The effect of 'make' or 'buy' on the timing of capacity investment by manufacturers in new markets

Zhaoqiong Qin

International Journal of Applied Management Science, 2013, vol. 5, issue 4, 377-396

Abstract: We analyse the manufacturer's decision in the timing of capacity investment when there are two retailers in the new market: an incumbent retailer who either makes the product in house or buys the product from the manufacturer and an entrant retailer who must purchase the product from the manufacturer. We find that the unit production costs of the manufacturer and the incumbent retailer, the demand uncertainty and the incumbent retailer's decision of 'make-in-house' and 'buy' are the main factors to affect the timing of capacity investment.

Keywords: capacity investment; timing; game theory; strategic outsourcing; manufacturing investment; new markets; make-or-buy; unit production costs; demand uncertainty. (search for similar items in EconPapers)
Date: 2013
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