Applying Real Options Approach for Analyzing Decision Flexibility in Product Development－The Case of a Microwave Technology Company in Taiwan

• Main Authors: Shih-Hsuan Hung, 洪士軒
• Other Authors: 王瑞德
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/16579712267857154657

碩士 === 國立中興大學 === 科技管理研究所 === 94 === High-tech industries are growing continuously in recent years. Enterprises have to spend a large amount of investment in R&D to maintain their core competence. Due to market and technology uncertainties, it is important to make go/no-go decisions at each review period of a product development. Specifically, for the high investment R&D project, uncertain factors and gradually gathered information give various choices in operation. These choices make the variation of project values more difficult to control. Managers may need to make higher managerial decision flexibility to avoid the downside risk and further create higher value for enterprise. In previous literature, many project valuation approaches assumed that a decision maker was unable to change investment decisions and thus unable to assess the project value effectively. This research applies the real options approach by Huchzermeier and Loch (2001) to bring the managerial flexibility into consideration. The proposed approach does not merely consider the financial factors, but also multifacet factors (including budget, market payoff, and product performance) that may influence the project value. It can help the decision maker evaluate important decisions either to continue or to terminate a project. In addition, sensitivity analyses for several important parameters are used to examine the decision quality. An example of a microwave technology company is used to illustrate the development concept. It is concluded that the proposed approach may provide managers an alternative tools in R&D process for making better decisions.