Establishing the value of flexibility created by training: Applying real options methodology to a single HR practice

Organization Science

Volumn 21, Issue 3, 2010, Pages 765-780

  Berk, Aleš ^a   Kaše, Robert ^a  

^a UNIVERSITY OF LJUBLJANA   (Slovenia)

Author keywords

Human capital; Human resource management; Intangibles; Real options; Training; Valuation model

Indexed keywords

EID: 77956990658     PISSN: 10477039     EISSN: 15265455     Source Type: Journal    
DOI: 10.1287/orsc.1090.0476     Document Type: Article

References (80)

1. Adner, R., D. A. Levinthal. 2004. What is not a real option: Considering boundaries for the application of real options to business strategy. Acad. Management Rev. 29(1) 74-85.
2. Amram, M., N. Kulatilaka. 1999. Disciplined decisions: Aligning strategy with the financial markets. Harvard Bus. Rev. 77(1) 95-104.
3. Barney, J. 1991. Firm resources and sustained competitive advantage. J. Management 17(1) 99-120.
4. Bartel, A. P. 1994. Productivity gains from the implementation of employee training programs. Indust. Relations 33(4) 411-425.
5. Bartel, A. P. 2000. Measuring the employer's return on investments in training: Evidence from the literature. Indust. Relations 39(3) 502-524.
6. Becker, G. S. 1964. Human Capital. National Bureau of Economic Research, New York.
7. Bhattacharya, M., P. M. Wright. 2005. Managing human assets in an uncertain world: Applying real option theory to HRM. Internat. J. Human Resource Management 16(6) 929-948.
8. Birati, A., A. Tziner. 1999. Economic utility of training programs. J. Bus. Psych. 14(1) 155-164.
9. Black, F., M. Scholes. 1973. The pricing of options and corporate liabilities. J. Political Econom. 81(3) 637-654.
10. Bontis, N., J. Fitz-enz. 2002. Intellectual capital ROI: A causal map of human capital antecedents and consequences. J. Intellectual Capital 3(3) 223-247.
11. Bontis, N., N. C. Dragonetti, K. Jacobsen, G. Roos. 1999. The knowledge toolbox: A review of the tools available to measure and manage intangible resources. Eur. Management J. 17(4) 391-402.
12. Boselie, P., G. Dietz, C. Boon. 2005. Commonalities and contradictions in HRM and performance research. Human Resource Management J. 15(3) 67-94.
13. Boudreau, J. W. 1983. Economic considerations estimating the utility of human resource productivity improvement programs. Personnel Psych. 36(3) 551-576.
14. Bowman, H. E., G. T. Moskowitz. 2001. Real options analysis and strategic decision making. Organ. Sci. 12(6) 772-777.
15. Boxall, P., J. Purcell. 2003. Strategy and Human Resource Management. Palgrave Macmillan, Hampshire.
16. Carnevale, A. P. 1989. The learning enterprise. Training Development J. 43(2) 26-37.
17. Cascio, W. F. 1991. Costing Human Resources. PWS-KENT, Boston.
18. Cheng, J. L. C., I. F. Kesner. 1997. Organizational slack and response to environmental shifts: The impact of resource allocation patterns. J. Management 23(1) 1-18.
19. Cohen, W. M., D. A. Levinthal. 1990. Absorptive capacity: A new perspective on learning and innovation. Admin. Sci. Quart. 35(1) 128-152.
20. Collins, C. J., K. G. Smith. 2006. Knowledge exchange and combination: The role of human resource practices in the performance of high-technology firms. Acad. Management J. 49(3) 544-560.
21. Cronbach, L. J., G. C. Gleser. 1965. Psychological Tests and Personnel Decisions. University of Illinois Press, Urbana.
22. Delery, J. E., D. H. Doty. 1996. Modes of theorizing in strategic human resource management: Test of universalistic, contingency, and configurational performance predictions. Acad. Management J. 39(4) 802-835.
23. Dixit, A. K., R. S. Pindyck. 1994. Investment Under Uncertainty. Princeton University Press, Princeton, NJ.
24. Dyer, L., R. Shafer. 1999. From human resource strategy to organizational effectivness: Lessons from research on agile organizations. P. Wright, L. Dyer, J. Bourdreau, G. Milkovich, eds. Research in Personnel and Human Resource Management,(Supplement 4: Strategic Human Resource Management in the 21st Century). JAI Press, Stamford, CT, 145-174.
