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Product and Process Flexibility in an Innovative Environment

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Author Info
Susan Athey
Armin Schmutzler

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Abstract

This article studies several attributes of a firm's long-run decisions about organizational structure, attributes that affect the firm's short-run innovative activity. We focus on flexibility, which lowers the future costs of implementing innovations, and research capabilities, which improve the future opportunities for innovation. We consider two dimentsions of innovation: demand-enhancing (product) and cost-reducing (process). These two types of innovation are complementary in terms of increasing the firm's net revenue in the short run. The complementarities between the firm's short-run decision variables then lead to complementarities between its long-run decisions about product and process flexibility and research capabilities.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 26 (1995)
Issue (Month): 4 (Winter)
Pages: 557-574
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Handle: RePEc:rje:randje:v:26:y:1995:i:winter:p:557-574

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