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Reconceptualizing Value Creation with Limited Resources

Reconceptualizing Value Creation with Limited Resources;
Reconceptualizing Value Creation with Limited Resources

Author
Hazy, Jim

Full text
https://www.jotmi.org/index.php/GT/article/view/art86
10.4067/S0718-27242008000100005
Abstract
In traditional economics and finance the notion of value creation is virtually synonymous with the net present value of cash flows. Such a characterization implies that all of the uses of resource inputs, such as raw material and energy, are known and that their value is priced into commodities markets. It also fails to allow for the opportunity cost associated with the depletion of resources which, with advancing technology, might reasonably have future uses far greater in value than can be achieved at present with current technology. Stated differently, in traditional valuation analysis the option value associated with scarce resources—when new technology or knowledge can be applied to them—is not addressed. In the present work, we define technology leverage as representative of this effect. We then address the problem of sustainability of organizations by stating four propositions and examining their implications for government policy and for firm governance.
 
In traditional economics and finance the notion of value creation is virtually synonymous with the net present value of cash flows. Such a characterization implies that all of the uses of resource inputs, such as raw material and energy, are known and that their value is priced into commodities markets. It also fails to allow for the opportunity cost associated with the depletion of resources which, with advancing technology, might reasonably have future uses far greater in value than can be achieved at present with current technology. Stated differently, in traditional valuation analysis the option value associated with scarce resources—when new technology or knowledge can be applied to them—is not addressed. In the present work, we define technology leverage as representative of this effect. We then address the problem of sustainability of organizations by stating four propositions and examining their implications for government policy and for firm governance.
 
In traditional economics and finance the notion of value creation is virtually synonymous with the net present value of cash flows. Such a characterization implies that all of the uses of resource inputs, such as raw material and energy, are known and that their value is priced into commodities markets. It also fails to allow for the opportunity cost associated with the depletion of resources which, with advancing technology, might reasonably have future uses far greater in value than can be achieved at present with current technology. Stated differently, in traditional valuation analysis the option value associated with scarce resources—when new technology or knowledge can be applied to them—is not addressed. In the present work, we define technology leverage as representative of this effect. We then address the problem of sustainability of organizations by stating four propositions and examining their implications for government policy and for firm governance.
 
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Artes, Arquitectura y UrbanismoCiencias Agrarias, Forestales y VeterinariasCiencias Exactas y NaturalesCiencias SocialesDerechoEconomía y AdministraciónFilosofía y HumanidadesIngenieríaMedicinaMultidisciplinarias
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Universidad de ChileUniversidad Católica de ChileUniversidad de Santiago de ChileUniversidad de ConcepciónUniversidad Austral de ChileUniversidad Católica de ValparaísoUniversidad del Bio BioUniversidad de ValparaísoUniversidad Católica del Nortemore

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