Justifying the Origin of Real Options and their Difficult Evaluation in Strategic Management

Thierry Burger-Helmchen

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This work explores and reviews the introduction of real option in the strategic management literature. The aim is to contribute to a better understanding of the origin of the real option. By distinguishing between shadow and real option, and implementing entrepreneurship in the traditional option valuation framework we obtain a more exhaustive representation of the strategic decision processes in the firm. We explain the creation of a real option as an entrepreneurial process, which transforms inventive ideas into profitable innovation. This constitutes 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. In addition, this approach offers a parallel understanding of why the real option theory is less used in practice than in theory.

Keywords: Real Option; Theory of the Firm; Entrepreneurship; Dynamic Capabilities. (search for similar items in EconPapers)
JEL-codes: D83 L29 M13 M19 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cse, nep-ent and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Justifying the Origin of Real Options and their Difficult Evaluation in Strategic Management (2007)
Working Paper: Justifying the origin of real options and their difficult evaluation in strategic management (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2006-31

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