Taylor, M D and Wamuziri, S C (2002) Strategic construction mechatronics valuation: A real option-pricing approach. Journal of Financial Management of Property and Construction, 7(2), pp. 75-90. ISSN 1366-4387
Abstract
This paper presents the application real option-pricing theory to the appraisal of advanced construction technology (ACT) investment opportunities. Discounted cash flow appraisal techniques alone do not take into account managerial investment flexibility and neglect timing, abandonment, process switching and sequential strategic growth options. Timing and strategic growth options are valued for hypothetical investment opportunities. Valuable insight into the intrinsic value of investment deferral, optimal expenditure timing and sequential investment opportunities is presented. Real option-pricing analysis provides a technique for amalgamating strategic planning with investment appraisal. The presented methodology does not replace the need for managerial judgement, but may assist technology strategy decision making within construction organisations. Furthermore, the strategic value of construction automation investment may appear more advantageous when appraised using real option-pricing theory.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | construction mechatronics, real option-pricing, strategic valuation |
| Index terms: | appraisal, methodology, decision-making, discounted cash flow, abandonment, option, automation, real option, investment appraisal, strategic planning, advanced construction technology, pricing, construction organization, technology strategy |
| Subjects: | organization, economic analysis, research methods, factor and component analysis, manufacturing engineering, automation and robotics, completion, financial analysis, business, management, decision analysis |
| Topics: | Research Practice, Cost Management, Business Strategy, Digital Applications, Risk Management, Project Management, Engineering Principles |
| Descriptive scope: | 3 PCT |
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