Research On The Decision Of Venture Capital Based On Real Options

In the new era of science and technology lead to the economy, venture capital activities have become much more。The development of venture capital industry has been extremely important in enhancing China's comprehensive competitiveness,and how to properly make decisions on venture capital projects is an important part of it. But with the uncertainty of venture capital projects become more and more prominent, the business flexibility and strategy adaptability implied in it are increasingly shown and can not be ignored. It appears that the traditional investment decision-making theory has been not applicable to make flexible adjustment and implementation of effective management with the changes in the future. So, exploring a decision-making theory with flexible management has increasingly become the key for a successful venture capital firms to take advantage of future investment opportunities and timely and effective measures. The theory of real options based on the theory of financial options provides a new vision for decision on venture capital. With real options approach, the investment opportunities in flexible management are considered as a range of options which can bring investment income. It has greatly exceeded the limitations of traditional decision-making method, well adapted to the uncertainty and operational flexibility for the characteristics of the new investment environment, come up with a new solution for evaluation of flexibility and strategic adaptability. The introduction of the real options approach to decision-making on venture capital projects provide some new ideas for risk investment management and scientific decision-making. On the basis of referring to a large number of domestic and international relevant literatures, this paper focus on real options theory applied in the decisions of venture capital from theoretical and applied aspects.In theory, this paper starts from the connotation of venture capital and commences the study on the venture capital decision-making from the perspective of the project life-cycle, analyzes its decision-making characteristics and an inherent requirement to decision-making theory. Then, the reform of venture capital decision-making theory is discussed from the traditional decision-making theory and real option theory. We analysis the limitations of the traditional theory and the need for the introduction of real option theory, and deeply study the real option theory .In applications, we apprehensively analysis the multi-stage characteristic of venture capital projects, as well as Real Options exist at all stages. Combined real option theory with characteristics of venture capital decision-making, we build pricing model of venture capital decision-making based on the theory of real options and discuss how to establish flexible investment decision-making system according to real option theory. Finally, we build an empirical analysis to the pricing model and verify its feasibility and improvement of the traditional decision-making methods.