Terranova Autos Inc.,a large automobile company,made an initial small investment in a start-up company that was developing a solar-powered car.This gave Terranova Autos controlling interests in the start-up company.However,Terranova Autos had no obligations to make continued investments in the experiments of the start-up company.It could invest in small amounts depending on the new product's success at each stage of its development.If the product proved to be successful,Terranova Autos would have the right to buy out the start-up company.This approach to strategic alliance is referred to as

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This approach to strategic alliance is referred to as a real-options perspective. The real-options perspective allows a firm to obtain additional information at predetermined stages. At each stage, after new information is revealed, the firm evaluates whether or not to make further investments. In a sense, a real option, which is the right, but not the obligation, to continue making investments allows the firm to buy time until sufficient information for a go versus no-go decision is revealed.