Strategic Investment

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Corporate finance and corporate strategy, while interconnected through investment decision-making, often operate in silos, leading to a significant gap between theory and practice. This book addresses that gap by integrating advancements in corporate finance, particularly real options and game theory, into a cohesive framework for competitive strategies. Through clear exposition and diverse industry examples, the authors, Han Smit and Lenos Trigeorgis, present an extended valuation framework that employs a problem-solving approach. By applying concepts from game theory and real options, managers can tackle critical questions such as when to invest early to deter competition versus when to delay, whether to engage in R&D or take a more accommodating approach, and how to value growth options or infrastructure investments. The book offers a variety of valuation scenarios, including acquisition strategies, R&D investments in high-tech sectors, joint research ventures, and product launches in consumer electronics, as well as infrastructure and oil exploration investments. By advancing beyond conventional real options or strategy analysis, this work enhances the application of real options and strategic thinking, serving as an essential resource for corporate managers, MBA students, and academics.