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Strategic delegation, quality competition, and new product profitability

Title
Strategic delegation, quality competition, and new product profitability
Authors
Shin, HyunShin, JongtaeYoo, ShijinSong, JoonKim, Alex
Ewha Authors
Hyun Sang Shin김지영
SCOPUS Author ID
Hyun Sang Shinscopus; 김지영scopus
Issue Date
2015
Journal Title
MANAGEMENT DECISION
ISSN
0025-1747JCR Link

1758-6070JCR Link
Citation
MANAGEMENT DECISION vol. 53, no. 3, pp. 713 - 729
Keywords
New product developmentGame theory
Publisher
EMERALD GROUP PUBLISHING LTD
Indexed
SSCI; SCOPUS WOS scopus
Document Type
Article
Abstract
Purpose - The purpose of this paper is to present a new perspective on the marketing-R&D interface by modelling firms that develop new products in a duopolistic market. Design/methodology/approach - By using a game-theoretic modelling approach, this study examines strategic delegation, through which the marketing and R&D managers of each firm are given authority over pricing and new products' quality levels. Findings - Interestingly, the study finds that the case where two managers with conflicting incentives negotiate (the horizontal coordination case) might produce a better financial outcome than when the managers' decisions are perfectly coordinated by a profit-maximizing CEO (the vertical control case). In addition, the study identifies several conditions that guarantee horizontal coordination's generation of higher profit, such as high (or low) sensitivity to the quality (or price) of a new product. The paper further shows that two competing firms may select horizontal coordination as a Nash equilibrium. Practical implications - These findings provide new insights into the role of marketing-R&D interaction under strategic delegation, which may allow rival firms to "spend smart" on R&D, avoid excessive (and unnecessary) quality competition, and thus enhance the profitability of new products. Such insights would be useful for any firms under budget constraints. Originality/value - To the authors' knowledge, this paper represents the first attempt to analyze how delegation interacts with the conflicting incentives of marketing and R&D managers, which in turn affects the quality investment decisions, competitive intensity, and, ultimately, the financial outcomes of new products developed competing firms.
DOI
10.1108/MD-05-2014-0318
Appears in Collections:
국제대학원 > 국제학과 > Journal papers
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