The Affecting Factors of IT Adoption - Integrating Real Option Theory and Innovation Diffusion Theory

The purpose of this paper is to investigate the relationships between the constructs of Real Option Theory (ROT) and Innovation Diffusion Theory (IDT) along with their impacts on new IT projects adoption. Unlike the more traditional techniques, real options theory explicitly accounts for uncertainty and future flexibility. Those variables are missed in all traditional innovation adoption theories (such as IDT), but are very important in situations dealing with structuring and timing investment decisions, especially in the face of high uncertain conditions such as new IT project. Three types of option are utilized in this study. They are 1) the building options mainly included explore options (including prototype options and pilot options), stage options, and lease options, 2) the operation options mainly included contract options, change-scale options, switch-use options, and abandon options, and 3) the growth options included strategic growth options. This study will investigate the impacts of these three option types on the main features of IDT, including relative advantages, compatibility, complexity, testability, and results demonstrability of innovation. Parametric uncertainty is used as a moderator of above relationships. The major contribution of this research model is to enhance and extend the IDT by adding two important constructs, uncertainty and managerial flexibility of the innovation.