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Author:Grenadier, S. T.
Weiss, A. M.
Title:Investment in technological innovations: An option pricing approach
Journal:Journal of Financial Economics
1997 : JUN, VOL. 44:3, p. 397-416
Index terms:CAPITAL BUDGETING
OPTIONS
TECHNOLOGICAL INNOVATION
INVESTMENT
Language:eng
Abstract:This study forms an analogy between the adoption of innovations and the exercise strategy of a stream of embedded options , which allows to use the tools of option pricing theory to derive and analyze a firm's optimal migration strategy under technological uncertainty. The results of the model are used to predict the adoption behavior of firms in a variety of technological environments. The impact of various characteristics of technological markets on a firm's decision to follow one of four distinct migration strategies are examined.
SCIMA record nr: 161535
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