Working Paper BETA #2009-21

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Title : Socio-technical transition processes: A real option based reasoning.

Author(s) : Arman Avadikyan, Patrick Llerena

Abstract : Using a real option reasoning perspective we study the uncertainties and irreversibilities that impact the investment decisions of firms during the different phases of technological transitions. The analysis of transition dynamics via real options reasoning allows the provision of an alternative and more qualified explanation of investment decisions according to the sequentiality of pathways considered. In our framework, flexibility management through option investments concerns both the incumbent and the future technological regime. In the first case it refers to ex-post flexibility management and in the second case to ex-ante flexibility management.

Key-words : Real option reasoning, technological transition, flexibility management.

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