Strategic Valuation of Investment Under Competition

Sol, Patricio del; Ghemawat, Pankaj

doi:10.1287/inte.29.6.42

Cited by 20 publications

(6 citation statements)

References 5 publications

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“…The effects of firms' investments on competitive position have been approached by many authors with different results. Some of them concluded that firm growth by investment positively influences firm's competitive advantage (Kulatilaka and Perotti, 1998;del Sol and Ghemawat, 1999;Tsai and Wang, 2004); that firms investment have a positive effect on firms' performance, which is commonly used as a proxy to competitive advantage (Brailsford and Yeoh, 2004;Amir et al, 2007;Gupta and Banga, 2009;Fang Yang, 2014;Pandya, 2017;Zuoza and Pilinkien_ e, 2019;Kim et al, 2021); that the effects of R&D investments on competitive advantage are contingent on the degree of competition faced by firms (Miller et al, 2005;Tubbs, 2007;Rav selj and Aristovnik, 2020), and that firms adjust their investment in R&D and in Capex when facing financial constraints in times of crisis (Flammer and Ioannou, 2021).…”

Section: Ejmbe 333mentioning

confidence: 99%

Genetic algorithm modeling of European Union firms' competitive advantage

Dias

Martins

Santos

et al. 2023

EJMBE

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PurposeThis research aims to identify the optimal configuration of investment which leads firms to their best competitive positions, considering the degree of concentration in the market.Design/methodology/approachThe methodology was quantitative and based on secondary data with samples of 124, 106 and 90 firms from competitive environment classified as perfect competition, monopolistic competition and oligopoly, respectively. Proposed models' parameters were estimated by means of genetic algorithms.FindingsAdjustments on firm's investment are contingent on the degree of competition they face. Results are in line with existing academic research affirmation that the purpose of investments is to create and exploit opportunities for positive economic rents and that investments allow firms to protect from rivals' competitive actions and reinforce the need for investment decision makers to consider the environment in which the firm is competing, when defining the amount of investment that must be done to achieve and maintain a favorable competitive advantage position.Originality/valueThis research brings two main original contributions. The first one is the identification of the optimal amount of capital and R&D investments which leads firms to their best competitive positions, contingent to the degree of concentration of the competitive environment in which they operate, and the size of the firm. The second one is related to the use of genetic algorithms to estimate optimization models that considers the three competitive environments studied (perfect competition, monopolistic competition and oligopoly) and the investment variables in the linear and quadratic forms.

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Section: Ejmbe 333mentioning

confidence: 99%

Genetic algorithm modeling of European Union firms' competitive advantage

Dias

Martins

Santos

et al. 2023

EJMBE

View full text Add to dashboard Cite

show abstract

“…The reliance of the BCG model on only two factors necessarily limits its applicability. Other factors, such as the level and type of existing competition, for instance, have also been suggested as significantly affecting an organization's cash flow (del Sol and Ghemawat, 1999). Furthermore, the appropriateness of the factors themselves and their relationships with cash flow have been questioned (Nippa et al, 2011).…”

Section: The Bcg Modelmentioning

confidence: 99%

Succeeding at new businesses: a matrix to measure flexibility

Burns

2014

Journal of Business Strategy

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Purpose – This purpose of this paper is to suggest and develop an alternative model, the Opportunity Assessment Matrix, to address some of the primary strategic issues in the business environment of today. Changes in the business environment are increasing the need for strategic planning, but it has also diminished the value of some of the classic tools used in strategy formation in the past, such as portfolio models. Design/methodology/approach – The shortcomings in applying portfolio models from the past to today’s business environment are discussed, providing a basis for the developing the Opportunity Assessment Matrix. Findings – The Opportunity Assessment Matrix is introduced as a means to evaluate the ability of an organization to successfully undertake and exploit new business opportunities. The proposed model is based on two dimensions – operational flexibility and market potential. Originality/value – The Opportunity Assessment Matrix facilitates an assessment of new business and product opportunities. With today’s ever-changing customer needs, the identification and exploitation of new product and business opportunities have become critical for the ongoing success of many firms. Most attempts by business firms to exploit new opportunities, however, are not successful, often due to a lack of an understanding of the market potential realization or an inadequate consideration of possible internal constraints. The Opportunity Assessment Matrix addresses both of these issues by examining the match between potential market opportunities and a firm’s ability to exploit them.

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“…This procedure seems to be indispensable if any consistency is to be maintained in the decisions the company takes to develop the structure before the strategy is implemented and to get on track towards achieving its organizational objectives. As such, in the same way that the importance of taking the intangible factors into consideration is highlighted when technologies are being assessed and selected (the increase in the plant's productive capacity, greater customer satisfaction, shorter delivery times, faster development of new products, the ability to have a bearing on market characteristics in the long term, and so on) (for example: Kaplan, 1986; Meredith and Suresh, 1986; Shank and Govindarajan, 1992; Soni et al , 1992; Shank, 1996; Kakati, 1997; Chiadamrong and O'Brien, 1999; Del Sol and Ghemawat, 1999; and Talluri and Yoon, 2000; amongst others), it is evident that the same factors will have to be taken into consideration when the result gained from the new equipment and activities is measured. The determination of the critical variables that should be used to measure system performance therefore becomes a key issue (Brown and Laverick, 1994; Small and Chen, 1995; Pawar and Driva, 1999); bearing in mind that it is virtually impossible to provide a generic list of measures that can be applied to all manufacturing firms, or, at the very least, all the firms in the same sector.…”

Section: State‐of‐the‐art and Research Questionsmentioning

confidence: 99%

Performance measurement systems, competitive priorities, and advanced manufacturing technology

Dı́az

Gil

Machuca

2005

International Journal of Operations &Amp; Production Management

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Purpose -When acquiring advanced manufacturing technologies (AMT), the greatest caution should be taken regarding the performance measurement system to be used: the decision regarding new investments should not be conditioned by the excessive use of financial indicators to the detriment of the strategic objectives that motivated the investments. It is intended to analyze the aeronautical sector, for which the purchase of AMT is qualifying criteria, with two intentions: first, to identify the performance measurement systems that are used, and second, to test their correspondence with the objectives that motivated the investments. Design/methodology/approach -A survey of the 20 plants in the population was conducted via a postal questionnaire plus a structured interview. The unit of analysis has been maintained through the triangulation of data sources. Findings -The findings suggest that both financial and non-financial indicators are used, with the latter gaining predominance over the former on some occasions, even though there is no clear correspondence between strategy and the measurement of performance. In the light of the findings, the question of what inspires a company's performance measurement system is still open, especially in those cases where there is no explicit strategy. With regard to practical implications, what seems to be indispensable is an improvement in the determination of the critical variables that should be used to measure performance. Research limitations/implications -Being valuable for academics and practitioners, this contribution relies, rather, on the possibility of a logical extrapolation to circumstances where the findings might apply, and researchers can judge whether the particular findings would be valid. Originality/value -Provides new evidence on the adaptation of the make-up and combination of the type of performance measures currently used by plants in the aeronautical industry, one of the sectors in which technological innovation is of the utmost importance.

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Strategic Valuation of Investment Under Competition

Cited by 20 publications

References 5 publications

Genetic algorithm modeling of European Union firms' competitive advantage

Genetic algorithm modeling of European Union firms' competitive advantage

Succeeding at new businesses: a matrix to measure flexibility

Performance measurement systems, competitive priorities, and advanced manufacturing technology

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