The Time-Cost Trade-Off Function, Overlapping Stages, and the Timing Decision
The previous chapter described the concept of the time-cost trade-off function and presented data concerning the shape of this function for twenty-nine product innovations. In this chapter, we explore this topic more fully. We analyze the determinants of the shape of the time-cost trade-off function, particular attention being given to the determinants of the elasticity of cost with respect to time. Also, we describe the extent to which various stages of the innovation process are carried out in parallel, and the relationship between such overlap and a project’s cost structure. Finally, we see how rapidly these projects should have been carried out, if the object was to maximize expected profits (and if the managers’ estimates of the relevant variables were correct); and we compare these durations with the actual durations. Our results shed new light on the nature, determinants, and application of the time-cost trade-off function.
KeywordsFirm Size Large Firm Innovative Activity Expected Profit Manufacturing Facility
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