The Determinants of Strategic Investment in Electronics and Information Industries - A Real Option Perspective

• Main Authors: Cheng, Hsi-tsung, 鄭錫聰
• Other Authors: Lee, Jiren
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/35844901119394248641

碩士 === 國立臺灣大學 === 國際企業學研究所 === 88 === This study attempts to systematically explore the determinants of strategic investment undertaken by technology-based companies from the real option theory. Specifically, we evaluate the potential effects of flexibility on subsequent decisions due to its prior, minority investments on new ventures. The real option theory suggests a minority investment could be regarded as an option for deferred- or staged-investment decisions. Based on this theoretical lens, we specify a research framework and adequate constructs pertaining to three major categories, they are the industry growth opportunity, investment types, and firm characteristics, under which our testable hypotheses are drawn. The empirical context is in electronics and computer industries in Taiwan, of which 242 corporate long-term investment projects made by manufacturing companies during 1993-1998 are identified. Our empirical results show a high degree of consistency between theoretical predictions and empirical evidence. First, a firm will tend to engage in minority investment when the growth potential and the volatility of the industries invested are high. Second, the relationship between new venture and the existing business will have implications on whether the focal firm will adopt minority investment. Firms will tend to adopt minority investments when they enter into the upstream stages of the industry value chain. Third, the empirical outcomes also show that a firm’s prior investment experience will significantly reduce the option value of undertaking minority investment for later investment initiatives. In other words, wholly-owned acquisitions are more likely to occur for experience firms. In addition, the present research also evidences that the impact of contextual variables on the existence of decision flexibility is significant. Our results show that, compared to those of wholly-owned acquisition cases, a firm who undertook minority investments will be more likely to either increase it equity commitment on the venture or further acquire the venture when the growth potential keeps in good shape and the market volatility keeps downward. Meanwhile, for those cases who maintain its original level of equity investments tend to be able to sustain a higher level of business losses while they are not in wholly-owned acquisition cases. Overall, this set of empirical outcomes clearly indicates the existence of decision flexibility by regarding a minority investment as a real option. Suggestions and implications based on our findings are also discussed.