Retrospective insights from real options in R&D

L.J.O. Lint

Research output: Book/ReportReportAcademic

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Abstract

Absent empirical validation of real option pricing in R&D, we discuss the evolution of three cases in R&D option valuation. The first case concerns an option on conversion of an existing production process. The other two cases concern R&D to develop new product technology in the consumer electronics market. To keep the analogy with financial options transparent, option valuation of R&D is generally based on a static view of the technology under consideration, and the main focus is on the value of waiting to invest under (exogenous) market uncertainty. We find, however, that the dynamics of the technology under consideration played a dominant role in the cases that we studied. Our study seems to be the first attempt to give some detailed descriptions ofoption valuation in a real R&D setting throughout time.
Original languageEnglish
Place of PublicationEindhoven
PublisherEindhoven Centre for Innovation Studies
Number of pages23
Publication statusPublished - 2000

Publication series

NameECIS working paper series
Volume200009

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