Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/159847 
Year of Publication: 
2015
Series/Report no.: 
Quaderni - Working Paper DSE No. 1009
Publisher: 
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE), Bologna
Abstract: 
We investigate the relationship between the extent of vertical flexibility and the underlying financial choices of a firm. By vertical flexibility we mean the opportunity to outsource a necessary input and to reverse the choice as input market conditions dictate. A firm simultaneously selects the portion of equity and debt and its vertical setting. Debt is provided by a lender that requires the payment of a fixed coupon over time and, as a collateral, an option to buy out the firm in certain circumstances. Debt leads to the same level of flexibility acquired by an unlevered firm. However, investment to set up a flexible technology occurs earlier. An alternative to debt is the involvement of venture capital for the production of the input. We explore this second avenue finding that the extent of outsourcing adopted is lower than for the unlevered firm, but the firm invests earlier.
JEL: 
C61
G31
G32
L24
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

Files in This Item:
File
Size
499.78 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.