Supplier's technology upgrading investment strategy considering product life cycle

• Published in: International journal of production economics Vol. 263; p. 108953
• Main Authors: Dong, Ming, Mao, Shunjie, Li, Shan
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.09.2023
• Subjects: New product introduction; Product diffusion; Product life cycle; Supplier's independent research and development; Supplier's independent research and development; Product life cycle; New product introduction; Product diffusion
• ISSN: 0925-5273; 1873-7579
• DOI: 10.1016/j.ijpe.2023.108953

Technology is evolving rapidly, which has a significant impact on firms' R&D investment decisions. When the downstream manufacturer decides to introduce new-technology products to the uncertain market, the upstream supplier needs to consider whether to invest in R&D to provide new components for the manufacturer. Different from the previous studies, this paper proposes a joint diffusion model that takes the product life cycle of the existing-technology products into account, revealing the impact of the product diffusion process and the existing technology's product life cycle on supplier's strategies. When the product spreads slowly, the later the new-technology product is introduced, the less likely the supplier will choose to invest in R&D. Moreover, the supplier will only invest in R&D as soon as possible or never with a slow product diffusion speed, depending on their R&D capabilities. When the product diffuses rapidly, the later the introduction of new-technology products, the likelihood of suppliers choosing to invest in R&D firstly increases and then decreases. What's more, suppliers are most likely to invest in R&D when existing technology products are just entering the mature stage with a rapid product diffusion speed.