Int. J. Operational Research, Vol. 5, No. 3, 2009 349 Copyright © 2009 Inderscience Enterprises Ltd. An adoption decision model of emerging capital budgeting methodologies Suvankar Ghosh, Marvin D. Troutt* and Jay Weinroth Department of Management Systems, College of Business Administration, Kent State University, P.O. Box 5190, Kent, OH 44242, USA Fax: 330-672-2953 E-mail: sghosh1@kent.edu E-mail: mtroutt@kent.edu E-mail: gweinroth@gmail.com *Corresponding author Xiaolin Li Department of e-Business and Technology Management, Towson University, 8000 York Rd, Towson, MD 21252, USA E-mail: lixiaolin22@gmail.com Abstract: Two emerging methodologies for capital budgeting are Real Options (RO) and Economic Value Added (EVA). Embracing EVA or RO is not a small undertaking for a firm. Given the extent of the change involved, we recommend that firm adopt these new approaches sequentially. We develop a Methodology Adoption Decision Model (MADM) for determining which methodology a firm should adopt first. The MADM focuses on the theoretical soundness and the practical applicability of the methodology. We conclude that EVA is more likely to be embraced by the industry than RO. We therefore recommend that management first focus on EVA adoption. Keywords: decision analysis; capital budgeting; RO; real options; EVA; economic value added. Reference to this paper should be made as follows: Ghosh, S., Troutt, M.D., Weinroth, J. and Li, X. (2009) ‘An adoption decision model of emerging capital budgeting methodologies’, Int. J. Operational Research, Vol. 5, No. 3, pp.349–362. Biographical notes: Suvankar Ghosh is a veteran of the information technology industry and is currently pursuing a PhD at the College of Business Administration at Kent State University. He has held key executive positions at Compaq Computer, Progress Software, and Digital Equipment, and is applying his extensive industry experience in his research on the strategic value of IT and on developing more powerful methods for measuring the financial and economic value of IT investments.