Real Options Theory and International Strategy: A Critical Review

Abstract

The application of real options theory to international strategy has surged in recent years. However, it is still a relatively new and loosely defined field, and there are several constraints on practical applications of this powerful theory. To move forward this field, the paper first provides a systematic analysis of theoretical and empirical contributions of real options theory to three critical issues in international strategy: (1) valuing multinational networks, (2) assessing market entry modes, and (3) evaluating market entry timing. The paper further suggests that future studies can focus on a refined treatment of uncertainty and the development of a dynamic theory in international strategy. Five testable propositions are developed in these directions.

Citation

Li, J. (2007), "Real Options Theory and International Strategy: A Critical Review", Reuer, J.J. and Tong, T.W. (Ed.) Real Options Theory (Advances in Strategic Management, Vol. 24), Emerald Group Publishing Limited, Leeds, pp. 67-101. https://doi.org/10.1016/S0742-3322(07)24003-3