Three essays on new product development: creating value from internal and external innovation

Nikpayam, Hossein

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URN: urn:nbn:de:bsz:180-madoc-634841
Document Type: Doctoral dissertation
Year of publication: 2022
Place of publication: Mannheim
University: Universität Mannheim
Evaluator: Fleischmann, Moritz
Date of oral examination: 11 November 2022
Publication language: English
Institution: Business School > ABWL u. Logistik (Fleischmann 2009-)
Subject: 650 Management
Keywords (English): new product development , innovation , contest , strategic communication
Abstract: Innovation is the cornerstone of business success in this day and age. The concept of innovation, at the firm level, is usually realized through the process of new product development (NPD). This dissertation examines specific challenges that a firm experiences during the generation of innovative ideas for NPD initiatives and the selection of the best ones. It then provides explicit guidance on how to efficiently use incentives and communication to manage the tradeoffs involved. The first essay is concerned with the allocation of scarce resources to competing internal and external NPD projects. We investigate the tradeoff between (i) the collection of relevant information about the projects under consideration and (ii) the allocation of resources to the most promising projects. In short, increasing resource allocation flexibility is not always a prudent strategy, and maintaining a combination of dedicated and flexible resource buckets may be an effective way for firms to limit their cost of information acquisition without compromising the scope and composition of their NPD portfolios. The second essay examines how the choice of a communication strategy, by a firm's senior management, in combination with financial incentives affects the process of resource allocation to NPD projects. In an environment where senior management has more refined information about the value of external projects, we ask: Should she reveal this information to the internal project managers, or not? The optimal strategy depends on two key factors: the types of projects the firm pursues and the severity of agency issues in internal R&D. Lastly, the third essay is concerned with innovation contests, in which contestants compete at their own expense for prizes offered by a contest holder. We investigate the role of in-contest performance feedback and characterize the optimal feedback policy in a very wide class of feedback policies. We find that, in many settings where informative feedback is useful, feedback is optimal when it is both truthful and fully informative.

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