The Valuation of a Patent through the Real Options Approach: A Tutorial

Iazzolino Gianpaolo () and Migliano Giuseppe
Additional contact information
Iazzolino Gianpaolo: Department of Mechanical, Energy and Management Engineering, University of Calabria, Via Pietro Bucci 46/C, 87036 Rende, Cosenza, Italy
Migliano Giuseppe: Department of Mechanical, Energy and Management Engineering, University of Calabria, Via Pietro Bucci 46/C, 87036 Rende, Cosenza, Italy

Journal of Business Valuation and Economic Loss Analysis, 2015, vol. 10, issue 1, 99-116

Abstract: The importance of knowledge and other intangible activities for the success of an enterprise have been broadly recognized over the last few years. In this paper a tutorial is illustrated on the valuation of a patent through the real options approach (ROA), since the use of the discounted cash flow (DCF) methods, such as the net present value (NPV), seems to show issues when evaluating opportunities, such as the ones offered by intangible activities. The logic underlying ROA is tightly based on financial options and, in this sense, uncertainty can be seen as an opportunity, and not necessarily as a threat and its effect on the value of an activity can become positive. The patent analysed (registered in 2009) is a patent by the Alfa Group (this is not the real name of the firm but is used here for privacy reasons), which is a worldwide leader in the production of Getters, metallic elements that, through a chemical absorption process, keep the devices in which they are embedded in vacuum status. Such equipment is used in lightning systems, monitor screens, flat screen TVs, etc. In this tutorial, an ROA has been developed in order to demonstrate how the value of intangible assets can be estimated by using an Italian case study that can be useful for further studies and uses.

Keywords: intangible assets; specific intangibles; valuation; patents; real options approach (ROA) (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1515/jbvela-2014-0007 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

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:bpj:jbvela:v:10:y:2015:i:1:p:99-116:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/jbvela/html

DOI: 10.1515/jbvela-2014-0007

Access Statistics for this article

Journal of Business Valuation and Economic Loss Analysis is currently edited by Bradley T. Ewing and James J. Hoffman

More articles in Journal of Business Valuation and Economic Loss Analysis from De Gruyter
Bibliographic data for series maintained by Peter Golla ().