Real options reasoning in healthcare: an integrative approach and synopsis.

For the past 40 years, practitioners and researchers alike have been grappling with the natural shortcomings associated with the net present value approach to strategic decision making and capital budgeting. Work by scholars in option pricing theory has evolved into an alternative perspective on strategic capital investments, called "real options." Proponents of real options argue that this is a superior way of approaching decision making and capital budgeting, compared with other approaches, as it allows for greater strategic flexibility and encourages exploration, experimentation, and innovation.

Real option logic for healthcare entrepreneurial growth and survival.

Given the increasing market and technological uncertainty of capital investments, healthcare financial executives need to incorporate flexibility into their decision making. Traditional capital budgeting techniques do not take into consideration the need for flexibility, changes in the environment, or actions by management. In response, practitioners from various industries have adopted a new way of looking at capital investments: real options.