Determinants of Internal and External Innovation: A Comparative Study on NPD Projects Selection

Abstract: A growing body of research is drawing attention to the importance of open innovation and the reasons firms should progressively switch to this paradigm. However, there is still some reluctance to embrace such approach to innovation. This study investigates the main factors impacting the selection of internal and external new product development in a US multinational company belonging to the semiconductor industry. The main factor found to impact the choice of internal and external innovation is the degree of radicalness of NPD projects. Hence, this is used as additional variable to the internal and external nature of projects to build a matrix, capable of describing the main factors managers take into account when deciding on the projects to undertake. Combining the internal or external and incremental or radical nature of NPD projects, for each category, it was possible to highlight the main dimensions determining the projects selection, namely the expected output and profitability, the purpose of the NPD process, the attention received by managers and the risk involved.