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Article: An approach to the valuation and decision of ERP investment projects based on real options
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TitleAn approach to the valuation and decision of ERP investment projects based on real options
 
AuthorsWu, F2
Li, HZ2
Chu, LK1
Sculli, D1
Gao, K2
 
KeywordsDecision-making
Enterprise resources planning (ERP)
Mixed-integer programming
Real option
Uncertainty
 
Issue Date2009
 
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0254-5330
 
CitationAnnals Of Operations Research, 2009, v. 168 n. 1, p. 181-203 [How to Cite?]
DOI: http://dx.doi.org/10.1007/s10479-008-0365-7
 
AbstractThe risks and uncertainties inherent in most enterprise resources planning (ERP) investment projects are vast. Decision making in multistage ERP projects investment is also complex, due mainly to the uncertainties involved and the various managerial and/or physical constraints to be enforced. This paper tackles the problem using a real-option analysis framework, and applies multistage stochastic integer programming in formulating an analytical model whose solution will yield optimum or near-optimum investment decisions for ERP projects. Traditionally, such decision problems were tackled using lattice simulation or finite difference methods to compute the value of simple real options. However, these approaches are incapable of dealing with the more complex compound real options, and their use is thus limited to simple real-option analysis. Multistage stochastic integer programming is particularly suitable for sequential decision making under uncertainty, and is used in this paper and to find near-optimal strategies for complex decision problems. Compared with the traditional approaches, multistage stochastic integer programming is a much more powerful tool in evaluating such compound real options. This paper describes the proposed real-option analysis model and uses an example case study to demonstrate the effectiveness of the proposed approach. © 2008 Springer Science+Business Media, LLC.
 
ISSN0254-5330
2012 Impact Factor: 1.029
2012 SCImago Journal Rankings: 1.174
 
DOIhttp://dx.doi.org/10.1007/s10479-008-0365-7
 
ISI Accession Number IDWOS:000264317000011
 
ReferencesReferences in Scopus
 
DC FieldValue
dc.contributor.authorWu, F
 
dc.contributor.authorLi, HZ
 
dc.contributor.authorChu, LK
 
dc.contributor.authorSculli, D
 
dc.contributor.authorGao, K
 
dc.date.accessioned2010-09-06T07:02:08Z
 
dc.date.available2010-09-06T07:02:08Z
 
dc.date.issued2009
 
dc.description.abstractThe risks and uncertainties inherent in most enterprise resources planning (ERP) investment projects are vast. Decision making in multistage ERP projects investment is also complex, due mainly to the uncertainties involved and the various managerial and/or physical constraints to be enforced. This paper tackles the problem using a real-option analysis framework, and applies multistage stochastic integer programming in formulating an analytical model whose solution will yield optimum or near-optimum investment decisions for ERP projects. Traditionally, such decision problems were tackled using lattice simulation or finite difference methods to compute the value of simple real options. However, these approaches are incapable of dealing with the more complex compound real options, and their use is thus limited to simple real-option analysis. Multistage stochastic integer programming is particularly suitable for sequential decision making under uncertainty, and is used in this paper and to find near-optimal strategies for complex decision problems. Compared with the traditional approaches, multistage stochastic integer programming is a much more powerful tool in evaluating such compound real options. This paper describes the proposed real-option analysis model and uses an example case study to demonstrate the effectiveness of the proposed approach. © 2008 Springer Science+Business Media, LLC.
 
dc.description.natureLink_to_subscribed_fulltext
 
dc.identifier.citationAnnals Of Operations Research, 2009, v. 168 n. 1, p. 181-203 [How to Cite?]
DOI: http://dx.doi.org/10.1007/s10479-008-0365-7
 
dc.identifier.doihttp://dx.doi.org/10.1007/s10479-008-0365-7
 
dc.identifier.eissn1572-9338
 
dc.identifier.epage203
 
dc.identifier.hkuros150745
 
dc.identifier.isiWOS:000264317000011
 
dc.identifier.issn0254-5330
2012 Impact Factor: 1.029
2012 SCImago Journal Rankings: 1.174
 
dc.identifier.issue1
 
dc.identifier.openurl
 
dc.identifier.scopuseid_2-s2.0-62949170084
 
dc.identifier.spage181
 
dc.identifier.urihttp://hdl.handle.net/10722/74521
 
dc.identifier.volume168
 
dc.languageeng
 
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0254-5330
 
dc.publisher.placeUnited States
 
dc.relation.ispartofAnnals of Operations Research
 
dc.relation.referencesReferences in Scopus
 
dc.subjectDecision-making
 
dc.subjectEnterprise resources planning (ERP)
 
dc.subjectMixed-integer programming
 
dc.subjectReal option
 
dc.subjectUncertainty
 
dc.titleAn approach to the valuation and decision of ERP investment projects based on real options
 
dc.typeArticle
 
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Author Affiliations
  1. The University of Hong Kong
  2. Xi'an Jiaotong University