Abstract :
Industrial organization theory suggests that innovativeness differs across the industry life cycle. Product innovation is high at
the beginning of an industry life cycle and diminishes over time. Process innovation is initially low, peaks later in the life cycle
and eventually tails off to a level similar to product innovation. However, when a competing product is introduced, companies
producing a late life-cycle product tend to increase their product innovation as a response to the competitive threat. This study
tests this theory in the context of the North American structural panel industry by comparing plywood, a product in the decline
stage of the product life cycle, to oriented strandboard (OSB), a product in the growth stage of the product life cycle. The two
industry sectors are compared based on their product innovativeness, structure of new product development (NPD) processes,
and product specialization. According to theory, plywood mills should be stronger in each of these areas resulting from response
to the competitive threat from OSB. Although these constructs are useful in differentiating between plywood and OSB
producers, findings are inconsistent with theory. Oriented strandboard mills were found to be more product-innovative and to
use a more structured NPD process than plywood mills. On the other hand, consistent with theory, plywood mills were found to
have a more specialized product line. Implications for industry and suggestions for future research are provided.
