This paper tests the power of real options theory to explain investment under uncertainty, exploiting differences in the degree of irreversibility between machinery and buildings. It reports estimates of investment equations for each asset class using a large sample of UK manufacturing...

We test for the presence of externalities in UK manufacturing industry, seeking to identify the channels through which they operate. Using survey data on average variable cost available by industry, we estimate a translog cost function, storing the coefficients on time dummies for a second stage...

Economic theory suggests several plausible reasons why firms may employ hurdle rates for capital investment appraisal that differ from discount rates. Using a sample of business units from the PIMS data bank of North American companies we find that hurdle rates are frequently below and also...

This paper compares pooled models of capital investment with non-pooled models using the UK's Confederation of British Industry's (CBI) Industrial Trends Survey for the U.K., particularly focusing on the effect of uncertainty on investment. The uncertainty measure is based on the cross sectional...

This paper reports estimation of investment equations for two classes of fixed assets: plant & machinery and building for a large sample of UK manufacturing industries. It exploits the different degree of irreversibility that characterises these assets to test the power of real options theory to...

This paper uses a model of capital investment that ascribes a theoretical role to profitability and uncertainty in determining the capital-output ratio. Empirical implementation uses quarterly data from UK manufacturing over a thirty-year period, and unique co-integrating relationships are...