The Time and Capacity Limits on Search

LI, Qiang | MAGGITTI, Patrick G | SMITH, Ken G | TESLUK, Paul E. | KATILA, Riitta

New products and services are fundamental to organisational performance and survival. New knowledge and information are fundamental to developing new products and services. Yet how top management teams (TMTs) search for and incorporate such information has rarely been investigated.

“It is well recognised that TMTs are directly involved in strategic decisions regarding innovation, but what is missing from prior studies is a more specific understanding of how individuals in these teams actually search and how their attention shapes new product outcomes,” said a paper by Qiang Li, Patrick Maggitti, Ken Smith, Paul Tesluk and Riitta Katila, which seeks to address the gap.

The authors developed a theory for understanding the factors affecting TMT search for new information and how that influences new product introductions, then tested it out on a sample of 61 public high-technology firms.

Search, they argued, could be broken down into two components, selection and intensity. The first refers to where managers seek information, the second to their effort and persistence when they search.

Managers who delve into unfamiliar, distant and diverse terrains should create more opportunities to discover novel, salient and vivid information, while effortful and persistent search should equip them to  consider alternative sources of knowledge, make new connections and combinations of information, and detect market trends, new technologies and other factors that are valuable to firm innovation. The interaction of selection and intensity should in turn influence the introduction of new products.

While these ideas mostly held up in a survey of the TMTs at the 61 firms and analysis of their data related to innovation, there were interesting nuances when it came to effort.

Unlike the other factors, which all increased new product introductions, increased effort was surprisingly correlated with fewer introductions. The authors suggested several reasons for this. One might be that too much effort on search distracted from other tasks. “Perhaps these TMT members were over-investing their limited cognitive and time resources in information gathering at the expense of other important top management functions related to new products, such as building organisational capabilities,” they said.

Another explanation might be that the TMT delegated search to others in their organisation, such as R&D teams, in which case it would be misleading to conclude low effort led to more innovation.

The detrimental effect of effort was particularly high when greater effort was combined with distant search terrains, which may be related to managers’ limited capacity and time.

“Taken together, our search effort and persistence interaction findings highlight the importance of understanding limited capacity and efficiency and especially raise questions about how TMTs should allocate their attention to different tasks and activities,” the authors said.

“Putting less effort and persistence into searching locations in which information is likely to be particularly salient and easily noticed can perhaps free cognitive and intellectual capacities of top managers to enable them to attend to other important organisational responsibilities.”

In sum, when it comes to new product development, TMTs should aim to effectively manage and allocate their attention to multiple activities, particularly if there are few or marginal benefits when searches are likely to result in little new information and knowledge. “Top managers should recognise the importance of fit between search terrains and search intensity and their relationship to new products,” the authors said.