Real Options: Taking Stock and Looking Ahead

Advances in Strategic Management, Vol. 24, pp. 31-66

49 Pages Posted: 28 May 2008 Last revised: 31 Jan 2010

See all articles by Yong Li

Yong Li

University of Nevada Las Vegas

Barclay E. James

University of Illinois at Urbana-Champaign - College of Business

Ravi Madhavan

University of Pittsburgh

Joseph T. Mahoney

University of Illinois

Abstract

We discuss recent developments in real options theory and its applications to strategic management research, examine the potential difficulties in implementing real options in theory and practice, and propose several areas for future research. Our review shows that real options theory has provided substantial insights into investment and exit decisions as well as into the choice of investment modes. In addition, extant research studies have contributed significantly to our understanding of whether and how organizations can benefit from real options. 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.

Keywords: Real options, uncertainty, investment decisions, governance, and performance

Suggested Citation

Li, Yong and James, Barclay E. and Madhavan, Ravindranath and Mahoney, Joseph T., Real Options: Taking Stock and Looking Ahead. Advances in Strategic Management, Vol. 24, pp. 31-66. Available at SSRN: https://ssrn.com/abstract=1138464

Yong Li (Contact Author)

University of Nevada Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Barclay E. James

University of Illinois at Urbana-Champaign - College of Business ( email )

Champaign, IL 61820
United States

Ravindranath Madhavan

University of Pittsburgh ( email )

Katz Graduate School of Business
236 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1530 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.business.pitt.edu/faculty/madhavan.html

Joseph T. Mahoney

University of Illinois ( email )

1206 South Sixth Street
339 Commerce West
Champaign, IL 61820
United States
217-244-7969 (Phone)
217-244-4102 (Fax)

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