Testing the Waters: Using Collective Real Options to Manage the Social Dilemma of Strategic Alliances

Abstract

We extend real options research by introducing the concept of collective real options and model how collective real options provide strategic alliances a mechanism to manage social uncertainty. Collective real options manage social uncertainty by producing relational small wins that develop trust. The amount of trust developed by acquiring a collective real option depends on the exposure of alliance partners. Alliance partner reputation also plays an important role in the impact of collective real options.