The use of management control systems in terms of radical and incremental innovation in the new product development process

Abstract

The purpose of this study is firstly to examine what are the differences of the use of management control systems (MCS) in terms of radical and incremental innovation in the new product development (NPD) process. Secondly this study will clarify whether incremental and radical innovation should be managed differently. Thirdly the study will provide insight to the control paradigm debate where the question is whether controls help or hinder innovation.

This study used Malmi and Brown's (2008) control package framework to identify the different MCS used in the NPD process for incremental and radical innovation. With help of the framework the differences of these two innovation types were compared in respect of MCS with analysis derived from the prevailing literature as well as from a case company.

The findings of this study conclude that there are differences in the use of MCS in respect of incremental and radical innovations throughout the NPD process and this is why the two innovation types should be managed differently. In the case company cultural controls, which include business and strategy focus cultures, are used more with radical innovation projects than with incremental ones. Business and strategy focus cultures are the controls that can bypass other controls and this way allow gate flexibility in the NPD process for the case company. Planning for radical innovation contains higher risks of hitting targets and this is why more intensive research, planning and experimentation is required. It was also found that formal controls make the NPD process more efficient but they also limit the innovativeness of the process. Also it was observed that the NPD process for radical innovation is more formal and structured than the previous literature has presented it. Finally this study gives support to the new control paradigm which argues that controls help innovation.