Publication Type
Working Paper
Version
publishedVersion
Publication Date
7-2014
Abstract
We construct a sequential investment model to investigate individual firms’ strategic choices of organizational forms when outsourcing their intermediate products. Our results indicate that as a result of the encouragement effect of sequential complementary investments, sequential investment alleviates the underinvestment caused by the hold-up problem. Thereafter, we analyze the impact of sequential investment on the choice of ownership structure. We show that contrary to the result of the standard property rights theory, strictly complementary assets could be owned separately.
Keywords
Sequential Investment, Hold-up, Underinvestment, Optimal Ownership Structure
Discipline
Finance
Research Areas
Applied Microeconomics
First Page
1
Last Page
25
Citation
ZHANG, Juyuan and ZHANG, Yi.
Sequential Investment, Hold-up, and Ownership Structure. (2014). 1-25.
Available at: https://ink.library.smu.edu.sg/soe_research/1480
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.