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Embedding real options in scenario planning: A new methodological approach

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  • Favato, Giampiero
  • Vecchiato, Riccardo

Abstract

The main goal of this paper is to explore whether and how we might integrate real options analysis into scenario planning in order to overcome the limitations and enhance the benefits of both techniques. So far scholars have emphasized that the main advantages of scenarios consist in developing the learning and adaptive skills of organizations. We thus investigate how to develop further these learning skills. Our paper contributes to the strategic management literature in three ways. First, it illustrates a new and simplified methodological approach to real option valuation. Second, it embeds this methodological approach into the 2×2 scenario matrix technique. Third, it deepens our understanding of the advantages that the combined use of scenarios and real options might bring to each technique.

Suggested Citation

  • Favato, Giampiero & Vecchiato, Riccardo, 2017. "Embedding real options in scenario planning: A new methodological approach," Technological Forecasting and Social Change, Elsevier, vol. 124(C), pages 135-149.
    • Handle: RePEc:eee:tefoso:v:124:y:2017:i:c:p:135-149
    DOI: 10.1016/j.techfore.2016.05.016
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    Cited by:

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    2. Jorge Tarifa-Fernández & Ana María Sánchez-Pérez & Salvador Cruz-Rambaud, 2019. "Internet of Things and Their Coming Perspectives: A Real Options Approach," Sustainability, MDPI, vol. 11(11), pages 1-15, June.
    3. Metz, Ashley & Hartley, Paul, 2020. "Scenario development as valuation: Opportunities for reflexivity," Technological Forecasting and Social Change, Elsevier, vol. 155(C).
    4. Marinković, Milan & Al-Tabbaa, Omar & Khan, Zaheer & Wu, Jie, 2022. "Corporate foresight: A systematic literature review and future research trajectories," Journal of Business Research, Elsevier, vol. 144(C), pages 289-311.
    5. F. S. Mennini & Gianluca Fabiano & G. Favato & P. Sciattella & P. Bonanni & C. Pinto & A. Marcellusi, 2019. "Economic burden of HPV9-related diseases: a real-world cost analysis from Italy," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(6), pages 829-840, August.
    6. Ana María Sánchez Pérez & Jorge Tarifa Fernández & Salvador Cruz Rambaud, 2020. "Assessing Blockchain Investments through the Learning Option: An Application to the Automotive and Aerospace Industry," Mathematics, MDPI, vol. 8(12), pages 1-13, December.
    7. Pavleska, Marija & Kerr, William A., 2020. "Linking investment decisions and future food security to the regulation of genetic-based technologies," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    8. Natalia Morozko & Nina Morozko & Valentina Didenko, 2020. "The Use of Real Options in Assessing the Development of Small Energy in Russia," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 205-211.
    9. Andreani, Stefano & Kalchschmidt, Matteo & Pinto, Roberto & Sayegh, Allen, 2019. "Reframing technologically enhanced urban scenarios: A design research model towards human centered smart cities," Technological Forecasting and Social Change, Elsevier, vol. 142(C), pages 15-25.
    10. Meadows, Maureen & O'Brien, Frances A., 2020. "The use of scenarios in developing strategy: An analysis of conversation and video data," Technological Forecasting and Social Change, Elsevier, vol. 158(C).

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