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Product Development Cycle Time And Organizational Performance

Christopher D. Ittner, David F. Larcker

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The authors develop and test a simple conceptual model linking product development cycle time to organizational performance. Using data from two industries (automobile and computer) and four countries (Canada, Germany, Japan, and the United States), they find that faster cycle time alone is not associated with higher accounting returns, sales growth, or perceived overall performance. Stronger support is found for the hypothesis that some product development practices, such as cross-functional teams and advanced design tools, interact with accelerated product development to improve performance, whereas other practices, such as reverse engineering of competitors’ products, suppress the potential benefits from lower cycle times. Finally, interaction effects for other organizational practices, such as customer involvement in the product development process and the extent to which new technology is obtained from external sources, appear to vary by industry.