The financial undertow of rapid technical advance in new product development

Abstract

The logic of time-based competition (TBC) has unleashed a broadside of industrial dynamics whereby the accelerating pace of technical advance may well challenge the financial health of industry-leading producers. Through a series of comparative case studies and subsequent analyses of entire populations of major producers in selected industries, this paper demonstrates that the financial justification for aggressive internal investment in product innovation has been deteriorating over the past decade or two. The results also indicate that TBC-induced financial pressures can flow downstream through industrial linkages from producers of technology-intensive intermediate inputs to end-product producers. Ultimately, in their quest to be time-based competitors, as firms which use rapid technical advance to establish competitive advantage, they can set in motion deeper and broader endogenous influences capable of reworking substantially long-established industry forms and fundamentals.