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Quality investment timing by the startup and the established firm

Author

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  • Bing Xia
  • Ju'e Guo
  • Richard Y.K. Fung

Abstract

This study investigates quality investment timing decisions of the established firm and the startup by a duopoly model, where firms can position quality early (demand uncertainty is high) or late (uncertainty has been resolved), possibly at different costs. The startup positions quality to maximize its survival probability, whereas the established firm maximizes profits. Results indicate that the startup positions quality earlier than the established firm when the demand uncertainty is high and costs do not decline sharply over time. Additionally, policy analysis shows that subsidies work better than direct funds in encouraging quality innovation of the startup.

Suggested Citation

  • Bing Xia & Ju'e Guo & Richard Y.K. Fung, 2018. "Quality investment timing by the startup and the established firm," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 39(3), pages 275-284, April.
    • Handle: RePEc:wly:mgtdec:v:39:y:2018:i:3:p:275-284
    DOI: 10.1002/mde.2902
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    Cited by:

    1. Haider Alvi, Farzad & Ulrich, Klaus, 2023. "Innovation finance ecosystems for entrepreneurial firms: A conceptual model and research propositions," Journal of Business Research, Elsevier, vol. 156(C).
    2. Bahadur Ali Soomro & Ghulam Rasool Lakhan & Naimatullah Shah, 2021. "COVID‐19 impediments and business start‐ups in Pakistan: Evidence from the second wave of the pandemic," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1909-1918, October.

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