Title: Searching for rational effect factors of R&D value within a real options framework

Authors: Chun-Yao Tseng, Ming-Cheng Wu

Addresses: Department of Business Administration, Tunghai University, No. 181, Section 3, Taichung Harbor Road, Taichung 40704, Taiwan, ROC. ' Department of Business Education, National Changhua University of Education, No. 1, Jin-De Road, Changhua 500, Taiwan, ROC

Abstract: Many academics and managers have confirmed the ability of real-option models to capture the value of flexibility in relation to R&D projects. However, few studies have focused on constructing empirical methods and testing their application to real circumstances. This study not only presents a sensitivity analysis of the R&D evaluation model, but also establishes an empirical analysis to examine these relationships using panel data on 101 Taiwanese electronics firms from 1991 to 2002. Based on the sensitivity analyses and empirical results, we conclude that the R&D value increases with increasing R&D capital, patent lifetime and risk-free rate.

Keywords: R&D value; valuation; real options; B-S model; research and development; sensitivity analysis; Taiwan; electronics industry.

DOI: 10.1504/IJTPM.2010.032856

International Journal of Technology, Policy and Management, 2010 Vol.10 No.1/2, pp.92 - 103

Published online: 25 Apr 2010 *

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