| How to make Research and Development (R&D) decision under uncertainty is a very essential problem in the practice and theory of management. Existing quantitative analysis method and qualitative analysis are not effective to solve the R&D investment because it is along-term investment project. Real option theory can put more flexibility to R&D investment as it take all factors which can have effect on R&D management into account. Considering the value of real option in R&D project can evaluate rationally R&D project investment.The purpose of the dissertation is to analyze real option pricing theory and the application in R&D in-depth, based on the framework of option pricing and the similarity between real option and option. This paper mainly includes: l.This part analyzes traditional investment decision-making theory and method and offers its weakness 2. This chapter summarized real option pricing method based on the similarity between real option and option. 3. This chapter analyzed the similarity between real option and R&D, summarized method to solve the R&D investment. 4. This part analyzed the application of option to defer, to switch, option to expand and compound option in R&D investment.The application in R&D overcame weakness of traditional investment decision-making and adds rationality to investment decision-making of R&D project. The paper provided scientific reference for department of decision-making.
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