Valuing new product development and analysing license agreements for intellectual property

John McAneney, Henk Berkman

Research output: Contribution to journalReview article

Abstract

Strategic investments in Research and Development (R&D) possess challenging features for valuation: the relationship between research effort and a marketable product is highly uncertain and there is always the possibility for some exogenous event or competitor behaviour to render the whole effort valueless. The R&D project studied here concerns the breeding of new fruit varieties in a programme jointly funded by a research provider and an international marketing company. The breeding programme is modelled on the premise that the R&D comprises a series of lotteries - in the sense that the outcome in each evaluation phase is probabilistic - and that the final prize in this lottery is a call option, in this case the option-to-market accorded the marketing company. The model provides a framework for optimising contractual arrangements between the joint venture parties and encouraging profit maximisation.

Original languageEnglish
Pages (from-to)105-115
Number of pages11
JournalInternational Journal of Biotechnology
Volume6
Issue number2-3
DOIs
Publication statusPublished - 2004

Keywords

  • Intellectual property
  • Product development
  • Real options
  • Valuation

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