Options As A Strategic Investment.epub ((INSTALL))
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Finally, it is possible to apply real options approach in order to analyze the investment alternatives. The conventional approach to project evaluation in the literature is based on financial analysis only; however, real options model can help to describe the strategic, organizational, operational and other issues that may affect the performance of the project [4,11-13,15,17,32,34,37].
The investment in innovation and technology is different from other investments because it is one of the most expensive and riskiest investments that firms have to make. Implementing innovation projects requires resources, management and marketing skills and most of the time, these resources are not sufficient in order to implement projects successfully. Like other investments, the strategy of investment in innovation is also a strategic choice of the firm. When a firm invests in innovation it tries to find a competitive advantage. In this regard, some studies on the subject are presented in the following paragraphs.
One of the most studied concepts in the research and development (R&D) field is the firm's innovation orientation [11,12,23,37]. This concept can be used in order to evaluate the firm's orientation towards innovation; however, there is no consensus about the results of this concept in the literature. Different results may be caused by different definitions of the innovation orientation. The innovation orientation is the firm's relative position in the innovation process. Some researchers have studied the relationship between innovation orientation and return on investment. According to these studies, the higher the firm's innovation orientation the higher the expected return on investment and vice versa [25-27,29].
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