top management support of r&d projects: a strategic leadership perspective

IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 42, NO. 3, AUGUST 1995 223

Top Management Support of R&D Projects: A Strategic Leadership Perspective

Stephen G. Green, Member, IEEE

Abstruct-A study of top management support of 213 R&D projects in 21 major firms revealed significant relationships between independent informants’ perceptions of top management support, project characteristics, and project performance. Testing a model based on a strategic leadership perspective, top management support was found to be directed at certain types of projects, Le., those that were expected to make greater contributions to business goals, represented larger investments, were seeking new products and process versus incremental improvements, and had originated from business sources as opposed to R&D. In addition, even after controlling for these project characteristics, projects with top management support were less likely to he terminated. In contrast, after controlling for project characteristics, completed projects with top management support were not judged to make greater contributions to the firm’s business goals suggesting top management may not be able to pick winners. Findings are discussed in terms of future research and implications for top management leadership within R&D.

I. INTRODUCTION OP management support has been depicted as a key T factor in successful innovation efforts in firms. The

popular R&D management literature provides examples where executives took an active role in the management of innovations. Moreover, the potential value of top management support during innovation efforts has been documented in the SAPPHO project [34], work on top management influence on and control of R&D [33], Chakrabarti and Hauschildt’s [8] review of the division of labor in R&D, Pinto and Slevin’s [30] critical factors in successful project implementation, and the Stanford Innovation Project in the US electronics industry [2 1). In general, this literature concludes that top management support of innovations contributes to success.

Empirical evidence is limited, however. Most of the empirical findings demonstrate a simple covariance between top management support of a project and better project performance, but do not offer much detail about what top management actually does. Top management’s role is usually described simply as “support” or “involvement” sometimes using single item measures [lo], [33], [34]. In addition, no empirical work could be found addressing the question of which projects are likely to be the focus of top management support. Given a large number of ongoing R&D projects in a firm and the relatively rare involvement of top management in specific projects [22],

Manuscript received September 13, 1993. Review of this manuscript was processed by Editor R. Balachandra. This work was supported by the National Science Foundation under Grant Number SES-85 19415.

The author is with the Krannert Graduate School of Management, Purdue University, West Lafayette, IN 47906 USA.

IEEE Log Number 9413359.

[34], i t is evident that top management must be making choices about which projects to support.

The purpose of this study is to extend our understanding of top management support within R&D. In this study, top management was defined as the CEO and hisher direct subordinates, responsible for corporate policy. Top management support of specific R&D projects is examined in a broad sense, as suggested by Pinto and Slevin [30], by looking at the extent to which top management engages in behaviors such as becoming involved in decisions about project issues, monitoring project progress, facilitating information flows to the project, and generally showing supportive behavior. Top management’s decision to exert support at the project level is hypothesized to be a strategic leadership process. I begin by using a strategic leadership framework [ 181 to propose a model of how R&D project characteristics promote top management support of those projects. Within this model, both project characteristics and top management support are hypothesized to make unique contributions to project outcomes, Le., project termination and the contribution of the project to the firm’s business goals. Presentation of the model is followed by a discussion of an empirical investigation of top management’s strategic support observed in a large sample of R&D projects developing products and process innovations in 21 large industrial firms.

11. THEORY AND HYPOTHESES

Hambrick [ 181 proposed that strategic leadership from top management is seen as both a result of setting characteristics and an influence on various organizational processes and ultimately organization performance. Although not explicitly acknowledged by Hambrick [ 181, this theoretical framework is well supported by other theory and research on leadership. Yukl [39] proposes a role model of leader behavior where leader behavior is determined by role expectations arising from numerous sources including the nature of the task and external environment. Similarly, Osbom and Hunt [29] have proposed an “adaptive-reactive’’ theory of leadership arguing that leadership is shaped by both macro and micro situational forces.

The premise of this study is that top management’s support of specific R&D projects is a form of strategic leadership. Because R&D projects focus on new products and processes that are intended to give the firm a competitive advantage, they have strategic implications [ 161, [36]. Thus certain characteristics of individual projects are argued to be important cues within the setting that signal the project’s strategic importance

0018-9391/95$04.00 0 1995 IEEE

224 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 42, NO. 3, AUGUST 1995

Top Management Size of Investment

Innovativeness

I I

Fig. 1. Top management support as a response to R&D project characteris

to top management and consequently attract top management’s attention and support.

A. Setting and Support

Top management is held responsible for the strategic di- rection of the enterprise [ 181-[ 191, [24]. Within that role, one of top management’s major responsibilities is the astute management of new technological developments [32]. Top management must “make decisions about which technological paths to follow” [16, p. 2411. They are held responsible for considering hundreds of projects and trying to support those that have potential for significant strategic impact [20]. Top management is enjoined to look at the needs and capabilities of the firm, the resource commitments represented by lines of research, and the commercial potential of projects and choose where to place their limited time and resources [4], [36].

