Aspiration and Real Options

Download or read book Aspiration and Real Options written by Richard J. Gentry and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: Recent debates regarding theories of strategic decision making have attempted to limit the application of real options theory to only those decisions where uncertainty is exogenous and time horizons are fixed. Many projects in a corporate setting do not fit this exclusive definition, so real options theory must either be restricted to a particular context or expanded to accommodate these problems. Rather than restrict the theory, this paper tries to expand real options theory to incorporate managerial behavior and thus attempts to resolve the problems with real options theory. To do so, this dissertation incorporates aspiration theory into real options theory to develop a behaviorally based perspective of option identification, development, and execution. For an empirical context, this research used a subfield of the telecommunications industry from 1996 through 2004. The study separated competitors in this market into two subgroups to highlight behavioral differences between groups. To highlight the importance and dynamics of entrepreneurial market entry, this dissertation divided the industry into two origin-based groups. This study found interesting behaviors based on the histories of the firms considered. Rather than support within group differences, this study found aspirations have a consistent influence on option purchase and market entry. While the effects of aspiration differences appear homogenous across groups, some results suggest that firms imitate within these groups. In addition, the firms position relative to other firms in the industry influences its tendency to purchase options and enter markets.