Industrial Marketing Management xxx (xxxx) xxx–xxx Contents lists available at ScienceDirect Industrial Marketing Management journal homepage: www.elsevier.com/locate/indmarman Research paper Cannibalize and combine? The impact of ambidextrous innovation on organizational outcomes under market competition Nukhet Harmancioglua, , Maria Sääksjärvib, Erik Jan Hultinkb ⁎ a b College of Administrative Sciences and Economics, Koç University, Istanbul 34450, Turkey Dept. Product Innovation Management, Delft University of Technology, Landbergstraat 15, 2628, CE, Delft, the Netherlands A R TICL E INFO A BSTR A CT Keywords: Willingness to cannibalize Willingness to combine existing knowledge Ambidextrous innovations Partial least squares Chinese business How can a firm achieve ambidexterity? The present study proposes that the answer to this question lies in the distinction between ambidextrous culture and ambidextrous innovation. Drawing upon organizational learning theory and the source-position-performance framework, we propose that ambidexterity requires the adoption of two important organizational cultures, willingness to cannibalize (WTCA) and willingness to combine existing knowledge (WTCO), which allow firms to attain superior performance through the implementation of both radical and incremental (i.e., ambidextrous) innovations. Our major contribution lies in addressing the important debate in the literature on whether exploration and exploitation are complements or substitutes. Furthermore, competition intensity is a key condition that determines the degree to which the two types of organizational cultures and the two types of innovations are necessary for superior firm performance. The study uses data from multiple respondents from 199 Chinese firms. Our findings thus suggest that WTCA and WTCO, which are traditionally treated as opposites, are complements in generating radical innovations. 1. Introduction Organizational learning forms the cornerstone of innovation research. The seminal work of March (1991) distinguishes between two types of learning behavior: exploration and exploitation. According to March (1991, p. 85), exploration involves a search beyond a firm's current product market and the creation of new knowledge outside the firm's existing technological trajectories and market boundaries, whereas exploitation refers to the use and refinement of existing knowledge and skills (Kim & Atuahene-Gima, 2010; Kyriakopoulos & Moorman, 2004). The two types of learning are inherently different, and have both advantages and disadvantages: Exploitation tends to give immediate and predictable returns, but overreliance on existing competencies may lead to “capability-rigidity traps” (Leonard-Barton, 1992; Wu & Shanley, 2009). Although exploration may lead to “more bang for every buck” (Hamel & Getz, 2004; p. 27), the likelihood of reaping such returns from exploration is lower, thereby creating an endless cycle of “failure traps” (Gupta, Smith, & Shalley, 2006; Levinthal & March, 1993). Due to the inherent tension between exploration and exploitation, businesses would benefit from achieving an optimal balance (e.g., Benner & Tushman, 2003; Raisch, Birkinshaw, Probst, & Tushman, 2009). Tushman and O'Reilly (1996) were the first to propose the idea ⁎ of pursuing ambidexterity (a term first used by Duncan, 1976), which allows a firm to simultaneously develop exploration and exploitation in order to achieve superior performance. While both exploration and exploitation are vital for superior performance, how to effectively balance and manage these two processes remains unclear in the literature (Atuahene-Gima, 2005; Lisboa, Skarmeas, & Lages, 2011). Despite the growing interest in pursuing ambidexterity within an organization, empirical evidence on the relationship between ambidexterity and performance remains inconsistent (c.f., Zhang, Wu, & Cui, 2015). One important debate in the literature concerns whether exploration and exploitation are complements (Gibson & Birkinshaw, 2004; He & Wong, 2004; Katila & Ahuja, 2002; Kyriakopoulos & Moorman, 2004) or substitutes indicating a tradeoff between the two (Atuahene-Gima & Murray, 2004; Li, Chu, & Lin, 2010; Vorhies, Orr, & Bush, 2011). The “tradeoff view” dominating the organizational learning literature has concluded that firms tend to overemphasize exploitation (the use of known solutions) at the expense of exploration (the search for new solutions) (Denrell & March, 2001). Moreover, returns on exploitation decrease over time (Sahal, 1985), as the number of possible recombinations of knowledge components is limited. Kim and Kogut (1996) and Fleming (2001) suggest that when a group of technologies is repeatedly applied, the potential for future combinations among these technologies is exhausted, increasing the necessity for the exploration Corresponding author. E-mail addresses: nharmancioglu@ku.edu.tr (N. Harmancioglu), m.c.saaksjarvi@tudelft.nl (M. Sääksjärvi), h.j.hultink@tudelft.nl (E.J. Hultink). https://doi.org/10.1016/j.indmarman.2019.07.005 Received 15 July 2016; Received in revised form 28 October 2018; Accepted 16 July 2019 0019-8501/ © 2019 Elsevier Inc. All rights reserved. Please cite this article as: Nukhet Harmancioglu, Maria Sääksjärvi and Erik Jan Hultink, Industrial Marketing Management, https://doi.org/10.1016/j.indmarman.2019.07.005 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. & Ketchen, 2001; Noble & Mokwa, 1999; O'Cass, Heirati, & Viet Ngo, 2014). The exploration/exploitation dichotomy may resemble the incremental/radical dichotomy; however, the concepts are indeed different (Kyriakopoulos & Moorman, 2004). While organizational cultures are antecedents to the simultaneous pursuit of exploration and exploitation, their successful implementation in the form of ambidextrous innovation entails an organizational capability. We investigate two key organizational cultures that have traditionally been treated as opposites (c.f., Atuahene-Gima, 2005; Chandy & Tellis, 2000; Kim & Atuahene-Gima, 2010), i.e., willingness to cannibalize existing products (WTCA) and willingness to combine existing knowledge (WTCO), and their influence on NPD implementation capability (radical and incremental innovation). Radical new products involve state-of-the art technological advances for the firm and often offer new benefits to existing and new customers (Chandy & Tellis, 1998), while incremental new products are product improvements and line extensions involving minor changes in product benefits and technology (Danneels & Kleinschmidt, 2001). As our third contribution, we address the recent calls (c.f., Huang & Tsai, 2014) in the innovation barriers literature (Aarikka-Stenroos & Lehtimäki, 2014; Bessant, Öberg, & Trifilova, 2014; Voss, Sirdeshmukh, & Voss, 2008) for work on the impact of the environmental context through moderated mediation frameworks. The lack of clarity in the findings in the literature calls for more research to find the appropriate contingency factors that would allow a firm to manage the dilemma between exploration and exploitation so as to realize the potential benefits of both (e.g., Lavie, Kang, & Rosenkopf, 2011; Raisch et al., 2009). Since research on innovation barriers stresses the importance of competitive pressures (Mohnen & Rosa, 2002; Sandberg & AarikkaStenroos, 2014; Voss & Voss, 2000), we focus on competitive intensity in the market. We conduct our study in the Chinese market. Tellis, Prabhu, and Chandy (2009) point out that governments around the globe now recognize the contribution of innovations to their economic prosperity and growth. Today, many countries, including China, provide substantial governmental funds to foster the development of value- of new knowledge. These arguments suggest that the two processes are substitutes. On the other hand, Cohen and Levinthal (1990) argue for the “complementary view” and suggest that the exploration of knowledge from outside the company depends on the existing capacity of the firm to understand, assimilate and apply knowledge. Further, when a firm explores new knowledge, it adds heterogeneity to the firm's existing knowledge (Henderson & Clark, 1990; Zhou & Li, 2012), helping it to avoid core rigidity. Hence, our first contribution lies in tackling this issue and addressing two important research questions that remain unanswered: How can ambidexterity be achieved? Does it always pay off? We believe that the lack of clarity in the findings in the ambidexterity literature may be due to imprecise conceptualization (c.f., Kim & Atuahene-Gima, 2010; Turner, Swart, & Maylor, 2013). Kim and Atuahene-Gima (2010) attribute the inconclusive nature of the empirical evidence to the existence of different dimensions of organizational market learning and to possible different routes by which these learning dimensions are linked to performance. Relying on insights from organizational learning theory (Levinthal & March, 1993; March, 1991), we argue that conducting exploitation and exploration simultaneously is not a straightforward task, as they require radically different mindsets and organizational routines (Gupta et al., 2006; He & Wong, 2004). Culture facilitates the development of projects closely aligned with these capabilities, which are embodied in people and technical/managerial systems (Calantone & Rubera, 2012). In a similar vein, the existing conceptualizations in the literature are twofold: learning as an organizational culture (Chandy & Tellis, 1998; Hurley & Hult, 1998; Slater & Narver, 1995; Salavou, Baltas, & Lioukas, 2004) and