Industrial Marketing Management 32 (2003) 517 – 530

Process implications of the use of the Internet in new product

development: a conceptual analysis
Muammer Ozer*
Department of Management, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon, Hong Kong, China
Received 1 May 2001; received in revised form 1 August 2002; accepted 1 October 2002

Abstract

New product development requires a long and detailed process with numerous activities such as product line planning, strategy
development, concept generation and screening, business analysis, development, testing and validation, manufacturing development and
commercialization. Furthermore, each of these activities has its own unique requirements, some requiring information collection from the
market, whereas others requiring the collaboration of different people who are involved in the new product development activities. This paper
investigates the Internet’s role in these activities and develops research propositions. In addition, it discusses how the impact of the Internet
might change based on different products and different organizational conditions.
D 2002 Elsevier Science Inc. All rights reserved.

Keywords: The Internet; Product innovation; Product development; Development process

The Internet offers numerous opportunities for firms to
conduct their business. Past research has already shown how
the Internet can help firms in their business activities such as
marketing [1], manufacturing [2], purchasing [3] and sales
[4]. One of the important business activities for firms is to
develop and introduce new products and services. Indeed,
new product development has been considered to be one of
the most important competitive factors in today’s market
environment. Consequently, firms heavily invest in new
product development.
However, new product development is an uncertain and
risky business [5], requiring a long and detailed process
with numerous activities such as product line planning,
strategy development, concept generation and screening,
business analysis, development, testing and validation,
manufacturing development and commercialization [6].
Furthermore, each of these activities has its own unique
requirements. For instance, the earlier stages, also charac-
terized as the ‘‘fuzzy-front-end’’ of the new product devel-
opment process [7], involve more uncertainties and, as a
result, require the collection and use of market information
* Tel.: +852-2788-7852; fax: +852-2788-7220.
E-mail address: mgozer@cityu.edu.hk (M. Ozer).
[8]. On the other hand, the later stages are more related to
the technical and marketing development of specific new
product ideas and require the collaboration of different
people both within and outside a firm [9].
Given its speed, convenience, interactivity and world-
wide coverage, the Internet can help firms collect, categor-
ize and use information needed for product development,
enable them to understand their market better and, hence,
help them reduce the fuzziness in the new product devel-
opment process. In addition, the Internet can facilitate the
collaboration of different people who are involved in
product development, increase the speed and the quality
of new product testing and validation and improve the
effectiveness and the efficiency of manufacturing devel-
opment and new product launch. Thus, there seems to be a
match between the offerings of the Internet and the different
requirements of the new product development process.
Hence, this article aims to investigate the role that the
Internet can play in the different stages of the new product
development process. The following section presents the
new product development process, identifies its key require-
ments, discusses how the Internet can help companies fulfill
the requirements and develops research propositions. After
that, the paper outlines how the role of the Internet might
change based on various product and organizational circum-

0019-8501/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved.
doi:10.1016/S0019-8501(02)00276-6
518 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
stances and offers related research propositions. The paper
also discusses the role of the Internet in new product
performance. Finally, the paper concludes with managerial
and research implications.
1. New product development process and the role of the
Internet
Past research has consistently shown that a high-quality
new product development process is one of the most critical
success factors in new product development [8,10 – 12]. As
a result, it has offered numerous processes that firms can use
when developing their new products. Cooper [13] defines a
new product development process as a formal blueprint,
roadmap, template or thought process for driving a new
product project from the idea to market launch and beyond.
The process involves predetermined set of stages and each
stage consists of a set of prescribed, cross-functional and
parallel activities. Each stage is preceded by a gate, con-
trolling the flow of the process and providing a decision
checkpoint in the process. Because of the stages and the
gates of the process, it is commonly called as the stage – gate
new product development process [13]. At each gate,
numerous deliverables that are the results of the actions
taken in the previous step are reviewed based on predeter-
mined criteria. The results of the reviews at each gate are the
outputs of that gate, which usually include a decision such
as go/no go, a prioritization level, resource commitments,
action plans, schedules and agreed deliverables for the next
gate [8].
There are three generations of the stage – gate new
product development process [13]. NASA introduced the
first-generation process in the 1960s. The first-generation
process has discrete phases with checkpoints at the end of
each phase. It brings discipline to an otherwise chaotic
process, reduces project risks and ensures task completion.
However, it has been criticized as being too cumbersome,
too slow, too development focused, and too functional. The
second-generation process builds on the first one; however,
it involves more cross-functional teams, integrates both
technical and nontechnical activities and takes a holistic
view, capturing the entire process rather than focusing on
a few stages of the process. It also puts more emphasis on
the predevelopment activities, is more market-oriented,
involves parallel and concurrent processing and entails
sharper decision points with clear go/no go criteria [13].
Although the second-generation process is a major
improvement over the first-generation process, it still has
various problems. Most notably, projects must wait at each
gate until all tasks have been completed; the process allows
only a limited amount of overlaps among the stages;
projects must go through all gates and stages; the process
pays more attention to selecting or rejecting products rather
than prioritizing them; the process is too detailed and too
bureaucratic. Taking into account the problems associated
with the first and second-generation processes, the third-
generation process emphasizes efficiency and effectiveness
in the new product development process through four
fundamental areas. First, it is fluid, which means that there
are overlaps in stages for greater speed. Second, it involves
fuzzy gates, reducing the rigidity of criteria used in the gates
and allowing conditional or situational considerations of the
activities. Third, it is more focused in terms of prioritizing
projects. Finally, it is flexible, suggesting that each new
product is unique and has its own unique development
process [13].
