The Option-Game Approach To Analyze Technology Innovation Investment

Technology innovation seems to become one of the representation of the 21st century. Every country realizes that it is important for expediting the economic development and strengthening the nation's economic power. So they increase the investment and reward for the technology innovation and set a strategic goal of according to the current situation. Meanwhile. the enterprise, whose investment almost controls the increase of the economy,is the micro foundation of the national economy and its prosperity walks hand in hand with the development of it. The money a company spends on the technology innovation is crucial to the sustainable development and the increase of the economy, and moreover, it can provide a kind of predominance.But the investment is highly uncertainty, irreversibility, competitiveness and the incomplete information which makes investors hesitate when they are making decisions. When we use the traditional DCF method to evaluate the investment for Technology innovation, we usually underestimate or overestimate its value and can't get a logical evaluation because we don't consider the flexibility of the management in the investing process. Based on the finance option, western scholars put forward the real option theory, and together with the game theory, they analyze the investment for Technology innovation.This paper has reviewed the shortcoming of the traditional DCF method, analyzed the option of the investment for technology innovation, and developed a general framework for its game analysis. Then it calculates the single and double phase investment, and the situation with or without competition. Finally, after taking into account the enterprises'cantonment before investing their money, considering the spillovers of technology because of incomplete information. The analysis above provides us a new way of thinking and a theoretical tool which can serve as a reference to technology innovation in an enterprise, and is significant to our country's innovation encouraging strategy.