New product introductions and failures under uncertainty

This paper examines new product introductions and failures when firms make new product introduction decisions under some uncertainty about future demand or cost conditions. It shows that increased uncertainty is not necessarily detrimental to new product introductions; it can incentivize more firms to introduce new products, and can lead to more new product failures, too. The paper also shows that markets that have firms with more positively correlated cost structures may attract fewer new product introductions and have fewer new product failures. Such cost correlations can arise, for example, if firms choose to cooperate on R&D, have common labor unions, or use the same suppliers, etc. Finally, we show that if firms are risk-averse, then the relationship between degree of uncertainty and number of new product introductions can be non-monotonic.