25. Fitz-enz, J. 1984. How to Measure Human Resources Management. McGraw-Hill, New York.
26. Fitz-enz, J. 2000. The ROI of Human Capital. Amacom, New York.
27. Flamholtz, E. G. 1985. Human Resource Accounting. Jossey-Bass, San Francisco.
28. Fundenberg, D., J. Tirole. 1984. The fat-cat effect, the puppy-dog ploy, and the lean and hungry look. Amer. Econom. Rev. 74(2) 361-366.
29. Grant, R. M. 1996. Toward a knowledge-based theory of the firm. Strategic Management J. 17(Winter) 109-122.
30. Hayes, R. H., W. J. Abernathy. 1980. Managing our way to economic decline. Harvard Bus. Rev. 58(4) 67-77.
31. Hayes, R. H., D. A Gravin. 1982. Managing as if tomorrow mattered. Harvard Bus. Rev. 60(3) 70-79.
32. Hull, C. J. 2005. Options, Futures and Other Derivatives, 6th ed. Prentice-Hall International, Upper Saddle River, NJ.
33. Huselid, M. A. 1995. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Acad. Management J. 38(3) 635-672.
34. Huselid, M. A., B. E. Becker. 1996. Methodological issues in crosssectional and panel estimates of the human resource-firm performance link. Indust. Relations 35(3) 400-422.
35. Johanson, U., H. H. Larsen. 2002. Human resource costing and accounting: Putting a price on human resource investments. C. Brewster, H. H. Larsen, eds. Human Resource Management in Northern Europe. Blackwell, Oxford, UK, 170-194.
36. Kim, D. H. 1993. The link between individual and organizational learning. Sloan Management Rev. 35(1) 37-50.
37. Kogut, B., N. Kulatilaka. 2001. Capabilities as real options. Organ. Sci. 12(6) 744-758.
38. Kogut, B., N. Kulatilaka. 2004. Response: Real options pricing and organizations: The contingent risks of extended theoretical domains. Acad. Management Rev. 29(1) 102-110.
39. Kogut, B., U. Zander. 1996. What firms do? Coordination, identity, and learning. Organ. Sci. 7(5) 502-518.
40. Kulatilaka, N., S. G. Marks. 1988. The strategic value of flexibility: Reducing the ability to compromise. Amer. Econom. Rev. 78(3) 574-580.
41. Kulatilaka, N., E. C. Perotti. 1998. Strategic growth options. Management Sci. 44(8) 1021-1031.
42. Kulatilaka, N., L. Trigeorgis. 1994. The general flexibility to switch: Real options revisited. Internat. J. Corporate Finance 6(2) 778-798.
43. Kyläheiko, K., J. Sandström, V. Virkkunen. 2002. Dynamic capability view in term of real options. Internat. J. Production Econom. 80(1) 65-83.
44. Lepak, D. P., S. A. Snell. 2002. Examining the human resource architecture: The relationship among human capital, employment, and human resource configurations. J. Management 28(4) 517-543.
45. Lev, B. 2001. Intangibles: Management, Measurement, and Reporting. Brookings Institution Press, Washington, DC.
46. Luehrman, A. T. 1998. Investment opportunities as real options: Getting started on the numbers. Harvard Bus. Rev. 76(4) 51-67.
47. MacDougall, L. S., H. R. Pike. 2003. Consider your options: Changes to strategic value during implementation of advanced manufacturing technology. Omega 31(1) 1-15.
48. Majd, S., R. Pindyck. 1987. Time to build, option value, and investment decisions. J. Financial Econom. 18(1) 7-27.
49. Martocchio, J. J., T. T. Baldwin. 1997. The evolution of strategic organizational training: New objectives and research agenda. G. Ferris, ed. Research in Personnel and Human Resource Management, Vol. 15. JAI Press, Stamford, CT, 1-46.
50. McDonald, R., D. Siegel. 1986. The value of waiting to invest. Quart. J. Econom. 101(4) 707-727.
51. McGrath, G. R., W. J. Ferrier, A. L. Mendelow. 2004. Real options as engines of choice and heterogeneity. Acad. Management Rev. 29(1) 86-101.
52. Merton, R. C. 1973. Theory of rational option pricing. Bell J. Econom. Management Sci. 4(1) 141-183.
53. Miller, K. D., A. T. Arikan. 2004. Technology search investments: Evolutionary, option reasoning, and option pricing approaches. Strategic Management J. 25(5) 473-485.
