 Exercising a firm’s growth options: A portfolio approachPablo de Andrés, Gabriel de la Fuente and Pilar Velasco Journal of Business Research, 2021, vol. 132, issue C, 571-585 Abstract: This paper investigates a firm’s decision to exercise its growth options within the current scope of business. We contend that the point at which a firm chooses whether or not to exercise such options depends on several strategic characteristics associated to its portfolio of businesses (i.e. level of diversification, average volatility of its current business, relatedness among them, and rivalry in its core business). Using a sample of U.S. companies from 1998 to 2013, we find evidence that a firm’s level of diversification and the volatility of its current business deter immediate growth option exercise. In contrast, relatedness and rivalry in its core business trigger growth options exercise. Our portfolio perspective differs from the bulk of the literature on real options, which evaluates each growth option exercise in isolation, and contributes to furthering knowledge on the drivers underlying a diversified firm's strategic investments. Keywords: Opportunity exploitation; Portfolio of businesses; Investment strategy; Options exercise; Real options (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:132:y:2021:i:c:p:571-585 DOI: 10.1016/j.jbusres.2021.04.074 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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