There are also compelling issues that indicate that new
product development process may not be uniform across
firms and products. Takeuchi and Nanoka [14] argue that
today’s rapidly changing and competitive market conditions
require firms to adopt a flexible and fast new product
development process and that a holistic ‘‘rugby’’ style new
product development might be needed to respond to the
conditions. With this approach, new product teams move
through all phases of the development together, passing the
ball back and forth as they develop new products. Based on
a case study, the authors concluded that it is possible to
achieve greater flexibility and speed in new product devel-
opment. They argued that a rugby style new product
development first gives substantial freedom to new product
teams within the context of the firm’s requirements. Second,
it involves autonomous self-organizing teams. Third,
because the team starts working together from the beginning
as a unit, its members’ activities are synchronized to a
certain degree, and this results in overlapping developing
phases. Fourth, as the team proceeds in the development
process, it acquires knowledge across multiple levels and
multiple functions. Fifth, the process avoids rigid controls,
but emphasizes subtle control just to prevent instability,
ambiguity and tension. Finally, the process also encourages
the transfer of accumulated knowledge to other new product
teams as well as other parts of the organization.
Another reason why new product development processes
may not be uniform across different products and firms is
the fact that there are different degrees of product innova-
tion. Christensen [15] argues that successful firms can be
pretty good at sustaining innovation, which involves
responding to evolutionary market changes. However, they
may have difficulties in dealing with disruptive innovation,
which creates an entirely new product market through the
launch of a new kind of product or service. Large firms can
run into difficulties when dealing with disruptive innova-
tions, as they may require new processes and values that are
not routine and readily available in the firms. Thus, the
firms can either create new organizational structures within
their organizational boundaries where new processes and
values are developed or spin out an independent organiza-
tion from the existing organization and develop within it the
required new processes and values or acquire a different
organization whose processes and values closely match the
requirements of the new product [16].
 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
Although different firms may adopt different new prod-
uct development processes and different products may
require different processes, a new product idea needs to be
conceived, selected, developed, tested and launched to the
market. A recent cross-sectional survey indicated that suc-
cessful firms usually engaged in the following new product
development activities in their new product development
process [6]: Product line planning, strategy development,
concept generation, concept screening, business analysis,
development, testing and validation, manufacturing devel-
opment and commercialization. Hence, we organize the
paper around these main activities and discuss the role of
the Internet in these activities, matching the offerings of the
Internet with the key requirements of the activities. The
following section presents these activities in more detail,
explains the role of the Internet in each area and develops
related research propositions. Table 1 summarizes the activ-
ities and the Internet’s role in the areas.
1.1. Product line planning
Product line planning refers to analyzing the firm’s
current portfolio vis-à-vis the competitive arena in new
product development [6]. It entails firms to assess the
strength of their existing products, compare them with those
of their competitors and decide how many new products and
what kind of new products to develop [17]. A recent survey
showed that more than 60% of successful new product cases
involved a product line planning, while only less than 40%
of unsuccessful new product cases involved this activity [6].
Despite the fact that new product development activities
are generally conducted for a single product, there is an
increasing understanding in the literature that at the earlier
stages of the new product development process, firms
usually consider a portfolio of products that they can
develop and manufacture with the same technology
[18,19]. This allows them to develop and introduce a series
of new products relatively inexpensively and quickly, to
better manage their new product development programs and
to plan the scheduling of sequential new product introduc-
tions [20]. In addition, since product line planning considers
all related products as a whole, it provides a broader view of
profitability, resource allocation, risk, market share, market
size and market growth aspects of a new product [21,22].
The Internet can play a number of crucial roles in this
area. Since a product line planning requires the considera-
tion of a wide variety of information such as the customer
needs, financial and technical requirements, probability of
success and market timing for all products in the portfolio
[18], the Internet can help firms collect, categorize and use
this information. Indeed, in a recent survey, Teo and Choo
[23] have shown that the use of the Internet in collecting
market information was positively related to the quality of
that information. They have also shown that the quality of
the collected information had a positive impact on the
quality of managers’ decisions. When new product manag-
519
ers make assessments with regard to how customers might
perceive the products in the product portfolio, they will be
using the high-quality information collected through the
Internet, and thus, their decisions will be more accurate.
In addition, since the information can be more complete and
can allow firms to see the big picture in the portfolio, they
can more effectively assess the similarities and dissimilar-
ities of the products in the portfolio and minimize the
perceived similarities of the products in the portfolio.
Consequently,
Proposition 1: The use of the Internet will be positively
associated with companies’ ability to collect, categorize and
use information needed for product line planning.
Proposition 2: The use of the Internet will lead companies
to make better decisions with regard to product line
planning.
1.2. Strategy development
Earlier studies have shown that firms are increasingly
taking a strategic viewpoint in their new product devel-
opment process [6,24]. Developing new products that are
consistent with overall company strategy increases the
likelihood that the firm can contribute necessary resources
and support to the development and launch of the new
products [25]. In addition, it can create a harmony and
synergy among the existing products of the organization.
Consequently, it can prevent firms from introducing new
products that threaten to take away business from their other
products (i.e., cannibalism) [26].
One of the key initial considerations in new product
development is to set the boundaries for the new product
development activities. This means assessing how much
emphasis is placed on being first to market with a new
product and whether the new product idea can make the firm
a market leader [27]. It also suggests establishing rules with
regard to whether the firm should pursue extensions of its
existing products or totally new products [28]. Finally, it
involves determining the amount of risk that the firm is
willing to take in developing new products [29].
As a popular tool to formulate new product development
strategies, firms utilize Product Innovation Charters (PICs),
which was originally described by Crawford [30]. PICs’
importance in new product development has long been
recognized in the literature [31] and their positive impact
on new product success has been empirically shown [32].
PICs essentially outline firms’ target business areas, set goals
and objectives of product innovation and list activities that
need to be conducted in order to achieve the goals and the
objectives.
