. In this paper, we take a networking capability view in studying inter-firm relationships. We assume that firms create their networks strategically. We show a more compelling picture of how networking behavior influences new product development performance by developing a research design and statistical approach that addresses the endogeneity problem in network research. We argue theoretically and demonstrate empirically that networking capability is a reliable predictor of new product development performance. We find that interaction cost reduction, opportunity discovery, resource acquisition, and market knowledge generation and technology knowledge generation, respectively, mediate the positive relationship between networking capability and new product development performance. Third, we find that environmental dynamism acts as a moderating factor in the effect of networking capability on new product development performance, and the effect of networking capability on interaction cost reduction, opportunity discovery, resource acquisition, and market knowledge generation and technology knowledge generation are more salient when environmental dynamism is high than when it is low. The implication of the findings is that firms can develop strong networking capability to enhance product and technology innovation.