Taylor, M D; Wamuziri, S C and Smith, I G N (2001) Strategic mechatronics investment: Understanding the managerial options. In: Akintoye, A (ed.) Proceedings of 17th Annual ARCOM Conference, 5-7 September 2001, Salford, UK.
Abstract
Real option pricing theory is emerging as a more effective and appropriate procedure for examining strategic investment, and in particular, construction mechatronics investment. On a net present value basis, high implementation costs, inappropriate discount rates and uncertain future cash flows may gauge automation investment as unpromising. The application of real option analysis combines capital budgeting and strategic planning within a decision framework. Waiting for new product information, new market information or competitors investment decisions are managerial options that are neglected within traditional discounted cash flow methodologies. The research examines the application of real option pricing theory to investment in imported automated construction technology. A preliminary investigation of the application of option pricing theory to the appraisal of construction mechatronics is presented. The derivation of pricing model parameters using historical market data is discussed. The research is ongoing and presently disputes the exclusive use of traditional investment appraisal techniques for the appraisal of construction mechatronics investment. The suggested methodology demonstrates the potential value of automated construction technology opportunities and may prevent short-termism within investment strategies through responding to varying market and industry circumstances.
| Item Type: | Conference Paper (Paper) |
|---|---|
| Uncontrolled Keywords: | construction mechatronics; cash flow; pricing theory; real options; strategic investment |
| Index terms: | pricing, cash flow, discounted cash flow, net present value, discount rates, automated construction, decision framework, investment strategy, dispute, capital budgeting, product information, investment appraisal, investigation, methodology, strategic planning, investment decision, option, strategic investment, implementation, real option, appraisal, automation |
| Subjects: | economic analysis, financial and cost management, contractual arrangements, data collection methods, dispute resolution, innovation studies, decision analysis, financial analysis, budgeting, research methods, factor and component analysis, financial management, management, automation and robotics |
| Topics: | Research Practice, Cost Management, Business Strategy, Procurement, Risk Management, Digital Applications, Legal Issues |
| Descriptive scope: | 4 PCTA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here