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Justifying the origin of real options and their difficult evaluation in strategic management

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  • Thierry Burger-Helmchen

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Thierry Burger-Helmchen, 2007. "Justifying the origin of real options and their difficult evaluation in strategic management," Post-Print hal-02302885, HAL.
    • Handle: RePEc:hal:journl:hal-02302885
    DOI: 10.1007/BF03396756
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    References listed on IDEAS

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    Cited by:

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    2. Sofia Pessoa e Costa & Stéphane Robin, 2007. "The Impact Of Training Programmes On Wages In France: An Evaluation Of The “Qualifying Contract” Using Propensity Scores," Working Papers of BETA 2007-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Gisèle Umbhauer, 2007. "De l’amiante au chrysotile, un glissement stratégique dans la désinformation," Working Papers of BETA 2007-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    5. Matthias Berger & Christian Matt & Jochen Gönsch & Thomas Hess, 2019. "Is the Time Ripe? How the Value of Waiting and Incentives Affect Users’ Switching Behaviors for Smart Home Devices," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 71(1), pages 91-123, February.

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    More about this item

    Keywords

    Dynamic Capabilities; Entrepreneurship; Real Options; Theory of the Firm;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M19 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Other

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