The Impact of Product Innovativeness on the Link between Development Speed and New Product Profitability * Fred Langerak 1 and Erik Jan Hultink 2 * The authors would like to thank the editor and two anonymous reviewers for their helpful comments on earlier versions of this manuscript. They also appreciate the comments of seminar participants at Loughborough University and Free University Amsterdam. Thanks are also due to Barbara Deleersnyder for her reflections on the decision tool. A review of the literature reveals that the relationship between development speed and new product profitability is not as strong and straightforward as conventional wisdom suggests. A number of studies show positive results, others show mixed results, and some present no evidence of a relationship. In other words, the valence of the link between development speed and new product profitability is unclear at this time. Therefore, this study investigates whether or not speeding new products to market has positive or negative effects on new product profitability. Prior research shows that product innovativeness influences both development speed and new product profitability. This raises the question of whether increasing speed is equally successful in improving profitability across new products that differ in their degree of innovativeness. Therefore, this study also investigates the moderating effect of product innovativeness on the relationship between development speed and new product profitability. The results from a survey-based study of 233 manufacturers of industrial products in the Netherlands reveal an inverted U-shaped relationship between development speed and new product profitability. The findings also show that the optimal point is different for two new product types—product improvements and line additions—that vary in their innovativeness. These results provide an onset for the development of a decision tool that helps managers to determine how much to spend on accelerating the development of individual new products and how they should allocate that spending across products in their new product portfolio. "There are two kinds of firms—the quick and the dead." Andy Grove, former president of Intel Introduction New product development (NPD) speed is critical because product life cycles are shrinking and because obsolescence is occurring more quickly than in the past while competition also has intensified (Filippini, Salmaso, and Tessarolo, 2004). To grow, it has become imperative for firms to move new products to market faster. Firms such as Gillette, Merrill Lynch, Honeywell, and Xerox are often cited as examples of firms that compete on development speed. Firms that succeed in speeding new products faster to market than competitors can obtain first-mover advantages (Dröge, Jayaram, and Vickery, 2000). These advantages stem from the firm's competitive start over rivals and are expected to result in dominant market positions (Smith and Reinertsen, 1991). Specifically, development speed and new product profitability are believed to be causally related. On closer examination however, the relationship between development speed and new product profitability does not seem to be as strong and straightforward as conventional wisdom suggests. A number of studies show positive results (e.g., Lynn, Skov, and Abel, 1999), some demonstrate mixed results (e.g., Ittner and Larcker, 1997), and others present no evidence of a relationship between development speed and new product profitability (e.g., Griffin, 2002). In other words, the valence of the relationship between development speed and new product profitability is unclear at this time. Therefore, the present study's primary objective is to offer consensus on the theoretical and empirical question of whether or not speeding new products to market has positive or negative effects on new product profitability. Looking at the relationship between development speed and new product profitability requires taking into account potential moderators (Suarez and Lanzolla, 2005). One of these moderators is product innovativeness because prior research suggests that innovativeness influences both development speed (Griffin, 2002) and new product profitability (Robinson, 1990). Nearly all empirical results show that more innovative new products are associated with slower development speeds (Ali, Krapfel, and LaBahn, 1995) and higher new product performance (Robinson, 1990), and vice versa. This raises the question of whether increasing development speed is uniformly successful in improving profitability across new products that differ in their degree of innovativeness (Ali, 2000). Therefore, the present study's secondary objective is to broaden the theory on NPD acceleration by focusing on the moderating effect of product innovativeness on the relationship between development speed and new product profitability.