Comovement of Sales, Retention Practice and Financing Constraints in Dutch Manufacturing

This paper assesses the significance of financing constraints in investment decisions for a balanced panel of 206 of the largest Dutch manufacturing firms over the period 1983-1996, employing split sample analysis of reduced form investment equations. Our empirical evidence demonstrates that financing constraints matter in Dutch manufacturing and are associated with high retention practice and strong firm-industry sales comovement.mathematical economics;

The delaying effect of financing constraints on investment

We develop a simple model in which a firm considers a number of investment projects. Because of limited financial resources, the firm can undertake at most one project. In line with the literature on real options we stress features like irreversibility, uncertainty and the possibility to postpone the investment decision and argue that financing constraints tend to increase the value of waiting.Economics ;

On the information value of (un)embedded network ties

A firm sets up a network of information generating alliances to reduce technological uncertainty. This alliance group creates both advantages associated with similarity of existing partners and limitations due to restricted choice of new partners. Our model analyses the conditions (technological uncertainty, information overlap, alliance search costs, and the number of previous alliances) under which a firm opts for an embedded tie within an existing network or an unembedded tie with a new partner.Strategy;