Kee H. Chung, Jang-Chul Kim, Young Sang Kim, Hao Zhang
This study analyzes the effect of information asymmetry on corporate cash holdings. Using various measures of information asymmetry, this study shows that companies that operate in environments with higher information asymmetry have smaller cash holdings. This study continues to find a negative relationship between information asymmetry and corporate cash holdings from a battery of sensitivity analyses, including the tests using different regression methods and the difference-in-difference tests employing brokerage-firm merger and closure events. On the whole, the results support the monitoring cost hypothesis of cash holdings over the investment opportunities hypothesis.
{"title":"Information Asymmetry and Corporate Cash Holdings","authors":"Kee H. Chung, Jang-Chul Kim, Young Sang Kim, Hao Zhang","doi":"10.2139/ssrn.1778582","DOIUrl":"https://doi.org/10.2139/ssrn.1778582","url":null,"abstract":"This study analyzes the effect of information asymmetry on corporate cash holdings. Using various measures of information asymmetry, this study shows that companies that operate in environments with higher information asymmetry have smaller cash holdings. This study continues to find a negative relationship between information asymmetry and corporate cash holdings from a battery of sensitivity analyses, including the tests using different regression methods and the difference-in-difference tests employing brokerage-firm merger and closure events. On the whole, the results support the monitoring cost hypothesis of cash holdings over the investment opportunities hypothesis.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114249263","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Two ubiquitous empirical regularities in pay distributions are that the variance of wages increases with experience, and innovations in wage residuals have a large, unpredictable component. The leading explanations for these patterns are that over time, either firms learn about worker productivity but productivity remains fixed or workers' productivities themselves evolve heterogeneously. In this paper, we seek to disentangle these two models and place magnitudes on their relative importance. We derive a dynamic model of learning and productivity that nests both models and allows them to coexist. We estimate our model on a 20-year panel of pay and performance measures from a single, large firm (the Baker-Gibbs-Holmstrom data). Incorporating performance measures yields two key innovations. First, the panel structure implies that we have repeat measures of correlates of productivity, as opposed to the empirical evidence on employer learning which uses one fixed measure. Second, we can separate productivity from pay, whereas the previous literature on productivity evolution could not. We find that both models are important in explaining the data. However, the predominant effect is that worker productivity evolves idiosyncratically over time, implying firms must continuously learn about a moving target. Therefore, while the majority of pay dispersion is driven by variation in individual productivity, wages differ significantly from individual productivity at all experience levels due to imperfect information. We believe this represents a significant reinterpretation of the empirical literature on employer learning.
{"title":"Employer Learning, Productivity and the Earnings Distribution: Evidence from Performance Measures","authors":"Lisa B. Kahn, Fabian Lange","doi":"10.1093/RESTUD/RDU021","DOIUrl":"https://doi.org/10.1093/RESTUD/RDU021","url":null,"abstract":"Two ubiquitous empirical regularities in pay distributions are that the variance of wages increases with experience, and innovations in wage residuals have a large, unpredictable component. The leading explanations for these patterns are that over time, either firms learn about worker productivity but productivity remains fixed or workers' productivities themselves evolve heterogeneously. In this paper, we seek to disentangle these two models and place magnitudes on their relative importance. We derive a dynamic model of learning and productivity that nests both models and allows them to coexist. We estimate our model on a 20-year panel of pay and performance measures from a single, large firm (the Baker-Gibbs-Holmstrom data). Incorporating performance measures yields two key innovations. First, the panel structure implies that we have repeat measures of correlates of productivity, as opposed to the empirical evidence on employer learning which uses one fixed measure. Second, we can separate productivity from pay, whereas the previous literature on productivity evolution could not. We find that both models are important in explaining the data. However, the predominant effect is that worker productivity evolves idiosyncratically over time, implying firms must continuously learn about a moving target. Therefore, while the majority of pay dispersion is driven by variation in individual productivity, wages differ significantly from individual productivity at all experience levels due to imperfect information. We believe this represents a significant reinterpretation of the empirical literature on employer learning.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132216033","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose - – The purpose of this paper is to investigate the phenomena of convergence and stability of leverage reported by Lemmon Design/methodology/approach - – A dynamic trade-off model of the firm was used to simulate investment, leverage, and payout decisions for different types of firms. From an econometric standpoint, the Efficient Method of Moments was used to recover the structural parameters. Findings - – The structural model generates a leverage ratio that oscillates around a long-run, time-invariant level and consistently reproduces the convergence and stability of leverage reported by Lemmon Practical implications - – Determining the optimal capital structure of a firm is a complex problem that has challenged academics and practitioners for a long time. Understanding leverage decisions is of great importance not only for financial managers, but also for investors, such as banks, debt-holders, equity-holders, and other capital providers, who need to understand how firms make capital structure decisions in order to achieve an efficient allocation of funds. Originality/value - – The author shows that the firm-specific fixed effects in leverage regressions are not related to the usual determinants (e.g. profitability, market-to-book ratio), but to the primitive characteristics of the firm (e.g. elasticity of capital in the production function, the volatility of profits, the capital depreciation rate, the income tax rate, etc.)
