Tightening the belt: methods for reducing development costs associated with new product innovation

Despite the fact that many firms are under pressure to reduce research and development (R&D) expenditures, there are few studies which test methods for containing costs associated with innovation. A multi-industry study of new product development projects suggests that development costs are lower when there are (a) high rewards for speedy development, high clarity of product concept, and low management interest in the project (criteria-related factors), (b) high use of external ideas and technologies (scope-related factor), (c) high number of product champions, low project leader's position in the organization, low project members' education level, and low team representativeness (staffing-related factors), and (d) low process overlap, low team proximity, low frequency of testing, and high use of CAD systems (structuring-related factors). The final model was significant at the p<0.001 level and explained 61% of the variance in development costs. Implications for scholars and managers are discussed.