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

Academy of Management Journal 51(3), 517–536, 2008

HEC Paris Research Paper No. SPE-2013-987

47 Pages Posted: 7 Mar 2013 Last revised: 3 Jul 2013

See all articles by Gonçalo Pacheco-de-Almeida

Gonçalo Pacheco-de-Almeida

HEC Paris - Strategy & Business Policy

James E. Henderson

IMD International

Karel Cool

INSEAD - Strategy

Date Written: June 1, 2008

Abstract

We examine how time-consuming resource accumulation influences the classic strategy trade-off between commitment and flexibility. In particular, using data from the worldwide petrochemical industry during the period 1975 to 1995, 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 where firms accumulate resources more slowly and that uncertainty is not always a disincentive for investment. The robustness of these results is only mitigated for extremely long resource accumulation lags.

Suggested Citation

Pacheco-de-Almeida, Gonçalo and Henderson, James E. and Cool, Karel, Resolving the Commitment vs. Flexibility Trade-Off: The Role of Resource Accumulation Lags (June 1, 2008). Academy of Management Journal 51(3), 517–536, 2008; HEC Paris Research Paper No. SPE-2013-987. Available at SSRN: https://ssrn.com/abstract=2229374

Gonçalo Pacheco-de-Almeida (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France
(+33) (0)1 39 67 97 62 (Phone)

HOME PAGE: http://www.hec.edu/Faculty-Research/Faculty-Directory/PACHECO-DE-ALMEIDA-Goncalo

James E. Henderson

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

Karel Cool

INSEAD - Strategy ( email )

Boulevard de Constance
77305 Fontainebleau
France
(33) (0)1 60 72 42 76 (Phone)
(33) (0)1 60 74 55 58 (Fax)

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