Electronic Thesis and Dissertation Repository

Degree

Doctor of Philosophy

Program

Business

Supervisor(s)

Rod E. White

Abstract

This dissertation considers fundamental questions about real options reasoning and its application in the face of uncertainty: do firms behave as real options reasoning predicts, and are there performance benefits from its application? The concept of uncertainty is further developed by considering two primary types: technological uncertainty and market needs uncertainty. A qualitative industry level historical case study is performed on the flat panel TV industry, chosen because it exhibits high technological uncertainty and low market needs uncertainty. Real options logic predicts, in such an industry, that firms will develop and maintain technology options until uncertainty is resolved. Firm level case studies for major incumbent Japanese TV set manufacturers and other relevant firms are performed. Comparison across the cases, and between several specific firms is conducted to test and further develop theory. The firms studied are found to generally behave as predicted by real options logic. Evidence from the study does not present a clear relation between options-related behavior and performance. Although this study identifies evidence not holding options can have large negative performance results, firms holding options as predicted by theory did not realize lasting performance improvements. With one exception, firms attempting to leverage technological capabilities into improved market positions were unable to realize durable improvements in their positions. The development and release of flat panel TV coincided with changes in performance for many firms in the industry; however, these performance changes were short lived. By the end of the study period, industry players had generally returned to the trajectories they were previously on. Between-case analysis of several outlying firms in the sample provides a rich and nuanced view of requirements for firms to dramatically improve performance in the face of high technological uncertainty in a market with very large size potential and relatively well-understood customer needs. This research contributes to the empirical literature on real options and is novel amongst academic research in its coverage of the flat panel display history using Japanese sources. Finally, this dissertation includes managerial implications regarding the usefulness of real options reasoning as well as practical issues in its implementation.


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