HEC Research Papers Series,
HEC Paris

Abstract: To investigate time compression dis-economies (TCD), this study estimated time-cost elasticities using 459 oil and gas global investment projects (1997-2010). Results show that the average cost of accelerating investments is negative: a firm could cut $6.3 million in costs of a single project by accumulating asset stocks one month faster. About 88 percent of the projects exhibit negative time-cost elasticities with over 39 percent of unrealized economies of time compression. Only 12 percent of the projects are subject to TCD. These time inefficiencies or frictions do not negate the existence of TCD, but suggest they are less prevalent than assumed in the literature. Management experience, R&D investment, firm size, economic development and political stability are shown to be associated with greater time compression efficiency.

Keywords: Sustainable Competitive Advantage; Temporal Frictions; Time Compression Diseconomies; Time Inefficiencies; Time-Cost Tradeoff

JEL-codes: D22; D24; L71; M11; M20

50 pages, March 20, 2018

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