R&D Investment Timing Analysis Based-on Growth Options

The research and development (R&D) is the important means for the enterprise obtains the competitive advantage and to raise the economic profit. Traditional investment decision-making approach is the discounted cash flow (DCF) method, which itself implies the future status of the project presupposes, and therefore can not accurately increasing the current uncertainty in the investment opportunity to make a reasonable assessment. Because business R&D investment is intended to establish a clear competitive advantage, future opportunities may be more valuable than the immediate benefits. Real option theory suggests that "uncertainty" can bring about development for the enterprise, profit opportunities, emphasizing the flexibility of watching the value of the proposed management "wait and see."But from a competitive point of view, waiting to be losing its competitive edge. Therefore, in order to maximize return on investment, business R&D investment in the "wait" and "early" to choose between investment in the optimal time to invest.This paper uses real options theory, the growth of options for enterprise R&D investment of time to build a business based on option theory development R&D investment timing decision analysis model to solve the optimal timing of investment. The results show that, enterprises in R&D investment timing depends on the growth option value and option value of waiting for more, including uncertainty, rates, and the successful development of enterprise future development projects on the impact of varying degrees.This paper is divided into five main parts:The first part is presented the background and significance of this study, research ideas and methods, and to outline research content and paper structure; The second part is based on the contents of this paper reviewed the related theories, by comparing the growth option theory and R&D investment decisions on the impact of this study to determine location; The third part is by analyzing the growth option of the company R&D investments affect the value and investment opportunity to build a growth options based on R&D investment decision-making time frame; The fourth part is to build growth options on the timing of corporate R&D investment analysis of the impact model to solve the optimal timing of investment, combined with numerical analysis for further discussion; The last part is the study concluded that innovation of this paper and the lack of future prospects and make the prospect.