How Do Real Options Come into Existence? A Step Toward an Option-Based Theory of the Firm

30 Pages Posted: 28 Sep 2004

See all articles by Thierry Burger-Helmchen

Thierry Burger-Helmchen

University of Strasbourg - Faculty of Economics and Management; University of Strasbourg - Bureau of Economic Theory and Application (BETA)

Date Written: January 2004

Abstract

To be relevant to a firm a real option needs to fit into a theory of the firm explaining its existence, exercise conditions and value. We make 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 competences for exercising these options. We explain the creation of a real option as an entrepreneurial process which transform inventive ideas into profitable innovation. The subsequent development of competence necessary to exercise the option gives boundaries, based on theories of the firm, for the often overoptimistic real option evaluation.

Keywords: Real Option, Theory of the Firm, Capabilities

JEL Classification: M00, G00, L00

Suggested Citation

Burger-Helmchen, Thierry and Burger-Helmchen, Thierry, How Do Real Options Come into Existence? A Step Toward an Option-Based Theory of the Firm (January 2004). Available at SSRN: https://ssrn.com/abstract=596841 or http://dx.doi.org/10.2139/ssrn.596841

Thierry Burger-Helmchen (Contact Author)

University of Strasbourg - Bureau of Economic Theory and Application (BETA) ( email )

France

University of Strasbourg - Faculty of Economics and Management ( email )

Strasbourg
61 avenue de la Foret Noire
67085 Strasbourg
France

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