Real options thinking
Real options involve rights to act on real tangible assets, but not on intangible assets
False:
Real options can involve rights to act on both real tangible and intangible assets
The basic principle of staged project management is that projects only proceed to subsequent stages if certain undefined criteria are met
False:
The criteria are predefined
Experimentation efficiency is defined by Thomke (1998) as ‘‘the economic value of information learned during an experimental cycle, divided by the cost of conducting the cycle."
True:
This is the definition from the Thomke article!
The five stages of the real option life cycle are 1) discovery, 2) exploration, 3) acquisition, 4) development and 5) exploitation
False:
Exploration and acquisition fall under the same stage, as firms can either acquire options, or they can create options themselves
Firms can only benefit from a real options approach after they equip themselves with resource-costly systems and capabilities to detect and develop real options
True:
Identifying and developing options requires sufficient financial and human resources
ASIC designers try to "get it right" the first time (while EPLD designers don't)
True:
The iteration frequency is lower for ASIC strategies than for EPLD, which suggests they want to get a design right as soon as possible
Real options (exercised in oligopolistic settings) can affect other option holders, while financial options do not hold this power
True:
Exercising financial options does not affect the holders of other options, while real options in oligopolistic settings can damage or preempt other option holders such as rivals, whose reaction must therefore be accounted for in initial strategic decisions
The positive moderating effect of staging innovation projects is smaller for resource-constrained firms and firms that envisage more incremental innovations
False:
It is true that the positive moderating effect of staging innovation projects is smaller for resource-constrained firms, but it is not true that it is smaller for firms who envisage incremental innovations (making incremental innovations fits the staging approach well)
The experimentation efficiency is high when an experiment is costly, but the incremental value of information learned is large
False:
The experimentation efficiency is high when an experiment is inexpensive, and the incremental value of information learned is high
The competitive advantage of a firm rests increasingly on an adaptive organizational capability to simultaneously manage their commitments and being flexible
False:
The competitive advantage of a firm rests increasingly on an adaptive organizational capability to simultaneously manage cooperation andcompetition
Resource-constrained firms do not benefit from applying real options reasoning in combination with the staged approach
False:
Resource-constrained firms use the staged approach mainly to capture the value in abandoning (while resource-abundant firms use the staged approach mainly to capture the value in waiting)
The value created by real options reasoning results from two distinct mechanisms:
1) The possibility to delay project decisions until uncertainty is reduced
2) The possibility to abandon unsuccessful projects and reinvest the budget into other, more promising projects
The overall performance difference between ASIC and EPLD is driven by the design prototyping and evaluation phases
False:
it is driven by the earlier stages (design specification, development and verification), because EPLD designers need less resources than ASIC designers