learning as an organizational capability (Huber, 1991; Sinkula, 1994; Weerawardena, O'Cass, & Julian, 2006). This has led to studies that have investigated ambidexterity at the organization level versus the product level (please see Table 1 for a review). Drawing on the source-position-performance (SPP) framework (Day & Wensley, 1988), we distinguish between organizational sources (such as organizational culture) and product advantages (such as organizational capabilities), which ultimately determine firm performance (Hult Table 1 Empirical studies on ambidexterity. Author(s) (year) Journal Level of analysis Perspective Interaction effect 1 2 3 Katila and Ahuja (2002) Nerkar (2003) Kyriakopoulos and Moorman (2004) Organizational level Product level Organizational level Tradeoff Tradeoff Complementarity Yes Yes No 4 5 6 7 8 9 10 11 12 He and Wong (2004) Gibson and Birkinshaw (2004) Atuahene-Gima (2005) Lubatkin et al. (2006) Atuahene-Gima and Murray (2007) Jansen et al. (2006) Voss et al. (2008) Li et al. (2010) Kim and Atuahene-Gima (2010) Organizational Organizational Product level Organizational Product level Organizational Product level Product level Product level Complementarity Complementarity Tradeoff Tradeoff Tradeoff Tradeoff Tradeoff Tradeoff Complementarity Yes Yes No No Yes No No Yes No 13 14 Molina-Castillo et al. (2011) Vorhies et al. (2011) Product level Organizational level Tradeoff Tradeoff No Yes 15 16 17 Lisboa et al. (2011) Lisboa, Skarmeas and Lages (2011) Calantone and Rubera (2012) Organizational level Organizational level Product level Complementarity Complementarity Tradeoff No No No 18 O'Cass et al. (2014) Academy of Management Journal Management Science International Journal of Research in Marketing Organization Science Academy of Management Journal Journal of Marketing Journal of Management Journal of International Marketing Management Science Academy of Management Journal Industrial Marketing Management Journal of Product Innovation Management Industrial Marketing Management Journal of Academy of Marketing Science Industrial Marketing Management Journal of Business Research Journal of Product Innovation Management Industrial Marketing Management Complementarity No 19 Zhang et al. (2015) Both organizational and product levels Product level Complementarity Yes 20 Wang, Van De Vrande, and Jansen (2017) This paper Product level Tradeoff No Both organizational and product levels Both complementarity and substitutes Yes 21 International Journal of Research in Marketing Research Policy 2 level level level level Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. ambidexterity means and how it can best be achieved (Cao, Gedajlovic, & Zhang, 2009; Gupta et al., 2006; Raisch et al., 2009). Örtenblad (2010) and Turner et al. (2013) attribute the reason for this to the variety of interpretations of multiple applications of the concept. While the exploration/exploitation dichotomy might be reminiscent of the incremental/radical dichotomy, the concepts are different (Kyriakopoulos & Moorman, 2004). Also, scholars do not agree that exploration necessarily leads to radical innovations and that exploitation necessarily leads to incremental innovations. Abernathy and Clark (1985) argue that firms can exploit existing competences to target not only existing markets, but also new ones. Rothwell and Gardiner (1988) suggest that firms can exploit existing competences not only to improve existing products, but also to create new products. O'Cass et al. (2014) add to the debate by arguing that the synchronization of exploration and exploitation in practice represents a multifaceted enigma: Firms become ambidextrous when organizationallevel exploratory and exploitative strategies interact with operationallevel exploratory and exploitative capabilities (c.f., Cantarello, Martini & Nosella, 2012; Chu, Li, & Lin, 2011). Exploration and exploitation require substantially different cultures and capabilities, which may potentially have different impacts on firm adaptation and performance (Gupta et al., 2006; He & Wong, 2004; Kyriakopoulos & Moorman, 2004). An emerging view suggests that the cultural and structural configurations organizations adopt may minimize the need for tradeoffs between exploration and exploitation (Benner & Tushman, 2003; Gibson & Birkinshaw, 2004; Voss et al., 2008). The extant innovation studies characterize organizational learning in two distinct ways: learning as an organizational culture (Chandy & Tellis, 1998; Hurley & Hult, 1998; Slater & Narver, 1995) and learning as an organizational capability (Huber, 1991; Sinkula, 1994). According to the former stream of research on organizational culture, learning requires an organizational mindset that facilitates the generation and dissemination of knowhow, shapes market demand and creates value-generating innovations (Baker & Sinkula, 2007; Morgan, Vorhies, & Mason, 2009; Zhou, Gao, Yang, & Zhou, 2005). The focus on the learning culture has led to studies on the benefits of ambidexterity at the firm level (e.g., He & Wong, 2004; Lubatkin, Simsek, Ling, & Veiga, 2006; Morgan & Berthon, 2008). The organizational capability view, on the other hand, defines learning as competence in a series of information processing activities (De Luca & Atuahene-Gima, 2007; Li & Calantone, 1998) and has given rise to studies on ambidexterity at the innovation level (Benner & Tushman, 2003; Li, Lin, & Chu, 2008). The basic premise of this stream of research is that if the firm effectively conducts these series of information processing activities and builds technical and marketing knowhow, it can gain sustainable competitive advantage in the long run (Day, 1994; Moorman, 1995). We believe that while organizational cultures are antecedents to the simultaneous pursuit of exploration and exploitation, their successful implementation in the form of ambidextrous innovation entails an organizational capability. Ambidextrous innovation signifies the ability to implement a balanced portfolio of both radical and incremental new products through which firms improve existing product benefits whilst simultaneously striving to offer new ones (O'Reilly III & Tushman, 2004). It can be considered a “Blue Ocean-type” of NPD capability, in which a firm endeavors to achieve seemingly different NPD goals by pursuing and implementing them simultaneously. Bessant et al. (2014) argue that the selection of projects and subsequent resource allocation not only entail building a portfolio of projects with a mixture of risk, but are often subjective and strongly path dependent. They are driven by their organizational cultures, which allow for much higher levels of exploitation and exploration. Hence, the two key organizational cultures that lie in the kernel of an innovation organization and drive its pursuit of ambidextrous innovations are willingness to cannibalize and willingness to combine existing knowledge (Atuahene-Gima, 2005; Zhou, Yim, & Tse, 2005). Willingness to cannibalize (WTCA) is an organizational culture that facilitates exploration in new technological trajectories and market generating innovations as well as the establishment of industrial parks to stimulate this trend (e.g., Beijing's Zhongguancun Science Park). Although Chinese companies are renowned for their incremental NPD, they also recognize the importance of radical new products to attain global competitiveness (Liu, Luo, & Shi, 2002). A growing number of new products are being launched in China, as the country is a major destination for foreign direct investment and the world's largest exporter due to its openness to international trade (Zhou & Li, 2012). With its innovation capacity, large population and considerable talent pool, China has the potential to make a substantial impact on the global economy. Hence, we examine the market conditions in China under which WTCA and WTCO provide higher value for the firm. We first define our constructs and present an overview of our conceptual model. Then, we develop our hypotheses, which are subsequently tested using simultaneous regression analysis. The presentation of the results is followed by a discussion of managerial implications and suggestions for further research. 