Footnote:
In: Review of Finance, 20(3), 1013-1043, May 2016
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 30, 2015 erstellt
Description:
We present a real options model of a firm's make-or-buy decision under demand uncertainty. "Making" is subject to decreasing returns to scale, fixed costs and capital investment. "Buying" happens at a fixed price and requires no investment. Three distinct procurement regimes endogenously arise: buying, making or concurrent sourcing for, respectively, low, intermediate and high demand. Capital constraints encourage buying or concurrent sourcing. Operating leverage peaks when the firm switches between buying and making, and it is lowest (and negative) at the switch between making and concurrent sourcing. This non-monotonic pattern mirrors and drives the behavior of the firm's beta