A real options approach to releasing “network” products

Abstract

While real options logic has been applied to many managerial initiatives in recent years, the effectiveness of real options in the context of new product releases remains ambiguous due to the dueling nature of growth options and deferral options, and the failure to factor these contexts to the theory. Focusing on products influenced by network effects, we propose that value of product release from a real options perspective is conditioned by the level of network rivalry and the strength of network effects (i.e., network intensity) in a given context. These ideas are formalized in a conceptual framework and a series of research propositions, and implications for theory and practice at the intersection of network effects and real options are offered.