Resolving the Commitment vs. Flexibility Trade-Off: The Role of Resource Accumulation Lags

Gonçalo Pacheco-de-Almeida (), James E. Henderson () and Karel Cool ()

No 987, HEC Research Papers Series from HEC Paris

Abstract: We examine how time-consuming resource accumulation influences the classic strategy trade-off between commitment and flexibility. In particular, using data from the worldwide petrochemical industry during the period 1975 to 1995, we study the impact of new plants’ time-to-build on firms’ decisions to invest under uncertainty. Our results suggest a nontrivial positive effect of resource accumulation lags on investment. Contradicting conventional wisdom, we show that competition may be fiercer in industries where firms accumulate resources more slowly and that uncertainty is not always a disincentive for investment. The robustness of these results is only mitigated for extremely long resource accumulation lags.

Keywords: Resource accumulation; commitment; flexibility; petrochemical; investment (search for similar items in EconPapers)
JEL-codes: L00 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2008-06-01
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:0987

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