{"title":"On the Determinants of Firm Leverage: Evidence from a Structural Estimation","authors":"A. Menichini","doi":"10.2139/ssrn.1669014","DOIUrl":"https://doi.org/10.2139/ssrn.1669014","url":null,"abstract":"Purpose - – The purpose of this paper is to investigate the phenomena of convergence and stability of leverage reported by Lemmon Design/methodology/approach - – A dynamic trade-off model of the firm was used to simulate investment, leverage, and payout decisions for different types of firms. From an econometric standpoint, the Efficient Method of Moments was used to recover the structural parameters. Findings - – The structural model generates a leverage ratio that oscillates around a long-run, time-invariant level and consistently reproduces the convergence and stability of leverage reported by Lemmon Practical implications - – Determining the optimal capital structure of a firm is a complex problem that has challenged academics and practitioners for a long time. Understanding leverage decisions is of great importance not only for financial managers, but also for investors, such as banks, debt-holders, equity-holders, and other capital providers, who need to understand how firms make capital structure decisions in order to achieve an efficient allocation of funds. Originality/value - – The author shows that the firm-specific fixed effects in leverage regressions are not related to the usual determinants (e.g. profitability, market-to-book ratio), but to the primitive characteristics of the firm (e.g. elasticity of capital in the production function, the volatility of profits, the capital depreciation rate, the income tax rate, etc.)","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"77 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131194546","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
M. Humphery‐Jenner, Sigitas Karpavičius, Jo‐Ann Suchard
Shelf offerings have risen in importance from 18% of all offerings in 1997 to 81% in 2007. Unlike in traditional offerings, shelf offerings are conducted like an auction in which underwriters tender to place the firm’s shares. This implies that cost-considerations have a more important role in shelf offerings, and that underwriter switching in shelf offerings might have different drivers from traditional offerings. We examine the drivers of switching in shelf offerings and traditional SEOs. The results suggest that switching in shelf offerings and traditional offerings have different drivers: cost-considerations (underwriter reputation) motivate switching in shelf offerings (traditional offerings).
{"title":"Underwriter Relationships and Shelf Offerings","authors":"M. Humphery‐Jenner, Sigitas Karpavičius, Jo‐Ann Suchard","doi":"10.2139/ssrn.1786038","DOIUrl":"https://doi.org/10.2139/ssrn.1786038","url":null,"abstract":"Shelf offerings have risen in importance from 18% of all offerings in 1997 to 81% in 2007. Unlike in traditional offerings, shelf offerings are conducted like an auction in which underwriters tender to place the firm’s shares. This implies that cost-considerations have a more important role in shelf offerings, and that underwriter switching in shelf offerings might have different drivers from traditional offerings. We examine the drivers of switching in shelf offerings and traditional SEOs. The results suggest that switching in shelf offerings and traditional offerings have different drivers: cost-considerations (underwriter reputation) motivate switching in shelf offerings (traditional offerings).","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125772584","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It is widely acknowledged that the 2007 mortgage crisis was preceded by a broad deterioration in underwriting diligence. This paper shows that this deterioration varied by the industry affiliation of mortgage lenders. Loans issued by homebuilders and stand-alone lenders were significantly less likely to default than loans issued by depository banks and affiliates of major financial institutions. I argue that homebuilders and stand-alone lenders had the least financial capacity to hold mortgages, and their resulting need to sell loans quickly on the secondary market forced them to issue safer loans. Tests of other explanations, including differences in information and incentives to avoid foreclosure externalities, receive little support. This study highlights a novel means by which firm boundaries influence firm adaptation to changing market conditions by defining the boundaries of the internal capital markets and hence the relative constraints of constituent units. This paper was accepted by Bruno Cassiman, business strategy.
