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Competition and Investment in Flexible Technologies

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Author Info

  • Lars-Hendrik Röller

    (European Institute of Business Administration (INSEAD), Boulevard de Constance, 77305 Fontainebleau Cedex, France)

  • Mihkel M. Tombak

    (European Institute of Business Administration (INSEAD), Boulevard de Constance, 77305 Fontainebleau Cedex, France)

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    Abstract

    This paper examines the implications of market structure on investment in flexible manufacturing systems (FMS). We analyze a two-stage game, in which firms choose between a flexible and a less flexible technology in the first stage, then choose production quantities in the second stage. In equilibrium, a large proportion of FMS firms is associated with more concentrated markets. Our model predicts that a larger market and/or a more differentiated product results in a higher proportion of FMS firms being sustained. These predictions are empirically supported using cross-section industry level data from both the US and Japan.

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    File URL: http://dx.doi.org/10.1287/mnsc.39.1.107
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 39 (1993)
    Issue (Month): 1 (January)
    Pages: 107-114

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    Handle: RePEc:inm:ormnsc:v:39:y:1993:i:1:p:107-114

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    Related research

    Keywords: flexible manufacturing systems (FMS); oligopolistic competition; product differentiation;

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    Cited by:
    1. Maria Jose Gil-Molto & Joanna Poyago-Theotoky, 2006. "Flexible vs Dedicated Technology Adoption in the Presence of a Public Firm," Discussion Paper Series 2006_1, Department of Economics, Loughborough University, revised Jan 2006.
    2. BOYER, Marcel & MOREAUX, Michel, 1995. "Capacity Commitment Versus Flexibility: The Technological Choice Nexus in a Strategic Context," Cahiers de recherche 9556, Universite de Montreal, Departement de sciences economiques.
    3. David F. Drake, 2011. "Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions," Harvard Business School Working Papers 12-029, Harvard Business School.
    4. Tombak, Mihkel M., 1995. "Process technologies, learning and brand proliferation," European Journal of Operational Research, Elsevier, vol. 82(1), pages 26-38, April.
    5. Noriaki Matsushima & Tomomichi Mizuno, 2009. "Input specificity and product differentiation," ISER Discussion Paper 0745, Institute of Social and Economic Research, Osaka University.
    6. Gal-Or, Esther, 2002. "Flexible manufacturing systems and the internal structure of the firm," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1061-1096, October.
    7. George Norman, 2000. "The Relative Advantages of Flexible versus Designated Manufacturing Technologies," Discussion Papers Series, Department of Economics, Tufts University 0019, Department of Economics, Tufts University.
    8. NORMAN, George & THISSE, Jacques-François, 1996. "Technology choice and market structure : strategic aspects of flexible manufacturing," CORE Discussion Papers 1996059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Barad, M. & Hoang, K., 1995. "Cutting tools versus machine tools investments in FMS design," International Journal of Production Economics, Elsevier, vol. 42(1), pages 29-40, November.
    10. Yang, Liu & Ng, C.T., 2014. "Flexible capacity strategy with multiple market periods under demand uncertainty and investment constraint," European Journal of Operational Research, Elsevier, vol. 236(2), pages 511-521.
    11. Mohammad Ali Kashefi, 2013. "The Effect of Salvage Market on Strategic Technology Choice and Capacity Investment Decision of Firm under Demand Uncertainty," Iranian Economic Review, Economics faculty of Tehran university, vol. 18(1), pages 25-67, winter.
    12. Tseng, Mei-Chiun, 2004. "Strategic choice of flexible manufacturing technologies," International Journal of Production Economics, Elsevier, vol. 91(3), pages 223-227, October.
    13. Cvsa, Viswanath & Gilbert, Stephen M., 2002. "Strategic commitment versus postponement in a two-tier supply chain," European Journal of Operational Research, Elsevier, vol. 141(3), pages 526-543, September.
    14. Dolage, D.A.R. & Sade, Abu Bakar & Ahmed, Elsadig Musa, 2010. "The influence of Flexible Manufacturing Technology adoption on productivity of Malaysian manufacturing industry," Economic Modelling, Elsevier, vol. 27(1), pages 395-403, January.
    15. Boyer, Marcel, 1996. "L’économie des organisations," L'Actualité Economique, Société Canadienne de Science Economique, vol. 72(3), pages 247-274, septembre.
    16. Marcel Boyer, 1997. "L'économie des organisations : Mythes et réalités," CIRANO Working Papers 97s-02, CIRANO.
    17. Kashefi, Mohammad Ali, 2012. "The Effect of Salvage Market on Strategic Technology Choice and Capacity Investment Decision of Firm under Demand Uncertainty," MPRA Paper 37836, University Library of Munich, Germany, revised 03 Apr 2012.

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