A Real Options Perspective on R&D Portfolio Diversification

Arbeitspapier

This paper shows that the presence of conditional staging in R&D (Research & Development) has a critical impact on portfolio risk, and changes diversification arguments when a portfolio is constructed. When R&D projects exhibit option-like characteristics, correlation between projects plays a more complicated role than traditional portfolio diversification would suggest. Real option theory argues that research projects with conditional phases have option-like risk and return properties, and are different from unconditional projects. We show that although the risk of a portfolio always depends on the correlation between projects, a portfolio of conditional R&D projects with real option characteristics has fundamentally different risk than a portfolio of unconditional projects. When conditional R&D projects are negatively correlated, portfolio risk is hardly reduced by diversification. When projects are positively correlated, however, diversification is more effective than these tools predict.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. 08-003/2

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General ; Management of Technological Innovation and R&D
• Thema: Real Options ; Research & Development (R&D) ; Risk Management ; Monte Carlo Simulation ; Realoptionsansatz ; Innovationsmanagement ; Portfolio-Management ; Monte-Carlo-Methode ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): van Bekkum, Sjoerd ; Pennings, Enrico ; Smit, Han
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2007

Weitere Informationen

• Handle: http://hdl.handle.net/10419/87083
• Letzte Aktualisierung: 10.03.2025, 11:47 MEZ