{"title":"Do Parents Matter? Effects of Lender Affiliation through the Mortgage Boom and Bust","authors":"Claudine Gartenberg","doi":"10.2139/ssrn.1700868","DOIUrl":"https://doi.org/10.2139/ssrn.1700868","url":null,"abstract":"It is widely acknowledged that the 2007 mortgage crisis was preceded by a broad deterioration in underwriting diligence. This paper shows that this deterioration varied by the industry affiliation of mortgage lenders. Loans issued by homebuilders and stand-alone lenders were significantly less likely to default than loans issued by depository banks and affiliates of major financial institutions. I argue that homebuilders and stand-alone lenders had the least financial capacity to hold mortgages, and their resulting need to sell loans quickly on the secondary market forced them to issue safer loans. Tests of other explanations, including differences in information and incentives to avoid foreclosure externalities, receive little support. This study highlights a novel means by which firm boundaries influence firm adaptation to changing market conditions by defining the boundaries of the internal capital markets and hence the relative constraints of constituent units. \u0000 \u0000This paper was accepted by Bruno Cassiman, business strategy.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-02-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133138869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the role of target firms' accounting quality in the merger and acquisition process. We predict that target firm accounting quality will be positively associated with 1 the likelihood that the deal will be structured as a negotiation rather than as an auction, 2 the speed with which the deal reaches final resolution, and 3 the likelihood that the proposed deal is ultimately completed. Our empirical evidence is consistent with these predictions. These results complement and extend existing findings on target firm accounting quality and provide new evidence that financial accounting quality relates positively to the efficient allocation of the economy's capital resources. This paper was accepted by Mary Barth, accounting.
{"title":"The Role of Accounting Quality in the M&A Market","authors":"Carol Marquardt, Emanuel Zur","doi":"10.2139/ssrn.1725020","DOIUrl":"https://doi.org/10.2139/ssrn.1725020","url":null,"abstract":"We examine the role of target firms' accounting quality in the merger and acquisition process. We predict that target firm accounting quality will be positively associated with 1 the likelihood that the deal will be structured as a negotiation rather than as an auction, 2 the speed with which the deal reaches final resolution, and 3 the likelihood that the proposed deal is ultimately completed. Our empirical evidence is consistent with these predictions. These results complement and extend existing findings on target firm accounting quality and provide new evidence that financial accounting quality relates positively to the efficient allocation of the economy's capital resources. \u0000 \u0000This paper was accepted by Mary Barth, accounting.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121656523","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we analyze the determinants of corporate saving in the form of changes in the stock of cash for 11 Asian economies using firm-level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in the stock of cash, which suggests that Asian firms are borrowing constrained and that they save more when their cash flow increases so that they will be able to finance future investments. Moreover, we find in the developed economy sample that, as expected, cash flow has a positive impact on the change in the stock of cash only in the case of the smallest firms, which are more likely to be borrowing constrained, and find in the developing economy sample that, as expected, the positive impact of cash flow on the change in the stock of cash declines with firm size. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis. Finally, we find some evidence that Tobin’s q has a positive impact on the change in the stock of cash.
{"title":"Corporate Cash Holding in Asia","authors":"C. Horioka, Akiko Terada-Hagiwara","doi":"10.2139/ssrn.2479138","DOIUrl":"https://doi.org/10.2139/ssrn.2479138","url":null,"abstract":"In this paper, we analyze the determinants of corporate saving in the form of changes in the stock of cash for 11 Asian economies using firm-level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in the stock of cash, which suggests that Asian firms are borrowing constrained and that they save more when their cash flow increases so that they will be able to finance future investments. Moreover, we find in the developed economy sample that, as expected, cash flow has a positive impact on the change in the stock of cash only in the case of the smallest firms, which are more likely to be borrowing constrained, and find in the developing economy sample that, as expected, the positive impact of cash flow on the change in the stock of cash declines with firm size. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis. Finally, we find some evidence that Tobin’s q has a positive impact on the change in the stock of cash.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"87 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127176932","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper I investigate the level of access of the opaque micro and small firms to finance. The objective of the paper is threefold: first to analyze how small and micro firms finance themselves, second to investigate what their financing preferences are and third to explore their opinions on how they evaluate the financing sources and the various obstacles to gain access to them. The simultaneous investigation of these issues reveals valuable information in the well known financing gap of small enterprises. I use a sample of Greek small and micro firms, representative of the population of small and micro firms in Greece, which cover 99.6% of the total number of firms operating in Greece. The data are derived from the answers in a structured questionnaire. The main conclusions are a. regarding equity financing: firms rely heavily on their own funds however they would not raise new equity from sources outside the family; thus, there is a reluctance in using new outside equity (venture capital, business angels and so on) b. regarding debt financing, firms have limited access to debt but they would use more debt than they currently do; thus, there is a financing gap in their access to debt finance, c. regarding grant financing, micro and small firms should be better informed and more encouraged to participate in state grants and co-financed projects; thus, there is an informational gap in grant financing.
