Identification and Valuation of Real Options in Technology Investments

摘要

The valuation or justification of investments in Information Technology (IT) is a fundamental issue in Information Systems (IS) research and an important practical problem faced by senior management. These investments often give firms some options to undertake projects in the future (that may not otherwise be possible) that could generate positive net present value at some time. In order to value these options, standard option pricing theories need to be applied appropriately to make reasonable judgments. In this, paper we discuss the identification of real options provided by investment in technology and suggest guidelines for their valuation using existing pricing models.