Internal vs external R&D: a real options approach

Sana Mrizak (), Baran Siyahhan () and Donia Trabelsi ()
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Sana Mrizak: IMT-BS - DEFI - Département Droit, Économie et Finances - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]
Baran Siyahhan: IMT-BS - DEFI - Département Droit, Économie et Finances - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]
Donia Trabelsi: IMT-BS - DEFI - Département Droit, Économie et Finances - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]

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Abstract: This paper proposes a model that investigates firms' choice over internal R&D and corporate venture capital. Central to our model is an incumbent firm's ability to successfully deploy a startup firm's intellectual capital in the context of a corporate venture capital project and the degree of knowledge spillovers in the absence of a corporate venture capital engagement. Although a higher ability to integrate a startup's intellectual capital combined with a low degree of knowledge spillovers creates an incentive to engage in corporate venture capital, we show that this incentive is tempered by the future economic benefit the incumbent firm expects from the project.

Keywords: Intellectual Capital; Absorptive Capacity; Corporate venture capital; Real Options; Knowledge Spillover (search for similar items in EconPapers)
Date: 2018-06-27
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Published in EFMA 2018 : European Financial Management Association, Jun 2018, Milan, Italy

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01823490

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