Real option analysis has been studied and applied in evaluating information technology (IT) investments for more than a decade. Its advantages over the traditional discounted cash flow techniques have been widely recognized in the information systems (IS) community. However real option analysis has yet to be seen in valuing digital government projects where the real option analysis and option thinking seem to be even more applicable. This study endeavors to fill this void by developing a digital government investment evaluation framework centered on real option analysis, and applying a recently developed option pricing model to a real world digital government project.
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