The Double-Edged Sword Effects of Stakeholder Involvement in NPD

New product development (NPD) success does not only depend on addressing the needs of a single consumer but rather simultaneously addressing the needs of multiple stakeholders on the demand-side of the firm like users, payers, and regulators. Building on the customer involvement literature and relying on a demand-side perspective of firm performance, we theorize that stakeholder involvement is a double-edged sword. On one side, firms can increase NPD financial performance (i.e., effectiveness) by involving multiple individuals or organizations that represent market needs (i.e., downstream market stakeholders) in NPD. On the other side, because the involvement of multiple stakeholders is time and resource consuming, it can have a negative effect on NPD operational performance (i.e., efficiency). The results, based on a survey of 192 medical device firms, show that involving a broad spectrum of downstream market stakeholders has a positive effect on financial performance and that, though it reduces operational performance, this negative effect can be mitigated by stakeholder integration capabilities. However, increasing the average intensity of stakeholder involvement leads to lower operational performance without providing financial rewards. Finally, we find that stakeholder interaction capabilities positively influence NPD operational performance, while stakeholder identification capabilities are detrimental, counter to our hypotheses.