Income approach to technology valuation for innovations
by JoonWhan Oh; Hyun Woo Park
International Journal of Technology Management (IJTM), Vol. 88, No. 2/3/4, 2022

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.

Online publication date: Wed, 16-Mar-2022

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