External involvement and operational performance : The mediating role of internal integration

Purpose – The purpose of this paper is to propose a business model related to NPD for improving performance by testing the relationship between external involvement and operational performance, as well as the mediating role of internal integration. Design/methodology/approach – To test the research hypotheses about the relationships above, survey data were collected from 176 Chinese manufacturing companies. Structural equation modeling was used to examine the hypotheses. Findings – The results indicate that both customer and supplier involvement have significant effects on internal integration. Internal integration has a significant effect on operational performance. In addition, internal integration partially mediates the relationship between customer and supplier involvement and operational performance. Research limitations/implications – First, the relative effectiveness of external involvement may be contingent on various factors (e.g. involvement timing and innovation strategy). Second, the authors did not identify the different effects of external involvement practices on different dimensions of operational performance. Finally, the hypothesized relationships may be different across different firm sizes, ownership types, industries or regions. Practical implications – Customer and supplier involvement are both important for improving organizational performance, which provides guidelines for managers to innovate business model in the product development process. Moreover, this study suggests that firms will not be able to capitalize on the capability of their customers or suppliers unless they are able to build high level of internal integration. Originality/value – This study provides support for both organizational learning theory and information processing theory. This study also contributes to external involvement literature by examining both the direct and indirect effects of external involvement on operational performance.