Michael Disch

2021

Product Cost Estimation (PCE) has been extensively studied in the past, and it still draws the attention of researchers and companies. The reason for this substantial demand is the influence of accurate financial planning on corporate success (Li Qian and Ben-Arieh, 2008, p. 805). Whereas major parts of PCE literature focus on overall product costs or material cost throughout the whole product lifecycle, only a minority dedicated to cost estimation of Research & Development (R&D). In particular, R&D costs in the early phases of New Product Development (NPD) are highly relevant for the overall profit of a product (Altavilla et al., 2018, p.1). Whether a company can profitably introduce a new product to the market depends on efficient financial planning from the early beginning. Nevertheless, estimating these costs is challenging due to uncertainties in data availability and vague product knowledge in conceptual design. The PCE literature is currently missing an overview of existing R&D cost estimation methods that are applicable in early phase NPD. Such an overview would help managers to improve cost management abilities and strengthen corporate performance. Further, for researchers, this would unveil the importance of cost control tools in R&D and motivate them to expand research on this managerial issue. We conducted a comprehensive literature review on this particular field of research to get a profound understanding of existing R&D cost estimation methods. The initial findings of this review can be used as a guideline and decision-making tool for researchers and managers to improve cost management at the earliest phase of the product lifecycle. Further, the former group gains valuable insights on future research aspects.