Investment Decisions in Modular Product Development
Developing new products is critical to firms’ success and is the key for sustaining competitive advantage. Firms engaging in product development (PD) face the important problem of allocating scarce development resources to a multitude of opportunities. In this paper, we propose a mathematical formulation to optimize product development (PD) investment decisions. The model maximizes the performance of a product under development based on its product architecture and the firm’s resource constraints. The analysis of the model shows that the architecture of a product plays an essential role in affecting the optimal resource allocation to various product modules.