Real Options and Resource Reallocation Processes

This article considers real options approaches through the lens of firm's resource reallocation processes. It explores some potential drivers and consequences of mismatches between initial resource allocation logics and subsequent reallocation realities, highlighting a process of rational escalation in the presence of sunk costs. It also presents a new perspective on the traditional stage-gate process, and considers some recent empirical evidence on the efficiency of resource reallocation processes in organizations.