Real Option as a Potential Link between Financial and Strategic Decision-making

In recent decades, business environment and traditional investment evaluation methods have radically changed. Managerial flexibility has become the most important source of competitive advantage. Corporate financial theory tries to describe it through the development of real options. During the practical analysis of strategic investments, the results of strategic and financial analysis should be reconciled. The point is how the real option approach can be appropriate for closing the gap between strategic and financial valuation. Traditional integrated management systems do not apply real options; however, based on my former studies, I suggest a strategic–real option model, which can be used for the development of strategic communication and decision-making process concerning value creating investments.