IDEAS home Printed from https://ideas.repec.org/a/taf/eurpls/v29y2021i3p446-467.html
   My bibliography  Save this article

Real option applications in megaproject planning: trends, relevance and research gaps. A literature review

Author

Listed:
  • Thomas Machiels
  • Tine Compernolle
  • Tom Coppens

Abstract

Megaprojects are complex and contain multiple risks and uncertainties. The dominant ‘predict and control’ planning method mainly ignores risks and uncertainties, making megaprojects inflexible and vulnerable to unforeseen changes. Insights and methods from real options theory (ROT) in economics and finance have the potential to improve planning of megaprojects in three ways: (a) better management and assessment of risks and uncertainties, (b) a more transparent and explicit identification and communication of risks and uncertainties, and (c) a monetary valuation of flexibility. An in-depth literature review of 42 papers of real options applications to megaprojects serves as a benchmark to analyse if current real options literature meets these three expectations. Through this review, we identify the main trends, relevance and research gaps. While its theoretical relevance is illustrated, three main gaps impede real options’ practical relevance for megaprojects: the applications paint an incomplete picture of megaprojects; its mathematical complexity; and the lack of empirical evidence of real-life cases. Based on a plea for more interactive research between scholars and planning practitioners, we provide an agenda for further research as to how ROT can better meet its expectations and fulfill its potential for the planning of megaprojects.

Suggested Citation

  • Thomas Machiels & Tine Compernolle & Tom Coppens, 2021. "Real option applications in megaproject planning: trends, relevance and research gaps. A literature review," European Planning Studies, Taylor & Francis Journals, vol. 29(3), pages 446-467, March.
  • Handle: RePEc:taf:eurpls:v:29:y:2021:i:3:p:446-467
    DOI: 10.1080/09654313.2020.1742665
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09654313.2020.1742665
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/09654313.2020.1742665?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gorupec Natalia & Brehmer Nataliia & Tiberius Victor & Kraus Sascha, 2022. "Tackling uncertain future scenarios with real options: A review and research framework," The Irish Journal of Management, Sciendo, vol. 41(1), pages 69-88, July.
    2. Martine Van den Boomen & Sjoerd Van der Meulen & Jonathan Van Ekris & Roel Spanjers & Olle Ten Voorde & Janwim Mulder & Peter Blommaart, 2021. "Optimized Expansion Strategy for a Hydrogen Pipe Network in the Port of Rotterdam with Compound Real Options Analysis," Sustainability, MDPI, vol. 13(16), pages 1-23, August.
    3. Hanne Lamberts-Van Assche & Tine Compernolle, 2022. "Using Real Options Thinking to Value Investment Flexibility in Carbon Capture and Utilization Projects: A Review," Sustainability, MDPI, vol. 14(4), pages 1-24, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurpls:v:29:y:2021:i:3:p:446-467. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CEPS20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.