While real options theory posits the advantage of real options reasoning (ROR) in preserving flexibility ex ante to manage uncertainty, whether ROR benefits firm performance remains a critical debate in the literature. Our study identifies firm imitation propensity (vis-à-vis innovation) as a firm-level boundary condition to illuminate for which firms ROR benefits business survival or not. Using unique multiple-wave data that track the survival of 259 Iranian small and medium-sized enterprises over five years, our results show that the relationship between ROR and firm survival is in general positive, but becomes weaker and could turn negative for firms with higher imitation propensity. Integrating insights from ROR and imitation research, our study helps towards resolving the debate on the performance implications of ROR by identifying a firm-level boundary condition to further our scholarly understanding of ROR as an uncertainty management approach.
