Strategic Technology Adoption and Hedging under Incomplete Markets

Markus Leippold () and Jacob Stromberg
Additional contact information
Jacob Stromberg: University of Zurich and Swiss Finance Institute

No 14-73, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We investigate the implications of technological innovation and non-diversifiable risk on entrepreneurial entry and optimal portfolio choice. In a real options model where two risk-averse individuals strategically decide on technology adoption, we show that the impact of non-diversifiable risk on the option timing decision is ambiguous and depends on the frequency of technological change. Compared to the complete market case, non-diversifiable risk may accelerate or delay the optimal investment decision. Moreover, strategic considerations regarding technology adoption play a central role for the entrepreneur's optimal portfolio choice in the presence of non-diversifiable risk.

Keywords: Real Options; Incomplete Markets; Technology Adoption; Optimal Portfolio Choice; Hedging (search for similar items in EconPapers)
JEL-codes: E02 G11 G31 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2014-11, Revised 2015-01
New Economics Papers: this item is included in nep-com, nep-cse and nep-ino
References: Add references at CitEc
Citations:

Downloads: (external link)
http://ssrn.com/abstract=2511204 (application/pdf)

Related works:
Journal Article: Strategic technology adoption and hedging under incomplete markets (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1473

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().