{"title":"Financing Practices and Preferences for Micro and Small Firms","authors":"N. Daskalakis","doi":"10.2139/ssrn.1683182","DOIUrl":"https://doi.org/10.2139/ssrn.1683182","url":null,"abstract":"In this paper I investigate the level of access of the opaque micro and small firms to finance. The objective of the paper is threefold: first to analyze how small and micro firms finance themselves, second to investigate what their financing preferences are and third to explore their opinions on how they evaluate the financing sources and the various obstacles to gain access to them. The simultaneous investigation of these issues reveals valuable information in the well known financing gap of small enterprises. I use a sample of Greek small and micro firms, representative of the population of small and micro firms in Greece, which cover 99.6% of the total number of firms operating in Greece. The data are derived from the answers in a structured questionnaire. The main conclusions are a. regarding equity financing: firms rely heavily on their own funds however they would not raise new equity from sources outside the family; thus, there is a reluctance in using new outside equity (venture capital, business angels and so on) b. regarding debt financing, firms have limited access to debt but they would use more debt than they currently do; thus, there is a financing gap in their access to debt finance, c. regarding grant financing, micro and small firms should be better informed and more encouraged to participate in state grants and co-financed projects; thus, there is an informational gap in grant financing.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"114 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-04-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122012230","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Entrepreneurs must experiment to learn how good they are at a new activity. What happens when the experimentation is financed by a lender? Under common scenarios, i.e., when there is the opportunity to learn by "starting small" or when "no-compete" clauses cannot be enforced ex-post, we show that financing experimentation can become harder precisely when it is more profitable, i.e., for lower values of the known-arm and for more optimistic priors. Endogenous collateral requirements (like those frequently observed in micro-credit schemes) are shown to be part of the optimal contract.
{"title":"Financing Experimentation","authors":"M. Drugov, Rocco Macchiavello","doi":"10.2139/ssrn.1600881","DOIUrl":"https://doi.org/10.2139/ssrn.1600881","url":null,"abstract":"Entrepreneurs must experiment to learn how good they are at a new activity. What happens when the experimentation is financed by a lender? Under common scenarios, i.e., when there is the opportunity to learn by \"starting small\" or when \"no-compete\" clauses cannot be enforced ex-post, we show that financing experimentation can become harder precisely when it is more profitable, i.e., for lower values of the known-arm and for more optimistic priors. Endogenous collateral requirements (like those frequently observed in micro-credit schemes) are shown to be part of the optimal contract.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130882416","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study a buyer's sourcing strategy along two dimensions: the supply base design and the pricing mechanism, considering supplier competition and cost-reduction effort. The supply base design concerns the number of suppliers (one or two) included in the supply base and the capacity to be invested in each supplier. The pricing mechanism determines the timing of the price decisions, with the buyer making price commitments before suppliers exert cost-reduction efforts that may be renegotiated afterward. We find that symmetric capacity investment in suppliers and low price commitments (more likely to be renegotiated) are effective at fostering supplier competition, whereas asymmetric investment and high price commitments (less likely to be renegotiated) are better at motivating supplier effort. A complementary relationship exists between the supply base design and pricing mechanism: A more symmetric supply base should be combined with lower price commitments, leading to more renegotiation opportunities. This results in three possible sourcing structures: sole sourcing (investing capacity in a single supplier and forming price with ex ante commitments), symmetric dual sourcing (investing equal capacity in both suppliers and forming price with ex post negotiations), and asymmetric dual sourcing (investing positive but unequal capacities in two (ex ante identical) suppliers and forming price using both ex ante commitments and ex post (re)negotiations). We characterize the conditions for each structure and identify a strategic role of capacity investment. This paper was accepted by Martin Lariviere, operations management.
{"title":"Sourcing for Supplier Effort and Competition: Design of the Supply Base and Pricing Mechanism","authors":"Cuihong Li","doi":"10.2139/ssrn.1489101","DOIUrl":"https://doi.org/10.2139/ssrn.1489101","url":null,"abstract":"We study a buyer's sourcing strategy along two dimensions: the supply base design and the pricing mechanism, considering supplier competition and cost-reduction effort. The supply base design concerns the number of suppliers (one or two) included in the supply base and the capacity to be invested in each supplier. The pricing mechanism determines the timing of the price decisions, with the buyer making price commitments before suppliers exert cost-reduction efforts that may be renegotiated afterward. We find that symmetric capacity investment in suppliers and low price commitments (more likely to be renegotiated) are effective at fostering supplier competition, whereas asymmetric investment and high price commitments (less likely to be renegotiated) are better at motivating supplier effort. A complementary relationship exists between the supply base design and pricing mechanism: A more symmetric supply base should be combined with lower price commitments, leading to more renegotiation opportunities. This results in three possible sourcing structures: sole sourcing (investing capacity in a single supplier and forming price with ex ante commitments), symmetric dual sourcing (investing equal capacity in both suppliers and forming price with ex post negotiations), and asymmetric dual sourcing (investing positive but unequal capacities in two (ex ante identical) suppliers and forming price using both ex ante commitments and ex post (re)negotiations). We characterize the conditions for each structure and identify a strategic role of capacity investment. This paper was accepted by Martin Lariviere, operations management.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126862065","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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