The Internet has been characterized as the ultimate
medium for interactivity and customization. Its ability to
address a person and ability to gather and remember the
response of that person through proper databases allow it to
 520
Table 1
The role of the Internet in new product development
New product Brief description The role of the Interneta Moderating conditionsa

M. Ozer / Industrial Marketing Management 32 (2003) 517–530

development activities
Product line planning
Strategy development
Concept generation
Concept screening
Business analysis
This activity entails firms to assess the
strength of their existing products, compare
them with those of their competitors and
decide how many new products and what
kind of new products to develop.
This activity sets the boundaries for the
new product development activities in
terms of target business areas, goals and
objectives of product innovation and
specific activities that need to be conducted
in order to achieve the goals and the objectives.
Firms at this stage try to generate as many
new product ideas as possible for
further consideration. Since only a
small proportion of ideas generated
can survive through the long new
product development process, a major
characteristic of an effective idea generation
is that a wide variety of ideas from a wide
variety of sources need to be considered.
After generating potential new product ideas,
firms need to screen them and choose the
most suitable one for further development.
This activity requires a comprehensive, flexible
and objective assessment of the new product ideas.
Firms at this stage conduct a comprehensive study
to build a business case for the new product idea
so that it can be further developed.
Activities at this phase include detailed market,
technical and financial assessments.
– The Internet can help firms collect,
categorize and use information needed
for product line planning (P1).
– It can also lead firms to make better decisions
with regard to product line planning (P2).
– The Internet can help companies
understand their market better and
thus target it more effectively (P3).
– The Internet can help them formulate
new product strategies faster (P4).
– It can help them implement the
strategies more effectively (P5).
– The Internet can help generate a
wide range of new product ideas (P6).
– It can generate ideas from a
wide range of sources (P7).
– The Internet can enhance the
comprehensiveness of the
concept screening process (P8).
– It can improve the flexibility
of the concept screening process (P9).
– It can make the screening
process more objective (P10).
– The Internet can increase the
speed of business analysis (P11).
– It can enhance the quality
of business analysis (P12).
– Innovative versus less innovative products (P22)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Innovative versus less-innovative products (P22)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Innovative versus less-innovative products (P22)
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Innovative versus less-innovative products (P22)
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Innovative versus less innovative products (P22)
– Transactional versus relational products (P23)
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
Development
Testing and validation
Manufacturing development
The strategy at this stage is to convert the
new product idea that just passed the business
analysis phase into a new product.
It may require the collaboration of people
both within and outside the firm.
At this stage, firms make sure that their new
products function properly before they
are mass-produced and marketed. Testing and
validation can be valuable for firms,
since it can help them ascertain the
functionality and manufacturability
of their new products as well as
determine whether the new products
meet customer requirements.
This activity is characterized by the development
– The Internet can facilitate the
collaboration among the new product
development team members (P13).
– It can improve the operational performance
of new product development activities (P14).
– The Internet can significantly increase
the speed of testing and validation (P15).
– It can substantially decrease the
costs of testing and validation (P16).
– It can greatly enhance the quality
of testing and validation (P17).
– The Internet can improve the quality
– Transactional versus relational products (P23)
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Transactional versus relational products (P23)
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Transactional versus relational products (P23)

M. Ozer / Industrial Marketing Management 32 (2003) 517–530

and piloting of relevant manufacturing
processes for a new product. A firm can
have a perfect new product idea; however,
if it cannot manufacture the intended product
effectively and efficiently, it can never
realize the benefits of its new
product development activities.
Commercialization At this stage, firms implement their marketing,
production and post-launch plans for their
new products. They also monitor and,
if necessary, adjust their activities.
a
Please refer to the numbered propositions in the text for more details.
of manufacturing development (P18).
– It can increase the efficiency of
manufacturing development (P19).
– The Internet can enhance the success
of new product commercialization (P20).
– It can increase the efficiency of new
product commercialization (P21).
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)
– Transactional versus relational products (P23)
– Industrial versus consumer products (P24)
– Organizational learning capabilities (P25)
– Technical and marketing capabilities (P26)
– Collaboration capabilities (P27)

521
522 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
be used to identify market trends and customer needs better
[33]. Indeed, in a survey study, it has been shown that the
Internet had a positive impact on product management
activities, including faster discovery of customer needs
and greater product customization [34]. In a case study, it
was reported that the use of electronic systems in IBM
allowed managers to consider a wide range of alternatives,
to discuss the issues in-depth, resolve issues faster and to
have complete documentation after the meetings [35].
Furthermore, because these types of information can be
shared within the firm more effectively with the help of the
Internet, companies can devise more effective new product
strategies that guide them to decide which new products to
pursue and which old products to eliminate. Thus,
Proposition 3: The use of the Internet will be positively
associated with companies’ ability to understand their
market better and thus target it more effectively.
Proposition 4: The Internet will allow firms to formulate
new product strategies faster.
Another issue in strategy development is that the strat-
egies should be implementable. Since firms might face
numerous challenges in the long new product development
process, they need the support and participation of everyone
involved in the downstream implementation of the strategies
developed at this phase. Because the Internet allows greater
information exchange among people and fosters greater
participation [36], it is also expected of the Internet to
enhance the chances of implementation of the strategies
devised at this phase. Hence,
Proposition 5: The Internet will help firms implement new
product strategies more effectively.
1.3. Concept generation
Firms at this stage try to generate as many new product
ideas as possible for further consideration for development
and commercialization. The ideas can be generated based on
customers’ needs, solutions to customers’ problems, inven-
tors’ cognitive processes, an extensive market research and
recent market trends [37]. Because only a small proportion
of ideas generated at this stage can survive through the long
new product development process, a major characteristic of
an effective idea generation is that a wide variety of ideas
from a wide variety of sources need to be considered [17].
