In union lies strength: Collaborative competence in new product development and its performance effects Anant A. Mishra 1 , Rachna Shah * Carlson School of Management, University of Minnesota, 321 Nineteenth Avenue South, Minneapolis, MN 55455-0438, United States 1. Introduction New product development (NPD) is a key source of competitive advantage for individual firms (Verona, 1999). Successful NPD requires firms to develop routines and practices to collaborate with suppliers, customers, and internal cross-functional employee teams. While some firms are able to involve key suppliers in their NPD endeavors, others are more effective in collaborating with customers. Still others develop expertise in leveraging advantages garnered from involving their own employees in product development teams. Few firms, however, develop the competence to engage suppliers, customers, and internal employees simultaneously in their NPD projects. We believe that the ability to simultaneously collaborate with suppliers, customers, and cross-func- tional teams in NPD is a valuable – yet rare – firm level capability. We label it collaborative competence in this study. The notion that focal firms need to integrate externally with their suppliers and customers and internally across different functions to achieve NPD success is not a new idea; it has a rich history in the organizational strategy (Bajaj et al., 2004; Grant, 1996; Bensaou and Venkatraman, 1995; Kogut and Zander, 1992) and supply chain literature (Frohlich and Westbrook, 2001; Hammel and Kopczak, 1993). Frohlich and Westbrook (2001) demonstrate empirically that firms with the widest arc of integration (i.e., firms that integrate both suppliers and customers into the activities of the focal firm) have the strongest association with performance improvement as compared to firms that integrate only suppliers or only customers. The practitioner literature also highlights the superior performance benefits of simultaneously involving multiple Journal of Operations Management 27 (2009) 324–338 ARTICLE INFO Article history: Received 23 January 2007 Received in revised form 7 October 2008 Accepted 9 October 2008 Available online 22 October 2008 Keywords: Collaborative competence Product development Resource based view Complementarity theory Structural equations modeling ABSTRACT It is widely recognized that new product development (NPD) is a highly interdependent process, yet efforts to empirically model the interdependence and examine its effect on firm performance are scarce. Our study addresses this research gap. We model firms’ abilities to collectively collaborate with suppliers, customers, and internal employee teams in NPD as collaborative competence and examine its impact on project and market performance. Using responses collected from 189 NPD managers, we find empirical evidence for collaborative competence and its differential impact on project and market performance. Specifically, we find that collaborative competence has a direct impact on project performance, but its impact on market performance is indirect, mediated through project performance. The results have significant managerial implications; achieving superior market performance from inter- and intra-organizational involvement is contingent on achieving superior project performance, and companies that fail to achieve desired project performance outcomes will also fail in achieving market performance goals. Published by Elsevier B.V. * Corresponding author. Tel.: +1 612 624 4432; fax: +1 612 624 8804. E-mail addresses: mish0049@umn.edu (A.A. Mishra), shahx024@umn.edu (R. Shah). 1 Tel.: +1 612 626 9761; fax: +1 612 624 8804. Contents lists available at ScienceDirect Journal of Operations Management journal homepage: www.elsevier.com/locate/jom 0272-6963/$ – see front matter . Published by Elsevier B.V. doi:10.1016/j.jom.2008.10.001