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Real Options: Taking Stock and Looking Ahead

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  • Li, Yong

    (State U of New York at Buffalo)

  • James, Barclay

    (U of Illinois at Urbana-Champaign)

  • Madhavan, Ravi

    (U of Pittsburgh)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)

Abstract

We discuss recent developments in real options theory and its applications to strategic management research, examine the potential difficulties in implementing real options in theory and practice, and propose several areas for future research. Our review shows that real options theory has provided important insights into investment and exit decisions as well as into the choice of investment modes. In addition, extant research studies have contributed substantially to our understanding of whether and how organizations can benefit from real options. Future research that addresses difficulties in applications will further advance both real options theory and practice in strategic management.

Suggested Citation

  • Li, Yong & James, Barclay & Madhavan, Ravi & Mahoney, Joseph T., 2006. "Real Options: Taking Stock and Looking Ahead," Working Papers 06-0114, University of Illinois at Urbana-Champaign, College of Business.
    • Handle: RePEc:ecl:illbus:06-0114
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    File URL: http://www.business.illinois.edu/Working_Papers/papers/06-0114.pdf
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