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The option‐creating institution: a real options perspective on economic organization
Author(s) -
Scherpereel Christopher M.
Publication year - 2008
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.671
Subject(s) - intuition , perspective (graphical) , flexibility (engineering) , corporate governance , institution , economics , business , organizational economics , industrial organization , marketing , management science , microeconomics , management , computer science , political science , law , philosophy , epistemology , artificial intelligence
This paper proposes a dynamic framework of economic organization called the option‐creating institution (OCI) model. The claim is made that firm, market, and hybrid governance structures emerge from the need for flexibility in an uncertain world. Each governance structure uniquely provides strategic real options that allow capitalist‐entrepreneurs, with unique risk preferences, to better organize their economic activities. The real options perspective on economic organization is developed by drawing insights from the exchange and coordination perspectives. It is proposed that this real options perspective matches practicing decision makers' intuition and that an inductive OCI model will offer a prescriptive guide. Copyright © 2008 John Wiley & Sons, Ltd.