Burgleman’s [6] description of the management of new ventures as a process of experimentation and selection is consistent with this view of top management’s role. A variety of new ventures may be underway, top management’s role is to recognize and select for support the most promising ventures. Burgleman stresses, however, that this tends to be a post hoc form of leadership where top management recognizes some of the ventures’ potential only after they had come into existence. This scenario suggests that top management should be motivated to support promising technological developments and would be scanning the firm’s setting for opportunities to do so.

This same process is hypothesized to be occumng within R&D. At any given time a number of R&D projects are ongoing. Top management, in its attempts to gain competitive advantage from this research, will be seeking to support and accelerate any developments that may yield strategic advantage for the firm. Thus as with any other investment, management will be attempting to gauge the potential payoffs and risks that each project represents for the firm. Because R&D is such an indeterminate process, however, direct assessment of payoffs and risks is very difficult [5] , [23]. In place of factual information in evaluating projects, management may iook for surrogates [ I l l . It is hypothesized here that

tics.

certain project characteristics may serve as such surrogates. For example, perceptions that the project meets important firm needs would signal potentially important payoffs or, research efforts seen as more radical may signal greater risk of failure and loss to the firm. Thus top management is expected to attend to such defining Characteristics of projects and to use this information to guide their decision as to where they might exert top management support of a specific project.

Although a number of project characteristics could be relevant to judging the project’s potential payoffs and risks [5, p. 511, this work focused on four project characteristics that are believed to signal such strategic information and thus are hypothesized to be related to top management support (see Fig. 1). Each of the project characteristics has implications for judging the potential value of the project to the firm or the potential risk the project represents. The expected contribution of the project to the firm and the perceived size of the firm’s investment in the project, clearly relate to the payoffs and financial risks inherent in the project. Two other characteristics, the innovativeness of the project and the source of suggestion for initiating the project, also may signal information to top management about the strategic value of a project. Each of these is briefly discussed below.

The expected contribution of the project to meeting firm needs is the most direct assessment of the project’s potential payoffs. As several authors note, one of the key issues in choosing to invest in technologies is the extent to which it has the potential to make a contribution to firm needs [ 5 ] , [36]. Projects that are expected to have a larger impact on firm needs, if successful, represent greater potential value to the firm. To the extent individuals expect such contributions from a project, they are likely to try to “sell” the project to top management and to gain their support [12], [22]. Thus top management’s judgment about project potential has a subjective component and is open to political processes [12, p. 1351. Given these processes and the mandate of top management to create value for shareholders, however, such projects are expected to attract the attention and support of top management. Thus it is hypothesized: HI. Top manage-

GREEN: TOP MANAGEMENT SUPPORT OF R&D PROJECTS 225

ment will exert greater support with projects expected to yield greater contributions to the jirm.

On the other hand, one of the key decisions in R&D management is allocation of resources to individual projects [2]. R&D resources are fixed and always must be distributed across a portfolio of projects [5], [23]. In general, projects with larger resource allocations represent greater risk to the firm and thus take on greater strategic significance [lo], [ 161. Moreover, given fixed resources, management must always be concerned whether resources should be redistributed to other more promising ventures [6]. All else being equal, projects that represent larger investments of firm resources represent a greater dependency of the firm on that project and thus a motivational investment of top management to want to actively manage that project [17]. Thus the larger the investment in a project, the more likely top management is to concerned about the risk that project represents and to directly influence project outcomes, Le., to exert support. It is hypothesized: H2. The larger the perceived investment in a project the more likely top management is to exert support of the project.

In addition to these characteristics, management also is expected to attend to other signals about project potential. The innovativeness of a project can have implications for both potential payoffs and risks for the firm. In this work, a greater degree of innovativeness was attributed to projects if they were seeking to establish a new product or process, as opposed to only making changes to existing products or processes. New products and processes have been widely acknowledged as an important way for firms to gain competitive advantage [7], [ 1 I], [16], [23]. Besides representing significant risks to the firm because of the technological and commercial uncertainty inherent in such undertakings, such projects often represent new strategic directions for a firm, e.g., attempts to open new markets or significantly change the firm’s pogition in an existing market [16], [23], [32]. Thus compared to the less innovative projects modifying existing products and processes, new product and process research is hypothesized to represent a important strategic undertaking and more likely to attract top management support, regardless of the size of the investment or the potential contributions to existing firm needs represented by a project. Therefore, it is hypothesized: H3. After controlling fo r size of investment and expected contributions, research aimed at developing new products or processes is more likely to experience top management support than research seeking incremental improvements in existing products and processes.