54. Mishina, Y., T. G. Pollock, J. F. Porac. 2004. Are more resources always better for growth? Resource stickiness in market and product expansion. Strategic Management J. 25(12) 1179-1197.
55. Morrow, C. C., M. Q. Jarrett, M. T. Rupinski. 1997. An investigation of the effect and economic utility of corporate-wide training. Personnel Psych. 50(1) 91-117.
56. Noe, R. A. 2002. Employee Training and Development. McGraw-Hill Irwin, New York.
57. Nohria, N., R. Gulati. 1996. Is slack good or bad for innovation? Acad. Management J. 39(5) 1245-1264.
58. Osterman, P. 1995. Skill, training, and work organization in American establishments. Indust. Relations 34(2) 125-146.
59. Paauwe, J. 2004. HRM and Performance: Achieving Long-Term Viability. Oxford University Press, Oxford, UK.
60. Pandza, K., S. Horsburgh, K. Gorton, A. Polajnar. 2003. A real options approach to managing resources and capabilities. Internat. J. Oper. Production Management 23(9) 1010-1032.
61. Roll, R. 1977. An analytical formula for unprotected American call option on stocks with known dividends. J. Financial Econom. 5(2) 251-258.
62. Senge, P. M. 1990. The Fifth Discipline: The Art and Practice of the Learning Organization. Doubleday, New York.
63. Smit, H. T. J., L. A. Ankum. 1993. A real options and game-theoretic approach to corporate investment strategy under competition. Financial Management 22(3) 241-250.
64. Smit, H. T. J., L. Trigeorgis. 2001. Flexibility and commitment in strategic investments. E. S. Schwartz, L. Trigeorgis, eds. Real Options and Investment Under Uncertainty: Classical Readings and Recent Contributions. MIT Press, Boston, 451-498.
65. Smit, H. T. J., L. Trigeorgis. 2004. Strategic Investment, Real Options and Games. Princeton University Press, Princeton, NJ.
66. Sudarsanam, S., G. Sorwar, B. Marr. 2006. Real options and the impact of intellectual capital on corporate value. J. Intellectual Capital 7(3) 291-308.
67. Sveiby, K. E. 2002. Measuring Intangibles and Intellectual Capital. MIT Press, Cambridge, MA.
68. Teisberg, E. O. 1993. Capital investment strategies under uncertain regulation. The Rand J. Econom. 24(4) 591-604.
69. Trigeorgis, L. 1993. Real options and interactions with financial flexibility. Financial Management 22(3) 202-224.
70. Trigeorgis, L. 1995. Real Options in Capital Investment: Models, Strategies and Applications. Praeger, Westport, CT.
71. Trigeorgis, L. 1996. Real Options: Managerial Flexibility and Strategy in Resource Allocation. MIT Press, Cambridge, MA.
72. Trigeorgis, L., S. P. Mason. 1987. Valuing managerial flexibility. Midland Corporate Finance J. 5(Spring) 14-21.
73. Valle, R., F. Martin, P. M. Romero, S. Dolan. 2000. Business strategy, work processes and human resource training: Are they congruent? J. Organ. Behav. 21(3) 283-297.
74. Vandenberg, R. J., H. A. Richardson, L. J. Eastman. 1999. The impact of high involvement work process on organizational effectiveness: A second-order latent variable approach. Group Organ. Management 24(3) 300-339.
75. van Veldhoven, M. 2005. Financial performance and the long-term link with HR practices, work climate and job stress. Human Resource Management J. 15(4) 30-53.
76. Voss, B. G., D. Sirdeshmukh, Z. G. Voss. 2008. The effects of slack of resources and environmental threat on product exploration and exploitation. Acad. Management J. 51(1) 147-164.
77. Wright, P. M., G. E. McMahan. 1992. Alternative theoretical perspectives for strategic HRM. J. Management 18(2) 295-320.
78. Wright, P. M., B. B. Dunford, S. A. Snell. 2001. Human resources and the resource-based view of the firm. J. Management 27(6) 701-721.
79. Wright, P. M., T. M. Gardner, L. M. Moynihan, M. R. Allen. 2005. The relationship between HR practices and firm performance: Examining causal order. Personnel Psych. 58(2) 409-446.
80. Zahra, S. A., G. George. 2002. Absorptive capacity: A review, reconceptualization, and extension. Acad. Management Rev. 27(2) 185-203.