Firm heterogeneity, investment, and industry expansion: a theoretical framework and the case of the uranium industry

The distinguishing feature of this investment analysis is its consideration of firm-specific variables. The theoretical section proposes that firm investment and, in turn, industry expansion are determined by firm-specific corporate variables in addition to the typically considered variables characterizing the firm's experience and expected conditions in a given market, such as rate of growth of demand, price, cost of capital, degree of utilization of capacity, etc. The framework is applied to the uranium mining and milling industry. Descriptive analysis is used to trace the history of the uranium industry in aggregate terms and also as an evolving roster of participating firms with different attributes. The market structure of the industry is also examined. The corporate variables framework is tested statistically in a single-equation, fixed-effects model of uranium exploration behavior, estimated on pooled cross section and time-series data. The postulated corporate variables, except internal firm structure, are combined with market variables in a model which attempts to explain the exploration behavior of 24 firms in the uranium industry from 1973 through 1979. The results indicate that cash flow and exploration expertise influence firms' level of exploration effort. However, differences among firms' intermarket investment strategies do not differentiate the magnitude of their exploration programs