Exploring the effectiveness of pursuing competing technologies in parallel projects during predevelopment

Abstract

Prior research has studied the effectiveness of parallel projects in the research and development stages. However, it has ignored predevelopment, which R&D intensive firms generally distinguish as a separate stage lodged between research and development. Predevelopment focuses on activities and decisions to select, from a subset of related technologies, the best option for a product application. Parallel projects are often a means of speeding up this process by actively pursuing learning spillovers. This paper develops assumptions about learning potential and then uses a real option model to test the trade-off between the higher costs and benefits of this parallel project approach. We compare outcomes for predevelopment using the same approach under research and development conditions, respectively. The results reveal that, when moving from research to development, the effectiveness of pursuing competing technologies in parallel projects first increases and then decreases, with a maximum positive result in predevelopment. The results also show that learning spillovers can compensate for the higher investment costs. Data from an empirical case support our findings.