Differentiating Major and Incremental New Product Development : The Effects of Functional and Numerical Workforce Flexibility

This study seeks to explain the differential effects of workforce flexibility on incremental and major new product development (NPD). Drawing on the resource-based theory of the firm, human resource management research, and innovation management literature, the authors distinguish two types of workforce flexibility, functional and numerical, and hypothesize differential effects on NPD outcomes. A large-scale sample of 284 Dutch firms across various manufacturing goods and business services industries serves to test these hypotheses. The results suggest that functional flexibility positively influences incremental NPD only, internal numerical flexibility negatively influences incremental NPD only, and external numerical flexibility positively influences major NPD only. Thus, differences between major and incremental NPD are grounded in the human resource flexibility of the firm. This complements research that found that such differences lie in critical development activities, learning processes and capabilities. It also complements product innovation research on flexibility in NPD processes and on flexibility in organizational structures and routines. It extends the resource-based theory of the firm suggesting that human resource flexibility is part of the dynamic capabilities that allow firms to reconfigure existing competencies. The conclusions imply that managers of manufacturing and service firms may use training and education and create a functional flexible workforce that can progressively enhance incremental NPD outcomes. They may want to avoid paying overtime, because such internal numerical flexibility hampers incremental NPD, but use fixed-term contracts to expand external numerical flexibility to enhance major NPD