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Does product development performance make a difference?

Author: Terwiesch, Christian ; Loch, Christoph H. ; Niederkofler, M.INSEAD Area: Technology and Operations Management Series: Working Paper ; 96/29/TM Publisher: Fontainebleau : INSEAD, 1996.Language: EnglishDescription: 22 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: High performance of the product development function is seen as a path to competitive advantage in companies across many industries. Product development performance is commonly measured as the efficient and rapid development of new and high performing products. However, the relevance of development performance for business success depends on the competitive market environment in which a firm operates. We develop a market contengency framework of the impact of development performance on profitability. The market environment dimensions are growth, industry profitability, market share and product life cycles. We statistically test the framework on data from 86 companies in 12 electronics industries worldwide. We show that product development performance is more important in technologically stable and mature industries. Large companies can significantly impact their financial performance through product development, whereas the profitability of small firms is driven mainly by their industry environment
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High performance of the product development function is seen as a path to competitive advantage in companies across many industries. Product development performance is commonly measured as the efficient and rapid development of new and high performing products. However, the relevance of development performance for business success depends on the competitive market environment in which a firm operates. We develop a market contengency framework of the impact of development performance on profitability. The market environment dimensions are growth, industry profitability, market share and product life cycles. We statistically test the framework on data from 86 companies in 12 electronics industries worldwide. We show that product development performance is more important in technologically stable and mature industries. Large companies can significantly impact their financial performance through product development, whereas the profitability of small firms is driven mainly by their industry environment

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