2. Theoretical background and model overview 2.1. Organizational learning and ambidexterity Most studies in learning research have emphasized the benefits of exploration and exploitation isolation (e.g., O'Reilly III & Tushman, 2004; Siggelkow & Levinthal, 2003). March (1991) shows that although exploitation yields more certain and immediate returns, exploration fosters he knowledge diversity necessary to sustain innovation performance in the long term. Although exploration may lead to the discovery of novel solutions, it also typically may cause a decrease in short-run performance, as most new novel solutions usually fail (Calantone & Rubera, 2012). On the other hand, Kanter (1988; cited in Zhou & Li, 2012) associates exploitation with “kaleidoscopic thinking” through which the same fragments of knowledge can evoke completely new perspectives and new product ideas. However, it makes the discovery of novel solutions unlikely and can lead to obsolescence in the long run, trapping firms in suboptimal solutions. Neither of these processes alone can guarantee organizational longevity (O'Reilly & Tushman, 2011). The “tradeoff view” dominating the learning literature suggests that exploration and exploitation compete for scarce resources so that firms must make choices between the two (March, 1991; Voss et al., 2008): Exploration reduces efficiency in the efforts to improve existing competences; on the other hand, exploitation makes it less necessary to engage in the exploration of new alternatives. A focus on exploitation may lead to a competency trap and a scarcity of novel ideas, whereas a focus on exploration may cause the firm to incur the costs of experimentation without reaping the benefits of deploying existing competencies. The argument put forward by Levinthal and March (1993, p. 105) is that “[t]he basic problem confronting an organization is to engage in sufficient exploitation to ensure its current viability and, at the same time, to devote enough energy to exploration to ensure its future viability.” Scholars supporting this view question whether exploration and exploitation can ever be effectively reconciled, causing an insurmountable tradeoff between the two (Gibson & Birkinshaw, 2004). This forces firms to make explicit choices. Recently, the growing body of scholarly work has defined ambidexterity as a concept by which to consider the need to balance the requirements of exploitation and exploration and manage both effectively. Despite the trade-off between exploration and exploitation, paying insufficient attention to either one hinders firm performance (Atuahene-Gima, 2005; Molina-Castillo, Jimenez-Jimenez, & MunueraAleman, 2011). Hence, researchers argue for a complementary and mutually reinforcing effect of exploration-exploitation on performance (Garcia & Calantone, 2002; Gupta et al., 2006): Exploitation provides the funds required for successful exploration, which in turn provides technological input for the building of new capabilities. However, there is a lack of consensus over exactly what the term 3 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. domains. Firms that are willing to cannibalize their existing product sales are prepared to diminish the actual value of their innovation expenditures in order to invest in new product generations. Furthermore, the massive success of new products that combine conventional and state-of-the-art technologies (such as Apple's iPhone) suggests an additional organizational culture: i.e., willingness to combine (WTCO) existing knowledge to significantly contribute to firm performance. WTCO is a type of organizational culture that supports exploitation through combining and leveraging the synergies across the existing productknowledge base. Hence, the adoption of these attitudes also entails an ambidextrous organizational culture. Building on the work of Kim and Atuahene-Gima (2010) and O'Cass et al. (2014), our research is positioned within the source-positionperformance (SPP) framework of Day and Wensley (1988). SPP distinguishes between positional advantages (such as organizational capabilities) and their sources (such as organizational culture). Day (1994) and Day and Nedungadi (1994) contend that a firm's assets and capabilities serve as the sources of advantages that support the market value of new products. Hunt and Morgan (1995) held a similar view that the potential resources of a firm, which are heterogeneous across firms and imperfectly mobile, translate into competitive market advantages and superior financial performance. The framework proposes that the impact of the sources (i.e., WTCA and WTCO) on performance is mediated through positional advantages (i.e., radical and incremental innovation; Hult & Ketchen, 2001; Noble & Mokwa, 1999). We view the balanced implementation of radical and incremental innovations as reflecting a unique capability in which firms manage, deploy and implement resources, hence providing firms with distinct positional advantages (Parmigiani & Holloway, 2011). Sources of these positional advantages (such as organizational culture) are not automatically converted into performance, but are mediated by the quality and timing of their deployment through positional advantages (such as innovation; Atuahene-Gima, 2005; Zhou, Yim, & Tse, 2005). Fig. 1 presents our conceptual framework. We hypothesize that while WTCA fosters the development of radical new products (H1), WTCO encourages the development of incremental new products (H2). A combination of WTCA and WTCO (i.e., the adoption of an ambidextrous culture) leads to both radical and incremental NPD (i.e., ambidextrous innovation; H3). We examine the impact of radical and incremental NPD on financial performance (H4 and H5). H6 predicts that firms focused on both radical and incremental NPD achieve superior financial performance. Finally, we study the moderating impact of competitive intensity and propose differential effects for H1–H3 versus H4–H6: We predict that competitive intensity will positively moderate the effects of organizational cultures on innovation types (H7), but negatively influence the conversion of innovation types to firm performance (H8). We develop these hypotheses in more detail below. 2.2. The effects of WTCA and WTCO on radical and incremental new products Similar to the SPP framework, Stalk, Evans, and Shulman (1992) and Srivastava, Fahey, and Christensen (2001) argue that a continuous learning mindset nurtures distinctive capabilities that create a competitive market position. Chandy and Tellis (1998) criticize the literature for its neglect of cultural factors that drive innovation (c.f., Baker, Sinkula, Grinstein, & Rosenzweig, 2014). Bessant et al. (2014) argue that organizational attitudes and routines for incremental innovation differ from those involved in handling radical innovation. Hence, we next propose differential effects of organizational attitudes on the two types of innovation. In order to pursue exploration, the firm needs to be willing to shed commitments into its existing resources, bearing the risk that some of its investments might become obsolete (Danneels, 2002; Tushman & Anderson, 1986). Willingness to cannibalize (WTCA) refers to an organizational culture in which a firm is prepared to diminish the actual value of its innovation investments and to forego potential sales revenue (Chandy & Tellis, 1998). It is an attitudinal demeanor of key decision makers in an organization, which is characterized by a continuous questioning of the status quo and the firm's current success (Han, Kim, & Kim, 2001). WTCA is critical because dominant firms in a market are often reluctant to jeopardize their current product sales for the sake of introducing new products to their existing markets. Developing radical new products requires the firm to allocate substantial resources to the new technology, which may render the firm's previous innovation investments obsolete or jeopardize the sales returns from its current products (Chandy, Prabhu, & Antia, 2003). Radical innovations require an organizational culture that supports searching for diverse sources of knowledge, both existing and new (Eggers, Kraus, & Covin, 2014; Green, Gavin, & Aiman-Smith, 1995). Indeed, the results of Chandy and Tellis (1998) show a significant positive relationship between WTCA and radical innovation. Willingness to forego and cannibalize existing product sales may provide the firm with the motivation to experiment extensively in research and development, and aggressively pursue radical NPD. Such an organizational climate may result in a breakthrough technology rather than a mere product improvement. As such, we propose that WTCA will have a positive effect on radical innovation, as it encourages firms to undertake the risks of deviating from the status quo. H1. Willingness to cannibalize is positively related to radical NPD. Similar to WTCA, WTCO reflects an organizational culture that requires investment decisions (Chandy & Tellis, 1998). NPD is inherently a risky venture, and requires a unique set of firm resources (Zahra & Nielsen, 2002). Hence, if a firm can leverage those resources by combining its knowledge bases and thereby create synergies across its technologies in an efficient way (Kim & Atuahene-Gima, 2010; Zhang et al., 2015), it may strengthen the value of its existing product portfolio and attain superior market performance (Im & Slater, 2012; Leonard-Barton, 1992). Studies have documented that there are multitudes of ways in which synergies can be achieved, including the recycling of product parts (Navtn-Chandra, 1994), the sharing of key components (Meyer & Utterback, 1993), and the use of common platforms (Meyer & Seliger, 1998). WTCO entails an organizational milieu that supports the integration of the firm's existing knowledge into new products. Kogut and Zander (1992) suggest that new knowledge and competencies do not develop in isolation from a firm's current knowhow. Indeed, the combination of current knowledge bases may enable a firm to recognize meaningful synergies across its NPD portfolio (Kyriakopoulos & Moorman, 2004; Sorescu, Chandy, & Prabhu, 2003). Hence, we propose that a synergistic combination leads to a strong NPD portfolio that serves to build on a firm's existing market base. Indeed, Atuahene-Gima (2005) proposes that products that are new to the Chinese market often result from recombinations of routines or ideas in Fig. 1. Hypothesized model. 