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Although a lot of scholars have offered valuable insights into licensing, there is little theoretical research on the role of licensing contracts as a vehicle of external finance for technology innovation. By addressing specific issues in markets with network effects, demand uncertainty, and the innovator's difficulties in financing of follow-on investments in development and commercialization of...
In this paper, we study the effect of different demand shocks on flexibility premium in capacity investment. We find that capacity flexibility premium is significantly higher under additive demand uncertainty than that under multiplicative demand shock. The result suggests that real options approach is more appropriate for investment decision in additive model, and when under multiplicative demand...
Incorporating patent litigation into a durable-good duopoly model, we revisit the optimal licensing contract on a cost-reducing innovation. We consider a simultaneous move game between two durable-good firms in a quantity-setting. The outside innovator chooses from fix fee, royalty or their combination maximizing his profits without triggering patent litigation. We also relate the optimal licensing...
In this paper, using real option pricing theory, the production or sales delocalization flexibility for multinational enterprises making decisions is modeled as exchange option under multifactor of uncertainty, such as stochastic exchange rate, labor costs or product price. The paper presents the option valuation of delocalization production or sale abroad and the optimal investment decision rules...
Using option game method, the paper present a model that capture the relation between firms' debt capacity and their investment opportunity engaged in the interest rate, tax rate, instantaneous interest of debt and market uncertainty. After solving in closed form for the optimal debt capacity, we show that the relation between debt capacity and growth option is a non-linear "U" shape relation...
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