Performance measure use and product innovation in R&D teams: The role of leadership style

Abstract

Manufacturing firms frequently rely on R&D teams for product innovation, and generally use performance measures to guide team decision making and to motivate R&D team members. We argue that it depends upon leadership style whether the use of performance measures affects product innovativeness in R&D teams. If the project leader uses performance measures to guide R&D team member efforts and displays a consideration leadership style that integrates their suggestions in decision making and helps team members internalise the objectives underlying the performance measures to align these with individual contributions, product innovativeness can be improved. We test our hypotheses based on survey responses of 150 R&D team members. We find no evidence for a direct association of the use of performance measures with product innovativeness. As expected, a consideration leadership style positively moderates the impact of all considered uses of performance measures (for attention focusing, strategic decision making and evaluation) on product innovativeness.