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Product and Process Flexibility in an Innovative Environment

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  • Susan Athey
  • Armin Schmutzler

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.

Suggested Citation

  • Susan Athey & Armin Schmutzler, 1995. "Product and Process Flexibility in an Innovative Environment," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 557-574, Winter.
  • Handle: RePEc:rje:randje:v:26:y:1995:i:winter:p:557-574
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    Cited by:

    1. Luca Lambertini & Andrea Mantovani, 2010. "Process and product innovation: A differential game approach to product life cycle," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(2), pages 227-252.
    2. Levin, Mark & Matrosova, Kseniya, 2015. "Innovation management based concidering advertising and complementarity of public and private levels of technology," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 109-132.
    3. Souresh Saha, 2007. "Consumer preferences and product and process R&D," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 250-268, March.
    4. Derek G. Brewin & Daniel C. Monchuk & Mark D. Partridge, 2009. "Examining the Adoption of Product and Process Innovations in the Canadian Food Processing Industry," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(1), pages 75-97, March.
    5. Christine Halmenschlager & Andrea Mantovani & Michael Troege, 2011. "Demand Expansion And Elasticity Improvement As Complementary Marketing Goals," Manchester School, University of Manchester, vol. 79(1), pages 145-158, January.
    6. repec:bla:reviec:v:25:y:2017:i:2:p:362-382 is not listed on IDEAS

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