Finally, the source of suggestion for a project, i.e., the origin of the project idea, has been shown to affect how well a project is received within the firm and its perceived likelihood of success. Projects that are advocated by individuals from “stakeholder” business sources, both internal and external to the firm, e.g., customers, marketing, or production, have been shown to be perceived as more directly related to the business interests or needs of the firm and to be more supported than are projects advocated by R&D alone [35]. It is also the case that projects advocated by business sources, vis a vis R&D, have been found to have somewhat higher probabilities of achieving business objectives, such as profitability and market share [3]. Thus top management also may have a bias toward such

projects with clear business links and thus be more inclined to support them regardless of the project potential to contribute to firm needs or the size of the project investment. Therefore, it is hypothesized: H4. After controlling fo r size of investment and expected contributions, research advocated by a business source is more likely to experience top management support than research originating solely within R&D.

B. Project Performance

Strong statements about the potential value of executive support for innovation performance are common [7], [16], [26], [35]. Top management can redirect resources to the project, positively affect staffing, facilitate coordination with other critical functional areas, and remove obstacles to project success [lo], [20], [35]. Nord and Tucker [26] describe how executives used their decision influence to actively guide the implementation of innovations in banking; they monitored progress, resolved conflicts during implementation, and sold the innovation to organizational members. Others also have argued that executives can guide, promote, and support the innovation process, overcoming resistance that might occur in the organization [27], [41], [40]. Therefore, higher levels of executive support generally are expected to be related to better project performance. Project performance, however, has been judged along many dimensions such as achievement of commercial goals, technical achievements, efficiency, team growth, and patents [13], [25]. In this study, two different aspects of project performance are measured: project termination and the perceived contribution of the project to business goals of the firm (see Fig. 1). There are obvious dependencies between these measures of performance, however. Terminated projects are much less likely to contribute to business goals. Consequently, hypotheses about strategic leadership and performance were formulated and tested in a particular sequence.

The first and most basic performance hurdle for an innovation is to stay alive. If top management leadership is to help an R&D project, i t must first protect it from termination. Top management, because of its authority, is in a unique position to do this. Therefore, it is expected that projects with greater levels of executive support are less likely to be terminated. If a project is allowed to continue to completion, however, the success of that project is judged not in terms of completion, but in terms of its contributions to business goals such as profitability, cost reduction, or market share. Consequently, the hypotheses about project contributions to business goals were developed and tested while controlling for the effects of project terminations on such outcomes.

Obviously, the extent to which an innovation, product or process, contributes to the achievement of business goals is a more stringent criterion. Market forces, competitor actions, and implementation practices all can affect the extent to which an innovation contributes to project goals. Top management’s ability to affect such outcomes obviously are more limited, but top management is held responsible for such outcomes and does have a unique strategic perspective and position in the firm. The question is whether their judgment is astute

226 lEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 42, NO. 3, AUGUST 1995

about projects and their strategic value, and whether they exert their support wisely focusing it on projects that deliver greater contribution to the firm’s business goals.

The value of top management support, however, must be judged in relation to other factors that might affect project performance. Each of the theoretical perspectives espousing situational determinants of leader behavior, also argue that situational variables also will directly affect outcomes associated with leadership [18], [29], [39]. Similarly, there is a large literature looking at project Characteristics as independent influences on project outcomes [lo], [ l l ] . Consistent with these arguments, project characteristics also are depicted as making direct contributions to project outcomes (see Fig. 1). The very characteristics that connote strategic importance to top management do so because they signal a project that represents certain payoffs and risks. Regardless of top management’s role in them, decisions about project termination or the eventual contributions of the project to the firm may be directly affected by these characteristics. A key question is whether top management’s support in project matters represents a value- add contribution to project outcomes beyond that inherent in the project’s characteristics. To my knowledge, none of the previous research on top management influences on innovation has attempted to control for project characteristic and when testing top management support effects on innovation outcomes. This work addresses this oversight by examining the following: H5. After controlling for project characteristics, greater top management support will be related to less project termination. H6. After controlling for project characteristics and termination, greater top management support will be related to greater project contributions to business goals.

C. Control Variable

The propensity of top management to become involved in specific R&D projects may be affected by the size of the firm. Smaller firms are likely to have fewer projects underway and top management may be more aware of specific R&D projects and less removed from these innovation efforts. Thus top management support may be more likely in smaller firms. Therefore, firm size will be used as a control variable when testing hypotheses.

111. METHOD

A. Sample

Data were collected on 213 R&D projects that had been conducted in 21 large industrial firms [see Table I]. Sampling was conducted with the help of an upper-level R&D manager in each firm to ensure that both successes and failures were represented. The sample [approximately 10 per firm] includes R&D projects where the product [87%] or process [12%] innovations had been transferred from R&D for commercialization or implementation [58%] and projects that had been terminated [42%].

