The goal of this research is to improve our understanding of the determinants of a business's rate and mix (in terms of level of innovativeness) of new product activities, with special emphasis on the pervasive influence of competitive forces on both inter-industry and intra-industry factors. Specifically, the study examines whether differences among businesses are the result of (1) a logical adaptation to the new product opportunities available and the competitive rivalry within the industry, i.e., industry differences, and/or (2) the result of the business's competitive strategy, relative position in the market, and reactions to specific competitive actions, i.e., business differences. A conceptual framework is used that includes factors influencing an industry's propensity to develop new products and a business's deviation from the industry average. These factors are examined using measures of an industry's ability and motivation, and a business's relative ability and motivation. We hypothesize that ability, motivation, and their interaction promote a higher rate of new product development, but that certain kinds of abilities and motivators do not have a positive relationship with the business's level of innovativeness (mix) of development activities. These hypotheses are tested using the confluence of two data sources, INDUSTRAT and PIMS. INDUSTRAT allows for detailed analysis of a business's new product decisions, while PIMS complements INDUSTRAT by providing data for businesses operating in a wide variety of competitive environments. A two-step regression procedure is used to analyze first industry, and secondly, business factors. Finally, a composite model including both industry and business factors, is estimated. Results indicate that both industry and business factors matter, and that both ability and motivation are important influences of new product activity. We also found that businesses are motivated differently across the phases of new product activities (research through sales), and with respect to the rate and mix of activities. We conclude that managers should manage their portfolios across phases and in terms of level of innovativeness, including consideration of those situations in which protection of the business's current position is recommended and when such actions become overprotection.
