[ skip to content ]

Real Options - Delay vs. Pre-Emption: Do Industrial Characteristics Matter?

Driver, Ciaran and Temple, Paul and Urga, Giovanni (2008) 'Real Options - Delay vs. Pre-Emption: Do Industrial Characteristics Matter?' International Journal of Industrial Organization, 26. pp. 532-545.

Full text not available from this repository.

Abstract

This paper presents an empirical study of the channels of influence from uncertainty to fixed investment suggested by real options theory. Using panel data from the Confederation of British Industry (CBI) Industrial Trends Survey, we report OLS estimates of the impact of uncertainty on investment where the regressors are augmented by cross-sectional averages of the dependent variable and of the individual specific regressors, as recently suggested by Pesaran [Pesaran, M.H., 2006. Estimation and Inference in large heterogeneous panels with a multifactor error structure. Econometrica 74, 967-1012]. The cross-industry pattern of results is checked for consistency with the pattern predicted by real options theory, using a specially constructed data set of industrial characteristics. We find that irreversibility is able to predict the pattern detected, but only when combined with a measure of the information advantage of delay. There is also evidence for expansion options effects; industries with high R&D and advertising intensities tend to have positive uncertainty effects.

Item Type: Journal Articles
SOAS Departments & Centres: Faculty of Law and Social Sciences > School of Finance and Management
DOI (Digital Object Identifier): 10.1016/j.ijindorg.2007.03.003
Depositing User: Mutsa Marau
Date Deposited: 22 Oct 2010 10:32
URI: http://eprints.soas.ac.uk/id/eprint/10510

Statistics

Download activity - last 12 months
Downloads since deposit
0Downloads
173Hits
Accesses by country - last 12 months
Accesses by referrer - last 12 months

Research Mentions and Reach

Additional statistics for this record are available via IRStats2

Repository staff only

Edit Item Edit Item