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A real options approach for prioritizing ICT business alternatives: a case study from broadband technology business field

Author

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  • G Angelou

    (University of Macedonia)

  • A Economides

    (University of Macedonia)

Abstract

This paper provides a methodology for finding the optimum deployment strategy for information and communication technologies business activities in the context of initial infrastructure projects, which support a number of future investment opportunities. It treats these opportunities as real options (ROs) and assumes that there is a competitive threat that can influence them negatively, or even worse, eliminate their value. We take into account that the competitors’ rate of arrival and erosion of competitiveness, during the waiting phase for the ROs to invest, follow a joint-diffusion process with the investments’ revenues. The proposed methodology is applied to a real-life broadband technology business activity showing how it can be formulated and solved.

Suggested Citation

  • G Angelou & A Economides, 2008. "A real options approach for prioritizing ICT business alternatives: a case study from broadband technology business field," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(10), pages 1340-1351, October.
    • Handle: RePEc:pal:jorsoc:v:59:y:2008:i:10:d:10.1057_palgrave.jors.2602477
    DOI: 10.1057/palgrave.jors.2602477
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    References listed on IDEAS

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    1. J Boston & J Pointon, 1999. "Valuation under technological change," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 50(3), pages 255-261, March.
    2. Kumar, Ram L., 1999. "Understanding DSS value: an options perspective," Omega, Elsevier, vol. 27(3), pages 295-304, June.
    3. Panayi, Sylvia & Trigeorgis, Lenos, 1998. "Multi-stage Real Options: The Cases of Information Technology Infrastructure and International Bank Expansion," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 2), pages 675-692.
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    Citations

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    Cited by:

    1. Guthrie, Graeme, 2012. "Regulated prices and real options," Telecommunications Policy, Elsevier, vol. 36(8), pages 650-663.
    2. Hernandez-Perdomo, Elvis A. & Mun, Johnathan & Rocco S., Claudio M., 2017. "Active management in state-owned energy companies: Integrating a real options approach into multicriteria analysis to make companies sustainable," Applied Energy, Elsevier, vol. 195(C), pages 487-502.
    3. Antonio Di Bari & Giovanni Villani, 2023. "An Options Game approach to valuate broadband projects in a smart city context," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(2), pages 1587-1601, April.
    4. S H Martzoukos, 2009. "Real R&D options and optimal activation of two-dimensional random controls," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(6), pages 843-858, June.
    5. Z Irani & Y K Dwivedi & M D Williams, 2009. "Understanding consumer adoption of broadband: an extension of the technology acceptance model," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(10), pages 1322-1334, October.
    6. Antonio Di Bari & Domenico Santoro & Maria Antonia Tarrazon-Rodon & Giovanni Villani, 2024. "The impact of polarity score on real option valuation for multistage projects," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(1), pages 57-76, February.
    7. Angelou, Georgios N. & Economides, Anastasios A., 2014. "Investment flexibility and competition modeling for broadband business," Telecommunications Policy, Elsevier, vol. 38(5), pages 438-448.
    8. Angelou, Georgios N. & Economides, Anastasios A., 2013. "Broadband business by utilities infrastructure exploitation: A multistage competition model," Telecommunications Policy, Elsevier, vol. 37(1), pages 63-79.
    9. Dimakopoulou, Andriana G. & Pramatari, Katerina C. & Tsekrekos, Andrianos E., 2014. "Applying real options to IT investment evaluation: The case of radio frequency identification (RFID) technology in the supply chain," International Journal of Production Economics, Elsevier, vol. 156(C), pages 191-207.

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