Knowledge Inventories and Managerial Myopia.

Managing knowledge inventories is the central issue posed by the knowledge-based view of the firm. Because of future opportunities to switch among technologies and idle or deploy technologies over time, managing knowledge inventories requires valuing flexibility. Real option theory presents normative pricing formulas for valuing flexibility. These formulas assume managers consider the full time horizon of technologies as well as all available substituting and complementary technologies. This study considers the implications of violations of these assumptions (i.e., temporal and spatial myopia) for managers’ technology investment decisions. Specifying decision criteria under alternative forms of myopia suggests possible sources and patterns of technology investment decision errors.