The option-creating institution: A real options perspective on economic organization

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26 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)455-470
Number of pages16
JournalStrategic Management Journal
Volume29
Issue number5
DOIs
StatePublished - May 1 2008

Keywords

  • Coordination
  • Exchange
  • Governance
  • Real options
  • Theory of the firm
  • Transaction cost

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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