4 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. benefits (Benner & Tushman, 2003). Since they often constitute entry barriers for competitor products (Debruyne & Reibstein, 2005; Han et al., 2001), they are major sources of firms' competitive power (Baker et al., 2014). new ways or by the mixture of previously disparate elements. However, it seems unlikely that the resulting products may be entirely new and represent completely new solutions compared to the existing products in the market. Nevertheless, WTCO has the potential to substantially influence firms' market performance, particularly through creating synergies, increasing the barriers of imitation, and providing new product use areas (Kim & Atuahene-Gima, 2010; Vorhies & Morgan, 2005; Zahra & Nielsen, 2002). Thus: H4. Radical NPD is positively related to financial performance. Incremental new products are also expected to have a positive impact on financial performance. They involve lower uncertainty and pose fewer risks than radical new products, and provide firms with more immediate rewards (Chandy et al., 2003). These products are more familiar, and hence easier for customers to adopt than radical innovations (Kleinschmidt & Cooper, 1991). This is because the degree of learning effort required by customers is relatively low (Zhou, Yim, & Tse, 2005). Although incremental new products often do not involve new technology or provide substantial new consumer benefits, they build on a firm's existing customer base and generate a steady stream of revenue for the firm. H2. Willingness to combine existing knowledge is positively related to incremental NPD. Two mechanisms may be substitutes if one becomes less effective when the other is increased. They may be complements if implementing one mechanism increases the returns from executing the other (Poppo & Zenger, 2002). Accordingly, the former may be represented by a negative interaction effect, while the latter may be characterized by a positive interaction effect (Tiwana, 2008). We support the “complementarity view” and propose that the simultaneous pursuit of radical and incremental innovation (i.e., ambidextrous innovation) entails both WTCO and WTCA (i.e., ambidextrous culture). WTCA encourages the search for knowledge outside the firm's expertise and for technologies new to the firm or the industry (Kyriakopoulos & Moorman, 2004). WTCO may augment the advantages of WTCA by increasing the firm's absorptive capacity in order to create more innovative solutions (Katila & Ahuja, 2002). Furthermore, WTCA may add novel variances and bring more distinctiveness to the firm's existing problem-solving solutions. Neglecting to utilize new knowledge and over-relying on existing investments may stifle idea generation, whereas neglecting to harness existing knowledge and focusing on new investments may result in numerous risky and costly NPD projects (Levinthal & March, 1993). In turn, WTCO fosters the utilization of knowledge within known parameters for tasks that match with the firm's dominant logic or mental models in addressing the market (Baker & Sinkula, 2007; Kim & Atuahene-Gima, 2010). The utilization of existing knowledge tends to lead to higher efficiency, as combining existing knowledge simultaneously builds on and leverages a firm's existing knowledge base while simultaneously creating synergies across existing resources (Kogut & Zander, 1992; Zhang et al., 2015). WTCO and WTCA jointly allow firms to take risks while simultaneously building on their strengths. The combined effect of these cultures should result in both radical and incremental NPD (c.f., Atuahene-Gima, 2005; O'Reilly III & Tushman, 2004), as they allow firms to simultaneously pursue multiple goals. Thus, we propose: H5. Incremental NPD is positively related to financial performance. In competitive markets, firms frequently introduce new products in order to enhance or defend their market positions. They often face a tradeoff between the degree of product improvement and the number of innovations they commercialize, due to cost considerations and anticipated consumer and competitor responses. Limited budgets may force firms to focus on many incrementally new products, and only a few radical innovations. When firms introduce many incremental innovations to the market, consumers may fail to recognize the additional benefits of each offering, as in the case of Nokia and Research in Motion (RIM) (NY Times, December 17, 2011). In contrast, Apple's founder and former CEO, Steve Jobs, attributed his own success to focusing on and commercializing only a few but radically new innovations each year (Fortune, March 7, 2008). In response to the competition, other firms such as Samsung choose to market a mix of both substantially innovative products and incremental product improvements. We further examine the performance implications of independent and simultaneous implementation of radical and incremental innovation. Ambidextrous innovations refer to a balanced implementation of radical and incremental new products; hence they entail an organizational capability from an SPP perspective. Recent studies show that for quick and easy market returns, firms tend to largely focus their NPD efforts on incremental product modifications, while substantially reducing investments in radically innovative products (Cooper, 2011). This suggests that radical and incremental innovations are treated as substitutes, resulting in new product portfolios skewed to incremental innovations (Reid, de Brentani, & Kleinschmidt, 2014). Some authors argue that businesses with the right balance and number of projects in their NPD portfolio develop high-value new products aligned with their organizational culture, as suggested by the SPP framework. The simultaneous implementation of radical and incremental NPD (i.e., ambidextrous innovation) is likely to have a positive effect on financial performance. The pursuit of both radical and incremental NPD may allow firms to balance the risks associated with both types of innovations, whilst leveraging their benefits. Hence, we argue that radical and incremental NPD are complements rather than substitutes (as opposed to what is generally considered in practice). We propose that firms able to develop both types of innovations may provide superior customer value and generate greater firm profits. More formally stated: H3. Willingness to cannibalize together with willingness to combine existing knowledge is positively related to (a) radical NPD and (b) incremental NPD. 2.3. The effects of radical and incremental NPD on performance Although synchronizing the pursuit of exploration and exploitation is necessary, the literature shows that even firms with a sound organizational culture and strategy are often unsuccessful due to poor implementation capabilities (De Sarbo, Di Benedeto, Song, & Sinha, 2005; Love, Priem, & Lumpkin, 2002). Indeed, WTCA and WTCO will only drive performance when appropriate capabilities are deployed (see Sarkees, Hulland, & Prescott, 2010; Cantarello et al., 2012). Radical and incremental NPD, two capabilities indicative of firm learning, are expected to positively contribute to financial performance. O'Malley, O'Dwyer, McNally, and Murphy (2014) suggest that radical innovations are generally juxtaposed with incremental innovations, implying that “innovativeness” ranges from minimal change to dramatic change. Radical new products are expected to have a positive impact on financial performance as they have the potential to both attract new customers and shape the preferences and behavior of existing consumers (Zhou, Yim, & Tse, 2005) by offering greater consumer H6. Radical NPD together with incremental NPD is positively related to financial performance. 2.4. Moderation effects of competitive intensity Dating back to the 1960s, contingency theorists posited that the optimal organization culture is dependent on factors such as 5 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. H8. Competitive intensity negatively moderates the relationship between willingness to combine and incremental NPD. environmental dynamism (Burns & Stalker, 1961; Lawrence & Lorsch, 1967). Drawing upon the SPP framework, research has empirically examined performance outcomes in general (e.g., innovation, profitability), given a match between a particular culture and other factors (Schilling & Steensma, 2001). Firms can attain a competitive advantage in the market through matching their internal environment appropriately to the underlying market conditions (Porter, 1985). Building upon the research on innovation barriers (Mohnen & Rosa, 2002; Sandberg & Aarikka-Stenroos, 2014; Voss & Voss, 2000; Zhou, Gao, et al., 2005), we focus on competitive intensity in the market, which signifies the degree of competitive rivalry within an industry. We posit that competitive intensity will have a negative moderating impact on the individual effects of organizational cultures (i.e., WTCA and WTCO) on innovation types (i.e., radical and incremental innovations), and the individual effects of innovation types on firm performance (c.f., Jansen, Van den Bosch, & Volberda, 2006). However, we predict positive moderating effects of competition intensity on ambidextrous cultureambidextrous innovation and ambidextrous innovation-firm performance links. We outline our reasoning below. Competitive pressures significantly shorten the life cycle of existing products, and require firms to quickly bring new products to the market (Tushman & Anderson, 1986; Zhou, Yim, & Tse, 2005), and hence may require a higher degree of willingness to cannibalize to advance radical new products. To stay ahead of the competition, firms may be required to invade the market and replace competitors' products, but to even more frequently cannibalize their own offerings. Siggelkow and Levinthal (2003) also find that exploration is more likely to be valuable for firms that face significant environmental change than firms that are in stable environments. Kim and Atuahene-Gima (2010), on the other hand, find