Strategic Investmeng-Real Options and Games.pdf
Han T. J. Smit
Lenos Trigeorgis
Copyright © 2004
by Han T. J. Smit and Lenos Trigeorgis
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Princeton University Press
Published by Princeton University Press,
41 William Street, Princeton, New Jersey 08540
ISBN: 0-691-01039-0
Introduction: Strategic Investment as Real Options
and Games xxiii
I.1. Introduction: About This Book xxiii
I.2. Real Options and Games: Linking Corporate Finance
and Strategy xxiv
I.3. An Overview of the Book xxviii
Part I: Approaches to Strategic Investment
Chapter 1
Corporate Finance and Strategic Planning:
A Linkage 3
1.1. Introduction 3
1.2. The Market Value of Growth Opportunities 5
1.3. From NPV to an Expanded (Strategic) NPV Criterion 8
1.4. Value Drivers of NPV, Flexibility Value, and Strategic Value 13
1.4.1. Value Drivers of NPV 14
1.4.2. Drivers of Flexibility or Growth Option Value 21
1.4.3. Drivers of Strategic Value and Strategic Moves 24
1.5. Value Creation in Strategic Planning 32
1.6. Conclusions 33
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Appendix 9.3. Sequential Stackelberg Leader–Follower
Entry 428
Chapter 10
Overview and Implications 429
10.1. Introduction 429
10.1.1. Linking Corporate Finance and Strategic Planning 429
10.1.2. An Expanded Valuation Framework to Capture Flexibility and
Strategic Value 431
10.2. Implications of the Strategic Options and Games
Framework 439
10.2.1. Timing Games for Simple Commercial Options 440
10.2.2. Investment Games Involving Strategic Options 442
10.3. Empirical Implications 445
References 447
Index 461
x Contents