The effect of 'make' or 'buy' on the timing of capacity investment by manufacturers in new markets

We analyse the manufacturer's decision in the timing of capacity investment when there are two retailers in the new market: an incumbent retailer who either makes the product in house or buys the product from the manufacturer and an entrant retailer who must purchase the product from the manufacturer. We find that the unit production costs of the manufacturer and the incumbent retailer, the demand uncertainty and the incumbent retailer's decision of 'make-in-house' and 'buy' are the main factors to affect the timing of capacity investment.