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How do real options come into existence? A step toward an option- based theory of the firm

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  • Thierry BURGER-HELMCHEN

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Abstract

To be relevant to a firm a real option needs to fit into a theory of the firm explaining its existence, exercise conditions and value. We make 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 competences for exercising these options. We explain the creation of a real option as an entrepreneurial process which transform inventive ideas into profitable innovation. The subsequent development of competence necessary to exercise the option gives boundaries, based on theories of the firm, for the often overoptimistic real option evaluation.

Suggested Citation

  • Thierry BURGER-HELMCHEN, 2004. "How do real options come into existence? A step toward an option- based theory of the firm," Finance 0409054, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0409054
    Note: Type of Document - pdf; pages: 30
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0409/0409054.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Real Option; Theory of the Firm; Capabilities;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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