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Regular version of the site

Article

Status-Quo vs New Strategy in Intangibles

Journal of Economic Studies. 2017. Vol. 44. No. 1. P. 138-153.

Purpose – This study explores company strategies for intangibles. We investigate whether it is reasonable for companies to intensify intangibles when the current strategy is not intangible-intensive. This paper aims to elaborate a theoretical model to describe the strategic decision-making in companies.

Design/methodology/approach – We use the Bellman equation framework to find the conditions under which a change in strategy for intangibles is reasonable.

Findings – The results determine the parameters of returns on intangibles in different strategies, the optimal intangible stock and the influence of external economic shocks. The findings of our study demonstrate that many requirements have to be met to make intangible-intensive strategy beneficial for a company. Moreover negative shocks of crises force a company to postpone a new strategy on intangibles.

Practical implications – This research provides an insight into strategic behaviour of companies under uncertainty. The theoretical findings demonstrate under which conditions companies should decide to switch to a strategy more intangible-intensive. This model can be used to empirically test parameters of different investment strategies of companies using structural estimation techniques.

Originality/value – This work contributes to the theory of managerial economics giving closed form solutions for the dynamic optimization of company behaviour. The findings also show how this behaviour might change when economic crises are faced or expected.