A Study of Optimal R&D Investment Decision: the View of Real Option

• Main Authors: Chen Ying-Chun, 陳盈君
• Other Authors: Jeng Chang-Shuen
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/92556455203974261450

碩士 === 銘傳大學 === 財務金融學系碩士班 === 92 === This study examines the firm how to make the optimal R&D investment decision when the market has only one firm and has a pioneer firm according to different the cost of capital, the number of technology jumping and the expected cash flow. We use Mathematica 4.1 to make numerical analysis. The results are blow: When the market has only one firm, we find 1.the positive relation between the real option’s strike price and the cost of capital and the negative relation between the real option’s payoff and the cost of capital. 2.the positive relation between the real option’s strike price and the number of technology jumping and the negative relation between the real option’s payoff and the number of technology jumping. 3.the positive relation between the real option’s strike price and the expected cash flow. 4.if the firm has to develop by itself, the real option’s strike price will higher than the firm that has various ways to help it develop. When the market has pioneer firm, we find 1.if the expected cash flow is small, the follower firm doesn’t join the R&D investment. 2.if the expected cash flow is medium or large, the follower firm which has more the number of technology jumping than pioneer has the negative relation between the real option’s payoff and the cost of capital. 3. if the expected cash flow is medium or large, the follower firm which has less the number of technology jumping than pioneer has the positive relation between the real option’s payoff and the cost of capital. Keywords: Real Option, R&D investment decision, patent