For each project, data were collected from two informants. All survey items were answered by the project leader and either the project leader’s boss or a project team member.

TABLE I SAMPLE DESCRIPTION

Companies number 21 industries

firm sizes

agricultural chemicals, flat rolled steel, industrial chemicals, packaged processed foods 1OOG150 OOO employees; mean = 48 708 em p I o y e e s

Projects number 213 types project origins

0 objectives

outcomes

87% product innovation; 12% process innovation 57% business source; 43% R&D source 81% totally new product/process; 19% modify existing product/process 58% commercialized or implemented; 42% terminated

Choice of informants for particular variables was guided by discussions with an upper-level manager within R&D. Informants were chosen for their knowledge about various aspects of the project, to assess the reliability of the judgments about the project, and to obtain independent sources of data for hypothesis testing.

B. Data Collection Procedure

Participating firms identified a liaison within upper-level R&D management who was knowledgeable regarding the firm’s R&D personnel and projects. In some cases, the liaison was a vice president within R&D, in other cases, the liaison was a division director or a manager responsible for overall management of the division’s portfolio of projects within R&D. In many cases, liaisons consulted with other R&D personnel to ensure they had sufficient and accurate knowledge of the projects being nominated for study. The research team worked with the liaison to select a sample of projects [8-12 per firm] and to identify appropriate informants. Projects were selected that the firm’s management believed were a representative sample of ongoing research, and that included both incremental and major innovation efforts. Questionnaires were distributed and collected in sealed envelopes by the liaison in each firm; each informant was assured of confidentiality. Upon receipt of the completed questionnaires a concerted effort was made to collect any missing data through follow-up requests. This procedure yielded a 99% response rate.

C. Measures

A set of questionnaires were developed through a year- long, joint effort of academic and R&D personnel. Following recommended procedures [28], [ 151, common factor analyses and tests for internal consistency [Cronbach’s alpha] were used to guide the creation of the measures. The reliability of the informants’ judgments about projects also was assessed. Following procedures recommended by Tinsley and Weiss [37], reliability of interrater judgments for scaled measures was estimated using intraclass correlations; agreement on nominal measures was assessed using a recommended X2 statistic. For all of the measures used in this study, estimates of internal consistency and the convergence of informants’ judgments


TABLE I1 PEARSON CORRELATION COEFFICIENTS

1, Business Advocacy -

3. Expected contribution -0.06 0.24* -

2. Size of investment -0.18* -

4. Innovativeness -0.02 0.19* 0.00 -

5. Firm size -0.06 0.02 0.07 -0.09 -

7. Contribution 0.18* 0.04 0.3 1 * -0.09 -0.01 0.22* __ 8. Termination -0.15* 0.09 -0.10 0.0 1 -0.09 -0.16* -0.67* -

Note: 11 = 197-213. * p < .os:** 1’ < .01

6. Top mgmt support 0.17* 0.24* 0.17* 0.22* 0.02 -

about individual projects are reported below. In order to minimize within-respondent, method variance biases, hypothesis testing was conducted using only one of the informants’ ratings for each variable. Data for predictors and criteria always came from different informants when testing the hypotheses. The informants for particular variables were chosen for their ability to knowledgeably answer questions and to avoid method variance bias. Following this conservative procedure, project characteristics were assessed using the Project Leader’s judgments. Top-management support was assessed using the Project Leader’s Boss’s judgments. And, project outcomes were assessed using a Project Team Member’s judgments. Informants for specific variables are indicated in parentheses below [PL = Project Leader; PLB = Project Leader’s Boss; TM = Team Member].

[PL] Project leaders indicated the perceived original source of suggestion for undertaking the project from a list of sixteen possible sources, e.g., R&D staff, marketing, sales, VP of R&D. Informants were allowed to indicate more than one source. The coding of responses distinguished between projects that were suggested by R&D alone and those where a business source, e.g. marketing personnel, was involved in suggesting the project. An assessment of the informants’ agreement on Business Advocacy was significant [65% agreement, X 2 = 18.05,~ < .0001]. For hypothesis testing, if the project was described as being suggested by R&D alone, Business Advocacy was coded a 0 [43%]. Otherwise, Business Advocacy was given a code of 1, indicating that the project had been reported as being suggested by a business source [57%].

2 ) Innovativeness: [PL] Informants indicated whether the project was perceived as intending to establish a new product or process for the firm or whether the project was perceived as intending to make recognizable changes to an existing product or process. Projects that were focused on modifying existing products or processes [coded 01 were expected to be more incremental undertakings for the firm [19%], whereas the pursuit of totally new products and processes [coded 11 was expected to represent more innovative efforts [81%]. The assessment of informant agreement on the innovativeness was significant [81% agreement X 2 = 74.94, p < .0001].

