Real R & D Options

Real R & D Options

1st Edition - December 5, 2002

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  • Editor: Dean Paxson
  • eBook ISBN: 9780080497976

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Real R&D options are among the earliest modelled real options, with now ten primary practical uses: general R&D planning, planning R&D in stages, evaluating test information, new product development timing, operations, abandonment, risk sharing, market funding, industry strategy and regulation. This book was partly motivated by requests to identify and develop real option models for R&D in telecommunications, petroleum technology and biotechnology. Nine new models cover information and implementation costs, analytical solutions for mean reverting, or fat tailed revenues, endogenous learning and exogenous and experiential shocks, American sequential options, and innovator advantages. Four new applications include forward start development options, exploration options, innovation with information costs, and innovator's real values with changing market share. R&D directors and researchers will find several uses for these models: general R&D planning evaluating test information new product development timing risk sharing industry strategy and regulation

Key Features

  • A practical guide to how organizations can use Real Option techniques to effectively value research and development by companies
  • Provides a rigorous theoretical underpinning of the use of Real Option techniques
  • Real Options applications are orientated around the economies of North America, Europe and Asia, for an international perspective


Corporate financiers; CIOs using 'Real Options' in business valuation, research and development analysis; Investment/portfolio managers; Equity trust/fund managers in researching companies to invest in; Portfolio planners in most financial institutions and investment houses who need to value companies; Directors of quantitative analysis in corporates, investment banks and venture capitalist houses; Chief economists in investment houses; Consultants; Actuaries; Risk managers; Regulators and central bankers; MBA graduate students

Table of Contents

  • Real R&D option models: classics and development (Paxson)
    R&D (Dis)investment decisions (Bieke, Klumpes, Tippett)
    Information uncertainty and real options (Bellalah)
    Subsidies for R&D investments (Jou, Lee)
    A gene to drug venture: Poisson and extreme distribution models
    R&D real American sequential investment options (Lee, Paxson)
    Implementation uncertainty and investment timing (Tsekrekos)
    Review of classical & new real R&D empirical applications (Paxson)
    Venture capital investments (Seppa, Laamanen)
    Geological uncertainty (Cortazar, Casassus, Schwartz)
    Service sector R&D (Warren, Jensen)
    Pharmaceutical R&D (Loch, Bode-Greuel)
    Electronics R&D new product (Lint, Pennings)
    Appendix 1: Models in Excel
    Appendix 2: Real R&D Options Database

Product details

  • No. of pages: 333
  • Language: English
  • Copyright: © Butterworth-Heinemann 2002
  • Published: December 5, 2002
  • Imprint: Butterworth-Heinemann
  • eBook ISBN: 9780080497976

About the Editor

Dean Paxson

Affiliations and Expertise

Professor of Finance, Manchester Business School.

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