Optimal Timing to Invest in E-commerce
Resource
Psychology and Marketing 23 (4): 335-348
Journal
Psychology and Marketing
Journal Volume
23
Journal Issue
4
Pages
335-348
Date Issued
2006
Date
2006
Author(s)
Chang, J.-R.
Abstract
The timing of investment in e-commerce remains hotly debated in both the academic and investment communities. This study develops a framework for analyzing the optimal timing for a company to invest in e-commerce for conducting its business-to-business (B2B) or business-to-consumer (B2C) transactions. This study applies a real option theory to assess a new risk-reward dynamic for investing in e-commerce. The numerical results demonstrate that the optimal timing of investment in e-commerce depends on uncertainties regarding future cash flows and the opportunity costs associated with e-commerce. Implications with regard to the behavior of Internet companies from a financial perspective are discussed. © 2006 Wiley Periodicals, Inc.
Type
journal article