Using real options to value modularity in standards | Zendy

Mark Gaynor | Zendy; S. Bradner | Zendy

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Using real options to value modularity in standards

Author(s) -

Mark Gaynor,

S. Bradner

Publication year - 2001

Publication title -

knowledge, technology and policy/knowledge in society/knowledge, technology, and policy

Language(s) - English

Resource type - Journals

eISSN - 0897-1986

pISSN - 1946-4789

DOI - 10.1007/pl00022275

Subject(s) - modularity (biology) , standardization , modular design , granularity , value (mathematics) , computer science , risk analysis (engineering) , software engineering , systems engineering , engineering , business , programming language , operating system , machine learning , biology , genetics

This paper proposes a model of technology standardization based on modular standards and the effect of market uncertainty on the value of modularity in standards. A real options model quantifies the value of modularity in standards, illustrating that a rational way to standardize some IT technology in uncertain markets is with modular design, end-2-end structure, and proper staging of the standard. Highly modularized standards provide a higher option value because of the ability to select the best modules to change at a fine granularity.

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