What Are We Really Good At? Product Strategy with Uncertain Capabilities

Jeanine Miklós-Thal (), Michael Raith () and Matthew Selove ()
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Jeanine Miklós-Thal: Simon Business School, University of Rochester, Rochester, New York 14627
Michael Raith: Simon Business School, University of Rochester, Rochester, New York 14627
Matthew Selove: Argyros School of Business and Economics, Chapman University, Orange, California 92866

Marketing Science, 2018, vol. 37, issue 2, 294-309

Abstract: Firms often learn about their own capabilities through their products’ successes and failures. This paper explores the interaction between learning about capabilities and product strategy in a formal model. We consider a firm that can launch a sequence of products, where each product’s success probability depends on the fit between the firm’s capabilities and the product. A successful new product always causes the firm to become more optimistic about the capability most relevant for that product; however, it can also cause the firm to become less optimistic about some of its other capabilities, including capabilities the new product does not use. The firm’s optimal forward-looking product strategy accounts for short-run expected profits as well as for the information value of learning for future decisions. We find that a product sharing few or even no capabilities with potential future products can have a greater information value than a product that shares more capabilities with future products and that learning about capabilities can affect the optimal sequence of product launch decisions.

Keywords: product strategy; capabilities; resource-based view of the firm (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:37:y:2018:i:2:p:294-309

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