Distributed Development and Product Line Decision Making

Posted: 2 Apr 2010

See all articles by Ram Bala

Ram Bala

Indian School of Business

Vish Krishnan

University of California, San Diego (UCSD) - Rady School of Management

Wenge Zhu

California State Polytechnic University, Pomona

Date Written: February 1, 2010

Abstract

Distributed product development, in which a firm's new product design happens in more than one geographic location, is becoming increasingly prevalent in a number of industries. While the cost savings from distributed development has received significant attention, some of the deeper implications of such development are just beginning to be understood. Motivated by our field work at software and electronic firms, we formulate a model to understand the linkages between the various drivers of distributed development such as capacity constraints and cost differences and its market implications such as customer response to remotely developed products. Analysis of the model helps unearth a subtle interaction between a firm's distributed development practice and its product management decisions. Although distributed development makes it optimal for the firm to limit market coverage and offer an exclusive higher-end offering under some conditions, a product line that expands market coverage is optimal under some other conditions. Interestingly, product line optimality occurs only at intermediate values of cost advantage, capacity limits and customer perception of quality loss due to distributed development. These supply-demand interactions provide an explanation for the versioning of development-intensive goods that so far has puzzled scholars. Our analysis underscores the need for product managers to go beyond the cost savings of distributed development and integrate their product line design decision with distributed development decision making.

Keywords: Product Line Design and Development, Global Distribution of Work

Suggested Citation

Bala, Ram and Krishnan, Vish and Zhu, Wenge, Distributed Development and Product Line Decision Making (February 1, 2010). Available at SSRN: https://ssrn.com/abstract=1578703

Ram Bala

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Vish Krishnan (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Wenge Zhu

California State Polytechnic University, Pomona ( email )

3801 W. Temple Avenue
Pomona, CA 91768
United States

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