A dynamic model of resource allocation in multi-project research and development systems

Managers and scholars have increasingly come to recognize the central role that design and engineering play in the overall process of delivering products to the final customer. Although significant progress has been made in the design of effective product development processes, many firms still struggle with the execution of their desired development process. In this paper a model is developed to study one hypothesis to explain why firms experience such difficulties. The analysis of the model leads to a number of new insights not present in the existing literature. First, the analysis shows that under a plausible set of assumptions product development systems have multiple steady-state modes of execution (or equilibria). This insight suggests that it is possible for product development systems to get ‘trapped’ in a state of low performance. Second, the analysis highlights that, for multiple equilibria to exist, a positive loop must dominate the system. The conditions required for such dominance are also provided. Third, the analysis demonstrates that the sensitivity of the system to undesirable self-reinforcing dynamics is determined by the utilization of resources. Fourth, simulation experiments show that testing delays also play a critical role in determining the system's dynamics. Finally, one extension to the model is considered, the introduction of new development tools, and policies for performance improvement are discussed.