Title :
Impact of Economic and Technical Uncertainties on Dynamic New Product Development
Author :
Tao Yao ; Bin Jiang ; Hongcheng Liu
Author_Institution :
Harold & Inge Marcus Dept. of Ind. & Manuf. Eng., Pennsylvania State Univ., University Park, PA, USA
Abstract :
A new product development process is usually under economic and technical uncertainties, and adjustable to the arrival of new information. As a result, new product development is not a one-time decision but a dynamic process under uncertainties. This paper applies repeated real options to derive optimal decision-making rules for a firm that faces two repeated options: 1) an incremental innovation project that is relatively easy to be developed and 2) a radical innovation project that offers superior performance but its development is much more difficult. Our findings can help firms make dynamic investment decisions on coexisting new product development projects.
Keywords :
decision making; industrial economics; innovation management; investment; product development; dynamic investment decision making; dynamic new product development process; economic uncertainties; incremental innovation project; one-time decision; optimal decision-making rules; radical innovation project; technical uncertainties; Decision making; Economics; Equations; Investments; Product development; Technological innovation; Uncertainty; New product development (NPD); project management; repeated real options; stochastic differential equation;
Journal_Title :
Engineering Management, IEEE Transactions on
DOI :
10.1109/TEM.2012.2187061
