A Test of Real Options Logic
AbstractThe main hypothesis examines whether real options logic is applied by entrepreneurs in undertaking key organisational change (e.g. ownership, technology, location, line of business etc.). This is explored in a model of firm performance using data collected in face-to-face interviews with entrepreneurs on the level and timing of precipitating influences of organisational change and the level and timing of consequential adjustments following organisational change. Two econometric estimation techniques (e.g. Box-Cox regression with WLS correction and Heckman sample selectivity correction) were employed. Firm performance is explained in terms of a count of real options exercised, measures of the level and timing of precipitators and consequential adjustments, plus interactions between these measures to capture firm behaviour through a real options lens. Evidence was found of the value of holding real options until uncertainties are resolved. At this point the value of waiting is at its lowest
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0509.
Date of creation: Jun 2005
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Real Options; Strategic Flexibility; Performance; Small Firms;
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-ENT-2005-09-11 (Entrepreneurship)
- NEP-FIN-2005-09-11 (Finance)
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