Does Cheaper, Faster, or Better Imply Sooner in the Timing of Innovation Decisions?

Steven A. Lippman and Kevin F. McCardle
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Steven A. Lippman: Graduate School of Management, UCLA, Los Angeles, California 90024
Kevin F. McCardle: Fuqua School of Business, Duke University, Durham, North Carolina 27706

Management Science, 1987, vol. 33, issue 8, 1058-1064

Abstract: A common myth/conception, based upon the notion of increasing returns to scale in R&D activity, is that large firms account for a disproportionate share of innovations. In this paper we consider three types of informational returns to scale (cheaper, faster, and better) and examine the impact of each on the timing of the firm's innovation decision. Contrary to popular conception, the decision is made later when information is cheaper, and the change in timing is unsignable in the case of faster arrival of information. Only more accurate (better) information leads to earlier decisions.

Keywords: innovation; R&D; information search (search for similar items in EconPapers)
Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:33:y:1987:i:8:p:1058-1064

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