A set of items also were developed to assess the importance of the project to the needs of the firm, its expected contribution to the firm if successful, how costly the research effort would be, and the size of the investment in the project.

1) Business Advocacy:

Principal factor analysis using squared multiple correlations as communality estimates was performed on these items. The number of factors retained was determined by considering the size of eigen values, scree plots, factor loading patterns, and interpretability. This analysis revealed two factors that appear to measure expected contribution [see Factor 1, Appendix A] and the size of the firm’s investment in the project [Factor 21.

3 ) Expected Contribution: [PL] The five items composing factor 1 [see Appendix A] were used to assess how important the project was perceived to be at initiation in terms of meeting significant needs of the firm and making a contribution to the firm, e.g., How important was the need of the firm in this line of business in the decision to initiate this project [ l = not a factor, 7 = of paramount importance] A higher score on the Expected Contribution indicates that at initiation team members saw the project as addressing important firm needs and expected it to make greater contributions to the firm [M[SD =19.67[5.32]; alpha = .78, intraclass T = .64,

4 ) Investment: [PL] measures the perceived size of the resource commitments of the firm to the project. The sum of six items from factor 2 [see Appendix A] was used to assess the size of the investment in the project, e.g., In comparison with other projects undertaken in this line of business in your firm, how would this project be classified in terms of Size of project budget [l = much smaller; 7 = much larger]. A higher score indicates a project with a greater resource commitment than typical, working in a more costly S&T area, i.e., a greater investment by the firm in the project [M[SDI = 25.17[5.47]; alpha = .76, intraclass T = .69, p < .0001].

5 ) Top Management Support: [PLB] Top management was defined as the CEO and hisher direct subordinates, responsible for corporate policy. A set of fourteen items were developed to measure a variety of different support behaviors: the amount of decision influence, monitoring, information facilitation, and support top management was perceived to exercise with specific projects, e.g., To what extent did top management facilitate the project team getting valuable information [ l = greatly inhibited information flow; 5 = greatly facilitated information flow]? Factor analysis of these items [see Appendix B] revealed a single factor. A higher score indicates that the project leader’s boss reported top management as more actively exercising support of a specific project [M[SD] = 34.22[ 11.541; alpha = .92, intraclass T = .44, p < .0002].

p < .0001].


.19***

.09*

-.lo*

I I .16* 1 Fig. 2. Standardized path coefficients are 5hown. All statistical significance are based on one-tailed tests. * p < .Os; * * p < .01: * * * p < ,001.

Signifcant relationships in path analysis. Note: A logistic regression was used to test the relationships between termination and the predictors.

6 ) Contribution to Business Goals: [TM] A set of 12 items were developed to measure the extent to which the project was perceived as a success inside the firm and the perceived impact of the project on representative business goals, e.g., What overall Impact did the project have on: 1) Profitability; 2) sales volume; 3) product cost; 4) market position; 5 ) employee benefits; 6) stockholder benefits; 7) company image [ l = strong negative; 7 = strong positive]. Factor analysis [see Appendix C] revealed a single factor. A higher score indicates that project team members perceived the project to have a more positive impact on the firm and its business goals [M[SD] = 50.60[11.91]; alpha = .92; intraclass T = 26, p < .0001].

7) Termination: [TM] measures whether or not the project was reported as discontinued by the firm [ l = yes; 0 = no]. Informants significantly agreed on project termination [9 1% agreement, X 2 = 132.81, p < .0001]. Team members reported 42% of the projects as terminated.

8) Firm Size (Annual Reports): The number of employees reported by the participating firms was collected from annual reports to be used as a control variable for the size of the firms. Since project is the unit of analysis and multiple projects were collected within each firm, the value of the size variable for each firm was assigned to each project within that firm [M[SD]= 48 707.8 [35 929.911.

IV. RESULTS

Due to sizable differences in the range of scores across the measures, all of the variables, except the categorical variables such as innovativeness, were standardized to a mean of 0 and standard deviation of 1 before conducting analyses. Table I1 presents the zero-order correlations among variables. As can be seen, firm size shows no significant correlations with any of the variables. Nevertheless, to be conservative in testing hypotheses, size was entered in all analyses as a control variable.

Path analysis was conducted to test the hypotheses and to estimate the model presented in Fig. 1. Cohen and Cohen’s [9,

pp. 36 1-3661 analytical strategy for estimating partial causal models with the hierarchical analysis of sets of variables was utilized. Within the analysis, project characteristics and project performance [termination and contribution] were treated as sets of variables, with no causal relationships specified between the variables within these sets. In addition, all possible paths [hypothesized and nonhypothesized] were tested. As is standard in path analysis, OLS regression was used to estimate direct effects in the model. Since termination is a dichotomous variable, however, the estimates for direct effects involving the termination variable were obtained using logistic regression analysis. While the nature of the termination variable necessitates the use of this analysis, this approach precludes the calculation of indirect and total effects as the OLS and logistic estimates cannot be combined. It is important to note, however, that all of the hypotheses involve only direct effects. Finally, when testing relationships between any of the variables and the contribution to business goals, termination effects were forced into the regression first to control for any effects of termination on the contributions made by projects. Significant path coefficients and residuals are presented in Fig. 2.

