This paper examines how individual decision-makers form NPD project selection and funding decisions. With a large sample of 245 subjects with various degrees of managerial experience created with a complex quasi-experiment, we are able to demonstrate that a fit between the specific human capital/knowledge background of decision makers (technically biased versus market biased versus ambidextrous) and novelty attributes of NPD project proposals explains personal preferences for more or less radical NPD projects. We also show how this fit-selection relation is mediated by the decision makers’ risk and return expectations (Sharpe Ratio). Our findings provide an alternative explanation for NPD funding decisions to the widely accepted project portfolio selection theories. Based on the fit between the knowledge background/human capital of decision-makers and the novelty attributes of NPD projects, we offer an alternative explanation for the preference for incremental innovations and the negligence of radical innovations in an organizational context, particularly when decision teams are diverse.
