Optimal timing to invest in e-commerce

✍ Scribed by Jow-Ran Chang; Mao-Wei Hung

• Publisher: John Wiley and Sons
• Year: 2006
• Tongue: English
• Weight: 190 KB
• Volume: 23
• Category: Article
• ISSN: 0742-6046
• DOI: 10.1002/mar.20114

✦ Synopsis

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.