Strategic Growth Options in Network Industries

Lin, Lihui; Kulatilaka, Nalin

doi:10.1016/s0742-3322(07)24006-9

Cited by 18 publications

(25 citation statements)

References 10 publications

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“…We offer the following possible explanations. First, theoretical research predicts that uncertainty, at its extremely high level, may increase the value of the growth option more than the value of the deferral option when early investment provides strong strategic advantages to preempt competitors (Kulatilaka and Perotti, 1998;Lin and Kulatilaka, 2007;Wernerfelt and Karnani, 1987). The venture capital market has very low barriers to entry (Cochrane, 2005).…”

Section: Discussionmentioning

confidence: 99%

“…First, relative to delayed investment, immediate investment may result in a larger market share and higher profits, thus bringing about first-mover advantages and creating greater upside potential (Kulatilaka and Perotti, 1998;Lin and Kulatilaka, 2007;Wernerfelt and Karnani, 1987). Second, the value of the deferral option is bounded, while the value of the growth option is not (Folta and O'Brien, 2004).…”

Section: Robustness Testsmentioning

confidence: 99%

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When are venture capital projects initiated?

Mahoney

2011

Journal of Business Venturing

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Section: Discussionmentioning

confidence: 99%

Section: Robustness Testsmentioning

confidence: 99%

When are venture capital projects initiated?

Mahoney

2011

Journal of Business Venturing

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“…Third, it might depend on the presence of preemption risks, due, for example, to network effects. When these effects are strong, the growth option value is likely to be greater that the deferral option value (Lin & Kulatilaka, 2007). The choice is also contingent on the level of uncertainty.…”

Section: Intensive Strategies For Technology Evaluationmentioning

confidence: 99%

Research on Markets for Inventions and Implications for R&D Allocation Strategies

Conti¹,

Gambardella²,

Novelli³

2013

The Academy of Management Annals

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This is the unspecified version of the paper.This version of the publication may differ from the final published version. is, the trade of elements of knowledge which are 'disembodied' from individuals, organizations and products. The aims of this paper are to bring together the various streams of research in this area and discuss their major assumptions and limitations, in order to provide a comprehensive framework for understanding the phenomenon, and identify promising paths for future research. We start our review by identifying the object of market exchange -that is, an invention whose knowledge has been codified and disembodied from individuals, organizations or artifacts. We then identify those factors that enable firms to trade inventions, distinguishing between institutional-, firm-, and industry-level factors. We close our analysis of the extant literature by discussing the implications of markets for inventions for firm behavior and performance. Against this background, we highlight an important avenue for future research. A neglected implication of the development of invention markets is that firms are confronted with a wide variety of technological paths from which to choose, because the opportunity to acquire technologies on the market offers them a greater variety that can their internal R&D departments. However, the streams of research on markets for inventions and on R&D allocation strategies have been surprisingly disconnected so far. Hence, in the final section, we start to establish and explore the link between these literatures, and to identify a research agenda in this domain. Permanent repository link3

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“…Specifically, early investments in certain industries may shape the expectations of potential users and induce them to adopt a particular industry standard, thus creating a strategic growth option. Lin and Kulatilaka (2007) find through simulation that at high levels of uncertainty, the strategic growth option often dominates the waiting-to-invest option and reduces the investment threshold.…”

Section: Options Interactionsmentioning

confidence: 94%

“…In a subsequent study, Lin and Kulatilaka (2007) focus on a situation where network effects are critical for gaining strategic advantages. Specifically, early investments in certain industries may shape the expectations of potential users and induce them to adopt a particular industry standard, thus creating a strategic growth option.…”

Section: Options Interactionsmentioning

confidence: 99%

Real Options: Taking Stock and Looking Ahead

James

Madhavan

et al. 2007

Advances in Strategic Management

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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 important insights into investment and exit decisions as well as into the choice of investment modes. In addition, extant research studies have contributed substantially 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. REAL OPTIONS: TAKING STOCK AND LOOKING AHEAD ABSTRACTWe 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.

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Strategic Growth Options in Network Industries

Cited by 18 publications

References 10 publications

When are venture capital projects initiated?

When are venture capital projects initiated?

Research on Markets for Inventions and Implications for R&D Allocation Strategies

Real Options: Taking Stock and Looking Ahead

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