Strategic management of operational resources under uncertainty

Xu, Wenxin

Permalink

https://hdl.handle.net/2142/95444 Copy

Description

Title

Strategic management of operational resources under uncertainty

Author(s)

Xu, Wenxin

Issue Date

2016-07-28

Director of Research (if dissertation) or Advisor (if thesis)

Kwon, H. Dharma

Doctoral Committee Chair(s)

Kwon, H. Dharma

Committee Member(s)

• Petruzzi, Nicholas C.
• Mahoney, Joseph T.
• Engelbrecht-Wiggans, Richard
• Agrawal, Anupam

Department of Study

Business Administration

Discipline

Business Administration

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

Uncertainty Game Theory

Abstract

This dissertation addresses and answers two questions: (1) What are the impacts of market uncertainty and technological uncertainty? (2) What is the best way for a firm to manage demand information and technological knowledge in the face of competition? The first essay (Chapter 2) investigates a problem of competitive investment with payoff externalities and uncertain but partially observable profitability. This essay examines a duopoly game, which, under appropriate conditions, reduces to a war of attrition game in the sense that both firms have incentives to be the follower. We find that due to the strategic interactions, payoff externalities and learning opportunities have counterintuitive effects on investment strategies and on the time to the first investment. In particular, we find that an increase in the rate of learning, which usually benefits the follower, may hasten or delay the first investment depending on the rate of learning and the prior probability that the investment is profitable. Overall, the results of this chapter suggest that firms facing entry into an unproven market need to consider the strategic effects arising from learning and externalities. The second essay (Chapter 3) investigates the strategy of investment in R&D projects when completion time of R&D is uncertain. By examining a game theoretic model of two firms competitively engaged in R&D projects, we find that the more innovative firm may or may not have an incentive to unilaterally share technological knowledge with its opponent; the result de- pends on the more innovative firm's tradeoff between reduction of competitive pressure and reduction of the competitor’s imitation. A direct implication of this result is that a firm may achieve superior performance by strategically managing its technological knowledge without incurring cost. The third essay (Chapter 4) investigates a problem of competitive investment in R&D projects to examine (1) the impacts of uncertainties and (2) the strategies of managing demand information and technological knowledge. We find that market uncertainty can improve or diminish a firm's payoff due to strategic interactions between firms and the interplay of learning effects and externalities. Our results also indicate that technological uncertainty can alter the relationship between the time to completion and the fierceness of competition. More specifically, we find that an increase in the time to completion may or may not increase the fierceness of the competition. Lastly, this essay compares the impact of disclosing demand information and that of disclosing technological knowledge. The results show that disclosing technological knowledge can only improve a firm's ex-ante payoff, whereas disclosing demand information can improve both the ex-ante and ex-post payoffs. Hence, our results indicate that the disclosed contents and the time to disclose are important when firms consider voluntary disclosure to reduce competition.

Graduation Semester

2016-12

Type of Resource

text

Permalink

http://hdl.handle.net/2142/95444

Copyright and License Information

Copyright 2016 Wenxin Xu

Owning Collections