Factors influencing new product development in microfinance institutions: a perspective from north Indian microfinance institutions
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LITERATURE REVIEW
A new product development plays a significant role in the life cycle of any organization. There are a number of factors that influence the decisions related to development of a new product in an organization including or- ganizations in banking and financial services industry. These can be broadly categorized into: internal or organizational factors, external or market fac- tors and product or process factors (Brown, Eisenhardt, 1995; Brand, 1998; Hadia, 2009). However, the research presented here focuses only on explor- ing the roles played by internal factors in MFIs in India in the new product development process because of our interests in studying the organizational 2. This model was based on delivering the financial services through a joint liability group mechanism and a “vanilla” product of a fixed amount for 50 weeks with weekly repayment. The success of this model as well as the credit product led many other Indian MFIs to follow the suit. © De Boeck Supérieur | Téléchargé le 25/04/2022 sur www.cairn.info (IP: 178.237.70.187)
Sanjeev KAPOOR and Gaurav SINHA 86
Journal of Innovation Economics – 2013/1 – n° 11 dynamics as well as unavailability of research studies on this topic (Mbogo, Ashika, 2011). This research aims at studying the internal or organizational factors for the first time in the microfinance sector in India. Several research studies have examined the impact of many internal or organizational factors on the new development process. For instance, Yapa (2008) have examined organizational strategy, structure, culture and leader- ship as important internal determinants influencing the new product devel- opment process in the banking industry. Another research by Hadia (2009) on innovations in financial services has explored several organizational fac- tors which are responsible for a successful new product development. These include: strategic factors, learning organizational perspective (past experi- ence to guide future innovations), organization culture of innovation, inter- functional coordination and communication, role of leaders and managers and strong and visible senior management support and commitment. Hepperle et al. (2010) argue that organizational culture, organizational structure, and available resources have substantial impact on the new prod- uct development process. Abir and Chokri (2010) have identified diversified nature of business, size of the organization, availability of financial resources and spread as major internal variables affecting the decisions related to new product development in banking industry. Similarly, Mbogo and Ashika (2011) have attempted to establish a positive correlation between organi- zational specific factors such as financial and human resources for MFIs and new product development in their study of Kenyan MFIs. Primarily, these internal factors, that have an influence on new product development process, have been used for creating a research framework for the purpose of this study (See Figure 1). The research framework is based on the classification of internal or organizational factors into the following sets viz. strategic orientation, board and governance, competitive edge and customer orientation, organizational culture and organizational capacities and resources. At the first place, strategic orientation (especially mission and vision) plays a significant role in the process of new product development (Urban, Hauser, 1993). A successful new product development is an outcome of strong commitment to follow corporate strategies (Gruenwald, 1992). Or- ganizations also need to clarify what they intend to achieve and how they wish to be perceived in the market. The organization is assumed to have an overall strategic vision and mission, which determine the new-product strategies of the organization (Zeithaml, Bitner, 1996). Likewise, Kotler et al. (1994) and Crawford (1994) have placed attention on strategic aspects like mission statement, vision, goals, and objectives as important factors in the © De Boeck Supérieur | Téléchargé le 25/04/2022 sur www.cairn.info (IP: 178.237.70.187) Factors influencing new product development… n° 11 – Journal of Innovation Economics – 2013/1 87 process of new product development. Citing examples of MFIs like BancoSol and Fundusz Mikro, Brand (1998) mentions that organizational mission and organization’s integral strengths (core competencies) play a crucial role in new product development process. Studies have proved that the board/top management also plays a crucial role in the new product development process (Edgar, Dunn and Co., 2009). Besides providing overall strategic direction, the board/ top management helps in creating an environment of cooperation and competence among different units (Sivadas, Dwyer, 2000). Craig and Goodwin (2003) highlight commitment of board and management at an MFI, Equity Building Society (EBS) to ensure adequate staff and resources allocation for new product de- velopment as an important component in this process. Even sometimes sup- port from board/ top management is often sufficient to marshal an organiza- tion’s resources for new product development in MFIs albeit organizational mission and its core competencies are not perfectly aligned (Brand, 1998). Corporate survival and growth, diversification and the quest for a com- petitive edge over rival business firms are among the factors most frequent- ly cited by top business executives in new product development process ( Hayhurst 1968; White 1976; Sachs, Benson, 1981; Kameshki 1988; Adis, Razli, 2009). Similarly a discussion paper by Edgar, Dunn and Co. (2009) focuses on the impact on new product development in financial services industry through first mover advantages in the market. Moreover, size of the organization matters in many cases and this too helps in leading a new product development process (Lazo, Woldesenbet, 2006). In fact, an organization’s culture and its resources also play a major role in influencing the decisions related to new product development. For example, Yapa (2008), Hadia (2009) and Hepperle et al. (2010) have underlined the significance of organization culture of innovation and resources in new prod- uct development. Studies have mentioned that the type of staff and function- al specialists needed to execute developments in an efficient manner are im- portant catalysts for a successful new product development (Rothwell, 1977; Takeuchi, Nonaka, 1986). Besides, initiatives to improve institutional capac- ity like training to staff to market and deliver new microfinance products help in the process of new product development (Craig, Goodwin, 2003). Findings of the present study attempt to substantiate the key role played by these five sets of internal or organizational aspects that influence the new product development process. These findings have been discussed in detail in the following sections according to the research framework suggested above (refer Figure 1). Prior to this, subsequent section discusses the meth- odology adopted for data collection and analysis. © De Boeck Supérieur | Téléchargé le 25/04/2022 sur www.cairn.info (IP: 178.237.70.187) |