Strategic Flexibility Real Options And Product-based Strategy

Strategic flexibility real options and product-based strategy

Research summary: This article provides a review of real options theory (ROT) in strategic management research.

Three levels of strategy

We review the fundamentals of ROT and provide a taxonomy of this research. By synthesizing and critiquing research on real options, we identify a number of important challenges as well as opportunities for ROT if it is to enhance its impact on strategic management and potentially develop into a theoretical pillar in the field.

We examine how ROT can inform the key tensions that managers face between commitment versus flexibility as well as between competition versus cooperation, and we show how it can uniquely address the fundamental issues in strategy.

Strategic flexibility real options and product-based strategy

We conclude with suggestions on future research directions that could enhance and unify the thus‐far distinct main approaches to real options research.

Managerial summary: Real options theory (ROT) applies the heuristics and valuation models originally designed for financial securities to the domain of corporate investment decisions (e.g., joint ventures [JVs], foreign direct investment, research and development [R&D], etc.) and strategic decision making under uncertainty.

This article provides a synthesis of this body of research in strategic management and related disciplines.

Strategic flexibility real options and product-based strategy

We suggest how ROT can address fundamental issues of strategy, including the dilemmas managers face between commitment versus flexibility as well as between competition versus cooperation. We discuss how three distinct approaches to real options analysis can complement each other, and we identify some of the main challenges and opportunities for ROT to become a theoretical pillar in strategy.

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic flexibility real options and product-based strategy