Technology Switch Option and the Market Value of the Firm: A Model and an Empirical Test

Oriani, Raffaele (2003) Technology Switch Option and the Market Value of the Firm: A Model and an Empirical Test. [Working Paper]. Social Science Electronic Pub. p. 32. SSRN Working Paper Series

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Abstract/Index

A correct assessment of the innovation activities is critical to firm performance. To this purpose, some authors have analyzed the relationship between innovation and firm's market value within a framework based on the real options theory. However, in these papers there is not an explicit modeling of the 'real options'. Our model of market value formally includes a technology switch option, which allows the firm to exchange one technology with another when it achieves a major innovation. The model also accounts for the stochastic nature of the innovation. We test the model on a panel of publicly traded British firms operating in different manufacturing industries. The results provide support to the claim that the stock market recognizes and evaluates a technology switch option.

Item Type: Report / Paper (Working Paper)
Research documents and activity classification: Working Papers > Non-Refereed Working Papers / of national relevance only
Divisions: Department of Business and Management
Additional Information: The paper has been published as: Raffaele Oriani (2007), Technology Switching Option and the Market Value of the Firm: A Model and an Empirical Test, in Professor Brian Silverman (ed.) Real Options Theory (Advances in Strategic Management, Volume 24), Emerald Group Publishing Limited, pp.429-458.
Uncontrolled Keywords: Innovation, real options, market value
MIUR Scientific Area: Area 09 - Industrial and Information Engineering > ING-IND/35 Engineering and Management
Deposited by: Maria Teresa Nistico
Date Deposited: 10 Dec 2010 14:39
Last Modified: 22 Apr 2015 00:13
URI: http://eprints.luiss.it/id/eprint/811

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