Corporate strategic responses to shocks and real options

Purpose: Our objective is to offer ideas that could help redirect theoretical attention to corporate strategic responses to shocks, shifting from a focus solely on containing and absorbing the costs of negative variability to a more integrated view of the interplay between downside risks and upside opportunities during periods of substantial change. Methodology: The paper adopts a theoretical approach grounded in real options theory, which conceptualizes corporate strategic responses to shocks not as random or isolated reactions to specific events, but as real options whose value is fundamentally shaped by uncertainty. Findings: The paper highlights the internal and external drivers that foster different strategic responses to shocks. Within a dynamic setting, a real options perspective enables an integrated understanding of the sequential patterns of reactions and their underlying mechanisms. Managerial implications: A real options approach to corporate strategic responses to shocks can enable managers to develop a more integrated understanding of how firms can balance the need to dynamically manage failure-related costs and growth-oriented strategies during periods of profound turbulence. Research limitations: Future research may refine the underlying theoretical development and subject its core ideas to rigorous empirical scrutiny. Originality: The paper represents the first attempt to apply a real-options lens to corporate strategic responses to shocks.