When to commit: competitive instability and the timing of AI investment

How do competitive environments shape the timing of firms’ investment in emerging technologies? Drawing on real options theory, we argue that option value operates at the point of initial commitment and is largely exhausted afterward, implying that competitive instability should delay entry into irreversible investments without suppressing post-entry intensity. We test this using a panel of U.S. listed firms over 2010–2022, combining AI-related hiring data with text-based measures of product-market fluidity. Firms in more unstable environments are significantly slower to initiate AI investment but scale at comparable rates once committed. Two patterns support the option-value mechanism: instability is unrelated to general IT investment, and its delaying effect strengthens with temporal volatility. The findings identify investment timing as a distinct strategic margin.