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| List of Figures | |
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| List of Tables | |
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| List of Boxes | |
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| Acknowledgments | |
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| Introduction: Strategic Investment as Real Options and Games | |
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| Introduction: About This Book | |
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| Real Options and Games: Linking Corporate Finance and Strategy | |
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| An Overview of the Book | |
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| Approaches to Strategic Investment | |
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| Corporate Finance and Strategic Planning: A Linkage | |
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| Introduction | |
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| The Market Value of Growth Opportunities | |
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| From NPV to an Expanded (Strategic) NPV Criterion | |
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| Value Drivers of NPV, Flexibility Value, and Strategic Value | |
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| Value Drivers of NPV | |
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| Drivers of Flexibility or Growth Option Value | |
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| Drivers of Strategic Value and Strategic Moves | |
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| Value Creation in Strategic Planning | |
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| Conclusions | |
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| Strategic Management: Competitive Advantage and Value Creation | |
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| Introduction | |
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| Views of Value Creation of the Firm | |
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| Industry and Competitive Analysis | |
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| Strategic Conflict and Game Theory | |
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| Internal, Resource-Based View of the Firm | |
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| Dynamic Capabilities | |
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| Options and Games: A Linkage Approach | |
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| Competitive Advantage and Industry Evolution | |
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| Competitive Advantage in the Early and Growth Stages | |
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| Competitive Advantage in Mature Businesses | |
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| Creative Destruction and Adaptation as Source of Advantage | |
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| Portfolio Planning of Growth Opportunities | |
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| Boston Consulting Group Matrix | |
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| Exercise Timing of Options: The Tomato Garden Analogy | |
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| Real-Options Growth Matrix | |
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| Conclusions | |
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| Corporate Real Options | |
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| Introduction | |
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| Options Valuation | |
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| Basic Nature of Options | |
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| From Financial to Real Options Valuation | |
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| Overview of Common Real Options | |
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| The (Simple) Option to Defer | |
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| Options to Expand or Contract | |
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| The Option to Abandon for Salvage or Switch Use | |
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| The Option to Temporarily Shut Down | |
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| Options to Switch Inputs or Outputs | |
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| Prototype Examples: Valuing an R & D Program and a Mining Concession | |
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| Valuing a Research and Development Program | |
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| Valuing a Mine Concession (License) Using Certainty-Equivalent Valuation | |
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| An In-Depth Case Application: Valuing Offshore Oil Concessions in the Netherlands | |
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| Stages of Offshore Petroleum Development on the Dutch Continental Shelf | |
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| Valuation Based on Replication in Financial Markets | |
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| Main Insights | |
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| Summary and Conclusions | |
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| Binomial Option Valuation | |
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| Games and Strategic Decisions | |
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| Introduction | |
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| The Rules of the Game | |
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| A Taxonomy of Basic Games | |
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| Time to Launch under Competition (Symmetric Innovation Race) | |
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| Asymmetric Innovation Race and Preemption | |
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| Simultaneous Innovation Race When the Opponent's Capabilities Are Unknown | |
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| Competitive Reactions in Quantity versus Price Competition | |
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| Quantity Competition | |
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| Price Competition | |
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| Type of Competitive Reaction: Strategic Substitutes versus Complements | |
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| Two-Stage Games: Strategic Value of Early Commitment | |
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| Direct versus Strategic Effects of Investment Commitment | |
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| Strategic Effect, Tough or Accommodating Positions, and Type of Competition | |
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| Summary and Conclusions | |
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| A Chronology of Game Theory Developments | |
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| Competitive Strategy and Games | |
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| Simple Strategic Investment Games | |
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| Introduction | |
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| A Road Map for Analyzing Competitive Strategies | |
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| One-Stage Strategic Investments | |
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| Two-Stage (Compound) Options: The Case of Proprietary R & D | |
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| Two-Stage Investments with Endogenous Competition | |
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| Competition in Last (Production) Stage: Contrarian versus Reciprocating Competition | |
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| Competition in Innovation Investment: Time-to-Market Races and Strategic Alliances | |
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| Cooperation in the First Stage: Joint R & D Ventures | |
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| Summary and Conclusions | |
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| Flexibility and Commitment | |
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| Introduction | |
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| The Basic Two-Stage Game | |
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| Equilibrium Quantities, Prices, and Payoff Values | |
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| Valuation of Competitive Strategies | |
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| Numerical Examples of Different Competitive Strategies under Contrarian versus Reciprocating Competition | |
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| Competitive R & D Strategies under Quantity Competition | |
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| Goodwill/Advertising Strategies under Price Competition | |
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| Summary and Conclusions | |
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| Reaction Functions, Equilibrium Actions, and Values in Different Market Structures under Quantity or Price Competition | |
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| Value Dynamics in Competitive R & D Strategies | |
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| Introduction | |
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| Literature on R & D Options | |
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| The Basic Two-Stage R & D Game | |
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| Critical Demand Zones/Sensitivity | |
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| Technical R & D Uncertainty, Stochastic Reaction Functions, and Asymmetric Information with Signaling | |
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| Technical R & D Uncertainty (under Symmetric Information) | |
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| Imperfect/Asymmetric Information and Stochastic Reaction Functions | |
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| Signaling Effects | |
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| Learning Experience Cost Effects | |
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| Competition versus Cooperation in R & D | |
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| Summary and Conclusions | |
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| Applications and Implications | |
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| Case Applications | |
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| Introduction | |
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| Strategic Games in Consumer Electronics | |
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| Winner Takes All versus Strategic Alliances in the Launch of Video Recorder Systems | |
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| The Competition versus Coordination Game of the High-Density Disk | |
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| Buy-and-Build Platform Acquisition Strategies | |
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| Classifying Acquisitions Based on Options and Games | |
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| Growth Option Value in a Buy-and-Build Strategy | |
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| Competition in a Buy-and-Build Strategy | |
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| Infrastructure Investment: The Case of European Airport Expansion | |
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| Infrastructure Investment and Aviation Developments | |
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| Infrastructure Valuation as an Options Game | |
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| Implementation in the Case of Schiphol Airport | |
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| Conclusions and Implications | |
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| Continuous-Time Models and Applications | |
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| Introduction and Overview | |
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| Continuous-Time Version of Smit-Trigeorgis Framework | |
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| Equilibrium Output and Values | |
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| Strategic Entry Decisions | |
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| Equilibrium Entry and Critical Demand Thresholds | |
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| Benchmark Cases: Symmetric Competition and Monopoly | |
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| Strategic Investment Timing under Uncertainty | |
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| Strategic Interactions and the Timing of Investment | |
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| Innovation with Uncertainty over Completion and Time Delays | |
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| Exercise Strategies under Incomplete Information with Applications | |
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| Entry and Preemption under Incomplete Information | |
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| Applications | |
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| General Equilibrium Investment Strategies under Imperfect Competition and Asymmetric Information | |
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| Equilibrium Investment Strategies under Imperfect Competition | |
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| Investment Strategies under Asymmetric Information | |
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| Conclusions | |
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| Derivation of Option-Pricing Differential Equation | |
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| Discounted Profit Flow and Value Function | |
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| Sequential Stackelberg Leader-Follower Entry | |
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| Overview and Implications | |
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| Introduction | |
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| Linking Corporate Finance and Strategic Planning | |
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| An Expanded Valuation Framework to Capture Flexibility and Strategic Value | |
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| Implications of the Strategic Options and Games Framework | |
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| Timing Games for Simple Commercial Options | |
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| Investment Games Involving Strategic Options | |
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| Empirical Implications | |
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| References | |
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| Index | |