Analysis For Two Kinds Of Real Options Models Of Investments In Capabilities

The capabilities can create the future resources, so study about the investments in capability is a hot issue of academic research in strategic management in nearly a decade. Existed research built a good base on the theory of capability explanation and qualitative analysis of investment in capabilities. By the model analysis and quantitative analysis, the paper build real option models of investment in capabilities, and give quantitative analysis about it. This paper considers the ideologies about creating firm-specific returns and investments in capability causing capability sets switching, and makes use of real option theory and the model framework, to establish investments model of investments in capability based on industry-based return and two-stage switching of capability sets ,then give the option value of investment from the model results. The paper discusses the effect of the industry-based return from investments in capabilities and the effect of switching on capability sets in two-stage investment model.This research mainly consists of three parts: the first part establishes investments model which separates the return into two components: the industry-based return and the firm-specific return, then discuss three sittings: fixed costs, varying costs of firm-specific which has linear relationship and the cost of random uncertainty. Based on results of the three different cost model, it discusses the influence of industry-based return to the decisions of investments in capabilities respectively. The second part gives a investment model of two-stage capability sets'switching, it studys from aspect of the modeling ideology, model description and model analysis. Applying real option value, the paper gives two-stage options evaluation and optimal investment decision. In the third part, it analyzes the results in the model of two-stage switching in capability sets,and study the influence of switching costs to investment decisions; we give the further consideration about the capability of a stage model of direct investment, compare one stage direct investment and two-stage switching from strategic angle. By applying dominant strategy ideology, we compare results of investment threshold, giving the investment decisions of the proposed business under different circumstances.