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Selecting Product Development Projects: Pioneering versus Incremental Innovation Strategies

  • Abdul Ali

    (Department of Marketing, College of Business and Management, University of Maryland, College Park, Maryland 20742)

  • Manohar U. Kalwani

    (Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Dan Kovenock

    (Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907)

In this paper, we investigate project selection choices of duopolists facing two alternatives: undertaking a "pioneering" type project (Type A) aimed to develop a highly innovative product, or an "incremental innovation" type project (Type B) aimed to develop a less innovative product such as the modification of an existing product. A key objective of our research is to examine how firm characteristics such as their differential efficiencies in completing projects, differences in the degree of substitutability between Type A and B products, and first mover advantages affect product development strategies. We develop a game-theoretic model to obtain insights into the project selection problem taking into account competitive reactions to a firm's choice of project development strategies and technical uncertainties associated with project completion times. We report model findings on recommended project selection strategies for efficient and disadvantaged firms. Further, we examine how a firm's choice of a Type A project is affected by an increase in the variance of the project completion time of a Type A project relative to that of a Type B project, while the ratio of their mean completion times is held constant.

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File URL: http://dx.doi.org/10.1287/mnsc.39.3.255
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 39 (1993)
Issue (Month): 3 (March)
Pages: 255-274

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Handle: RePEc:inm:ormnsc:v:39:y:1993:i:3:p:255-274
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