Analysis of Studies from 2000-2010 in Real Option Theory and Application to OM英文文献资料.docVIP

American Journal of Operations Research, 2011, 1, 16-23 doi: 10.4236/ajor.2011.11003 Published Online March 2011 (/journal/ajor) 16 Analysis of Studies from 2000-2010 in Real Option Theory and Application to OM Hui-Chuan Chen University of Texas at Arlington, US E-mail:hui-chuan.chen@ Received February 20, 2011; revised March 21, 2011; accepted March 23, 2011 Abstract Traditional project investment methods, such as the discounted cash flow (DCF) with a fixed static plan, are no longer sufficient to assist the corporate strategies of seizing opportunities and profitability. The option pricing formula includes a theoretical framework for pricing financial options, assuming that the risk in a financial hedged position is zero, if the option is adjusted continuously in a short position. Hence, the real options revolution arose in response to the dissatisfaction of corporation practitioners with traditional capital budgeting techniques, such as standard discount cash flow. This paper analyzes relevant articles from the “Journal of Operations Management” and “Management Sciences” as related to real options theory in the field of operations management. The goal of this study is to review and identify the gaps in application to real option theory in their studies. Finally, this paper provides suggestions for future researchers. Keywords: Option Theory, Operations Management, Hedging, Flexibility 1.Introduction 2. Overview of Conventional Real Options Theory In today’s highly competitive business environment, corporate managers must constantly make decisions in response to the rapidly changing marketplaces, including new product introductions, information systems, re- search and development, as well as outsourcing of manu- facturing. Company strategies must be flexible and agile in order to seize the opportunities and profitability. If managers can learn from their mistakes, an