that exploration becomes more effective under a turbulent market environment. Hence, for the same level of radical innovation, higher WTCA is required (please see Fig. 2a). Furthermore, firms may also need to compensate for the repercussions of their risky substantial investments and seek higher economies of scale in competitive markets. Recombining resources and replenishing existing knowhow with new knowledge may provide firms with agility and allow them to produce creative but economical solutions. In competitive markets, firms need to further develop their existing knowledge base and synergistically utilize their existing technologies. Through a higher degree of WTCO, firms can outperform their rivals by better serving their existing markets. Kim and Atuahene-Gima (2010) also show that exploitation is more effective when competitive intensity is high. WTCO may allow firms to provide their customers with new products without having to invest large resources into R&D. Thus, for the same level of incremental innovation, higher WTCO is required (see Fig. 2a): Long-term survival in the market requires firms to keep up with technological advancements and to provide value-generating innovations before their competitors do. Due to the escalation of their commitments to existing product technologies, most firms usually have a preference for the status quo (Schmidt & Calantone, 2002), which often leads to decline, as the market environment is dynamic. This may cause the firm to fall behind in competition, impair growth or even result in market failure (Sorescu et al., 2003). The combination of WTCA and WTCO may particularly foster creativity and flexibility under competition, as it may allow firms to realize the potential benefits of exploiting existing competence while exploring new opportunities at the same time (Hodgkinson & Healey, 2014). Hence, firms operating in competitive markets where technologies are undergoing rapid change may attain superior performance by leveraging their existing technologies while building new ones (Day, 1994; Tushman & Anderson, 1986). H9. Competitive intensity positively moderates the relationship between the combination of WTCA and WTCO on (a) radical NPD and (b) incremental NPD. In markets with intense competition, firms race for price, advertising, product alternatives, and added services (Porter, 1985). In such markets, firms have less certainty regarding their performance (Sarin & Mahajan, 2001). In competitive markets, competitors may quickly erode a firm's product-based advantages by imitating or improving the product offerings (Weerawardena et al., 2006). As the number of competing technologies increases, customers have a greater range of options to consider, and do not have to stay loyal to a single firm. This may increase the failure rate of both radical and incremental innovations, and make it immensely difficult for firms to reap market returns from their innovation investments. Hence, Droge, Calantone, and Harmancioglu (2008) argue that for a given level of innovation, lower performance will be achieved under turbulent market conditions. For a given desired level of performance, more innovation is required from managers and their firms under turbulent environmental conditions (please see Fig. 2a). We thus hypothesize: H10. Competitive intensity negatively moderates the relationship between radical NPD and firm performance. H11. Competitive intensity negatively moderates the relationship between incremental NPD and firm performance. Innovations, radical ones in particular, go beyond expressed customer needs (Eggers et al., 2014). They allow the firm to rejuvenate or purposefully redefine markets (Covin & Miles, 1999; Zahra, Nielsen, & Bogner, 1999). However, when faced with major environmental shifts such as the introduction of rival products or the entrance of radically H7. Competitive intensity negatively moderates the relationship between willingness to cannibalize and radical NPD. Innovation/ Performance Innovation/ Performance P high P high Given P Given P P low P low Culture/ Innovation Fig. 2. Illustrating hypothesized positive and negative moderation. (a) Hypothesized Negative Moderating Effects of Competitive Intensity. NOTE: The linkage from culture (/innovation) to innovation (/performance) is less positive under competitive intensity, compared to low competitive intensity. (b) Hypothesized Positive Moderating Effects of Competitive Intensity. NOTE: The linkage from culture (/innovation) to innovation (/performance) is more positive in high competitive intensity, compared to low competitive intensity. 6 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. different competitors, managers are typically unable to break free from their extant routines and are thus unable to generate radical innovations (Hodgkinson & Healey, 2014). To cope with competition, they focus on incremental improvements in their products for less risky and quicker market returns. However, given the individual benefits of the two types of innovations, their combination entails a causally ambiguous capability. From a SPP perspective, if the firm can complement incremental innovations with radical ones, it may generate higher positional advantages in competitive markets (Atuahene-Gima, 2005; O'Reilly III & Tushman, 2004). Thus: (2005), this procedure is critical to ensure the quality and reliability of the data when collecting data in China. Through this extensive data collection procedure, we were able to obtain questionnaires completed by two respondents from 199 firms (80%) and by single respondents from the remaining 50 firms (20%). A telephone follow-up was conducted to ensure the quality of the data collection. All respondents were contacted and requested to re-report their answers to parts of the questionnaire. Comparisons between their original and subsequent answers resulted in no significant differences, and thus the accuracy of the responses to our survey was corroborated. The sample was balanced between Chinese (51%) and foreign (49%) companies. Participating firms ranged in size from 200 to 45,000 employees (with an average of 4333 employees). Average business experience in China was 4 years and average experience with new product introductions was 5 years. The first group of informants included sales managers (47%), marketing managers (35%), CEOs and business managers (12%), and brand managers (6%). The second group of informants included general business managers (52%), strategy and finance managers (34%), technology managers (12%), and product managers (2%). Different respondents were solicited to provide information regarding the independent and dependent variables to eliminate concerns regarding common method bias (Slater & Atuahene-Gima, 2004). As the data were collected on-site, a comparison between early and late respondents is not appropriate (cf. Atuahene-Gima, 2005). We tested for the possibility of non-response bias by comparing the collected sample with a sample of 50 non-responding firms (Armstrong & Overton, 1977). Mean comparisons indicated no significant differences in firm size, percentage of Chinese ownership, and industry type. We found no evidence of a potential non-response bias. H12. Competitive intensity positively moderates the relationship between the combination of radical and incremental NPD on firm performance. 3. Methodology 3.1. Sample and data collection The present study was conducted in mainland China. China was selected for data collection for several reasons. First, we were able to capture a rich set of cases by conducting our study in a market in which new products are introduced frequently. China is also a turbulent market in which firms face tough competition from Chinese and foreign firms, and are often challenged with the obsolescence of their capabilities and the erosion of their market share (Li & Atuahene-Gima, 2001). Thus, the Chinese business environment was suitable to examine innovation returns from firm conduct in response to market forces. The sample comprised of firms located all around China (particularly in Beijing and Shanghai); they were randomly selected from a mailing list of 1500 firms operating in a variety of manufacturing and service industries, provided by a local marketing research consulting firm. This professional research firm conducted the data collection in two stages. In the first stage, each firm was contacted by phone to verify that their number of employees was greater than 200, as we only focused on larger firms for the purposes of this study.1 Eight hundred of the 1500 companies fit the requirements of our study. In the second stage, we randomly selected 450 companies from our list of 800 qualified firms, each of which was contacted by phone to encourage participation by two key informants; 249 firms agreed to participate in our study. We used a questionnaire as our primary data collection tool. The survey instrument was prepared in English and then translated into Chinese. All of the measures were checked for accuracy using backtranslation to establish construct validity and equivalence (Craig & Douglas, 2000; Sekaran, 1983). The instrument was pre-tested on a sample of 30 managers to ensure face validity and appropriateness of the measures for the Chinese context. The wordings of some items were revised based on the inputs from these participating managers. The data collection was conducted through field interviews. An interviewer scheduled appointments with two key informants from each firm, presented the questionnaire to them, and collected the