Quality investment timing by the startup and the established firm

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

8 Scopus Citations
View graph of relations

Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)275-284
Journal / PublicationManagerial and Decision Economics
Volume39
Issue number3
Online published27 Oct 2017
Publication statusPublished - Apr 2018

Abstract

This study investigates quality investment timing decisions of the established firm and the startup by a duopoly model, where firms can position quality early (demand uncertainty is high) or late (uncertainty has been resolved), possibly at different costs. The startup positions quality to maximize its survival probability, whereas the established firm maximizes profits. Results indicate that the startup positions quality earlier than the established firm when the demand uncertainty is high and costs do not decline sharply over time. Additionally, policy analysis shows that subsidies work better than direct funds in encouraging quality innovation of the startup.