Structural panel industry evolution: Implications for innovation and new product development

Industrial organization theory suggests that innovativeness differs across the industry life cycle. Product innovation is high at the beginning of an industry life cycle and diminishes over time. Process innovation is initially low, peaks later in the life cycle and eventually tails off to a level similar to product innovation. However, when a competing product is introduced, companies producing a late life-cycle product tend to increase their product innovation as a response to the competitive threat. This study tests this theory in the context of the North American structural panel industry by comparing plywood, a product in the decline stage of the product life cycle, to oriented strandboard (OSB), a product in the growth stage of the product life cycle. The two industry sectors are compared based on their product innovativeness, structure of new product development (NPD) processes, and product specialization. According to theory, plywood mills should be stronger in each of these areas resulting from response to the competitive threat from OSB. Although these constructs are useful in differentiating between plywood and OSB producers, findings are inconsistent with theory. Oriented strandboard mills were found to be more product-innovative and to use a more structured NPD process than plywood mills. On the other hand, consistent with theory, plywood mills were found to have a more specialized product line. Implications for industry and suggestions for future research are provided.