Linking Optimal Design Decisions to the Theory of the Firm: The Case of Resource Allocation

Abstract

Resource allocation is a core business milestone in a firm’s product development process: Maximize the final value derived from allocating resources into an appropriate product mix. Optimal engineering design typically deals with determining the best product based on technological (and, occasionally, cost) requirements. Linking technological with business decisions allows the firm to follow a resource allocation process that directly considers not only the resources to invest in different products but also the appropriate physical properties of these products. Thus, optimal designs are determined within an enterprise context that maximizes the firm’s value. The article demonstrates how this integration can be accomplished analytically using a simple example in automotive product development.