questionnaires upon completion. As pointed out by Atuahene-Gima 3.2. Measures Our measures consist of items adapted from the existing literature as well as new ones developed for the purposes of the present study. All items were specified as reflective indicators comprising 5-point Likert scales from “strongly disagree” to “strongly agree.” Table 2 presents the scale items and composite reliabilities. Table 3 shows the correlations among our constructs. We included demand uncertainty, technological turbulence, firm type (Western vs. Chinese), firm size (logarithm of firm annual sales) and firm ownership (percentage of Chinese ownership) as control variables in our model. Radical NPD was measured using a three-item scale adapted from Atuahene-Gima (2005) and Gatignon and Xuereb (1997). Incremental NPD was assessed using a two-item scale from Gatignon and Xuereb (1997). We measured WTCA using an eight-item scale from Chandy and Tellis (1998). The eight items loaded on two factors, and we used the factor with the higher eigenvalue and loadings in our study. The items used include the extent to which the firm is willing to sacrifice sales of existing products to improve sales of newly launched products, the support the firm provides to projects that could potentially take away from current sales of existing products in China, and how easily the firm can replace one set of abilities with a different set of abilities to adopt a new technology suitable for the Chinese market. To gauge WTCO, we developed new scale items, following research on knowledge integration (Nonaka, 1994; Van Den Bosch, Volberda, & De Boer, 1999) and “combinative capabilities” (Leonard-Barton, 1992, 1995). We adopted these knowledge-based measures to the product development context. The measures were pre-tested in six expert interviews conducted with managers in Beijing and Shanghai. The interviewees were managers in high positions with at least 5 years of business experience in China. Frequently mentioned themes were converted into scale items. The scale was pre-tested with ten other managers with relevant business experience. Confusing or ambiguous items were removed. The scale was presented to 30 managers in Beijing and Shanghai. Based on their comments, the wording of some items was revised. The resulting scale consisted of five items. After a principal components analysis, one item 1 We referred to Atuahene-Gima's (2005) study in collecting our data. We focused on large firms with a portfolio of different products and product lines and a history of product innovations, since we study the joint pursuit of WTCA and WTCO as well as the joint implementation of both radical and incremental innovations. Sandberg and Aarikka-Stenroos (2014) suggest that research on general innovation barriers relates innovation barriers to the size of a firm (c.f., Mohnen & Rosa, 2002). Large established firms tend to be more concerned with risks of market uncertainty and organizational inertia and structured routines, whereas small firms tend to face obstacles related to lack of resources (c.f., D'Este, Iammarino, Savona, & von Tunzelmann, 2012, Hewitt-Dundas, 2006 and Mohnen & Rosa, 2002). Our focus on large firms is thus appropriate for our study, given that we study market forces and organizational attitudes. 7 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. Table 2 Measures, loadings, and reliabilities. Factor loadings Willingness to cannibalize We support projects even if they could potentially take away from current sales of existing products in China. We easily replace one set of abilities with a different set of abilities to adopt a new technology suitable for the Chinese market. We are very willing to sacrifice the sales of existing products in the Chinese market in order to improve the sales of newly launched products. We can easily change the manner in which we carry out tasks to fill the needs of a new product launched in China. Willingness to combine existing knowledge Our new products are often combinations of existing ones. At our firm, launching new products involves rearranging parts of existing ones. By combining our existing knowledge in new ways, synergies can be reached. Radical NPD Our products in the Chinese market radically differ from competitor products. Our products incorporate a large new body of technological knowledge. The products we launch are highly innovative, replacing vastly inferior alternatives. Incremental NPD The products we launch are very similar to our main competitors' products. The products we launch incrementally improve existing technology. Competitive intensity This market is too competitive; price wars often occur. Firms in this industry aggressively fight to hold onto their share of the market. Demand uncertainty It is difficult to understand consumers' expectations of a brand. Consumers always look for novelty; they are never loyal to a single brand. Technological turbulence Over the last 5 years, we see that in the industry where we operate, the diversity in production technology has dramatically increased. The leading foreign firms have introduced their state-of-the-art products into China at the same time as their home market. Financial performance As compared to our competitors, we have: Increased business unit profitability As compared to our competitors, we have: Increased return on investment (ROI) As compared to our competitors, we have: Increased return on sales (ROS) Composite reliability AVE 0.81 0.52 0.80 0.57 0.81 0.59 0.69 0.54 0.79 0.66 0.87 0.77 0.83 0.71 0.88 0.71 0.77 0.76 0.65 0.71 0.72 0.78 0.76 0.76 0.81 0.73 0.56 0.87 0.79 0.83 0.85 0.90 0.86 0.82 0.82 0.82 0.88 unidimensionality of the multi-item constructs and to delete unreliable items: Items that load on multiple constructs and have low item-toconstruct loading were eliminated. The overall measurement model fit well: χ2 = 202.155 (df = 137), the Bentler-Bonnet non-normed fit index (NNFI) was 0.93, the comparative fit index (CFI) was 0.94, and RMSEA was 0.04. The largest standardized residual was an acceptable level of 0.18 (i.e., less than 2). The scale reliability of the measures was evaluated by calculating their Internal Composite Reliabilities (ICR) and Cronbach's alphas, and by examining the loadings of the items on their corresponding factors (Hulland, 1999). Based on ICR and Cronbach's alpha measures, all scales demonstrated adequate internal consistency (Fornell & Larcker, 1981). Analysis of the measurement model revealed high loadings for all scales, which provided support for their reliability (see Table 2). Convergent validity was then assessed by average variance extracted (AVE) estimates (Fornell & Larcker, 1981; Hair et al., 2012). The reported AVEs in PLS were at least 0.50, showing support for substantial explained variance in each variable. At the construct level, discriminant validity was evaluated by testing whether the AVE of each construct (the average variance shared between a construct and its measures) was greater than the shared variance between the construct and any other construct in the model (square of correlation between the two constructs) (Fornell & Larcker, 1981; Hulland, 1999). The AVEs of the constructs were all higher than their shared variances, and thus all constructs in the model exhibited discriminant validity. Discriminant validity at the item level was shown by the lack of significant cross loadings, as indicated by a Lagrangian multiplier test (LM) (Bagozzi, Yi, & Phillips, 1991). Moreover, a model with construct correlations constrained to 1.00 was compared to an unconstrained model. This led to a significant increase in Chi-square, and LM-tests revealed that these constraints should be removed. Thus, all constructs exhibited discriminant validity. was dropped. The items used in our subsequent analyses included the degree to which synergies could be reached by combining existing knowledge in new ways and whether products were combinations of existing products. We measured competitive intensity, demand uncertainty, and technological turbulence using items from Zhou, Yim, and Tse (2005). We incorporated an item from the study by Sarin and Mahajan (2001) to the two-item scale of competitive intensity by Zhou, Yim, and Tse (2005) to develop a broader scale for the assessment of competition in China. Demand uncertainty and technological turbulence were both assessed on two-item scales. We gauged financial performance with three items (Vorhies & Morgan, 2005). The items include business unit profitability, increase in return on investment (ROI) and increase in return on sales (ROS), all relative to competitors. To validate our subjective assessment of firm performance, we obtained the profit margin and market share of most of the companies in our sample. We then correlated the subjective assessment with the two objective performance measures. The correlations of profit margin and market share with financial performance were significant (r's = 0.403 and 0.303; p < .05), providing support for the validity of our measures (Morgan, Kaleka, & Katsikeas, 2004). 