How to Evaluate and Invest in Emerging A/E/C Technologies under Uncertainty

Abstract

Many emerging architectural/engineering/construction (A/E/C) technology investments are of strategic importance and may create future growth opportunities. Therefore, from the strategic perspective, management needs a better method that can quantify the strategic value of technology investment and suggest optimal investment strategies when the future is uncertain. This paper presents a quantitative valuation method based on modern option pricing theory for evaluating major investments in emerging A/E/C technologies. This framework considers specifically the technology investment risk and embedded managerial options. It further aligns the investment evaluation process with the financial market. The analysis may help A/E/C firms more accurately evaluate investments in emerging technologies, such as information technology and automation, and make strategic investment decisions under uncertainty.