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
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
Date of revision:
Contact details of provider:
Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
Phone: 01334 462420
Fax: 01334 462438
Web page: http://crieff.wordpress.com/
More information through EDIRC
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- F. Lotti & E. Santarelli, 2002.
"The Survival of Family Firms: The Importance of Control and Family Ties,"
461, Dipartimento Scienze Economiche, Universita' di Bologna.
- Enrico Santarelli & Francesca Lotti, 2005. "The Survival of Family Firms: The Importance of Control and Family Ties," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 12(2), pages 183-192.
- José Mata & Pedro Portugal, 2001. "The Survival of New Domestic and Foreign Owned Firms," Working Papers w200101, Banco de Portugal, Economics and Research Department.
- Toshinobu Matsuda, 2005. "Differential Demand Systems: A Further Look at Barten's Synthesis," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 607-619, January.
- Fotopoulos, Georgios & Louri, Helen, 2000. " Location and Survival of New Entry," Small Business Economics, Springer, vol. 14(4), pages 311-21, June.
- Bernadette Power & Gavin Reid, 2005. "Flexibility, Firm-Specific Turbulence and the Performance of the Long-lived Small Firm," Review of Industrial Organization, Springer, vol. 26(4), pages 415-443, 06.
- Nicholas Bloom & John Van Reenen, 2002. "Patents, Real Options and Firm Performance," Economic Journal, Royal Economic Society, vol. 112(478), pages C97-C116, March.
- Simon C. Parker & Yacine Belghitar, 2006. "What Happens to Nascent Entrepreneurs? An Econometric Analysis of the PSED," Small Business Economics, Springer, vol. 27(1), pages 81-101, August.
- Ericson, Torgeir, 2009. "Direct load control of residential water heaters," Energy Policy, Elsevier, vol. 37(9), pages 3502-3512, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bram Boskamp).
If references are entirely missing, you can add them using this form.