A Study On The Models And Applications Of Investing In R&D And Emerging Technology Based On Real Options Approach

Technology innovation can be classified as the suppliers and adopters of technology innovation. This paper emphasizes particularly on the study of the investment decision of technology suppliers. The suppliers of technology innovation are the enterprises that research and develop new technology and new product by investing. These enterprises can make use of the new technology and product and get revenue, or sell to adopters who introduce the new technology and product to market and get economic return. In the procedure of research and development of technology and product, a firm has to be faced with two kinds of uncertainty. First, the uncertainties associated with technology and product, for example, the uncertainty of investment cost, the technology uncertainty in the procedure of R&D. Second, the uncertainties associated with market environment, for example, the appearance of substitute, or the rival intervention, or the change of macro economic environment. These uncertainties usually change dynamically with the evolution of R&D. To deal with the dynamic uncertainty in the procedure of R&D, the managers must have the flexibility of decision-making.This paper reviews the classical non-real option and real option literatures of technology innovation, then aims at some problems that have be been involved little in current study. Especially, this paper pays (special) attention to phenomena existing in technology innovation process, such as the challenge faced by R&D caused by system complexity, the prospective research and development made by firms to reply to the changing market demand, the phenomenon of personal access system—the low quality technology or product , which appears after high quality technology and product, the strike caused by emerging technology and valuation of emerging technology enterprises. Thus, this paper focuses on the cooperative research and development — R&D alliance, the decision about R&D investment, and valuation of emerging technology. In the study of R&D investment decision, this paper studies the decision of continuous innovation, the imperfect competition and the decision of emerging technology R&D investment.In the aspect of cooperative R&D, this paper focuses on the impacts of cost-effective effect, innovation effect, and each alliance member's relative importance in technology innovation on the timing of construction of R&D dynamic alliance. The study shows that under Nash equilibrium, with increasing cost coefficients, the timing of alliance construction gets closerto the result of cost-effective effect, at the same time, with decreasing relative importance of alliance leaderin innovation, the timing of...