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Resource allocation flexibility for innovation performance: The effects of breadth, uncertainty, and selectiveness

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  • Klingebiel, Ronald
  • Rammer, Christian

Abstract

Our study shows empirically that the choice of resource allocation strategy affects innovation performance. A policy of allocating resources to a broader range of innovation projects increases sales of new products, especially if these are truly novel, i.e. new to the market. The effect of greater breadth appears to outweigh that of increased resource allocation per project. We find further indication that the performance effect of breadth increases with commercial uncertainty. It is also stronger for firms that allocate resources more selectively at later stages of the innovation process. Based on these results, we theorize that breadth increases performance as it spreads a firm's bets on unproven innovative endeavors, and more so when these endeavors are more uncertain. Limiting resource commitments through selectiveness contains breadth's disadvantages, a combination that provides flexibility in resource allocation.

Suggested Citation

  • Klingebiel, Ronald & Rammer, Christian, 2011. "Resource allocation flexibility for innovation performance: The effects of breadth, uncertainty, and selectiveness," ZEW Discussion Papers 11-073, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:11073
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    Cited by:

    1. repec:eee:respol:v:46:y:2017:i:10:p:1810-1823 is not listed on IDEAS
    2. Luukkonen, Terttu, 2014. "Universities, Funding Systems, and the Renewal of the Industrial Knowledge Base: UNI Project Findings," ETLA Reports 33, The Research Institute of the Finnish Economy.

    More about this item

    Keywords

    innovation performance; resource allocation; uncertainty; selectiveness; innovation management;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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