Strategic NPV: Real options and strategic games under different information structures

Han Smit, L Trigeorgis

Research output: Contribution to journalArticleAcademicpeer-review

14 Citations (Scopus)

Abstract

Among the most difficult firm strategic choices is the tradeoff between making a long-term commitment or holding off on investment in the face of uncertainty. To operationalize strategic management theory under demand, technological and competitive uncertainty, we develop a Strategic NPV framework that integrates real options and game theory to quantify value components and interactions at the interface between NPV, real options and strategic games. Our approach results in new propositions clarifying the way learning-experience conditions, technological uncertainty and proprietary information interact to tilt the balance in the interplay between wait-and-see flexibility and strategic commitment. As such, Strategic NPV adds to our understanding of the conditions where NPV, real options or strategic thinking are more relevant.
Original languageEnglish
Pages (from-to)2444-2464
Number of pages21
JournalStrategic Management Journal
Volume38
Issue number13
DOIs
Publication statusPublished - 17 Apr 2017

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