Risky Preemptive Investment

57 Pages Posted: 20 Mar 2017 Last revised: 27 Jan 2024

See all articles by Limin Fang

Limin Fang

University of British Columbia

Nathan Yang

Cornell University

Date Written: January 27, 2024

Abstract

Our study assesses the survival odds from strategic firm investment aimed at deterring competitors from entering markets. We develop a dynamic strategic real options investment model for quantifying the relationship between preemptive motives and survival. Under a retail competition context, we use monthly data about fast casual taco chain establishments in Texas where we observe granular strategic investment decisions across a large number of geographic product markets. With this data and our theoretical framework, we demonstrate that the economic conditions that relate to competition intensity appear to impact the relationship between preemptive motives and survival.

Keywords: Dynamic Discrete Choice Models; Entrepreneurship; Firm Investment and Value; Market Power; Product Market Competition; Real Options Theory; Retail Strategy

JEL Classification: G30; G31; L10; L25; L26; L41; L66

Suggested Citation

Fang, Limin and Yang, Nathan, Risky Preemptive Investment (January 27, 2024). Available at SSRN: https://ssrn.com/abstract=2936192 or http://dx.doi.org/10.2139/ssrn.2936192

Limin Fang

University of British Columbia ( email )

2053 Main Mall
Vancouver, British Columbia V6T1Z2
Canada

HOME PAGE: http://https://sites.google.com/site/fangliminecon/home

Nathan Yang (Contact Author)

Cornell University ( email )

Dyson School, Warren Hall
360E
Ithaca, NY 14853-6201
United States
6072551590 (Phone)

HOME PAGE: http://dyson.cornell.edu/faculty-research/faculty/ncy6/

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