Conclusion

Abstract

We have developed a decision model that allows to valuate the impact of information updating in new product development projects. This has been accomplished by integrating a general updating mechanism for market requirement information during the development process into a real options framework. Our approach allows to explicitly address two sources of uncertainty: firstly, technical uncertainty stemming from the performance variability of the project and secondly, market uncertainty arising from performance requirement variability of the customers. While management can respond to the former uncertainty through appropriate counter measures, the latter can be reduced by updating the initial market requirement estimates with information obtained from additional market studies, for example.