Managing commitments and flexibility by real options

Rese, Mario; Roemer, Ellen

doi:10.1016/j.indmarman.2004.03.003

Cited by 32 publications

(12 citation statements)

References 33 publications

(33 reference statements)

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“…TCE-and RO-theory scholars also refer to the concept of ''Knightian risk''. RO-theory scholars (Adner & Levinthal, 2004;Rese & Roemer, 2004) agree that RO uncertainty refers to Knightian risk because an uncertain realization of future environmental states can be derived from an ex-ante specified probability distribution. On the other hand, TCE, focusing on bounded rationality, seems to be agnostic when marking a difference between risk and uncertainty (Leiblein, 2003).…”

Section: Theory and Hypothesesmentioning

confidence: 99%

How risk influences the choice of governance mode in biopharmaceutical inter-firm relationships

Billitteri

Nigro

Perrone

2013

International Business Review

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This paper proposes a new theoretical framework for assessing the influence of risk in\ud shaping the governance form in biopharmaceutical inter-firm relationships. In particular,\ud we propose a multidimensional operationalization of relational and performance risk and,\ud by following Transaction Cost Economics (TCE) and Real Options (RO) theory constructs,\ud we hypothesize a relation between the aforementioned risk components and the choice of\ud governance form. Specifically, following TCE reasoning, we hypothesize that a high level of\ud relational risk leads towards more hierarchical governance forms, while, following RO\ud theory, we hypothesize that a high level of performance risk leads toward market-oriented\ud governance forms; finally, we hypothesize a moderating effect of each risk component on\ud the other. We empirically test our framework through the analysis of 353 inter-firm\ud relationships signed worldwide between pharmaceutical and biotech companies from\ud 2007 to 2010. The results show substantive support for our theoretical framework.\ud Furthermore, we find a significant moderating effect of the performance risk on the TCE\ud relation between relational risk and governance forms

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Section: Theory and Hypothesesmentioning

confidence: 99%

How risk influences the choice of governance mode in biopharmaceutical inter-firm relationships

Billitteri

Nigro

Perrone

2013

International Business Review

View full text Add to dashboard Cite

show abstract

“…The advantages of vertical integration are evident in stable business contexts, where transactions dynamics and the possibility of new opportunities can be disregarded (Rese and Roemer, 2004) If the latter is not the case it becomes necessary to allow degree of strategic flexibility.…”

Section: Transactions Cost Analysis Vs Real Optionsmentioning

confidence: 99%

“…We derived decision making-models in which a balanced is reached between protection (with is concomitant loss of flexibility) and openness to business opportunities. Our approach complements the literature on strategic trade-offs between flexibility and contracts (Argyres and Liebeskind, 1999); (Argyres and Liebeskind, 2000); (Barney and Lee, 2000); (Rese and Roemer, 2004). A brief discussion of these references can help to put into context our own take the problem.…”

Section: Introductionmentioning

confidence: 96%

“…The advantages of contracts, particularly those intended to protect investment in specific assets has been predicated in terms of reduction of transaction costs (Williamson, 1985), (Rese and Roemer, 2004). The protection is obtained through low-yield, transaction specific investments, covering the risks derived from three possible sources: malicious behavior of other agents, contingencies of the markets or changes in technology.…”

Section: Introductionmentioning

confidence: 99%

“…(Argyres and Liebeskind, 1999); (Argyres and Liebeskind, 2000) explore the consequences of contracts over corporate governance, claiming that real options are the right tools for the designs of corporate structures. (Rese and Roemer, 2004), in turn, develops a binomial options model that trade-off agreement and strategic flexibility. Following this lead we will consider a binomial model of valuation of exchange options on provision contracts.…”

Section: Introductionmentioning

confidence: 99%

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