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R&D Investment Decision On Emerging Technology

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  • GUANG-JUN DENG

    ()
    (School of Management and Economics, The University of Electronic Science and Technology of China, No. 4, Section 2, North Jianshe Road, Chengdu, Sichuan 610054, P. R. China)

  • YONG ZENG

    ()
    (School of Management and Economics, The University of Electronic Science and Technology of China, No. 4, Section 2, North Jianshe Road, Chengdu, Sichuan 610054, P. R. China)

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    Abstract

    The prosperity of emerging technology may be triggered by the occurrence of rare events, and once emerging technology booms, there may be an enormous market demand for it. This paper explores the firm's commercial and R&D investment decisions on emerging technology in real options framework. We think that, for the fear that a rare event which occurs prior to R&D success would trigger the emerging technology boom, the firm should carry out prospective R&D in the emerging technology innovation. So the impacts of the R&D hazard rate and the intensity of rare event arrival on the prospective R&D investment strategy are mainly addressed. There are two results. First, the firm is most likely to take the strategy at low, rather than high, probability of technological boom in market-driven innovation. Second, in technology-driven innovation, the huge potential profit of emerging technology in booming period can arouse more attention toward the firm. When the growth rate of profit flow in booming period rises to some degree, the firm may take this strategy unconditionally.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Information Technology and Decision Making.

    Volume (Year): 10 (2011)
    Issue (Month): 03 ()
    Pages: 451-477

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    Handle: RePEc:wsi:ijitdm:v:10:y:2011:i:03:p:451-477

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    Related research

    Keywords: Emerging technology; R&D; market-driven innovation; technology-driven innovation; real options; investment decision; 22E46; 53C35; 57S20;

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