Quality investment timing by the startup and the established firm

Abstract

This study investigates quality investment timing decisions of the established firm and the startup by a duopoly model, where firms can position quality early (demand uncertainty is high) or late (uncertainty has been resolved), possibly at different costs. The startup positions quality to maximize its survival probability, whereas the established firm maximizes profits. Results indicate that the startup positions quality earlier than the established firm when the demand uncertainty is high and costs do not decline sharply over time. Additionally, policy analysis shows that subsidies work better than direct funds in encouraging quality innovation of the startup.

COVID‐19 impediments and business start‐ups in Pakistan: Evidence from the second wave of the pandemic

“…Leadership issues in business, ethics, and the management of employees have become dominant. Xia et al (2018) propose that start‐ups, in positioning themselves as offering quality, face significant demand uncertainty in the initial stage. Start‐ups position themselves as offering quality to make the most of their probability of survival, but established firms seek to maximize profits.…”

Profit Seeking versus Survival Seeking: Green Investment of Capital-Constrained Suppliers with Incentive Contracts

“…Accordingly, recent research assumes that survival-seeking startups maximise their assets or other financial measurements [10]. Based on the preceding assumption, the survival-seeking objective is introduced into fields of capacity investment [39], production quantity [43], quality competition [13], and so on. e current study contributes to this literature stream and firstly introduces the survival-seeking objective into GSCM.…”

“…at is, most startups fail, and only a small proportion of these firms show continuous developments and fewer of them finally go public [9]. Consequently, recent studies have proposed that startups may maximise their survival probability rather than expected profits in their operations [10][11][12][13]. erefore, how green investment and contract choice in the supply chain will differ if the startup suppliers change their operational objective from profit seeking to survival seeking deserves further discussion.…”

Quality Investing and Pricing Strategies by Startups: Impacts of Demand Uncertainties and Capital Constraint

“…Then, the objective of a startup should take into account the acute failure risk associated with entry into a new market. Thus, most recent studies assume that a survival-seeking startup maximizes its survival probability [27,[29][30][31].…”

“…Based on this assumption, Archibald et al [29] argue that startups may adopt conservative strategies in making inventory policies, while Swinney et al [27] find that startups perform aggressively in capacity investment. Xia et al [31] find that startups also perform aggressively in the quality competition with established firms. Finally, Levesque et al [32] compare a survival-maximizing startup with a profitmaximizing startup, and they find that if the market-entry investment is large, the former produces at a larger scale than the latter when the startup competes with an established rival, which in turn is forced to reduce its production level.…”