The real R&D options value incorporating technological risk management

摘要

Purpose - The paper aims to evaluate the real research and development (R&D) options value through the proposed model that can jointly consider the two types of risk management activities, i.e. hedging risks and making use of risks. Hedging is an important risk-management tool that can diversify R&D risk internally since R&D organizations cannot transfer technological risks to another entity by conventional loss financing methods. Making use of risks means R&D organizations can benefit from proactively managing risks, and then can create management-flexibility value from the real option reasoning viewpoint. Design/methodology/approach - Using the real options pricing approach, the paper provides an applicable assessment method for R&D projects that can jointly consider the aforementioned two types of risk management activities. The paper also investigates the value-enhancing effects of R&D risk management activities via interviews survey and secondary data analyses in the pharmaceutical industry of Taiwan. Findings - Through numerical analyses, the results indicate that the hedging management can serve to be effective mechanisms of risk reduction as well as value enhancement for R&D projects. Additionally, the value-enhancing effect of hedging management is more significant for those R&D projects with even higher risk-level. The results of empirical study also are consistent with the model prediction. Originality/value - To achieve great performance of R&D risk management, R&D organizations need to implement both the types of risk management activities. By this real-options valuation approach incorporating together those risk management activities, R&D projects portfolio can be evaluated adequately.