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

Author

Listed:
  • 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)

  • James Henderson
  • Karel Cool

    (INSEAD - Institut Européen d'administration des Affaires)

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.

Suggested Citation

  • Gonçalo Pacheco-De-Almeida & James Henderson & Karel Cool, 2008. "Resolving the Commitment vs. Flexibility Trade-Off: The Role of Resource Accumulation Lags," Post-Print hal-00576358, HAL.
    • Handle: RePEc:hal:journl:hal-00576358
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    Citations

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    Cited by:

    1. Li, Xu & Vermeulen, Freek, 2021. "High risk, low return (and vice versa): the effect of product innovation on firm performance in a transition economy," LSE Research Online Documents on Economics 120268, London School of Economics and Political Science, LSE Library.
    2. Benischke, Mirko H. & Guldiken, Orhun & Doh, Jonathan P. & Martin, Geoffrey & Zhang, Yanze, 2022. "Towards a behavioral theory of MNC response to political risk and uncertainty: The role of CEO wealth at risk," Journal of World Business, Elsevier, vol. 57(1).
    3. Sihem Ben Mahmoud-Jouini & Philippe Silberzahn & Thomas Paris, 2017. "Resolving The Commitment-Flexibility Dilemma In New Technology Ventures," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(06), pages 1-18, August.
    4. Tony W. Tong & Yong Li, 2011. "Real Options and Investment Mode: Evidence from Corporate Venture Capital and Acquisition," Organization Science, INFORMS, vol. 22(3), pages 659-674, June.
    5. Puay Khoon Toh & Taekyu Kim, 2013. "Why Put All Your Eggs in One Basket? A Competition-Based View of How Technological Uncertainty Affects a Firm’s Technological Specialization," Organization Science, INFORMS, vol. 24(4), pages 1214-1236, August.
    6. Axarloglou, Kostas & Visvikis, Ilias & Zarkos, Stefanos, 2013. "The time dimension and value of flexibility in resource allocation: The case of the maritime industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 52(C), pages 35-48.
    7. Reha Karadag & Laura Poppo, 2023. "Strategic resource decay," Strategic Management Journal, Wiley Blackwell, vol. 44(6), pages 1534-1561, June.
    8. Jiménez, Alfredo & Bayraktar, Secil, 2021. "Hello! Namaste? Within-country linguistic diversity and infrastructure projects in emerging markets," Journal of Business Research, Elsevier, vol. 130(C), pages 86-97.
    9. Rodolphe Durand & Panayiotis (Panikos) Georgallis, 2018. "Differential Firm Commitment to Industries Supported by Social Movement Organizations," Organization Science, INFORMS, vol. 29(1), pages 154-171, February.

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