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- Title
Investing in capabilities: bidding in strategic factor markets with costly information.
- Authors
Maritan, Catherine A.; Florence, Robert E.
- Abstract
We explore how firms invest in capabilities by acquiring assets in strategic factor markets. We formalize the problem using an auction model in which heterogeneous firms bid for an asset to investigate relationships among expected returns to the investment, information used to estimate the expected returns and information used to estimate the expected bids from competitors. Our results demonstrate the importance of recognizing different components of the expected returns and the importance of considering the cost of acquiring information to inform the bid. Through this analysis we illustrate complementarities and trade-offs that are involved in the process of making investment decisions. Copyright © 2008 John Wiley & Sons, Ltd.
- Subjects
INVESTMENTS; ASSET acquisitions; BIDDING strategies; MARKETING strategy; BUSINESS planning; RESOURCE-based theory of the firm; RESOURCE allocation; RESOURCE management; COMPETITIVE advantage in business
- Publication
Managerial & Decision Economics, 2008, Vol 29, Issue 2/3, p227
- ISSN
0143-6570
- Publication type
Article
- DOI
10.1002/mde.1385