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How do real options come into existence? A step toward an option- based theory of the firm

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  • Thierry BURGER-HELMCHEN

    (BETA)

Abstract

To be relevant to a firm a real option needs to fit into a theory of the firm explaining its existence, exercise conditions and value. We make 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 competences for exercising these options. We explain the creation of a real option as an entrepreneurial process which transform inventive ideas into profitable innovation. The subsequent development of competence necessary to exercise the option gives boundaries, based on theories of the firm, for the often overoptimistic real option evaluation.

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File URL: http://128.118.178.162/eps/fin/papers/0409/0409054.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0409054.

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Length: 30 pages
Date of creation: 28 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0409054

Note: Type of Document - pdf; pages: 30
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Web page: http://128.118.178.162

Related research

Keywords: Real Option; Theory of the Firm; Capabilities;

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  1. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, December.
  2. Nicolai J. Foss, 1999. "The Use of Knowledge in Firms," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(3), pages 458-, September.
  3. Patrick Cohendet & Patrick Llerena, 2003. "Routines and incentives: the role of communities in the firm," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 271-297, April.
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