New Product Development: How Cost Information Precision Affects Designer Focus and Behavior in a Multiple Objective Setting

Abstract

The development of new products that satisfy customer needs in a costeffective manner is key to survival for many organizations. The role that cost information plays in new product development (NPD), such as its effect on designers' focus and crucial NPD performance measures, is unclear. This experimental study extends existing accounting NPD research by investigating the effect of two levels of cost information precision (specific versus relative) and new products (radical versus incremental) on designers' focus and two common NPD performance measures: product cost and product features. The results indicate that compared to relative cost information, specific cost information increases designers' focus on cost minimization for incremental but not radical products. However, providing designers with specific cost information results in more cost-effective designs for both types of products. In addition, contrary to expectations, more cost-effective designs do not come at the expense of reduced product features. The results show that the role played by cost information in NPD is more complex than has been suggested in prior literature.