Abstract
Research on capacity competition has examined the conditions under which early mover’s capacity investment might preempt, or instead escalate, latecomers’ capacity investment. In contrast, this paper investigates the role of early mover’s supply chain investment in de-escalating subsequent capacity competition, in a setting where competing firms enter a new location to establish new production sites. Supply chain investment refers to investment in developing and integrating with supply chain partners in the location where a production site resides. We build a two-stage model where an early mover and a latecomer first make their investment decisions sequentially, and next choose either their output level (Cournot competition) or pricing (Bertrand competition) simultaneously. Predictions derived from the analytical model is then tested using data on a set of leading IT manufacturers. Both analytical and empirical results suggest that latecomer’s capacity investment increases correspondingly with early mover’s capacity investment, but decreases with early mover’s supply chain investment.
Original language | English |
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Pages (from-to) | 942-958 |
Number of pages | 17 |
Journal | International Journal of Production Research |
Volume | 59 |
Issue number | 3 |
Early online date | 10 Jan 2020 |
DOIs | |
Publication status | Published - 2021 |
Bibliographical note
Funding Information:This research was partly supported by the Ministry of Science and Technology in Taiwan under grant number MOST 107-2410-H-002-110-MY3. Financial support from National Taiwan University and National Chengchi University is also gratefully acknowledged.
Publisher Copyright:
© 2020 Informa UK Limited, trading as Taylor & Francis Group.
Keywords
- capacity competition
- game theory
- Operations strategy
- regression analysis
- supply chain investment