Research On Competitive And Cooperative R&D Project Investment Decision Based On Real Option

In the global economy, the competitive focus has moved from the front of the product development stage, the enterprises’ future market position is largely due to R&D(research and development) project investment opportunities generated by today’s decision. When R&D project carried out a quantitative assessment, the net present value method and other traditional investment decision methods ignore the investment in a variety of uncertainties, delayed important investment opportunities, the cost of irreversibility, and competition and cooperation that make enterprises lose valuable investment opportunities and greater benefits. Therefore, with a variety of uncertai nties, scientific selections of investment opportunities have become the key to the successful R&D project investment.Real option theory is not to deny the traditional investment decision method, but in a combination of investments in a variety of uncertainties, the formation of a more scientific method of R&D project Investment decision. This paper which includes the combination of real options theory and competitive behavior, has the application which contains real option theory to assess the multiple uncertainties of R&D project option value and investment profits, and solves the scientific R&D investment, accuracy and flexibility issues. Also it takes the advantage of game on the analysis of competitive behavior among investors, and builds a model of R&D investment decision profits, which finds the optimal timing and optimal decisions under equilibrium for R&D projects investment.In this paper, the basic theories of R&D project investment decisions are reviewed, and the limitations of traditional investment decision method are analyzed. Also it discusses the real option theory for R&D project investment under multiple uncertainties, and analyzes the development of real option in R&D project investment. On this basis, this paper from the two angles of e nterprise competitive position in the market and competitors reaction, analyzes the selection of R&D investment decisions with the first-mover advantage and the follower advantage. After identifying the R&D investment uncertainties and its impact on the project profits, this paper analyzes the multiple uncertainties from the qualitative and quantitative angles. Through derived differential equations for the technical, commercial and sudden uncertainties, it builds R&D project investment decision profit model to set a theoretical foundation.Real Option method without considering the strategic impact of other market participants solves to quantify the value of R&D project, but for the presence of competitors, it results in the R&D project value calculation that is not accurate. This paper stands in the perspective of business investment with two competing enterprises, and considers the impact of market competition brought about by the four investment decisions: a market pioneer or follower, immediate investment with another enterprise, or waiting for the opportunity to invest with another enterprise. After information disclosure, this paper builds the R&D project investment decision model under multiple uncertainties, and obtains more accurate real option value. Finally, through game theory combined with real options theory, it solves the impact of competitor behavior and a variety of uncertainties for the R&D project optimal investment decision.In order to better respond to various uncertainties and the pursuit of profit maximization, some enterprises tend to form the technology sharing alliance with a full exchange of information or cost sharing alliance with seeking maximize the overall profits. However, due to the self-interest, for the profits after successfully R&D project, the enterprises need to make their own optimal investment decisions. Taking two enterprises of alliance, this paper analyzes the characteristics of alliances and establishes appropriate R&D project investment decision model by real opti on theory for the evaluation of R&D project investment opportunities and decision-making benefits. Technology sharing alliance of enterprises seeks to maximize their own profits, so it needs to find Nash equilibrium point as the R&D project optimal investment decisions. When cost sharing alliance maximizes overall profits, the enterprises obtain optimal investment decisions in terms of cooperation, and their own profits by calculating the Shapley value for a reasonable allocation.In reality, investors are not always risk-neutral. Knight uncertainty is the ambiguity, and in the subjective, investors will have ambiguity preference. In order to be more application of real options theory in the investment decision-making of R&D project, it needs to consider ambiguity preference of investors in real option theory. It uses real options theory to quantify Knight uncertainty, and establishes corresponding R&D project investment decision model for investment opportunities and profits. Through the research of competition and cooperation under the ambiguity preference conditions of R&D projects optimal decisions it can be found: enterprises have different optimal investment decision under Knight uncertainty, which enhance the investment decision-making more scientific.