Analysis on Option Value of Supplier Involvement in Collaborative Development

Abstract:

The purpose of this study was to recognize and analysis the option value of supplier’s involvement in the collabotative project. Using real option theory, this paper began by distinguishing two forms of exit mechnisms for a collaborative project between enterprises in supply chain, and then analysised the anticipated project value of every participation by different exit mechanism. Research conclusion shown, the option behaviour of common termination is endogenetic in project, and every participant will get benifit through making the parterners’ agreement consistency, which emphasis the collaboration nature of partnership. Unilateral termination of collaborative project is an non-cooperative behaviour which will incur loss of parterner’s benefit and reduce the project’s overall value.

• Periodical: Advanced Materials Research (Volumes 328-330)
• Pages: 814-819
• DOI: https://doi.org/10.4028/www.scientific.net/AMR.328-330.814
• Online since: September 2011
• Authors: Zi Jian Zhang, Hua Pan
• Keywords: Collaborative Development, Real Option, Supplier Involvement, Termination Mechanism

References

[1] Clark K B. Project Scope and Project Performance: The Effect of Parts Strategy and Supplier Involvement on Product Development. Management Science, Vol. 35 (1998), pp.1247-1263.

DOI: 10.1287/mnsc.35.10.1247

[2] Dyer J H. Effective Inter firm Collaboration: How Firms Minimize Transaction Costs and Maximize Transaction Value. Strategic Management Journal, Vol. 18 (1997), pp.535-556.

DOI: 10.1002/(sici)1097-0266(199708)18:7<535::aid-smj885>3.0.co;2-z

[3] E. Johnsen, T. Supplier involvement in new product development and innovation: Taking stock and looking to the future. Journal of Purchasing &Supply Management. Vol. 15(2009),P. 187-197.

DOI: 10.1016/j.pursup.2009.03.008

[4] Pindyck, R., S.: Irreversibility, Uncertainty, and Investment. J. Journal of Economic Literature, vol. 29 (1991), pp.1110-1148.

[5] Trigeorgis, L.: Real Options. Cambridge, MA, MIT Press(1996).

[6] Kogut, B.: Ventures and the Option to Expand and Acquire. J. Management Science, vol. 37(1991), pp.19-33.

DOI: 10.1287/mnsc.37.1.19

[7] Chi, T., Mcguire, D. J.: Collahorative Ventures and Value of Learning: Integrating the Transaction Cost and Stmtegic 0ption Perspectives on the Choice of Market Entry Modes. J. Journal of IntemationaI Business Studies, vol. 27)1996), pp.285-307.

DOI: 10.1057/palgrave.jibs.8490136

[8] Chi, T.: Option to Acquire or Divest a Joint Venture. J. Strategic Management Journal, vol. 21)2000), pp.665-687.

DOI: 10.1002/(sici)1097-0266(200006)21:6<665::aid-smj109>3.0.co;2-0

[9] Folta, T., Miller, D.: Real Options in Equity Pannerships. J. Strategic Management Journal, vol. 23 )2002), pp.77-88.

[10] Cheng Mei, A Study on the Strategic Alliance Based on the Options Game. J. Nankai Bussines Review, vol. 10)2007), pp.54-59.

[11] Newman, R.,G.: Single source qualification. J. Journal of Purchasing and Materials Management, vol. 24)1988), pp.10-17.

[12] Dyer, J., H., Ouchi, W. G.: Japanese-style partnerships: Giving companies a competitive edge. J. Sloan Management Review, vol. 35)1993), pp.51-63.