Investing in capabilities: bidding in strategic factor markets with costly information

Catherine A. Maritan and Robert E. Florence
Additional contact information
Catherine A. Maritan: Whitman School of Management, Syracuse University, Syracuse, NY 13244-2450, USA, Postal: Whitman School of Management, Syracuse University, Syracuse, NY 13244-2450, USA
Robert E. Florence: School of Business, St. Bonaventure University, St. Bonaventure, NY 14778, USA, Postal: School of Business, St. Bonaventure University, St. Bonaventure, NY 14778, USA

Managerial and Decision Economics, 2008, vol. 29, issue 2-3, 227-239

Abstract: We explore how firms invest in capabilities by acquiring assets in strategic factor markets. We formalize the problem using an auction model in which heterogeneous firms bid for an asset to investigate relationships among expected returns to the investment, information used to estimate the expected returns and information used to estimate the expected bids from competitors. Our results demonstrate the importance of recognizing different components of the expected returns and the importance of considering the cost of acquiring information to inform the bid. Through this analysis we illustrate complementarities and trade-offs that are involved in the process of making investment decisions. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1002/mde.1385 Link to full text; subscription required (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:29:y:2008:i:2-3:p:227-239

DOI: 10.1002/mde.1385

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().