A theory of advantage based on feedback learning and real option perspectives.

What is it about?

This paper recognizes that the literature on feedback learning and real options emphasize two distinct forms of uncertainty, contemporaneous and prospective uncertainty. We argue that differences in the ability to integrate new information to exercise a contingent claim on an asset in a factor market leads to competitive heterogeneity in the exercise of real options and describe how these differences may generate competitive advantage. We conclude by suggesting broader implications of our theory-- notably how differences in managerial cognition, organization structure, and problem framing and solving skills affect firms ability to manage the uncertainty that surrounds investments in real options and generate competitive advantage.

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Why is it important?

The paper aims to contribute by suggesting a new way of thinking about how organizational characteristics and real options may contribute to the emergence of competitive advantage.