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.
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Burger-Helmchen, T. Justifying the Origin of Real Options and their Difficult Evaluation in Strategic Management. Schmalenbach Bus Rev 59, 387–405 (2007). https://doi.org/10.1007/BF03396756
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DOI: https://doi.org/10.1007/BF03396756