The Radical Innovation Investment Decision Refined

Natasa Bilkic (natasa.bilkic@notes.upb.de), Thomas Gries and Wim Naudé
Additional contact information
Natasa Bilkic: University of Paderborn

No 7338, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We refine modelling of the radical innovation decision in this paper by extending real option theory to include non-marginal stochastic jump processes. From the model analytics we determine that the average magnitude and frequency of non-marginal stochastic jump processes are the most important parameters in this highly uncertain decision process. We show that these stochastic shocks imply that investment in radical innovation may very often be too time consuming and/or expensive to remain attractive for private entrepreneurs.

Keywords: radical innovation; innovation; entrepreneurship; investment; R&D; risk; real option theory; technology (search for similar items in EconPapers)
JEL-codes: D81 D92 L26 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-04
New Economics Papers: this item is included in nep-ent, nep-ino, nep-knm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://docs.iza.org/dp7338.pdf (application/pdf)

Related works:
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:iza:izadps:dp7338

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
library@iza.org

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte (hinte@iza.org).