Real Options as a Tool for Value Creation: Evidence from Sustainable Development and Information Technology Sectors

Managers in different fields are faced with investment decisions under market and technological uncertainties. The future opportunities involving uncertainties and managerial flexibility should be valued by the real options approach and no more by the methods based on discounted cash flow (DCF), since the later cannot correctly capture the operating flexibility available within the project. In this book, the authors show how to apply the real options approach to real world fields. We develop a dynamic programming approach in diverse fields characterized by different types of uncertainty, including telecommunications, sustainable transport and acquisition of innovative technological firms. Depending on the application field, we consider proprietary real options held by one firm or shared options where several competing firms hold the investment opportunity.