For instance, customers can be asked about their needs, lead
users can be asked about potential problems that customers
face today and asked to generate solutions for the identified
problems, product designers can be asked to invent new
products based on their experience, market analysts can be
asked to gauge the market and suggest new products and
anthropologists can be asked to study market trends and
suggest new product ideas to capture the trends.
A successful concept generation activity requires a non-
threatening and conducive environment in which people feel
comfortable to express and share their ideas. Past studies
have shown that compared to the alternatives, online com-
munications produce more unique and quality ideas, result
in greater equality of participation and thus satisfaction and
lead to more extreme, unconventional and risky ideas [38 –
40]. In addition, because the Internet can be accessed from a
wider range of locations, firms can reach a wider range of
idea sources. People such as customers, experts, lead users
and salespeople in different parts of the world can take part
in the concept generation activity and thus enhance the
ability of companies to generate a wide range of ideas from
a wide range of idea sources. This leads to the following
propositions:
Proposition 6: The use of the Internet will lead to the
generation of a wider range of new product ideas.
Proposition 7: The use of the Internet will be associated
with the use of a wider range of sources.
1.4. Concept screening
New product development is a highly risky business. As
such, surveys suggest that the new product market success
rates remain to be low, ranging from 53% to 61% [6]. In
addition to being risky, it is also uncertain. There are too
many unknowns with regard to competition, technology,
customers, economy, customer lifestyles and other envir-
onmental factors that firms simply may not know how these
factors might affect the success of their new products. Rapid
changes in these factors further complicate firms’ new
product development activities. One of the key new product
development activities that firms use to reduce the risks and
uncertainties associated with new products is the careful
screening of potentially successful new product ideas. After
generating potential new product ideas, firms need to screen
them and choose the most suitable one for further devel-
opment, as they may not have the necessary resources to
develop all of the ideas and not all ideas might be viable.
Past research offers numerous methods that can be used
in concept screening, with their benefits and limitations
[41]. Overall, concept screening entails numerous effective
strategies. First, it requires the use of different viewpoints
and expertise. In order to reduce the risks and uncertainties
and to account for the different viewpoints, firms need to
take a comprehensive view and use as many methods as
possible in their concept screening process. Otherwise,
screening new product ideas based on one or two methods
will not answer all the related questions, as each method
looks at a unique aspect of the screening process.
Second, concept screening is not to be done in isolation,
but needs to take into account the rapid changes in the
market environment. As firms proceed in the new product
development process, they will gather new information and
 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
need to adapt their new product concepts in order to respond
to the changes more effectively. However, if their concept
screening approach is very rigid in terms of timeframes,
budgets, criteria and alternatives, their ideas may not be
relevant by the time they are fully developed. Instead, they
need to be prepared to modify their approaches and criteria
and reevaluate their new product ideas as soon as there is
new information [42].
Finally, new product practitioners and researchers
increasingly believe that the new product development
process including its concept screening phase can be highly
political because of the large amount of resources and
responsibilities involved. In fact, due to pure political rea-
sons, truly successful new product ideas may be eliminated
while the value of potentially unsuccessful new product
ideas may be inflated [43]. As a result, the concept screening
process and its criteria should be as objective as possible. In
addition, everyone involved in the process should perceive
the process to be as fair, balanced and objective. Otherwise,
it can create strong animosity among them towards the
concept screening process and this can hinder their participa-
tion in the process [44].
Since the Internet allows people responsible for concept
screening to have a better access to knowledge residing in
different parts of the firm, they can consider a wide range of
viewpoints and expertise in their screening decisions. This,
in turn, makes the decisions more comprehensive. In addi-
tion, the Internet is usually associated with decentralized
decision structures that allow flexible exchange of know-
ledge across functional areas, which can enhance the flex-
ibility of new concept screeners to incorporate new
information into their decisions faster [45]. Finally, because
everyone involved in the screening process can have a better
access to the information and criteria used to screen the new
product concepts in an Internet-based platform, the Internet
can also improve the objectivity of the concept screening
process. All these discussions give rise to the following
propositions:
Proposition 8: The use of the Internet will be positively
associated with the comprehensiveness of the concept
screening process.
Proposition 9: The use of the Internet will be positively
related to the flexibility of the concept screening process.
Proposition 10: The use of the Internet will lead to a more
objective concept screening process.
1.5. Business analysis
Firms at this stage conduct a comprehensive study to build
a business case for the new product idea so that it can be
further developed. Activities at this phase include detailed
market, technical and financial assessments [8]. Industrial
organization-view of the firm suggests that a firm’s perform-
523
ance depends on the characteristics of the market in which it
competes. Thus, past studies have concluded that the success
of a firm in a market is a function of such factors as barriers to
entry, number and size of competing firms, demand elasticity
and differences among competitors [46]. Furthermore, mar-
ket attractiveness can also be an important consideration, as
research suggests that products are likely to be more suc-
cessful in large, growing and less-competitive markets [9].
As a result, a detailed market analysis can help firms
understand their market environment and ascertain that there
is a consistency between the environmental requirements of
their new product ideas and the market environment.
The technical assessment of the new product ideas
involves determining the technical requirements of a new
product and assessing how well they fit with the firm’s
technical capabilities. Empirical studies have already shown
that firms’ abilities to meet these requirements lead to higher
product and competitive advantages and this, in turn, results
in higher product performance [47]. Hence, a technical
analysis can help firms make sure that their new products
are technically feasible to design, develop and manufacture.
