Ambiguity, managerial ability, and growth options

Driouchi, Tarik and Chen, Mingyu and Lyu, Zhuo and Bennett, David and So, Raymond (2021) Ambiguity, managerial ability, and growth options. British Journal of Management. ISSN 1045-3172

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Abstract

This paper studies the role of ambiguity and managerial ability in firm growth options from the perspective of behavioural theory. We argue that managerial ability increases both the identification and exploitation of growth options opportunities, but ambiguity reduces strategic growth options value as a result of information incompleteness and non-Bayesian behaviour. Using a dataset of all US-listed firms, we test the joint effects of ambiguity and managerial ability on growth options value after controlling for standard determinants and endogeneity. The results indicate that ambiguity has a negative effect on growth options value, while ability has a positive effect. We also find that the negative association between ambiguity and growth options is less pronounced with higher managerial ability. These findings underscore the importance of firm heterogeneity in the identification, exercise, and management of strategic and innovative real options opportunities. The paper's contribution provides relevant management insights into the behavioural antecedents of real options at the firm level as well as highlights that managerial and behavioural characteristics are important determinants of growth options value.

Item Type:
Journal Article
Journal or Publication Title:
British Journal of Management
Additional Information:
This is the peer reviewed version of the following article: Driouchi, T., Chen, M., Lyu, Z., Bennett, D.J. and So, R.H. (2021), Ambiguity, Managerial Ability, and Growth Options. Brit J Manage. https://doi.org/10.1111/1467-8551.12534 which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12534 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1405
Subjects:
ID Code:
157501
Deposited By:
Deposited On:
21 Jul 2021 13:15
Refereed?:
Yes
Published?:
Published
Last Modified:
06 Oct 2021 08:19