Title: How to limit the impact of downside risk of innovative projects: a new solution from a real option

Authors: Bruna Ecchia

Addresses: Department of Business Administration, University of Naples Federico II, Via Cinthia 26, Monte S. Angelo, Napoli 80126, Italy

Abstract: This paper considers a new strategy of limiting the internal impact of downside risk of isolated entrepreneurial initiatives to achieve a specific, highly innovative project. As an alternative to the traditional spin-off, often excessive when the project is limited and isolated, a kind of |spin-in| can be adopted by setting aside (and isolating at both an operative and accounting level) the internal resources strictly functional to the specific project. This is a solution recently introduced in Italy. The part of the firm|s assets set aside from the rest of the business represents to what extent the firm is willing to expose itself to risk for the project in question. It is a kind of real option to take advantage of certain types of innovation without excessive boomerang effects.

Keywords: innovation; downside risks; risk management; set aside assets; specific projects; innovative projects; internal impacts; isolated initiatives; entrepreneurial initiatives; spin-off; spin-in; operative levels; accounting levels; internal resources; Italy; risk exposure; boomerang effects; enterprise development.

DOI: 10.1504/IJMED.2011.041550

International Journal of Management and Enterprise Development, 2011 Vol.10 No.2/3, pp.208 - 215

Published online: 30 Apr 2015 *

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