One of the primary aims of firms to launch new products is
to generate financial results. Consequently, they need to
determine whether their new product ideas can generate
sufficient financial results that will justify the investments
made into their developments. They need to have a number of
financial information in order to conduct this analysis. For
instance, they need to know the financial returns that they can
generate from a new product. Similarly, they need to know
the amount of financial resources needed to design, develop,
manufacture and market it. Because there are uncertainties
associated with all these information, they also need to have
the probabilities of achieving the financial results and of
meeting the established budget goals. Finally, they also need
to have benchmarks with regard to the acceptable amount of
financial returns and new product budgets so as to be able to
assess the new product’s financial viability.
Business analysis requires firms to collect market, tech-
nical and financial information. Past research has consis-
tently shown that such information can have a major impact
on the quality of new product decisions. For example, a
recent survey of marketing, R&D and manufacturing man-
agers has revealed that compared to unsuccessful new
products, successful new products involved a greater-than-
average amount of gathering and usage of relevant informa-
tion [48]. Furthermore, past studies have found a strong
relationship between market information and new product
success across different market environments with different
degrees of market turbulence, competition and technological
intensity [49,50].
The Internet allows firms to collect market intelligence
and identify market trends. It offers an extensive amount of
information on many aspects of business, ranging from
market data to foreign trade data. Governmental and non-
governmental online sites offer a large amount of economic
and demographic data, which can be useful in predicting
524 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
potential market size for a new product. In addition, such
data sources can also provide information about market
conditions, market shares, tax regulations, foreign invest-
ment and a host of other relevant information for different
countries so that those companies that are interested in
pursuing global markets can conduct business analysis for
their target markets.
The Internet can also offer speedy access to latest
research studies and secondary databases, thereby helping
firms conduct technical assessments more effectively. For
example, the Networked Computer Science Technical
Report Library (NCSTL) compiles leading-edge computer-
related research and provides an efficient and user-friendly
environment for retrieval of the research findings [51].
Similarly, several pharmaceutical and chemical firms and
universities conducting research in these areas share
research results in their R&D activities, thus expediting
the new product development process and saving huge sums
of money not only for the firms but also for the public [52].
Finally, given the shortage of qualified R&D people, the
Internet can also be helpful to locate and recruit them [53].
The Internet can also help firms locate a suitable supplier
and determine the expected costs within a short period of
time, as research has shown that the Internet can reduce the
time it takes to locate a supplier and place an order from a
few months to a few weeks [54]. Research suggests that in a
typical procurement process, 52% of the cycle time is taken
up by the search process, 20% by screening and sorting
proposals and 10% by contract negotiations [54]. Firms can
post a request for quotes for the items necessary to develop
their new products in online auctions in order to estimate the
costs of the items as well as to determine suitable suppliers
of the items. With these auctions, buyers can post requests
for quotes and suppliers respond with bids in a short period
of time, thus speeding up the financial analysis in new
product development. In addition, because the use of the
Internet in collecting business information is positively
related to the quality of that information and because the
quality of the collected information has a positive impact on
the quality of managers’ decisions [23], it is expected that
the use of the Internet can enhance the speed and the quality
of business analysis.
Proposition 11: The use of the Internet will increase the
speed of business analysis.
Proposition 12: The use of the Internet will enhance the
quality of business analysis.
1.6. Development
The strategy at this stage is to convert the new product
idea that just passed the business analysis phase into a new
product. This stage may require the collaboration of people
from R&D, engineering, marketing and other functional
areas. It may also require the opinions of individuals such
as suppliers and distributors in the possible supply chain of
the new product idea. Furthermore, as it is becoming a global
strategy, firms operating in multiple countries may need to
conduct their new product development activities in different
regions of the world.
Collaboration among the development team members
increases the availability of the relevant information and
enhances the flexibility and adaptability of the new product
development activities. It increases the likelihood that sol-
utions will be found, improves the quality of solutions and
speeds the problem-solving process [55]. It can be relevant
when a task requires multiple opinions [56]. The information-
processing theory suggests that when people with different
backgrounds share their expertise during new product devel-
opment, their views can represent more functional areas and
the views can be more varied and comprehensive compared
to a single view. Thus, collaboration can enhance the decision
quality [9]. Besides the information-processing view, a prob-
lem-solving view also suggests that when people share their
expertise in a new product development setting, they essen-
tially try to understand the issues pertaining to the potential
success of a new product from a different angle and thus can
solve the problem, developing a new product better [9].
Another important theoretical justification for the role of
collaboration in new product development is the depend-
ency theory that suggests that integration of various func-
tional activities in new product development can enhance
the quality of new product development decisions [57].
Because different people with different backgrounds might
pursue varied and often incompatible ‘‘thought worlds’’
[58], collaboration can help them be familiar with the
important issues involved in a new product development
and thus make better decisions.
The Internet can play a crucial role in the coordination of
the new product development activities. More specifically,
new product team members in different parts of the world
can communicate with each other quite effectively and
exchange documents and product designs over the Internet
very easily. With the help of the Internet, designers can
conduct remote product simulations, exchange images real-
time and even asynchronously notify the other designers of a
change in a design being worked on. In fact, a number of
firms have recently received awards for their use of the
Internet in their new product development and offer exam-
ples of best new product development practices for other
firms. For instance, Eaton uses Internet-based software to
provide just-in-time training to its new product development
team members, especially nonspecialists. Similarly, GTE
uses this technology to receive inputs from its internal
customers about their new products and Ingersoll Milling
Machine uses the Internet to disseminate information and
updates about its new products to its employees [59].
In addition to helping new product team members
collaborate with each other more effectively, because of its
‘‘from-anywhere-at-anytime’’ accessibility, the Internet will
increase the diversity of team members, as it is easier for
 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
potential team members such as suppliers and distributors to
participate in new product development. This in turn should
enhance the operational performance of new product devel-
opment activities, as past research has already found that
diversity in cross-functional new product teams is positively
related to such operational factors as technical quality and
schedule and budget performance [60]. Thus,
Proposition 13: The use of the Internet is positively related
to the amount of collaboration among the new product
development team members.
