The allocation of r&d funds between product development and process improvements: A follow-up study

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An earlier study published in the Journal of Strategic Marketing (volume 3) analyses the link between R&D intensity, technological environment and competitive positioning. This paper builds on that study by answering the question ‘how are R&D funds allocated between product development and process improvements?’ The allocation of funds between product development or process improvement is crucial to business units in a rapidly changing technological environment. Current research recognizes the strategic nature of such choices, and suggests that managers have to understand their technological environment before they gain a competitive advantage. Using the Profit Impact of Market Strategy (PIMS) database, a sample of 2,498 business units are cross-classified into stable and turbulent technological environments, and by the stage of product life-cycle. Analysis of variance is applied in an attempt to determine the response pattern of the product/process technological mix for business units following different competitive strategies. The results show that the allocation of funds toward product development or process improvement is dependent upon the stage of the product life-cycle, the technological environment and the competitive strategy of the business unit. © 1996 Chapman & Hall.

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Journal of Strategic Marketing