Capabilities, Real Options, and the Resource Allocation Process

Catherine A. Maritan, Todd M. Alessandri

Research output: Chapter in Book/Report/Conference proceedingChapter

15 Scopus citations

Abstract

In this paper, we consider the relationship between the investment decision process and returns to investments in capabilities. We draw on characteristics of capabilities to develop a framework that identifies four components of the returns to an investment that are derived from industry-based versus firm-specific elements, and option and non-option elements. We then link these components to elements of the resource allocation process. In taking this approach we place the study of real options into the larger investment context, recognizing that they co-exist with and should be understood in conjunction with other investment characteristics. These arguments highlight the importance of connecting the investment process with realization of returns, thereby providing the conceptual foundations for a decision tool.

Original languageEnglish (US)
Title of host publicationReal Options Theory
EditorsJeffrey Reuer, Tony Tong
Pages307-332
Number of pages26
DOIs
StatePublished - Jun 18 2007

Publication series

NameAdvances in Strategic Management
Volume24
ISSN (Print)0742-3322

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management

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  • Cite this

    Maritan, C. A., & Alessandri, T. M. (2007). Capabilities, Real Options, and the Resource Allocation Process. In J. Reuer, & T. Tong (Eds.), Real Options Theory (pp. 307-332). (Advances in Strategic Management; Vol. 24). https://doi.org/10.1016/S0742-3322(07)24011-2