Hypotheses 1 4 predicted that the expected contribution of a project, the size of its investment, its innovativeness, and having a business advocate for the project would be associated with higher levels of top management support. Moreover, in hypotheses 3 and 4, innovativeness and business advocacy were predicted to be related to support after controlling for contribution and investment. As can be seen in Fig. 2, strong support for all four hypotheses was found. Top management support of a specific project was more likely when that project was advocated by individuals within business functions, represented a larger investment of firm resources, was expected to make a significant contribution to existing firm needs, and was intended to develop a new product or process. The R2 from the individual regression equation indicated that 16% of the variance in top management support could be explained by these four project characteristics [F[5,182] = 6 . 7 4 , ~ < .0001]


Hypotheses 5 predicted that top management support would be uniquely related to project termination, after controlling for any effects due to project characteristics. Hypothesis 6 predicted that top management support would be uniquely related to project contributions to business goals, after controlling for any effects due to project characteristics. As can be seen in Fig. 2, top management support was directly related to project termination, but was not related to the project’s contributions to business goals. Thus support is found for hypothesis 5, but not for hypothesis 6. In addition, direct paths were found between a number of the project characteristics and both project outcomes. Termination was more likely when a project represented a larger investment and less likely when the project was advocated by business sources. The pseudo R’ [ 11 from the individual logistic regression equation predicting termination indicated that 8% of the variance in termination could be explained by the combined effects of project characteristics and top management support [X’ = 14.19, p < .03, 71 = 1851. Contributions to business goals were more likely when a project was expected to contribute more at the outset, was focused on less innovative, incremental research, and was advocated by a business source. The R’ from the individual regression equation predicting project contributions indicated that 52% of the variance in project contributions is explained by the combined effects of project characteristics, top management support, while controlling for termination [ F [7, 1751 = 26, 37, p < .0001]. The strong, covariance between termination and contribution inflates this R2 figure. After removing termination’s effects on contribution, the remaining variables explain .08% of the variance. Thus in Fig. 2, the residual for the contributions to business goals is shown as .92 which is considered to be a more accurate representation of the unexplained variance for that variable in the model.

V. DISCUSSION These findings, based on a large and diverse sample of

R&D projects, indicate that top management does play a support role at the individual project level within R&D. In every firm, evidence was found of top management being an active player in individual R&D projects. In this sample, the top management measures and factor analysis revealed an interrelated set of behaviors used by top management to support and “push” product and process development within the firm. Such involvement of top management may cross the line between support and become meddling, however, where they begin to micromanage projects. Nevertheless, in this study, behaviors that might be seen as more meddling in character, i.e., exerting influence over project level decisions and monitoring project performance, were seen by R&D personnel as part of a larger support construct that included behaviors where top management took a role in informing and supporting the project. This finding suggests that even though top management might increase their control over the project that control was not seen as autocratic or meddling. Thus at least in this sample, it appears that when top management chose to be involved at the project level they were seen as adopting a shepherding posture in managing innovations.

Consistent with the strategic leadership framework, top management’s support was clearly related to project characteristics. Top managers were more likely to assume support roles when projects were more directly tied to competitive issues such as firm need and risk. Projects that were expected to yield greater contributions to the firm and that represented larger investments were associated with more top management support. Thus top management’s involvement in individual R&D projects does appear to be in part a strategic choice. Top management support also was more likely when the project originated from a business source and was focused on new product or process development vis a vis incremental research. These latter findings hold even when controlling for the expected contribution of the project to business goals and its size of investment. This suggests that top management is sensitive to strategic dimensions that go beyond financial concerns. Many authors contend that development of new technology is an important source of competitive advantage [ 161, [32]. Apparently, top management is inclined to oversee such efforts regardless of their relationship to firm needs. Similarly, top management’s preference for projects with business origins suggests a potential bias in top management’s view of innovation efforts. If we have already taken into account the expected contributions of the project, the size of its investment, and its innovativeness, why should top management be more inclined to support projects from the business side?

