Dynamic capability view in terms of real options

In this paper we will make an attempt to open up the black box of the modern basic theory of strategic management, i.e. the resource-based view. We will launch a dynamized version about it and interpret its usability in terms of real options applications. According to the dynamic capability view of the firm, the company consists of human, physical and financial resources and its knowledge base, which, in turn, consists of already existing and routinely exploited, i.e. static and not yet fully developed or exploited dynamic capabilities, which both can be produced either internally by the firm itself or externally through the open market or networks. It is widely recognized that in modern firms especially the development, creation and management of dynamic capabilities is of utmost strategic importance. Our paper focuses on the hard issue of managing and valuating dynamic capabilities when designing the strategic boundaries of the firm, let us say when making decisions about network relations. To be able to do this, we will take a broad look at the real options approach as a special method to shed some light on the very aspects of coping with technological and market uncertainty. Some empirical industry-related illustrations about real options applications are launched as well. (C) 2002 Elsevier Science B.V. All rights reserved.