The suitability of the Real Options Analysis for the investment valuation has been criticized recently due to the possibilities for the management to inflate the valuation. This is understandable: the option can described so that almost every investment looks profitable when there is a convenient option or several options attached to it. Particularly in terms of accounting the ROA approach has been criticized in a paper commissioned by the Finnish Employment and the Economy (Anttonen et al., 2011). This criticism further underscores the need for ROA usage to be studied in Finland for startup companies and investments in general.
A necessary further research would be multiple case study. The research should have different types of firms and their financial information would be disclosed as needed for the research. It would be beneficial to see how close to these valuations the ROA valuation comes to especially if the time period of the research is long enough for some of the firms to get actual investments. This research could compare the valuation done using ROA to the valuation assigned to the company by investors. Naturally a bigger quantitative research would be ideal to diminish the random errors in valuations and see the results from various companies from different fields of business.
Another line of research could be to use one case company with ROA and other valuation methods in order to compare the valuations and to find out where the differences originate. Afterwards, the valuation assigned by the investors could be compared to each of these valuations done by different methods.
The problems of the model are obvious but so are the answers. The possibility to inflate the investment valuation is always there. This is why it is essential for the reader to understand how the model works and analyze the numbers behind the valuation critically. Otherwise the ROA approach is no different to financial options and the mathematics behind it is similar. The trust issue is visible in Finland also in the work of auditors: at my work place we tried to appraise customer's R&D investment to the company's balance sheet but the auditors hesitated citing the law and uncertainty. Although this is understandable it doesn't mean that the state of legislature and opinions shouldn't change. There needs to be more valuations done using real options and more research. The startup companies – hailed as saviors to the economic troubles Finland is in - oblige us.
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