It also should be noted that only 16% of the variance in top management support was explained by the set of project characteristics examined in this study. Other factors must be affecting top management’s decision to support individual projects. In this study, the relationship between the nature of the task [project characteristics] and leader behavior received attention. This relationship is only one of Yukl’s [39] proposed influences on leader behavior. Yukl also points out that many other contextual variables, such as regulations, policies, sub- ordinate expectations, and feedback about performance could affect top management’s decision to support R&D projects. Two other areas that might prove fruitful in more fully understanding influences on top management support are the political processes that surround innovation efforts [ 121 and the role that champions play in obtaining upper management

It was argued that the value of top management support must be judged in relation to other factors that might affect project performance. Although specific hypotheses were not proposed, project characteristics were seen as potential, independent influences on project outcomes. As can be seen in Fig. 2, this was the case. Projects that were advocated by business sources, were less innovative, and had high expectations for projects contributions to firm needs were all more likely to make contributions to business goals, regardless of the amount of top management support the project received. Two project characteristics also were related to the decision to terminate projects. Termination was more likely for big- investment projects and for projects that were not advocated by business sources, i.e., originating solely from within R&D. Retrospective bias may have inflated some of these judgment,

support [22].


e.g., high contributing projects were expected to contribute at initiation. Such bias, however, does not easily explain the higher perceived contributions for projects from business sources or for less innovative projects. Similarly, the finding that expected contribution did not predict termination also argues against a retrospective bias in judgments about the expected contributions of the projects. A retrospective consistency bias would predict that respondents would report that terminated projects also were perceived as less likely to contribute to firm needs at initiation.

Top management support’s relationship to project outcomes was limited to project termination. As predicted in hypothesis 5, more top management support was negatively related to termination. It appears top management may be able to keep projects alive. This may have value to the firm if one assumes that projects kept alive by top management are eventually completed and yield contributions to the firms business or technical goals. There is no evidence in this study, however, that top management’s involvement in a completed project is associated with greater contributions of that project to the firm. Top management support had no significant relationship to contributions to business goals. Thus even though top management does seem attuned to projects that have strategic implications, they do not appear especially astute at picking “winners,” i.e., projects that deliver greater contributions to firm goals. It also may be that even if top management backs a project to the end, their influence is not sufficient to affect the eventual contributions of the innovation. Perhaps the expectation that top management support could affect the eventual contributions of an innovation to firm business goals was an optimistic view of top management and their ability to shape the outcomes of the innovation process. As noted in the introduction, many forces impinge on a project’s eventual contributions to the firm, forces such as competitor actions and market shifts that are often very difficult to anticipate and are outside the control of top management or the firm. Perhaps it is enough that top management can keep alive projects that appear to have important strategic implications, recognizing that some of them will go on to be winners whereas others may not deliver as much as hoped for.

Although relationships between top management support and termination are evident here, the nature of that relationship presents some complexities. Business advocacy and size of investment were found to be related to both top management support and termination decisions. Thus in this model these two project characteristics have both direct and indirect effects on project termination. In the case of business advocacy, these effects are consistent. Projects advocated by business sources are less likely to be terminated; they also provoke more top management support which leads to the project being less likely to be terminated. The findings for size of investment, however, present countervailing forces on termination decisions. Projects that represent larger investments are more likely to be terminated, perhaps to conserve resources. Projects that represent larger investments also provoke more top management support, however, which leads to the project being less likely to be terminated. Thus larger investment

projects appear to create forces that both increase and de- crease the likelihood of termination. This finding exemplifies the complexity of the project termination decision. It also suggests that top management support may be crucial for large investment projects. Without that support, those projects are more likely to be a target for termination.

While interesting, the termination findings must be inter- preted with caution. Previous work in this area has argued strongly for the causal effects of top management support on project outcomes and that dynamic may well be operating here. Given that the informants were retrospectively reflecting on the pattern of support over the life of the project and outcomes, however, it is plausible that as the project progressed inter- mediate outcomes caused top management to increase their support in project matters. Given our knowledge of leadership in other settings, the most likely scenario is that these processes are reflexive [38]. Only longitudinal data could shed light on this question.

Similarly, in some cases one might expect reciprocal relationships between some project characteristics and top management support. Both size of the investment in the project and the expected contribution of the project to firm could attract top management support, as argued here, or be caused by the presence of top management support for the project. The other two project characteristics, however, are not so amenable to this reverse causality interpretation. Top management support does not seem likely to precede the idea for a project originating within a business function, nor is it likely to cause a project to be seen as focusing on a new product or process rather than an incremental modification.

Great care was taken to minimize biases in the study and to buttress our confidence in the findings. Measures were developed to represent single constructs that were internally consistent and interpretable. Multiple respondents were used for every measure and were demonstrated to provide reliable judgments about the project. For hypothesis testing, individual respondents were chosen to ensure that predictors and criteria were never collected from the same data source. Also, even though the data were retrospective, the reliability of the respondents judgments and the fact that in several instances they were reporting objective, verifiable events tends to support the accuracy of those judgments [14], [31] and increases our confidence in the findings.

