Title: Deciding on new products using a computer-assisted real options approach

Authors: Alexandra Rese, Daniel Baier

Addresses: Institute of Business Administration and Economics, Brandenburg University of Technology Cottbus, Konrad-Wachsmann-Allee 1, D-03046 Cottbus, Germany. ' Institute of Business Administration and Economics, Brandenburg University of Technology Cottbus, Konrad-Wachsmann-Allee 1, D-03046 Cottbus, Germany

Abstract: Technical and market uncertainties are significant challenges for R&D management. Especially, in the case of New Product Development (NPD), investment decisions have to be made under uncertainty due to unknown costs and returns which arise from project complexity and duration. The framework of real options has been proposed for a better understanding of R&D project|s uncertainty, for modelling management|s flexibility during the project and for selecting the best project alternative. This paper describes the application of a real options approach to the management of NPD projects using standard computer-assisted add-ons to spreadsheet technology.

Keywords: new product development; NPD; real options; uncertainty; computer-assisted decision support; risk analysis; risk assessment; R&D management; research and development; management flexibility; project alternatives.

DOI: 10.1504/IJTIP.2007.015774

International Journal of Technology Intelligence and Planning, 2007 Vol.3 No.3, pp.292 - 303

Published online: 14 Nov 2007 *

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