Journal ArticleDOI
Options analysis of software platform decisions: a case study
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TLDR
This paper argues that traditional quantitative approaches to a cost-benefit analysis give only a partial picture of decision situations in IT investment situations, and compares different valuation techniques for this task and discusses their respective advantages and drawbacks.Abstract:
In recent years, the use of option pricing models to support IT investment decisions has been proposed in the MIS literature. In this paper, we discuss the practical advantages of such techniques for the selection of a software platform. First, we argue that traditional quantitative approaches to a cost-benefit analysis give only a partial picture of such decision situations: due to the long planning horizon required because of the time-consuming and resource-intensive implementation process, it is not possible to exactly predict which applications will, in fact, run on the system over time. Thus, the investor is faced with the problem of valuing "implementation opportunities." We then compare different valuation techniques for this task and discuss their respective advantages and drawbacks. The practical advantages of employing such models are demonstrated by describing a real-life case study where option pricing models were used for deciding whether to continue employing SAP R/2 or to switch to SAP R/3.read more
Citations
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Journal ArticleDOI
Real Options and IT Platform Adoption: Implications for Theory and Practice
TL;DR: A model of the determinants of option value associated with investments in innovative IT platforms is developed, addressing a central question in the innovation field: When should a firm take a lead role in innovation with emerging technologies.
Journal ArticleDOI
Let a Thousand Flowers Bloom? An Early Look at Large Numbers of Software 'Apps' Developers and Patterns of Innovation
Kevin Boudreau,Kevin Boudreau +1 more
TL;DR: Overall, adding large numbers of producers led innovation to become more dependent on population-level diversity, variation, and experimentation—while drawing less on the heroic efforts of any one individual innovator.
Journal ArticleDOI
Let a Thousand Flowers Bloom? An Early Look at Large Numbers of Software App Developers and Patterns of Innovation
TL;DR: This paper studied the effect of adding large numbers of producers of application software programs (applications) to leading handheld computer platforms, from 1999 to 2004, and found that adding producers to a platform also shaped investment incentives in ways that were consistent with a tension between network effects and competitive crowding, alternately increasing or decreasing innovation incentives depending on whether apps were differentiated or close substitutes.
Journal ArticleDOI
Leveraging IT Capabilities and Competitive Process Capabilities for the Management of Interorganizational Relationship Portfolios
Arun Rai,Xinlin Tang +1 more
TL;DR: This work theorizes how key structural IT capabilities and process capabilities operate as systems of complements and discusses the theoretical and practical implications of how firms should develop complementary systems of structuralIT capabilities and competitive process capabilities to manage IR portfolios dynamically and leverage external resources.
Journal ArticleDOI
Managing Information Technology Investment Risk: A Real Options Perspective
TL;DR: An approach for managing IT investment risk that helps to rationally choose which options to deliberately embed in an investment so as to optimally control the balance between risk and reward is presented.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Journal ArticleDOI
Option pricing: A simplified approach☆
TL;DR: In this paper, a simple discrete-time model for valuing options is presented, which is based on the Black-Scholes model, which has previously been derived only by much more difficult methods.
Book
Real Options: Managerial Flexibility and Strategy in Resource Allocation
TL;DR: Real Options as mentioned in this paper reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market.
Book
Financial Theory and Corporate Policy
TL;DR: In this article, the authors present an overview of financial theory and its application in corporate finance, including the role of the CFO and performance measurement, and the relationship between CFO's role and performance measurement.
Journal ArticleDOI
The value of an option to exchange one asset for another
TL;DR: In this article, the authors developed an equation for the value of the option to exchange one risky asset for another: the investment adviser's performance incentive fee, the general margin account, the exchange offer, and the standby commitment.