The irreversibility of investments may be the result of several causes. Bell Journal of Economics, 13, 418—438. Research streams on competition and cooperation are central to the field of strategic management but have evolved independently. To sum up, we reach the following propositions based on real options theory. Do firms learn to create value? Practical implications — The paper finds that in general partner motives are symmetric, but some motives are more natural candidates for partners to couple together. An Examination of Options Embedded in a Firm's Patents: The Value of Dispersion in Citations. Furthermore, the results revealed a negative relationship between the value created by both the acquirers and divesters, respectively, and the degree of technological and demand uncertainty.
Finally, we need to think more not only about valuation, but also its mirror image, the optimal management and contingent exercise of key real options. Foreign direct investment as a sequential process. We suggest an alternative approach, one that emphasizes the distinctive contributions of strategic management. Managerial and Decision Economics, 18 4 , 279—294. Future research that addresses difficulties in applications will further advance both real options theory and practice in strategic management. We call for future generations of research to enhance the impact of real options as an emerging dominant conceptual lens in strategic management.
Research Policy, 26: 283- 301. Research summary: This article shows that there is a positive association between the changes in the number of prior acquisitions or the changes in the prominence of prior acquirers within the focal venture's subfield and the venture's likelihood to be acquired. We find that: 1 the length of prior relationships has a curvilinear, U-shaped effect on negotiation time, suggesting the possibility of diverse learning mechanisms as the relationship unfolds; 2 the impact of the detail of termination provisions on negotiation time varies across different types of termination provisions; and 3 it takes a shorter time to negotiate certain types of termination provisions when partners have longer prior relationships. Option to acquire or divest a joint venture. Ideally, such a dynamic theory requires consistency in researching sequential stages. We also relate some of the contributions of the articles in the special issue to the research agenda we are calling for.
Furthermore, Folta and Miller 2002 and Vassolo et al. In some contexts, however, firms may be compelled to undertake certain investments due to regulation, competitor actions, prior contractual commitments, or governance inseparabilities e. Japanese joint ventures with Western multinational: Synthesizing the economic and cultural explanations of failure. They also differ in terms of their focus on cost efficiency as well as the role of knowledge, learning, and decision flexibility. An Empirical Examination of Management of Real Options in the U. Management Science, 40 1 , 123—139.
Journal of Economic Behavior and Organization, 61 3 , 432—452. A financial option is a derivative security whose value is derived from the worth and characteristics of another financial security, or the so-called underlying asset. In this paper, we examine how firms can overcome these obstacles and form equity alliances with newly public companies to obtain valuable growth opportunities. Organization Science, 12 6 , 744—758. Journal of Financial and Quantitative Analysis, 28, 1—20.
Strategic Management Journal, 15 6 , 437—457. Strategic Management Journal, 22: 27- 44. It also increases the risk of unanticipated contingencies and need for contract renegotiation, and hence, of market failure when asset specificity is high Leiblein,. Subrahmanyam Eds , Recent advances in corporate finance. This requires thinking more deeply about organizational processes, managerial incentives, and control systems as well as agency conflicts and behavioral biases. Empirical Research on Strategic Investments and Firm Performance. Their core idea is that building an effective option portfolio requires attention to balancing growth and switching options, and they discuss how the value of an option portfolio depends on the width of the portfolio as well as the correlation among the underlying assets for each option.
The new directions in alliance research partially stem from the recent greater availability of databases that contain actual contract details. We have also critically examined key challenges for real options research in strategic management. Journal of Applied Corporate Finance, 17 2 , 8—16. The foreign investment decision process. Management Science, 37 1 , 19—33. Asset stock accumulation and sustainability of competitive advantage. To Joint Ventures and Real Options 105 make the best of such a dynamic theory requires consistency in researching sequential stages.
Testing models of irreversible investment using North Sea oil data. Journal of Political Economy, 97 3 , 620—638. Rugman, Tailan Chi, David C. Strategic Management Journal, 9 4 , 319—332. Conversely, an unequal ownership division implies that one partner has made a larger contribution to the venture and has more bargaining power than the other party, which it can use to dictate terms, leading to more negotiations and changes Blodgett, 1992.
We complement previous research on acquisition premiums by suggesting that signals about targets can enhance sellers' gains by reducing acquirers' offer price discounting that is due to information asymmetries. While considerable progress has been made in conceptualizing different types of real options for various strategic investments, considerably less has been done to empirically validate the core propositions of real options theory. These mixed empirical results may be attributed to various theoretical and empirical issues. Below we discuss the four questions and we include some additional questions under each broader category. However, firms having market signals on their resources and prospects can mitigate information problems and carry out cross-border acquisitions. Strategic Management Journal, 24, 839—859. Campa 1993 similarly observes a negative relationship between exchange rate volatility and the number of foreign entries in the U.
Recent years have also seen an increasing academic interest in the Real Options Theory Advances in Strategic Management, Volume 24, 67—101 Copyright r 2007 by Elsevier Ltd. However, in a business environment with high exogenous market uncertainty as well as endogenous behavioral partner uncertainty, firms must consider both upside growth opportunities and substantial market risks that must be contained. These real options include the option to wait-to-invest or the option to defer , the options to abandon and switch, and corporate Real Options: Taking Stock and Looking Ahead 35 growth options. The dynamics of the liability of foreignness: A global study of survival in financial services. Calls on high-technology: Japanese exploration of venture capital investments in the United States.