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International investment decisions under uncertainty: Contributions of real options theory and future directions

Published online by Cambridge University Press:  12 February 2015

Sangcheol Song ,
Mona Makhija  and
Sung Min Kim
Sangcheol Song*
Affiliation:
HAUB school of Business, Saint Joseph’s University, Philadelphia, PA, USA
Mona Makhija
Affiliation:
Fisher College of Business, The Ohio State University, Columbus, OH, USA
Sung Min Kim
Affiliation:
Graduate School of Business, Loyola University Chicago, Chicago, IL, USA
*
Corresponding author: ssong@sju.edu
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Abstract

We undertake a critical literature review to facilitate academic dialogs regarding decisions under uncertainty in international business settings and highlight the growing focus on international investments as conveyers of real options. Our literature review (1) provides a systematic overview of uncertainty types considered in this literature, real options identified as particular to international investments, and valuation approaches used and (2) highlights key methodological approaches used for testing real options models applied to international investments, and the controversies in this regard. This study draws on the above to shed light on important avenues for future research including (a) the need for more fine-grained and diverse measures of uncertainty in the international context, (b) an emphasis on clarifying the value effects of combinations of real options, and (c) the necessity of further consideration of the costs of options along with the value.

Keywords

multinational corporationsinternational businessforeign direct investmentreal options theoryuncertainty

Information

Type
Research Article
Information
Journal of Management & Organization , Volume 21 , Issue 6 , November 2015 , pp. 786 - 811
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2015 

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