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Technology search investments: evolutionary, option reasoning, and option pricing approaches

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  • Kent D. Miller
  • Andaç T. Arikan

Abstract

How do firms allocate limited search resources among substituting technologies with uncertain prospects? This paper contrasts three different approaches. The first follows evolutionary theorists' portrayals of decision‐making processes under bounded rationality. The second approach—real option reasoning—fosters flexibility by investing in more than one technology and postponing the decision to specialize. Following the third approach—real option pricing—firms base their search investments on forward‐looking calculations of technology option prices. We lay out the contrasting theoretical assumptions behind each of these three approaches and construct a simulation model to compare their implications. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Kent D. Miller & Andaç T. Arikan, 2004. "Technology search investments: evolutionary, option reasoning, and option pricing approaches," Strategic Management Journal, Wiley Blackwell, vol. 25(5), pages 473-485, May.
    • Handle: RePEc:bla:stratm:v:25:y:2004:i:5:p:473-485
    DOI: 10.1002/smj.392
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    Cited by:

    1. Dongyoub Shin & Sunhyuk Kim & Kiwon Jung, 2016. "Intended rationality in exit decisions: The organizational field of rivals as a source of signal in segment exit decisions by Korean SI ventures, 2000–2006," Australian Journal of Management, Australian School of Business, vol. 41(2), pages 398-421, May.
    2. Han T. J. Smit & Lenos Trigeorgis, 2017. "Strategic NPV: Real Options and Strategic Games under Different Information Structures," Strategic Management Journal, Wiley Blackwell, vol. 38(13), pages 2555-2578, December.
    3. Aleš Berk & Robert Kaše, 2010. "Establishing the Value of Flexibility Created by Training: Applying Real Options Methodology to a Single HR Practice," Organization Science, INFORMS, vol. 21(3), pages 765-780, June.
    4. Maley, Jane F. & Moeller, Miriam & Ting, Alina F., 2020. "Sustainable expatriate compensation in an uncertain environment," Journal of International Management, Elsevier, vol. 26(3).
    5. Andries, Petra & Hünermund, Paul, 2020. "Firm-level effects of staged investments in innovation: The moderating role of resource availability," Research Policy, Elsevier, vol. 49(7).
    6. Podoynitsyna, Ksenia & Song, Michael & van der Bij, Hans & Weggeman, Mathieu, 2013. "Improving new technology venture performance under direct and indirect network externality conditions," Journal of Business Venturing, Elsevier, vol. 28(2), pages 195-210.
    7. Xinming Deng & Xianyi Long, 2019. "Financial Performance Gaps and Corporate Social Responsibility," Sustainability, MDPI, vol. 11(12), pages 1-21, June.
    8. Reha Karadag & Laura Poppo, 2023. "Strategic resource decay," Strategic Management Journal, Wiley Blackwell, vol. 44(6), pages 1534-1561, June.
    9. Thierry Burger-Helmchen, 2008. "From Investment Rules of Thumb to Routines," Post-Print hal-02153062, HAL.
    10. Hao Liang & Christopher Marquis & Luc Renneboog & Sunny Li Sun, 2018. "Future-Time Framing: The Effect of Language on Corporate Future Orientation," Organization Science, INFORMS, vol. 29(6), pages 1093-1111, December.
    11. Renshaw, Phil St John & Dickmann, Michael & Parry, Emma, 2022. "The value of international assignments through the lens of real-options-reasoning," Journal of Business Research, Elsevier, vol. 151(C), pages 423-434.
    12. Wei-Ru Chen, 2008. "Determinants of Firms' Backward- and Forward-Looking R&D Search Behavior," Organization Science, INFORMS, vol. 19(4), pages 609-622, August.
    13. Andries, Petra & Hünermund, Paul, 2014. "Staging innovation projects: (when) does it pay off?," ZEW Discussion Papers 14-091, ZEW - Leibniz Centre for European Economic Research.
    14. Wenhong Zhang & Yapu Zhao & Donghan Wang & Haifeng Wang & Jian Li, 2019. "Ambidextrous search and product innovation: moderating effects of resource and structural attributes," The Journal of Technology Transfer, Springer, vol. 44(4), pages 1007-1028, August.
    15. John Qi Dong, 2021. "Technological choices under uncertainty: Does organizational aspiration matter?," Strategic Management Journal, Wiley Blackwell, vol. 42(5), pages 898-916, May.
    16. Driouchi, Tarik & Trigeorgis, Lenos & So, Raymond H.Y., 2020. "Individual antecedents of real options appraisal: The role of national culture and ambiguity," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1018-1032.
    17. Z Irani, 2010. "Investment evaluation within project management: an information systems perspective," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(6), pages 917-928, June.

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