Proposition 14: The use of the Internet is positively related
to the operational performance of new product development
activities.
1.7. Testing and validation
Studies have shown that testing and validation can
account for nearly half of total development efforts [61].
Testing and validation can be valuable for firms since it can
help them ascertain the functionality and manufacturability
of their new products and determine whether the new
products meet customer requirements. In addition, the
earlier such tests are conducted, the earlier they can under-
stand their new products and the earlier they can fix any
potential problems at lower costs. However, developing a
prototype and conducting relevant tests can cost huge sums
of money and time. Furthermore, firms usually need to
develop multiple prototypes and repeat the tests, resulting in
even higher costs [61].
Research also suggests that firms manage this activity by
delaying it as much as possible and hoping to resolve all
problems with a single ‘‘killer’’ test towards the end of the
new product development process. Consequently, they may
need to correct numerous design problems too late in the
process at a substantially increased cost [61]. Although the
use of a single test towards the end of the new product
development process can offer short-term cost benefits to
firms, it may not be sufficient to discover and correct
potential problems of new products.
The Internet can be useful for firms to test and validate
their new products. It allows them to survey buyers in
remote locations. In addition, its animation features can
enable them to conduct virtual prototype tests without
actually manufacturing a prototype. Optical Dynamic,
which designs optical lens casting equipment, uses the
Internet to test and validate the design of its new products.
Hence, everyone in the product development team has a
better understanding of a new design and is less confused
about the design intent. Thus, numerous design improve-
ments can be made in the electronic prototype prior to a
much costly physical prototype [62]. Consistent with the
industry trend, empirical studies have also shown that online
prototype testing is as effective as more traditional offline
physical prototype testing [63].
525
With the help of the Internet, firms can produce multiple
animated prototypes and test them in a short period of time. It
should be particularly relevant for new products that require
expensive physical prototypes. Because firms can build an
animated prototype and communicate it with all the relevant
parties in a short period of time, the Internet can substantially
increase the speed of testing and validation. In addition, since
building an online prototype is usually less expensive than
building a physical prototype, the Internet can also reduce
the cost of testing and validation. Because of the reduced
costs, firms can conduct the tests early in the new product
development process and can easily repeat them. Since
repeated testing is associated with more accuracy [41], the
Internet can also enhance the quality of the tests. As a result,
Proposition 15: The Internet significantly increases the
speed of testing and validation.
Proposition 16: The Internet substantially decreases the
costs of testing and validation.
Proposition 17: The Internet greatly enhances the quality of
testing and validation.
1.8. Manufacturing development
This activity is characterized by the development and
piloting of relevant manufacturing processes for a new
product [6]. The firm can have a perfect new product idea;
however, if it cannot manufacture the intended product
effectively and efficiently, it can never realize the benefits
of its new product development activities. Serious problems
can arise from a poor manufacturing development, which
can delay new product introduction and may cause the firm
to miss market opportunities. It can also undermine the
quality of new products and reduce customer satisfaction
and, as a result, damage future sales [57].
Resource-based view of new product development sug-
gests that a firm’s manufacturing capabilities can increase
process effectiveness and efficiencies [64,65]. However,
complexities related to product architecture and manufac-
turing processes can hinder manufacturability of new prod-
ucts [57]. Empirical studies suggest that such complexities
can be reduced by greater integration of manufacturing and
design functions into the new product development process
and greater flexibility of the manufacturing activities in
terms of being able to incorporate emerging circumstances
into the new product development [57,66].
The Internet can simplify documentation and allow all
parties including manufacturing and design functions to
participate in new product decisions more effectively and
efficiently [67]. The participation of manufacturing and
design functions in new product development should help
their integration with the rest of the new product devel-
opment team. Past research has also shown that Internet-
based tools provide greater manufacturing flexibility
526 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
[68,69]. Since the integration of manufacturing and design
functions into the new product development process and the
flexibility of manufacturing are positively related to the
effectiveness and the efficiency of manufacturing devel-
opment [57,66], the Internet should enhance the manufac-
turability, and thus, the quality and the efficiency of
manufacturing development. Hence,
Proposition 18: The Internet will improve the quality of
manufacturing development.
Proposition 19: The Internet will enhance the efficiency of
manufacturing development.
1.9. Commercialization
At this stage, firms implement their marketing, produc-
tion and post-launch plans for their new products and
monitor and, if necessary, adjust their activities [8]. New
product commercialization usually involves both strategic
(which new product to offer, who to offer, when to offer and
why to offer) and tactical (how to offer) decisions [70]. The
strategic decisions are usually made in the earlier stages of
the new product development process, while the tactical
decisions are made at this stage. Thus, new product com-
mercialization first requires greater consistency and align-
ment between these two sets of decisions.
Once the strategic and tactical decisions are aligned, new
product commercialization also requires creating product
awareness among potential buyers. In other words, potential
buyers need to be informed about the new product and its
availability. Another key activity during the commercializa-
tion stage is to provide continuous customer support. In
addition to providing customer support, new product com-
mercialization may also require offering technical support to
salespeople and the members of the distribution channel.
Because of the highly efficient documentation and data-
base capabilities, the Internet can make available all the
strategic decisions made in the earlier stages to people who
are responsible for the tactical decisions, irrespective of their
locations. Hence, they can align their tactical decisions with
the strategic decisions better and achieve greater consistency
between the two sets of decisions. It can also be used to
create new product awareness. For instance, Acer, Compaq,
IBM and Hewlett Packard use the Internet to advertise their
new products [71]. Furthermore, some new products may
have certain technical features that can be easily explained
to potential buyers by using the Internet. As such, Apple
Computer, Cisco Systems and Microsoft use the Internet to
provide a large amount of information about their newly
released products.
