Time Compression (Dis)Economies: An Empirical Analysis
Strategic Management Journal, Forthcoming
50 Pages Posted: 23 Jun 2018 Last revised: 8 Jul 2018
Date Written: March 20, 2018
To investigate time compression dis-economies (TCD), this study estimated time-cost elasticities using 459 oil and gas global investment projects (1997-2010). Results show that the average cost of accelerating investments is negative: a firm could cut $6.3 million in costs of a single project by accumulating asset stocks one month faster. About 88 percent of the projects exhibit negative time-cost elasticities with over 39 percent of unrealized economies of time compression. Only 12 percent of the projects are subject to TCD. These time inefficiencies or frictions do not negate the existence of TCD, but suggest they are less prevalent than assumed in the literature. Management experience, R&D investment, firm size, economic development and political stability are shown to be associated with greater time compression efficiency.
Keywords: Sustainable Competitive Advantage, Temporal Frictions, Time Compression Diseconomies, Time Inefficiencies, Time-Cost Tradeoff
JEL Classification: D22, D24, L71, M11, M20
Suggested Citation: Suggested Citation