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Essays on growth options and corporate strategy

Tong, Wenfeng
http://rave.ohiolink.edu/etdc/view?acc_num=osu1085200642

Abstract Details

2004, Doctor of Philosophy, Ohio State University, Business Administration.
The dissertation consists of three empirical essays that aim to test real options theory in the corporate strategy domain and they all center on the growth options that firms possess. The first essay introduces growth option value—the proportion of the firm’s value accounted for by growth options—and provides a way to estimate it. Growth option value is then related to a number of internal and external corporate development activities commonly viewed as investments with embedded future growth opportunities. The analysis builds on a dynamic panel dataset of 293 firms from 1989-2000, and the results indicate that firms’ investments in research and development and in joint ventures (JVs) contribute significantly to growth option value, while investments in tangible capital and in acquisitions do not. The essay helps identify boundaries for the application of real options theory to strategy and the variable growth option value would have more general implications for future research on real options. The second essay aims to contribute to the JV literature by critically examining a proposition long held in the strategy and international business literature, namely, JVs represent valuable options to expand under market and technological uncertainty. The essay first develops a contingent framework of this proposition and then empirically tests it. The findings suggest that while JVs do enhance growth option value, they do so only under certain circumstances. Specifically, international joint ventures (IJVs) contribute to growth option value in general, and minority IJVs and diversifying IJVs have significant effects in particular, irrespective of whether the ventures are located in developed or emerging economies. The third essay is a variance decomposition study of growth option value. The findings suggest that stable firm effects are almost twice as much important as total industry effects on growth option value, and that year effects are relatively unimportant. These results hold when single-business firms and manufacturing firms form sub-samples for additional analyses. These results have broader implications for research in strategic management and real options, given the importance of the growth of the firm to corporate strategy and that of growth options to resource allocation and value creation.
Jay Barney (Advisor)
130 p.
Options; Growth; Investment; Joint Venture

Recommended Citations

Citations

  • Tong, W. (2004). Essays on growth options and corporate strategy [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1085200642

    APA Style (7th edition)

  • Tong, Wenfeng. Essays on growth options and corporate strategy. 2004. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1085200642.

    MLA Style (8th edition)

  • Tong, Wenfeng. "Essays on growth options and corporate strategy." Doctoral dissertation, Ohio State University, 2004. http://rave.ohiolink.edu/etdc/view?acc_num=osu1085200642

    Chicago Manual of Style (17th edition)

osu1085200642
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© 2004, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.