International investment decisions under uncertainty: Contributions of real options theory and future directions

We undertake a critical literature review to facilitate academic dialogs regarding decisions under uncertainty in international business settings and highlight the growing focus on international investments as conveyers of real options. Our literature review (1) provides a systematic overview of uncertainty types considered in this literature, real options identified as particular to international investments, and valuation approaches used and (2) highlights key methodological approaches used for testing real options models applied to international investments, and the controversies in this regard. This study draws on the above to shed light on important avenues for future research including (a) the need for more fine-grained and diverse measures of uncertainty in the international context, (b) an emphasis on clarifying the value effects of combinations of real options, and (c) the necessity of further consideration of the costs of options along with the value.