3.3. Measurement model validation We followed the standard procedures for purifying and validating our constructs, and the data were analyzed using a two-step approach, separating the measurement model from the structural model (Gerbing & Anderson, 1988). Using Hair, Sarstedt, Ringle, and Mena's (2012) guidelines, the adequacy of the measurement model was tested by examining: (1) unidimensionality of the constructs, (2) scale reliabilities, and (3) convergent and discriminant validity. Principal components analysis with varimax rotation was first performed to assess the unidimensionality of each construct. Only the first eigenvalue was greater than one, supporting their unidimensionality. Confirmatory factor analysis (CFA) was then used for a further check of the 8 Industrial Marketing Management xxx (xxxx) xxx–xxx 3.4. Analyses and results 2.92 3.81 3.82 3.29 3.45 3.54 3.52 3.64 0.77 0.68 0.65 0.63 0.67 0.60 0.59 0.65 1.00 0.21 0.11 0.32 0.36 0.14 0.12 0.20 1.00 0.32 0.37 0.36 0.30 0.10 0.27 1.00 0.28 0.27 0.19 0.15 0.29 1.00 0.43 0.26 0.15 0.33 1.00 0.24 0.24 0.40 1.00 0.25 0.31 1.00 0.21 We used simultaneous moderated regressions based on maximum likelihood estimation to test our moderated mediation hypotheses. The measurement items were averaged for the multi-item constructs. We also mean-centered the measures to avoid multicollinearity with their product terms (Aiken & West, 1991; Judd & McClelland, 1989; Muller, Judd & Yzerbyt, 2005). We employed bootstrapping (resampling with replacement) to determine statistical significance (cf. Hair et al., 2012). Bootstrapping, widely used in innovation and marketing (Bone, Sharma, & Shimp, 1989; Van Trijp, Hoyer, & Inman, 1996), determines sampling distributions of parameter estimates with unknown theoretical distributions. The standard deviation of the average of the generated bootstrap samples (i.e., the bootstrap standard error) is also used to calculate the bootstrap-t values (BST) to test the hypothesis as to whether sampling error dominates the random fitting error. We drew 500 bootstrap samples to compute the standard errors of the estimates. The construct level statistics (AVE and ICR) indicated a good fit for the manifest variables to the latent variables; however, they do not give an indication of overall model fit or how the latent variables co-vary with one another. Table 4 presents the results for the hypothesized model (variance explained for each dependent construct and path coefficients for the hypotheses along with their significance levels). For analysis purposes, we pooled the data between the first and second respondent to gain stability for our estimates. To examine if the data were suitable for pooling, we performed a Chow test and compared the regression scores across the two different respondents. As there were no significant differences between the respondents on the focal links we propose, it was deemed suitable to pool the data for subsequent analysis. H1 states that WTCA is positively related to radical NPD. We found a positive relationship between WTCA and radical NPD (β = 0.146, t = 1.960, p = .05). Thus, we find support for H1. H2 proposes that WTCO is positively incremental NPD. The results show that the effect of WTCO on incremental NPD is significant (β = 0.167, t = 2.101, p < .05). We thus find support for H2. We find that the interaction between willingness to cannibalize and willingness to combine is significantly and positively related to radical NPD (β = 0.118, t = 1.826, p < .10), but not incremental NPD (β = 0.056, p > .05). We thus find support for H3a, but not H3b. Therefore, willingness to cannibalize and willingness to combine are complements for radical NPD. As proposed in H4, radical NPD is positively related to firm performance (β = 0.179, t = 2.961, p < .01). However, in contrast to H5, incremental NPD does not exert a significant positive effect on financial performance (β = 0.071, p > .05). Thus, H5 is not supported. H6 posits a positive interaction effect on financial performance between radical and incremental NPD. This hypothesis is supported (β = 0.232, t = 3.389, p < .01). Therefore, radical and incremental NPD are complements for superior financial performance. We now turn to the moderation effect of competitive intensity. Competitive intensity exerts a significant negative impact on the link between WTCA and radical NPD (β = −0.149, t = −2.262, p < .05). Hence, H7 was supported. In contrast to H8, the interaction effect between competitive intensity and WTCO on incremental NPD was positive (β = 0.117, t = 1.683, p < .10). H9, which posited a significant negative moderation effect by competitive intensity on the links between ambidextrous culture (WTCA*WTCO) and innovation types, was supported for radical NPD (β = −0.154, t = −2.103, p < .01), but not incremental NPD (β = −0.019, p > .05). Hence, H9 was rejected. Thus, we concluded that under competitive intensity, willingness to cannibalize and willingness to combine become substitutes for radical NPD. Similarly, competitive intensity significantly moderated the link between firm performance and incremental NPD (β = −0.305, t = −4.560, p < .01), but not radical NPD (β = 0.078, p > .05). Thus, H10 was rejected, but H11 was supported. Finally, competitive Demand uncertainty Technological turbulence Competitive Intensity Willingness to Cannibalize Willingness to Combine Existing Knowledge Radical NPD Incremental NPD Financial Performance Table 3 Correlations among model constructs. Means Standard deviation Demand uncertainty Technological turbulence Competitive intensity Willingness to cannibalize Willingness to combine Radical NPD Incremental NPD N. Harmancioglu, et al. 9 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. Table 4 Results for the hypothesized model. Path modeled WTCA WTCO WTCA × WTCO WTCA × Competitive Intensity WTCA × WTCO × Competitive Intensity Competitive Intensity Technological turbulence Demand Uncertainty WTCA WTCO WTCA × WTCO WTCO × Competitive Intensity WTCA × WTCO × Competitive Intensity Competitive Intensity Technological turbulence Demand uncertainty Radical NPD Incremental NPD Radical × Incremental Radical NPD × Competitive Intensity Incremental NPD × Competitive Intensity Radical NPD × Incremental NPD × Competitive Intensity Competitive Intensity Technological turbulence Demand uncertainty Firm type Firm size Firm ownership ⁎⁎⁎ ⁎⁎ ⁎ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ ➔ Radical NPD Radical NPD Radical NPD Radical NPD Radical NPD Radical NPD Radical NPD Radical NPD Incremental NPD Incremental NPD Incremental NPD Incremental NPD Incremental NPD Incremental NPD Incremental NPD Incremental NPD Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Financial Performance Coefficient t-Value R2 0.146 0.174 0.118 −0.149 −0.154 0.205 −0.013 0.128 0.079 0.167 0.056 0.117 −0.019 −0.052 0.107 0.025 0.179 0.071 0.232 0.078 −0.305 0.460 0.192 −0.030 0.050 0.082 0.092 0.032 1.960⁎⁎ 2.308⁎⁎ 1.828⁎ −2.262⁎⁎ −2.013⁎⁎ 2.789⁎⁎⁎ −0.173 (ns) 1.816⁎ 0.995 (ns) 2.101⁎⁎ 0.812 (ns) 1.683⁎ −0.237 (ns) −0.658 (ns) 1.360 (ns) 0.335 (ns) 2.961⁎⁎⁎ 1.171 (ns) 3.585⁎⁎⁎ 1.282 (ns) −4.560⁎⁎⁎ 6.929⁎⁎⁎ 3.080⁎⁎⁎ −0.451 (ns) 0.841 (ns) 1.413 (ns) 1.576 (ns) 0.529 (ns) 0.180 0.083 0.345 p < .01. p < .05. p < .10. factor test: Results revealed that seven factors with eigenvalues greater than 1.0 accounted for 68% of total variance (with the first factor explaining 24%) and that a single higher-order factor does not exist. Second, following the guidelines of Podsakoff, MacKenzie, Lee and Podsakoff (2003), we incorporated a “same-source” factor (i.e., single common method factor) to the indicators of all constructs. This model, in which the same-source factor loadings were estimated freely, was compared to a constrained model in which same-source loadings were zero. A CFA yielded a χ2 difference of 31.533 (df = 7, p > .05; n.s.). These results suggested that a same-source factor was not present. Finally, we also tested for potential endogeneity of modularity. It is possible that firms may choose to adopt WTCA and WTCO based on the characteristics of their company or the market environment. In other words, the variables we modeled as moderators may be better modeled as antecedents to WTCA and WTCO. We excluded this possibility as follows. We used an instrumental variables regression model with a two-stage least squares (2SLS) estimator (Stock & Watson, 2011). In a first-stage model, we regressed WTCA and WTCO on competitive intensity, demand uncertainty, technological turbulence, firm size, firm type (Western vs. Chinese) and firm ownership (percentage of Chinese ownership). As excluded instrumental variables, we used customer satisfaction, cost efficiency, and speed-to-market. We found support for the validity of our instruments using a Sargan (1958) test (χ2 = 5.900; p = .207; χ2 = 5.800; p = .215). Durbin-Wu-Hausman tests indicated that endogeneity of the WTCA and WTCO variables is not an issue in our study (χ2 = 0.495, χ2 = 0.651, both p > .05). intensity positively moderated the relationship between ambidextrous innovation (radical NPD*incremental NPD) and firm performance (β = 0.460, t = 6.929, p < .01), providing support for H12. Hence, radical and incremental NPD are complements for superior financial performance, also under competition. 