Abstract
The Association of Southeast Asian Nations (ASEAN) intends to create the ASEAN Economic Community (AEC) as a single market, to be completed by 2020. The single market will boost the competition in both ASEAN’s internal and external markets, which will spur innovation. Creative innovation will change the production technology to generate enhanced value products and services. Generating this new technology requires R&D investment. This paper discusses the strategic investment decisions which businesses in ASEAN will have to face in a highly competitive environment under uncertain growth conditions, by systematically outlaying several plausible strategic investment outcomes. The game-theoretic real options approach is used to analyze the strategic timing and interplay of strategic investments between Thai and Malaysian consumer firms. In particular, it is used to analyze the valuation of the firms’ strategic investment payoffs.
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