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

Gonçalo Pacheco-De-Almeida, James Henderson and Karel Cool
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Gonçalo Pacheco-De-Almeida: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, Stern school of business - NYU - New York University [New York] - NYU - NYU System
Karel Cool: INSEAD - Institut Européen d'administration des Affaires

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Abstract: We examine how time-consuming resource accumulation influences the classic strategy trade-off between commitment and flexibility. In particular, using 1975-95 data from the worldwide petrochemical industry, 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 in which firms accumulate resources more slowly and that uncertainty is not always a disincentive for investment. The robustness of these results is only diminished for extremely long resource accumulation lags.

Keywords: resource management; risk management; competition; decision making; organizational sociology; strategic planning; industrial efficiency; resource allocation (search for similar items in EconPapers)
Date: 2008-06
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Published in Academy of Management Journal, 2008, Vol.51, issue 3, p.517-536

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00576358

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