ABSTRACT
Inventions and technological change are the major driving forces of economic and industrial growth. Growth opportunities are real growth options whose values are affected by management’s strategic investment decisions. Real growth options are not endowed on companies. They are instead acquired through competitive investments. For any firm, current investments may influence future opportunities either by creating growth opportunities or maximizing the value of an existing opportunity set. There is strong evidence that growth opportunities constitute a sizable proportion of the market values of many firms. In financial practice and theory various measures of growth opportunities have been used including price-earnings ratio, market-to-book value of equity, Tobin’s Q, market-to-book value of assets and the return-on-investment premium over the cost of capital. This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book.
