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New Product Innovation with Multiple Features and Technology Constraints

Author

Listed:
  • Kathy A. Paulson Gjerde

    (College of Business Administration, Butler University, 4600 Sunset Avenue, Indianapolis, Indiana 46208-3485)

  • Susan A. Slotnick

    (School of Management, Arizona State University West, 4701 W. Thunderbird Road, Phoenix, Arizona 85069-7100)

  • Matthew J. Sobel

    (Weatherhead School of Management, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, Ohio 44106-7235)

Abstract

We model a firm's decisions about product innovation, focusing on the extent to which features should be improved or changed in the succession of models that comprise a life cycle. We show that the structure of the internal and external environment in which a firm operates suggests when to innovate to the technology frontier. The criterion is maximization of the expected present value of profits during the life cycle. Computational studies complement the theoretical results and lead to insights about when to bundle innovations across features. The formalization was influenced by extensive interviews with managers in a high-technology firm that dominates its industry.

Suggested Citation

  • Kathy A. Paulson Gjerde & Susan A. Slotnick & Matthew J. Sobel, 2002. "New Product Innovation with Multiple Features and Technology Constraints," Management Science, INFORMS, vol. 48(10), pages 1268-1284, October.
    • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:10:p:1268-1284
    DOI: 10.1287/mnsc.48.10.1268.270
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    References listed on IDEAS

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