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Consider a firm that is developing an innovative product. We study the trade‐offs associated with its product design decisions in regards to product performance (the function of the product), product reliability (whether the product will perform its function), and product time‐to‐market (the development time for the product). Specifically, while a more innovative product may deliver better product performance, without sufficient development time, the product may not be as reliable given that innovations require a time buffer to conduct many iterations of product testing and improvement. We further examine the impact of a government‐imposed minimum product reliability standard on the firm, the product, and on social welfare. We find that contrary to common belief, a minimum product reliability standard set by the government may induce more unreliable products or hurt consumer surplus and social welfare. We also find …