Option theory is the best approach to integrate finance and strategy. It quantifies growth options and management flexibility, that are the heart of business strategy. A project can be viewed as a set of real options, as defer the investment, expand or contract operational scale, abandon, temporarily or definitively, investments in subsequent projects, switching inputs and outputs. Real options can be precified in a way analogous to financial options.
Real option; option pricing theory; management flexibility; integration between strategy and finance