Title: Income approach to technology valuation for innovations

Authors: JoonWhan Oh; Hyun Woo Park

Addresses: School of Business, Konkuk University, 120 Neungdong-ro, Gwangjin-gu, Seoul 05029, South Korea ' Korea Institute of Science and Technology Information (KISTI), 66 Hoegiro, Dongdademun-gu, Seoul 02456, South Korea

Abstract: Until now, technology valuation has been dominated by the income approach, a forward-looking methodology that discounts future cash flow. To account for risk in technology valuation of innovations, a typical net present value (NPV) method is complemented with real option valuation method. Even though real option techniques account for risk changes in practice, such models are subject to criticism for reasons of mathematical complexity. We propose a modified income approach we refer to as 'Innotech' that incorporates innovation characteristics and industry characteristics into the valuation model. Our modified approach for the valuation of innovative technology reduces challenges related to mathematical modelling and dependency on factors such as risk premium, expected cash flows and contributory charge.

Keywords: technology valuation; innovative technology; net present value; NPV; innovation characteristics; industry characteristics.

DOI: 10.1504/IJTM.2022.10045781

International Journal of Technology Management, 2022 Vol.88 No.2/3/4, pp.389 - 407

Accepted: 06 Mar 2021
Published online: 16 Mar 2022 *

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