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Evaluate IT Investment Opportunities Using Real Options Theory

Evaluate IT Investment Opportunities Using Real Options Theory

Xiaotong Li, John D. Johnson
Copyright: © 2002 |Volume: 15 |Issue: 3 |Pages: 16
ISSN: 1040-1628|EISSN: 1533-7979|ISSN: 1040-1628|EISBN13: 9781615200276|EISSN: 1533-7979|DOI: 10.4018/irmj.2002070103
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MLA

Li, Xiaotong, and John D. Johnson. "Evaluate IT Investment Opportunities Using Real Options Theory." IRMJ vol.15, no.3 2002: pp.32-47. http://doi.org/10.4018/irmj.2002070103

APA

Li, X. & Johnson, J. D. (2002). Evaluate IT Investment Opportunities Using Real Options Theory. Information Resources Management Journal (IRMJ), 15(3), 32-47. http://doi.org/10.4018/irmj.2002070103

Chicago

Li, Xiaotong, and John D. Johnson. "Evaluate IT Investment Opportunities Using Real Options Theory," Information Resources Management Journal (IRMJ) 15, no.3: 32-47. http://doi.org/10.4018/irmj.2002070103

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Abstract

In this paper, we discuss the real options theory and its applications in IT investment evaluation. We provide a framework within which the appropriateness of using real options theory in strategic IT investment evaluation is systematically justified. In our framework, IT investment opportunities are classified into four categories based on two criteria: the technology switching costs and the nature of competition. We point out that different real options models should be adopted for each category. The electronic brokerage’s investment decision in wireless technology is discussed as a real world case within the framework. Our study also provides some insights about the relationship between technology standardization and IT investment decisions.

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