Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71615
Authors: 
Bilkic, Natasa
Gries, Thomas
Naudé, Wim A.
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7338
Abstract: 
We refine modelling of the radical innovation decision in this paper by extending real option theory to include non-marginal stochastic jump processes. From the model analytics we determine that the average magnitude and frequency of non-marginal stochastic jump processes are the most important parameters in this highly uncertain decision process. We show that these stochastic shocks imply that investment in radical innovation may very often be too time consuming and/or expensive to remain attractive for private entrepreneurs.
Subjects: 
radical innovation
innovation
entrepreneurship
investment
R&D
risk
real option theory
technology
JEL: 
D92
D81
L26
Document Type: 
Working Paper

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