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ディスカッション／ワーキング・ペーパー

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Discussion Papers In Economics And Business. 2014, 14-13, p. 1-26

Valuation of sequential R&D investment under technological, market, and rival preemption uncertainty

Nishihara, Michi

Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

英語

text

2014-04

http://www2.econ.osaka-u.ac.jp/library/global/dp/1413.pdf

We develop a real options model for evaluating and optimizing an R&D project. The model can capture key features of R&D, including research duration, growth opportunity, debt financing, and uncertainty of technological, demand market, and rival preemption. Nevertheless, it is computationally tractable and thus helps practitioners to evaluate various cases of R&D investment. Further, by analyzing the model with a wide range of parameter values, we unveil the interactions of key R&D features. The effect of duration on investment depends on whether there is a possibility of rival preemption. Higher uncertainty of research duration speeds up project inception in the presence of rival preemption. Higher uncertainty of technological success, combined with a growth opportunity embedded in the R&D project, accelerates investment. Debt financing can greatly decrease time lag between the first stage project and growth project. These results are consistent with the empirical evidence.

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Valuation of sequential R&D investment under technological, market, and rival preemption uncertainty

Nishihara, Michi

Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

英語

2014-04

Discussion Papers In Economics And Business

14-13

1

26

https://hdl.handle.net/11094/27204

http://www2.econ.osaka-u.ac.jp/library/global/dp/1413.pdf