With a simple Internet access, people can share files and
talk to each other real time, irrespective of their locations.
This is highly relevant during the launch of new products
that require constant training of salespeople, customers and
resellers. Firms such as Baan [72], FileNet [73] and the
Tompkins Group [74] heavily use Internet-based systems
when they launch new products to provide their salespeople
in remote locations with up-to-date positioning information.
The salespeople are able to get answers to their questions
and share their experiences with other salespeople in the
system. The firms also train their resellers through the
Internet so that they will be more knowledgeable about
their new products.
Indeed, using the Internet in new product commerciali-
zation is not anymore a matter of choice, but is a key
requirement in today’s competitive market environment
[1,75]. Salespeople, customers and retailers are increasingly
demanding real-time access to company databases in order
to get answers to their new product-related questions.
Because the Internet allows such an access, it can help
companies commercialize their new products more effec-
tively and efficiently. Thus, the following propositions are
advanced:
Proposition 20: The Internet will increase the success of
new product commercialization.
Proposition 21: The Internet will enhance the efficiency of
new product commercialization.
2. Differential impacts of the use of the Internet across
different products and different organizational
circumstances
It is clear that the Internet’s role is not uniform across
different products such as innovative versus less-innovative
products, transactional versus relational products and indus-
trial versus consumer products. In addition, the mere use of
the Internet may not be sufficient to utilize its full potential
in new product development. Instead, an effective use of the
Internet may require numerous organizational conditions
including organizational learning capabilities, technical
and marketing capabilities and collaborative capabilities.
The following section discusses how the role of the Internet
might differ across these product and organizational con-
ditions.
2.1. Innovative versus less-innovative products
There are varying degrees of innovation. While less-
innovative products are typically extensions of existing
products, innovative products may require the development
of new products whose markets often do not exist [76].
Thus, innovative products usually involve greater uncer-
tainties and risks than less-innovative products in terms of
the nature of the product itself, market acceptance, prof-
itability and the firm’s capabilities to produce the product
effectively and efficiently [25]. Because the earlier stages
of the new product development process, including product
line planning, strategic development, concept generation
 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
and screening and business analysis, are more related to
reducing product, process and market uncertainties and
risks through the collection and use of relevant information,
and since the Internet can facilitate these activities, it is
expected the Internet’s role in these stages to be more useful
for innovative products than less-innovative products.
Hence,
Proposition 22: The role of the Internet in earlier stages of
the new product development process (product line planning
through business analysis) will be more pronounced for
innovative rather than less-innovative products.
2.2. Transactional versus relational products
Firms can certainly treat their new products and its parts
as commodity items and consider their business with the
outside parties as a transaction. On the other hand, they can
also treat their new products and its parts as specialized
products and consider their business with the outside parties
as a special relationship. It has long been argued that
building relationships with external organizations can be
beneficial to the long-term survival of firms [77]. Such
relationships can help them in many different ways. For
example, suppliers can suggest ideas for new product
development or execute rapid design changes needed in
parts; professional organizations can provide superior talent;
regulators can facilitate and hasten product or manufactur-
ing quality approvals; distributors can provide market access
and customer information; customers can suggest new
competencies that the firm should develop [78].
The Internet offers unique opportunities for these two
types of products. For transactional products, due to its wide
coverage and speed, it can help firms efficiently identify sui-
table vendors for their new products in the business analysis
stage. On the other hand, for relational products, firms will
value inputs from their outside partners. The collaboration
capabilities of the Internet can allow them to interact with
such partners more effectively and efficiently. Because the
cooperation of the outside parties such as suppliers and
distributors are usually more relevant during the devel-
opment, testing and validation, manufacturing development
and commercialization stages, it is expected of the role of the
Internet in these stages to be greater for relational products
compared to transactional products. As a result,
Proposition 23: While the role of the Internet in the
business analysis stage will be greater for transactional
products, its role in the development, testing and validation,
manufacturing development and commercialization stages
will be more pronounced for relational products.
2.3. Industrial versus consumer products
The differences between industrial and consumer prod-
ucts have long been documented and tested in the literature.
527
Compared to consumer products, industrial products
involve more concentrated effort, rational buying behavior,
personal selling and reciprocal relationships. In addition,
industrial products require large and usually long-term
financial and nonfinancial commitments, are more risky,
can affect the whole organization and the decisions to
purchase them are typically made by a buying group
[79,80]. All these unique characteristics mean that indus-
trial new products require more careful concept generation
and screening, more detailed business analysis and more
collaboration with potential buyers in the development,
testing and validation, manufacturing development and
commercialization stages. Because the Internet can facil-
itate all these activities, its role in these stages will be more
pronounced for industrial products compared to consumer
products. Thus,
Proposition 24: The role of the Internet in the concept
generation and screening, business analysis, development,
testing and validation, manufacturing development and
commercialization stages will be higher for industrial rather
than consumer products.
2.4. Organizational learning capabilities
Past research suggests that firms can build competitive
advantages by generating knowledge and sharing it during
their new product development activities [81]. One of the
key new product success factors is to have a clear and
specific product definition [8]. Thus, new product devel-
opment should include a learning aspect in order to clarify
and specify the new products and discover ways of
improving them. In a case study, Bordley [82] asked
several technologists to assess a number of R&D projects.
During the process, the assessors were forced to think
about some ‘‘showstoppers.’’ As a result, the project teams
became aware of the issues and tackled them early in the
process despite the fact that their main objective was to
develop numerical estimates of the value of each R&D
project.
Companies can accumulate a great deal of knowledge
with regard to their markets, products, processes and strat-
egies as part of their new product development process. The
generation and more importantly the use of such knowledge
throughout the process can create exceptional opportunities
for them to learn over time as how best to develop new
products and thus be more competitive. The Internet is
highly suitable for generating and sharing necessary know-
ledge because of its advanced documentation and collab-
oration capabilities. However, the Internet can help firms
learn and improve only when they are interested in learning.
