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

Thierry Burger-Helmchen

Schmalenbach Business Review (sbr), 2007, vol. 59, issue 4, 387-405

Abstract: I explore and review the introduction of real options in strategic management studies. My aim is to contribute to a better understanding of the origin of the real options. By distinguishing between shadow and real options and implementing entrepreneurship in the traditional option valuation framework, I obtain a more exhaustive representation of the strategic decision processes in the firm. I explain the creation of a real option as an entrepreneurial process, one 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 competencies for exercising these options. In addition, this approach offers a parallel understanding of why the real options theory is less often used in practice than in theory.

Keywords: Dynamic Capabilities; Entrepreneurship; Real Options; Theory of the Firm (search for similar items in EconPapers)
JEL-codes: D83 L29 M13 M19 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (5)

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Working Paper: 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 (2006)
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