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    Rights statement: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated versionBart M. Lambrecht, Grzegorz Pawlina, and João C. A. Teixeira Making, Buying, and Concurrent Sourcing: Implications for Operating Leverage and Stock Beta Review of Finance (2016) 20 (3): 1013-1043 first published online July 3, 2015 doi:10.1093/rof/rfv027 is available online at: http://rof.oxfordjournals.org/content/20/3/1013

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Making, buying and concurrent sourcing: implications for operating leverage and stock beta

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Making, buying and concurrent sourcing : implications for operating leverage and stock beta. / Lambrecht, Bart; Pawlina, Grzegorz; Teixeira, Joao.

In: Review of Finance, Vol. 20, No. 3, 05.2016, p. 1013-1043.

Research output: Contribution to journalJournal articlepeer-review

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@article{dec7b6f97a744cd5b38681ea0876f53f,
title = "Making, buying and concurrent sourcing: implications for operating leverage and stock beta",
abstract = "We present a real options model of a firm{\textquoteright}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{\textquoteright}s beta. ",
author = "Bart Lambrecht and Grzegorz Pawlina and Joao Teixeira",
note = "This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated versionBart M. Lambrecht, Grzegorz Pawlina, and Jo{\~a}o C. A. Teixeira Making, Buying, and Concurrent Sourcing: Implications for Operating Leverage and Stock Beta Review of Finance (2016) 20 (3): 1013-1043 first published online July 3, 2015 doi:10.1093/rof/rfv027 is available online at: http://rof.oxfordjournals.org/content/20/3/1013",
year = "2016",
month = may,
doi = "10.1093/rof/rfv027",
language = "English",
volume = "20",
pages = "1013--1043",
journal = "Review of Finance",
issn = "1572-3097",
publisher = "Oxford University Press",
number = "3",

}

RIS

TY - JOUR

T1 - Making, buying and concurrent sourcing

T2 - implications for operating leverage and stock beta

AU - Lambrecht, Bart

AU - Pawlina, Grzegorz

AU - Teixeira, Joao

N1 - This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated versionBart M. Lambrecht, Grzegorz Pawlina, and João C. A. Teixeira Making, Buying, and Concurrent Sourcing: Implications for Operating Leverage and Stock Beta Review of Finance (2016) 20 (3): 1013-1043 first published online July 3, 2015 doi:10.1093/rof/rfv027 is available online at: http://rof.oxfordjournals.org/content/20/3/1013

PY - 2016/5

Y1 - 2016/5

N2 - 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.

AB - 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.

U2 - 10.1093/rof/rfv027

DO - 10.1093/rof/rfv027

M3 - Journal article

VL - 20

SP - 1013

EP - 1043

JO - Review of Finance

JF - Review of Finance

SN - 1572-3097

IS - 3

ER -