3.5. Additional analyses To calibrate the specific indirect (and moderated indirect) effects accounted for by each individual mediator along with their critical ratios, we employed two methods: (1) we referred to Sobel's (1982) operational definition and the significance test of indirect effects; and (2) we then conducted a Preacher and Hayes (2008) bootstrap test of the indirect effects. In this second test, if the confidence interval of the indirect effect estimates does not include 0, the indirect effect is significant and mediation is established (Zhao, Lynch, & Chen, 2010). We compared the results of the Sobel z-test and the Preacher-Hayes bootstrap tests, and found that the results on the significant indirect effects were consistent. Our results indicate that radical NPD mediates the paths between WTCA and performance (coefficient: 0.027, Sobel test statistic 1.70, p < .10). This mediation relationship is significantly and negatively moderated by competitive intensity (coefficient: −0.037, Sobel test statistic: −1.784 when competition intensity moderates the WTCA-radical NPD link). Incremental NPD does not significantly mediate the relationship between willingness to combine and financial performance (coefficient: 0.012, Sobel test statistic: n.s.). However, this mediation relationship is significantly and negatively moderated by competitive intensity (coefficient: −0.058, Sobel test statistic: −1.889 when competition intensity moderates the incremental NPD-performance link). These mediating effects clearly demonstrate the importance of WTCA as a path to NPD and firm performance, providing further support for its significance as a tool to gain a sustainable competitive advantage. To test for common method bias, we first conducted Harman's one- 4. Discussion 4.1. Theoretical implications: interpretation of our results Overall, our results show that whereas WTCA engenders radical NPD, WTCO fosters incremental NPD. Contrary to our expectations, firms that are both willing to cannibalize existing sales and combine 10 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. utility from existing distinctive technology resources. To react to the competition in the market, organizations may choose to commercialize improved products without facing the substantial costs associated with exploration (Lumpkin & Dess, 2001), but combining their existing knowledge in unique ways. Radical and incremental NPD together are positively related to financial performance. This finding corroborates the SPP framework and the “complementarity” view that the simultaneous pursuit of radical and incremental NPD allows firms to both establish and maintain superior market positions and financial returns. This suggests that firms may solidify their financial power with both types of new products. The importance of the “complementarity view” increases and this relationship becomes even stronger as competitive intensity in the market increases. Hence, we conclude that greater financial returns in highly competitive markets depend on a balanced portfolio of radical and incremental new products. In turbulent markets in which competitive pressure is high, firms face the challenge of identifying consumers' explicit and latent preferences. In such markets, it becomes more germane to discover and meet consumer needs better than rival firms through ambidextrous innovation. existing knowledge, favor radical NPD but not incremental NPD. What is interesting, however, is that WTCA and WTCO are complements in generating radical innovations. Further, radical NPD contributes to financial performance. A combination of both WTCA and WTCO contributes to radical innovation over and above the influence of WTCA or WTCO on radical innovation alone. Our findings thus suggest that WTCA and WTCO are complements in generating radical innovations. As we expected, the impact of WTCA on radical NPD is negatively moderated by the competitive intensity in the market. While the main effect of WTCO on incremental NPD is positive, this path is positively moderated by competitive intensity. Interestingly, the impact of ambidextrous culture (WTCA*WTCO) on radical NPD (not incremental NPD) is negative in the presence of competitive intensity. These results indicate that at higher levels of intense competition, WTCA and WTCO become substitutes in generating radical innovations. While the effect of radical NPD on firm performance holds regardless of the level of competition, the impact of incremental NPD is hindered as the competitive intensity increases. This suggests that for the same level of firm performance, competitive markets demand higher incremental NPD. A simultaneous focus on both radical and incremental innovation leads to greater financial performance. Hence, radical and incremental NPD are complements for superior performance. Furthermore, the impact of ambidextrous innovation on performance is positively moderated by competition, indicating that higher ambidextrous innovation leads to superior performance in the presence of intense competition. We will unpack our results further below. First, our results support the “complementarity” view that both WTCA and WTCO are of great importance for innovation development: WTCA mainly through its impact on radical NPD, and WTCO through its impact on incremental NPD. The significant link between WTCA and radical NPD signals that avoidance of organizational inertias with regards to innovation requires readiness to obsolete previous products and to jeopardize returns from current expenditures. WTCA may increase a firm's creativity and its openness to product ideas that challenge the status quo, and as such foster radical NPD. An organizational attitude characterized by both WTCA and WTCO fosters radical NPD. Firms that replenish existing knowhow with new technologies, while seeking ideas and experimenting to break the status quo, will be more likely to create entirely new products with completely new customer solutions (Ward, Smith, & Vaid, 1997). Through a combination of the two attitudes, firms may be able not only to protect new products from imitation, but may also allow firms to build on existing knowhow to simultaneously explore new markets. The developed solutions are likely to be new to the market, hence fostering radical rather than incremental NPD. These effects are negatively moderated by the level of market competition. This suggests that under competitive turbulence: (1) WTCA and WTCO are substitutes for radical NPD; and (2) higher WTCA and higher ambidextrous cultures are demanded for the same level of innovation. The latter may be because WTCA and ambidextrous cultures may help the firm surmount the ramifications of intense competition and seize market opportunities for innovation. The former explanation suggests that rivalry in the market increases the competition between WTCA and WTCO for scarce resources (Calantone & Rubera, 2012; March, 1991; Voss et al., 2008). This may be because competition may create intensive pressures for higher efficiency and lower prices that lead to tighter margins and less organizational slack (Jansen et al., 2006). Hence, firms must make choices between WTCA and WTCO. Furthermore, given that WTCA and WTCO entail diverse information sources (existing and new knowledge), a focus on both may create conflicts among organizational members (Jehn, Northcraft, & Neale, 1999), hindering radical NPD. In turn, WTCO is positively related to incremental NPD. Competition positively moderates this relationship (c.f., Kim & Atuahene-Gima, 2010). The positive link signifies that WTCO allows firms to make efficient resource allocation decisions and maximize the 4.2. Limitations We tested our hypotheses using data collected in China, which served as an appropriate setting for our study given the transitional environment prevailing in the country. Future research may collect data from other countries. The measurements were mostly perceptual since we studied organizational culture and processes; this is a limitation of our study. However, we collected responses to our survey from multiple respondents, and validated our subjective performance assessments by obtaining objective measures: the profit margin and market share of each firm. We hope that the findings will serve as a springboard for future research in the area. 4.3. Managerial implications For managers, our study suggests the following: (1) WTCA alone contributes to radical innovation, and more WTCA is needed for the same level of performance under market competition; (2) WTCO alone contributes to incremental innovation, and this effect becomes stronger in the presence of competition; (3) a combination of both contributes to radical NPD, but WTCA and WTCO become substitutes in the presence of market competition; (4) both radical and ambidextrous innovation foster superior performance; (5) competition intensity demands more incremental innovation for the same level of performance; and (6) firms must develop a portfolio of both radical and incremental new products for superior financial performance, particularly if they are operating in uncertain and competitive markets. Our findings thus suggest that WTCA and WTCO, which are traditionally treated as opposites, are complements in generating radical innovations. Radical innovation is a prerequisite for survival in the contemporary business environment, in which firms face intense competitive threats and constantly shifting consumer expectations; and the keys to developing and excelling in innovation are firms' willingness to risk current investments and efforts to nurture their established knowhow by synergistically reutilizing their existing technologies and combining them with new and superior ones. Acknowledgements This study was funded by grants from the Academy of Finland (grant number is #122438). An earlier version of the paper was presented at the 2009 Product Development & Management Association (PDMA) Research Forum. The authors would like to thank Abbie Griffin, Kwaku Atuahene-Gima, Saeed Samiee, Luigi DeLuca, Serge Rijsdijk and Gerda Gemser for their comments on prior versions of this manuscript. 11 Industrial Marketing Management xxx (xxxx) xxx–xxx N. Harmancioglu, et al. References Droge, C., Calantone, R., & Harmancioglu, N. 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