Innovation Acceleration and the Product Life Cycle

Abstract

The industrialization of research and development in the post-1980 knowledge-based economy accelerated new product development giving rise to the conventional wisdom that product life cycles were shortening. The digital transformation and the advent of "Industry 4.0", coupled with the rising competitive pressure from China's development as a technological power, intensified the pace of product market disruption in the 2010s. The steep improvement in machine learning capabilities at the beginning of the 2020s, in the context of intense global rivalry to dominate the new general purpose technologies built on big data and artificial intelligence promises to further accelerate the introduction of innovative products. At the same time, reflecting the reality that the future is here but only in some places, many established products continue to have a long life cycle. This note updates the evidence on the general shortening of product life cycles. This is an important issue for understanding the impact of accelerated innovation given that disruption compresses the profitable portion of product life cycles, increases uncertainty, and thereby raises the required hurdle rate of return for firms considering commitments to new product development, potentially and paradoxically dampening business dynamism. The note contributes to the discussion of the reasons for waning business dynamism in an age of innovation.

Keywords: Product life cycle, innovation, business dynamism, knowledge-based economy, digital transformation, Industry 4.0, artificial intelligence (AI), return on investment, China's technological rise JEL Codes: O30, O31, O32, O33, L60, M21