Real
Options in Strategic Management
Advances in
Strategic Management ∙ Volume 24 (2007)
Jeffrey J. Reuer
and Tony W. Tong, Editors
Real
options theory has attracted significant interest in the field of strategic
management in recent years. Advocates of
the real options approach emphasize that importing concepts from financial
economics on options holds out the potential of yielding new insights on
strategic decision-making under uncertainty as well as boundary-of-the-firm
issues that are the focus of competitive and corporate strategy,
respectively. Real options theory is
distinctive because it highlights the combined importance of uncertainty and
managerial discretion, and it presents a dynamic view of firms’ investment and
organizational governance decisions.
Scholars also see promise in real options as a normative theory that can
bridge corporate strategy and finance by injecting strategic reality into
capital budgeting models while also bringing the discipline of financial
markets into strategic thinking.
At the same
time, there is much debate and confusion about the merits and promise of real
options in strategy. Despite its
analytical appeal and history, the techniques of real options analysis have yet
to take root in the world of practice in any broad-based fashion. Others emphasize that many of the assumptions
underlying standard financial option valuation models do not hold in strategic
contexts for resource development and deployment, implying that any use of real
options may be limited to simple metaphors at best. While considerable progress has been made in
conceptualizing different types of real options for various strategic
investments, considerably less has been done to empirically validate the core
propositions of real options theory.
Even less is known on the side of organization.
In light of
the recent interest in real options as well as some of these trends in the
field, this volume examines the ways in which real options theory can
contribute to strategic management. Given
the boundary-spanning nature of this theory, both strategy and finance scholars
have contributed chapters to take stock of our current understanding of real
options and tackle the research agenda.
In addition to conceptual pieces that unearth some of the key stumbling
blocks and trace out pathways for real options theory to move forward, several
chapters offer theoretical and empirical analyses of real options in different
strategic contexts.
The result
is that the compendium provides a forum for readers interested in this area to
find a dialogue on the theory’s progress and prospects and a catalyst for
further research on real options in the strategy field.
TABLE OF CONTENTS
Introduction
1.
Real Options in
Strategic Management
Tony
Tong and Jeffrey Reuer
Advances in Real
Options Research in Strategy
2.
Real Options: Taking Stock and Looking Ahead
Yong Li, Barclay E. James, Ravi
Madhavan, and Joseph T. Mahoney
3.
Real Options Theory and International Strategy: A Critical Review
Jing
Li
4.
Joint Ventures and Real Options: An Integrated Perspective
Ilya Cuypers and Xavier Martin
5.
How Do Real Options Matter? Empirical Research on Strategic Investments and
Firm Performance
Jeffrey Reuer and Tony Tong
Real Options and Strategic Investment Decisions
6.
Strategic Growth Options in Network Industries
Lihui
Lin and Nalin Kulatilaka
7. Market versus Managerial Valuations of Real Options
Timothy Folta and Jonathan O’Brien
8.
Deferral and Growth Options under Sequential Innovation
Michael
Leiblein and Arvids Ziedonis
9. Business Methods Patents as Real Options: Value and
Disclosure as Drivers of Litigation
Atul Nerkar, Srikanth Paruchuri, and
Mukti Khaire
10.
Managing a Portfolio of Real Options
Jay Anand, Raffaele Oriani, and
Roberto Vassolo
Organizational and
Managerial Dimensions of Real Options
11.
Capabilities, Real Options, and the Resource Allocation Process
Catherine Maritan and Todd
Alessandri
12.
Real Options Meet Organization Theory: Coping with Path Dependencies, Agency
Costs, and Organizational Form
Russell Coff and Kevin Laverty
13.
Real Options and Resource Reallocation Processes
Ron Adner
14.
Why Invest in Firm-Specific Human Capital? A Real Options View of Employment
Contracts
Todd Fister and Anju Seth
Performance
Implications of Real Options
15.
An Examination of Options Embedded in a Firm’s Patents: The Value of
Dispersion in Citations
Tailan Chi and Edward Levitas
16.
Technology Switching Option and the Market Value of the Firm: A Model and an
Empirical Test
Raffaele Oriani
17.
Strategic Implications of Valuation: Evidence from Valuing Growth Options
Todd Alessandri, Diane Lander, and
Richard Bettis
18.
An Empirical Examination of Management of Real Options in the
Isin Guler
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