Strategic implications of valuation methods

Author's OriginalStrategy is ultimately aimed at creating shareholder value, placing valuation in a central role linking finance and strategy. Focusing on growth options, this paper uses a unique "perfect information" model to examine, from a strategy point of view, the relationship between the market value of the firm and its intrinsic, or DCF, value. Although the research is at the level of the firm, the results have implications at the level of individual strategies and projects, since a firm can be conceptualized as a collection of projects. The findings highlight the relationship between the value of growth options and macroeconomic conditions, industry characteristics, and firm-specific factors. A revised version of this paper has since been published in the journal Advances in Strategic Management. Please use this version in your citations.Alessandri, T. M., Lander, D. M., & Bettis, R. A. (2007), Strategic Implications of Valuation: Evidence from Valuing Growth Options, in Professor Brian Silverman (ed.) Real Options Theory. Advances in Strategic Management, 24, 459-48

A real options approach to environmental R&D project evaluation

With the immense evolution of technology and consumers’ maturing anticipations, novel products’ development becomes the primary way that companies adapt to survive in the growing international contention. Creation or innovation can allow the organization to stand one step forward of the competition and to conduct the competition in the direction it selects. We examined the evaluation system of real options approach to a biomimicry R&D project together with conventional R&D and environmental R&D projects. This model considers uncertainties of investment cost and cash flow of the new product in each project. We find that investment on environmental and biomimicry technologies will achieve promising expectations in Asian area when certain environmental demands increase