Justifying the Origin of Real Options and their Difficult Evaluation in Strategic Management
AbstractI explore and review the introduction of real options in strategic management studies. My aim is to contribute to a better understanding of the origin of the real options. By distinguishing between shadow and real options and implementing entrepreneurship in the traditional option valuation framework, I obtain a more exhaustive representation of the strategic decision processes in the firm. I explain the creation of a real option as an entrepreneurial process, one which transforms inventive ideas into profitable innovation. This constitutes a step toward an option-based theory of the firm by describing the emergence of a firm’s options and the strategic building of new competencies for exercising these options. In addition, this approach offers a parallel understanding of why the real options theory is less often used in practice than in theory.
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Bibliographic InfoArticle provided by LMU Munich School of Management in its journal Schmalenbach Business Review.
Volume (Year): 59 (2007)
Issue (Month): 4 (October)
Dynamic Capabilities; Entrepreneurship; Real Options; Theory of the Firm;
Other versions of this item:
- Thierry Burger-Helmchen, 2006. "Justifying the Origin of Real Options and their Difficult Evaluation in Strategic Management," Working Papers of BETA 2006-31, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- M19 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Other
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