Decision support for firm performance by real options analytics. (23rd July 2017)

• Record Type: Journal Article
• Authors: Power, Bernadette; Reid, Gavin C.
• Is Part Of: Managerial and decision economics. Volume 39:Number 1(2018)
• Page Start: 56
• Page End: 64
• Publication Date: 2017-07-23
• Subjects: Managerial economics -- Periodicals; Decision making -- Periodicals; Management -- Periodicals; 658.15
• DOI: 10.1002/mde.2867
• Languages: English
• ISSNs: 0143-6570

Abstract

Abstract : This paper develops a real options decision support tool for raising the performance of the firm. It shows how entrepreneurs can use our intuitive tool quickly to assess the nature and type of action required for improved performance. This exploits our estimated econometric relationship between precipitators of entrepreneurial opportunities, time until exercise, and firm performance. Our 3D chromaticity plots show how staging investments, investment time, and firm performance support entrepreneurial decisions to embed, or to expedite, investments. Speedy entrepreneurial action is securely supported with this tool, without expertise in econometric estimation or in formulae for real options valuation.