Timing the adoption of a new technology: an option‐based approach

Deals with the problem of timing the adoption of a new technology. This is a very important question of strategy which directly affects the firm’s competitive capability and whose analysis cannot be adequately faced by conventional capital budgeting techniques. Aims to provide a procedure for deciding on the appropriate adoption time, which is based on the option pricing approach. In particular, since innovative technologies generally disclose a set of strategic opportunities, makes the assumption that adoption occurs when it is possible to profit better from these opportunities. The decision procedure introduced also provides the starting point for developing a practical, option‐based framework to formulate a technology strategy. In this perspective, a proactive attitude of firms towards the planning and looking for future technology opportunities is proposed.

[1]  Ted G. Eschenbach,et al.  Exposition on Using Graphs for Sensitivity Analysis , 1989 .

[2]  Raj Aggarwal,et al.  Project Exit Value as a Measure of Flexibility and Risk Exposure , 1989 .

[3]  Giovanni Azzone,et al.  Simulation v. Analytical Models for the Economic Evaluation of Flexible Manufacturing Systems: An Option-Based Approach , 1992 .

[4]  R. Grant.  The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation , 1991 .

[5]  Ted G. Eschenbach,et al.  Stochastic Sensitivity Analysis , 1990 .

[6]  G. Salkin,et al.  Valuation of real projects using option pricing techniques , 1991 .

[7]  E. F. Brigham,et al.  Financial Management: Theory and Practice , 1990 .

[8]  F. Black,et al.  The Pricing of Options and Corporate Liabilities , 1973, Journal of Political Economy.

[9]  M. Porter.  Competitive Advantage: Creating and Sustaining Superior Performance , 1985 .

[10]  David Brookfield.  Risk and capital budgeting , 1995 .

[11]  A. Irving.  Stochastic sensitivity analysis , 1992 .

[12]  Ranga V. Ramasesh,et al.  Economic justification of advanced manufacturing technology , 1993 .

[13]  Keith Dickson,et al.  A model of technology strategy , 1993 .

[14]  Uncertainty and the Abandonment Option , 1992 .

[15]  J. S. Busby.  The Value of Advanced Manufacturing Technology: How to Assess the Worth of Computers in Industry , 1992 .

[16]  B. Ronen,et al.  The Declining Price Paradox of New Technologies , 1987 .

[17]  Eduardo Pinheiro Gondim de Vasconcellos,et al.  The future of technology management , 1994 .

[18]  V. Mahajan,et al.  Innovation Diffusion Models of New Product Acceptance. , 1987 .

[19]  Cristina Masella,et al.  Strategic Investment in New Product Development , 1993 .