In pursuit of realizing an IT investment methodology: the real options way
A number of researchers have voiced their concerns about the ability of traditional methods such as DCF in valuing real investments. Real options evolved as a possible substitute to the traditional evaluation methods. Many researchers have claimed that real options valuation surpasses traditional methods in many areas, especially where the investments in question are quite uncommon such as investments in Information Technology. This study interviewed the decision-makers from nine New Zealand companies to learn about their current attitudes and practices in evaluating Information Technology investments, and to examine the potential of using the real options model to assist them in evaluating those investments. The findings suggest that investment decisions in that area are based on the company's strategic perspective. The respondents indicated that IT investments were unlike other types of investments. In addition, there is a considerable difference between what the respondents believed and what they practised concerning the evaluation of those investments. Although managers indicated that it was important to use financial analysis in appraising IT investments, the results indicate that the role of financial analysis is often limited if not absent in assessing those investments. The results also provide strong support to using the six types of real options, especially the real option to grow, in evaluating the different types of IT investments. However, the respondents indicated that the real option to abandon was least likely to be helpful in assessing strategic IT investments.... [Show full abstract]
Keywordsinvestment strategies; information technology investments; financial analysis; IT investment evaluation; investment decisions
Access RightsDigital thesis can be viewed by current staff and students of Lincoln University only. Print copy available for reading in Lincoln University Library.
Showing items related by title, author, creator and subject.
Greer, Glen; Tony, Z.; Associates (New Zealand Agricultural and Resource Economics Society, 2010-08)New Zealand primary sector industry approaches to industry-good investment, and the approaches to evaluation reported in the literature were reviewed to provide understanding of the key issues in ensuring such investments ...
Greer, Glen; Tony, Z.; Associates (Lincoln University, Christchurch, 2009-06)The Commodity Levy process for land-based industries is administered by the Ministry of Agriculture and Forestry (MAF). As well as fulfilling the Ministry’s formal role in the Commodity Levy process, MAF staff assists ...
Kelly, Jessie E. (Lincoln University, 1999)The role of listed property in New Zealand institutional investment portfolios is analysed. The asset allocations of major New Zealand investment managers is studied over 1993 to 1998. NZSE40 Gross Index, Ord Minnett ...