 Capacity optimization of an innovating firmVerena Hagspiel, Peter Kort, Cláudia Nunes, Rita Pimentel and Kristian Støre International Journal of Production Economics, 2021, vol. 233, issue C Abstract: This article considers an incumbent's product innovation decision within an uncertain framework, where the firm decides whether to continue selling the established product. The model being dynamic allows to analyze the trade-off between an early innovation where the new product only slightly improves the existing one, or innovating late with a much better new product. We find that the effect of uncertainty is that it raises the value of the strategy where the firm keeps on producing the old product after innovating. This results in earlier investment if the firm stays active on the established product market after adopting the new product, and that it keeps on producing the established product for a longer time after the product innovation. Limited uncertainty could lead to a non-monotonicity: with a better new product it is not optimal to innovate, whereas innovating is optimal with a worse one. Keywords: Innovation; Product portfolio; Investment under uncertainty; Dynamic programming (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:233:y:2021:i:c:s0925527320303704 DOI: 10.1016/j.ijpe.2020.108021 Access Statistics for this article International Journal of Production Economics is currently edited by Stefan Minner More articles in International Journal of Production Economics from Elsevier |
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