This study is the first work to shed light on the relative effects of setting and top management support on project performance. To my knowledge, no previous work in this area has partialled out setting effects when examining top management support. The findings support the proposition that both setting and leadership variables are uniquely related to innovation performance. Top management support also made a unique contribution to explaining project termination. This suggests that top management, through their leadership, can be a source of incremental support beyond that given to projects by others in the firm.

Overall, this study also provides support for Hambrick’s [18] view of strategic leadership and the model proposed here. Moreover, this work suggests it might be useful to adopt a role theory perspective in attempting to understand top

GREEN: TOP MANAGEMENT SUPPORT OF R&D PROJECTS 23 1

management’s support of individual innovation efforts within the firm. Evidence is mounting that such support may be a boon to innovation [8], [21], [30], [33], [34]. Little attention, however, has been paid to when and why top management chooses to assume this role. As noted above, Yukl [39, p. 1491 provides a role theory framework that could be useful in guiding future research on this question.

Finally, there may be some lessons for top management in this work. If top management support is partially determined by setting variables, such as project characteristics, several issues arise. First, is top management supporting the right kinds of projects for the right reasons? One would assume that it is desirable for top management to exert more support over projects that promise greater contributions or that represent larger investments by the firm. But, should top management support new product or process research more than research aimed at incremental improvements? Should top management support projects from the business side more than projects originating from R&D, especially when it isn’t related to the expected contribution of the project to the firm? Are these prudent management decisions driven by strategic concerns or do they represent bias? More research on the setting variables that attract top management support is needed. Second, top management should be concerned that they are getting information about the innovation setting in a timely, informative, and accurate fashion so that they can make strategically informed choices about where their support could be most beneficial. Given the potential influence of top management on the likelihood of projects being completed, the assessment of setting characteristics should not be haphazard. Moreover, reassessment of these factors should occur periodically over the life of the project. Finally, these findings suggest top management should scrutinize carefully the impact of their support on projects. If top management is a factor in keeping a project alive, the value of this behavior needs to systematically understood. This conclusion also underscores the importance of future work in this area focusing on a greater variety of top management leadership behaviors. Only by spreading our net wider can we hope to understand how top management can best promote successful innovation in today’s organizations.

APPENDIX A

FACTOR PATTERN FOR EXPECTED CONTRIBUTION AND INVESTMENT

7. Impact of project if successful .86 .14 8. Contribution expected from .76 . I8 project 9. Costs for this firm to do R&D .06 .73 in this S&T area 10. Costs of this research in gen. .1s .73 sci. community 1 1 . Costs for new firms to enter .03 .55 this S&T area

eigen value 3.12 1.62 % of total variance explained 0.33 0.19 % of common variance explained 0.64 0.33 Bold items compose factor n = 411

APPENDIX B

FACTOR PATTERN FOR TOP MANAGEMENT LEADERSHIP

Items 1. Influences defining business objectives 2. Influences seeting technical objectives 3. Influences decision to initiate project 4. Influences initial priority of the project 5. Influences initial resource commitments 6. Influences changes in resource commitments 7. Influences changes in project priority 8. Influences exposure of results to others 9. Frequency of monitoring/evaluating project IO. How soon made aware of milestones 1 1. Frequency of providing valuable information 12. Facilitated project getting valuable information 13. Displayed general supportive behavior

Factor 1 .78 .67 .80 .84 .8 1 .79

.79

.65

.62

.60 S O

.46

.52

eigen value 6.62 percent of total variance explained 0.50 percent of common variance explained 0.86 n = 320

APPENDIX C

FACTOR PATTERN FOR PROJECT CONTRIBUTION TO BUSINESS GOALS

Items 1. Time to completion for this project 2. Scientific disciplines required to do this project 3. Size of project budget 4. Import. of project for needs of firm in LOB 5. Import. of project for oveall needs of this firm 6. Change expected in firm due to project

Factor 1 Factor 2 Items Factor 1 .oo .42 1. Did this project achieve commercial obj. .75

2. How much change resulted from this project

4. Amount of contribution can be described as

.72 .22 .53 3. How much impact did this project have .76

.86 .24 .65 5. How are results now viewed .76 .40 .02 6. Overall impact on profitablity 3 2

.77 .58 .03 8. Overall impact on product cost .46

.77

.72

7. Overall impact on sales volume

9. Overall impact on market position .71 .13 10. Overall impact on employee benefits .44

11. Overall impact on stockholder benefits

232

12. Overall impact on company image

eigen value percent of total variance explained percent of common variance explained 7 1 = 411

.68

6.23 0.56 0.87

ACKNOWLEDGMENT

The author appreciates the helpful comments of James W. Dean, Jr.. Jeffrey B. Arthur, and the anonymous reviewers.

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top management support of r&d projects: a strategic leadership perspective

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