Abstract
The economic value of a corporate strategic move is driven by an increase in revenues, a reduction of costs and/or risks, and consists of the net present value of projected cash flows (static value) complemented by dynamic considerations (real options value) and adjusted for competitive interactions with rivals and partners (game- theoretic value). We develop a framework of the economic value of corporate strategic moves that effectively connects corporate and competitive strategies. The framework offers a new synthesis by uncovering mechanisms that influence the profitability of a corporate strategic move across the static, real-options, and game-theoretic perspectives, identifying tensions within a given value driver, and revealing tradeoffs among the three value drivers. In this paper, we apply our framework to the revenue driver of a specific corporate strategic move-corporate diversification—and derive propositions that are new to the strategic management field.
Published Version
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