"Product Complexity, network structure and product innovation performance"

Despite a consensus that a firm’s extended product development network plays a critical role in its innovation performance, empirical evidence linking network structure, product complexity, and product innovation performance remains relatively scarce. Facilitated by social network analysis, this study uses a longitudinal study employing secondary data from the Video Game industry to investigate their relationships. Our analyses suggest that product complexity has a curvilinear relationship with product innovation performance. Moreover, the complexity- innovation performance relationship is moderated by the two measures of a firm’s network structure namely network centrality and network interconnectedness in interesting ways. While network centrality measures the speed and access to the network’s information and knowledge, network interconnectedness measures the convergence of information and knowledge within the network. We find that increasing network centrality appears to magnify the negative effect of high levels of product complexity on product innovation performance, while increasing network interconnectedness appears to mute this negative effect, allowing firms to operate at higher levels of product complexity. This suggests an important implication on how to manage firm’s extended network relationships as a function of the product development efforts.