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Initiating Supplier New Product Development Projects: A Behavioral Investigation
Author(s) -
Wuttke David A.,
Donohue Karen,
Siemsen Enno
Publication year - 2018
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.12784
Subject(s) - revenue , business , product (mathematics) , new product development , continuation , value (mathematics) , marketing , project management , industrial organization , operations management , economics , computer science , finance , management , geometry , mathematics , machine learning , programming language
While suppliers are often an excellent source of product innovation for buyers, their propensity to undertake or continue a product development project can be elusive. This study examines how characteristics of the innovation project, including the type of project revenue, type of cost uncertainty, and the contract frame, influence the decision to accept, and subsequently continue, an innovation project. Through a series of controlled behavioral experiments, we find that acceptance rates increase when projects are characterized by a low real options value or an entirely new (vs. replacement) revenue stream. While these factors have less influence on the supplier's decision to continue the project, once accepted, continuation rates do increase if acceptance and continuation decisions are made by the same person. We also find that using a reward (vs. penalty) frame for sustaining supplier engagements significantly increases acceptance rates.