As a result,
Proposition 25: The role of the Internet in new product
development will be more pronounced when the organiza-
tion is learning oriented as opposed to when it is not.
528 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
2.5. Technical and marketing capabilities
Resource-based view of the firm suggests that a firm’s
resources can affect the effectiveness and the efficiency of
its new product development [64,83]. Its technical capabil-
ities can help it develop and manufacture new products
more effectively and efficiently. Similarly, its marketing
capabilities can help it collect market information and
formulate product launch strategies based on that informa-
tion. Although the Internet can enable firms to design,
develop, manufacture and market new products more effec-
tively and efficiently, it is simply a tool that firms can use in
the process. Unless they have the necessary new product
development capabilities, the impact of the Internet in new
product development will be limited. For instance, the
Internet can help firms communicate with their target market
more effectively during the launch of their new product;
however, they still need to use their marketing expertise to
decide what information to convey to the target market.
Hence,
Proposition 26: The role of the Internet in new product
development will be higher when a firm has necessary
technical and marketing capabilities compared to when it
does not.
2.6. Collaboration capabilities
New product development requires the collaboration of
new product team members both within and outside the firm
[36]. Because of its communication features, the Internet
can facilitate such collaborations. However, it does not
mean that as soon as a firm adopts the Internet in its new
product development activities, people will start to collab-
orate. Instead, successful collaborations require more than
the mere use of the Internet and involve new skills, mindsets
and corporate architecture. In fact, they require a partnering
skillset, a partnering mindset and a supportive context that
provides commitment, processes and resources to facilitate
collaboration [84]. Furthermore, these capabilities are not
necessarily static but are rebuilt and recreated over time
[84]. Thus, the impact of the Internet in new product
development will depend on the extent to which a firm
fulfills these requirements. Hence, it is proposed that
Proposition 27: The role of the Internet in new product
development will be higher when a firm possesses necessary
collaborative capabilities as opposed to when it does not.
3. The role of the Internet in new product success
Throughout the new product development process, the
Internet offers numerous benefits to firms. In the product
line planning stage, the Internet enhances their ability to
collect, categorize and use information needed for product
line planning and leads them to make better decisions with
regard to product line planning. In the strategy devel-
opment stage, it helps them understand their market better
and thus target it more effectively. In addition, it allows
them to formulate new product strategies faster and imple-
ment them more effectively. In the concept generation
stage, it helps them generate a wider range of new product
ideas from a wider range of sources. In the concept
screening stage, it makes the concept screening process
more comprehensive, flexible and objective. In the busi-
ness analysis phase, it increases the speed and the quality
of the analyses. In the development stage, it facilitates the
collaboration of new product team members and enhances
operational performance. In the testing and validation
stage, it significantly increases the speed of the tests and
enhances their quality. In the manufacturing development
stage, it improves the effectiveness and the efficiency of
the development. Finally, in the commercialization stage, it
enhances the effectiveness and the efficiency of new
product launch.
Past research in new product development has already
shown that these benefits are among the important factors
that distinguish successful and unsuccessful new products.
For example, it was shown that the collection and use of
relevant new product information was a key factor affecting
the success of new products [48]. In addition, it was
concluded that successful new products involved a quality
execution of the new product development process [8].
Moreover, the process’ effectiveness and efficiency were
among the key determinants of new product success [9].
Because the use of the Internet is positively related to these
factors, and since these factors enhance the success of new
products, the following proposition is posited:
Proposition 28: The use of the Internet in new product
development will be positively related to the success of new
products.
4. Conclusion
New product development is indeed a long and detailed
process. The process involves numerous activities such as
product line planning, strategy development, concept gen-
eration and screening, business analysis, development, test-
ing and validation, manufacturing development and
commercialization. Furthermore, each of these activities
has its own unique requirements, some requiring informa-
tion collection from the market, whereas others requiring the
collaboration of new product development team members.
The purpose of this paper was to investigate the role of the
Internet in fulfilling the different requirements of the new
product development process and develop related research
propositions. The paper also discussed how the impact of
the Internet might change across different products and
different organizational conditions.
 M. Ozer / Industrial Marketing Management 32 (2003) 517–530
The results of the paper suggest that the Internet offers
opportunities for firms in their new product development
pursuits in terms of enhancing their abilities to collect,
categorize and use information needed for product devel-
opment; helping them understand their market better and
thus target it more effectively; generating a wider range of
new product ideas from a wider range of sources; making
the concept screening process more comprehensive, flexible
and objective; increasing the speed and the quality of
business analyses; facilitating the collaboration of new
product team members and enhancing operational perform-
ance; increasing the speed and the quality of testing and
validation; improving the effectiveness and the efficiency of
manufacturing development; enhancing the effectiveness
and the efficiency of new product launch. The results also
suggest that the impact of the Internet is not uniform across
different products and different organizational conditions,
implying that firms need to adapt their use of the Internet
based on the specific product that they are developing and
that they need to make sure that they have the right
organizational conditions for the use of the Internet.
The paper also offers numerous research implications.
For instance, the paper presented a number of propositions.
Future studies can develop suitable measures for the varia-
bles and test the relationships among them. They can apply
both survey and experiment-based methodologies to test the
propositions. They can also use both perceptual and object-
ive measures of Internet usage in new product development
and its impact on the new product development activities.
Furthermore, future studies can investigate other moderating
conditions besides the product and organization-related
variables that might affect the Internet’s role in new product
development.
Acknowledgements
This study was partially supported by a financial grant
from the City University of Hong Kong (Grant No. 9030
709-520).
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