Spurring Cross-Functional Integration for Higher New Product Performance: A Group Effectiveness Perspective

Spurring integration among functional specialists so they collectively create successful, or high-performing, new products is a central interest of innovation practitioners and researchers. Firms are increasingly assembling cross-functional new product development (NPD) teams for this purpose. However, integration of team members' divergent orientations and expertise is notoriously difficult to achieve. Individuals from distinct functions such as design, marketing, manufacturing, and research and development (R&D) are often assigned to NPD teams but have contrasting backgrounds, priorities, and thought worlds. If not well managed, this diversity can yield unproductive conflict and chaos rather than successful new products. Firms are thus looking for avenues of integrating the varied expertise and orientations within these cross-functional teams. The aim of this study is to address two important and not fully resolved questions: (1) does cross-functional integration in NPD teams actually improve new product performance; and if so, (2) what are ways to strengthen integration? The study began by developing a model of cross-functional integration from the perspective of the group effectiveness theory. The theory has been used to explain the performance of a wide range of small, complex work groups; this study is the first application of the theory to NPD teams. The model developed from this theory was then tested by conducting a survey of dual informants in 206 NPD teams in an array of U. S. high-technology companies. In answer to the first research question, the findings show that cross-functional integration indeed contributes to new product performance as long conjectured. This finding is important in that it highlights that bringing together the skills, efforts, and knowledge of differing functions in an NPD team has a clear and coveted payoff: high-performing new products. In answer to the second question, the findings indicate that both intra-(or internal) and extra-(or external) team factors contribute and codetermine cross-functional integration. Specifically, social cohesion and superordinate identity as internal team factors and market-oriented reward system, planning process formalization, and managerial encouragement to take risks as external team factors foster integration. These findings underscore that spurring integration requires addressing the conditions inside as well as outside NPD teams. These specialized work groups operate as organizations within organizations; recognition of this in situ arrangement is the first step toward better managing and ensuring rewards from team integration. Based on these findings, managerial and research implications were drawn for team integration and new product performance.