The emerging information technology of internet of things (IoT) has caught much attention from both theoretical research and production practice. The application of IoT in manufacturing industry can dramatically improve business process efficiency and promote organizational performance. However, firms tend to hesitate in the investment decisions, which poses great challenges to the IoT application progress. Besides the investment nature of long cycle and high risk, the “organizational factors” are also non-ignorable. A general organizational change model is first refined according to the organizational change of Jianghuai Auto Company when applying IoT. Based on the binomial lattice tree framework, we propose a two-stage real options model to solve the optimal investment problems in both stages of internal pilot and product life-cycle management (PLM) expansion. Investment costs and future benefits are considered to investigate the promoting effect of organizational factors in project implementation. This paper demonstrates the internal causes and significances of organizational change for IoT development project, which is also theoretically meaningful for explanation of real options approach in organizational area.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.