198,715 research outputs found

    Internet of Things and Their Coming Perspectives: A Real Options Approach

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    Internet of things is developing at a dizzying rate, and companies are forced to implement it in order to maintain their operational efficiency. The high flexibility inherent to these technologies makes it necessary to apply an appropriate measure, which properly assesses risks and rewards. Real options methodology is available as a tool which fits the conditions, both economic and strategic, under which investment in internet of things technologies is developed. The contribution of this paper is twofold. On the one hand, it offers an adequate tool to assess the strategic value of investment in internet of things technologies. On the other hand, it tries to raise awareness among managers of internet of things technologies because of their potential to contribute to economic and social progress. The results of the research described in this paper highlight the importance of taking action as quickly as possible if companies want to obtain the best possible performance. In order to enhance the understanding of internet of things technologies investment, this paper provides a methodology to assess the implementation of internet of things technologies by using the real options approach; in particular, the option to expand has been proposed for use in the decision-making process

    The real SAPÂź Business one cost : a case study of ERP adoption in an SME

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    This paper reports on a UK based service management Small and Medium-sized Enterprise (SME) that invested into SAP¼ Business One. The action research case study highlights the real cost and difficulties faced in moving to the one single SAP system and the process that was followed in order to identify third-party vendors that can integrate or customise SAP¼ Business One. This paper highlights the additional costs required to ensure a ‘fit-for-purpose’ solution to close the gap between strategic needs and the existing SAP Business One solution. The gap itself is illustrated by highlighting 10 key functionalities expected by the given service management SME. The actual implementation cost of the Enterprise Resource Planning (ERP) was found to be approximately double the initial SAP costs. The real costs involve time for, among other things, process reengineering, strategic decision making, software add-ons, staff-training, project-management and software maintenance

    Financial innovation, strategic real options and endogenous competition : theory and an application to Internet banking

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    Innovations in financial services continuously influence the scope of financial intermediation and the nature of competition between intermediaries. This paper examines the optimal exercise of strategic real options to invest in such an innovation, Internet banking technology, within a two-stage game, parameterized by the distribution of bank size and uncertainty over the profitability of investment, and empirically tests the results on a novel data set. Unlike traditional options, in which the distribution of the future value of the underlying asset is exogenous and the timing of exercise affects only the return to the option holder, the timing of the exercise of real options in a strategic context allows the option holder to manipulate the distribution of returns to all players. The value of the strategic investment option in our model, as a consequence, depends on both expected future profits as well as the variance of those profits. Expected profits to an entrant depend, in equilibrium, on its size, as measured by existing market share (concentration) or total assets, relative to its rivals. Conditional on the degree of uncertainty, larger banks should, as a consequence, exercise their options earlier than smaller banks, for purely strategic advantages, and act as market leaders in the provision of Internet banking services. Like ordinary options, however, the value of the strategic investment option to both large and small banks increases in uncertainty, implying that early exercise will be more likely the more information is available about potential demand. We test these hypotheses on investment in Internet banking services with data from a sample of 1,618 commercial banks in the tenth Federal Reserve District during 1999. Evidence indicates that relative bank size, as measured by either market share or asset size, positively influences the likelihood of entry into Internet banking, and trend-adjusted variation in income per person (a proxy for uncertainty of demand) negatively influences the likelihood of entry into Internet banking. In addition, market concentration of a bank's competitive rivals has a negative relationship with the likelihood of entering the market for Internet banking services. These relations are evident in both bivariate analysis and in multivariate logit regression analysis.Competition ; Internet ; Internet banking

    Business Value of IT Investment: The Case of a Low Cost Airline’s Website

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    Using the case of a low cost airline company’s website we analyze some special research questions of information technology valuation. The distinctive characteristics of this research are the ex post valuation perspective; the parallel and comparative use of accounting and business valuation approaches; and the integrated application of discounted cash flow and real option valuation. As the examined international company is a strategic user of e-technology and wants to manage and account intangible IT-assets explicitly, these specific valuation perspectives are gaining practical significance

    Socio-technical transition processes: A real option based reasoning.

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    Using a real option reasoning perspective we study the uncertainties and irreversibilities that impact the investment decisions of firms during the different phases of technological transitions. The analysis of transition dynamics via real options reasoning allows the provision of an alternative and more qualified explanation of investment decisions according to the sequentiality of pathways considered. In our framework, flexibility management through option investments concerns both the incumbent and the future technological regime. In the first case it refers to ex-post flexibility management and in the second case to ex-ante flexibility management.

    Microeconomic Policies in the New Economy

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    Competition policy, Technology policy, Network industries

    Strategic Investment Under Uncertainty: Merging Real Options with Game Theory

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    As becomes apparent from the standard text books in industrial organization (cf.Tirole, 1988, The Theory of Industrial Organization), the analysis of the e.ects of uncertainty within this field is yet underdeveloped.This paper shows that the new theory of strategic real options can be used to fill this empty hole .Based on the work by Smets (1991) standard models are identified, and they are analyzed by applying a method involving symmetric mixed strategies.As an illustration, extensions regarding asymmetry, technology adoption and decreasing uncertainty over time are reviewed.Among others, it is found that the value of a high cost firm can increase in its own cost.Furthermore, it is established to what extent investments are delayed when technologial progress is anticipated, and it is found that competition can be bad for welfare.productivity;innovation;technology;corporate finance;valuation;capital budgeting;investment;game theory;uncertainty
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