TY  - GEN
AB  - We study in a dynamic framework how product innovation activities of a
firm are influenced by its production capacity investments for an established
product and vice versa. The firm initially has capacity to sell an established
product, and it also has the option to undertake an R&D project, which
upon completion allows the firm to introduce a new vertically and horizontally
differentiated product to the market, thereby extending its product range. The
breakthrough probability of detecting the new product depends on both the
value of the firm’s R&D stock and its current R&D investment. It is shown
that the initial production capacity for the established product influences the
intensity of R&D activities of the firm. In particular, there are constellations
such that for large initial production capacity for the established product the
firm never invests in R&D and the new product is never introduced. For small
initial capacity the firm keeps investing in R&D implying that eventually the
new product is always introduced. Finally, for an intermediate range of initial
capacity levels the firm initially invests in product R&D, but then reduces
these investments to zero. In this scenario the new product is introduced with
a positive probability, which is however substantially smaller than 1. From a
technical perspective this analysis gives the example of a new type of Skiba
threshold phenomenon in the framework of a multi-mode optimization model.
DA  - 2014
DO  - 10.4119/unibi/2915525
KW  - product innovation
KW  - multi-product firm
KW  - R&D
KW  - piecewise deterministic optimal control
KW  - Skiba curve
LA  - eng
PY  - 2014
SN  - 2196-2723
SP  - 38-
TI  - Product Innovation Incentives by an Incumbent Firm: A Dynamic Analysis
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29155251
Y2  - 2024-11-25T05:59:05
ER  -