ANALYSIS OF R&D INNOVATION PROJECTS WITH EMBEDDED REAL OPTIONS
This article addresses the issue of innovation project valuation in the presence of embedded real options. It provides a review of real options analysis schemes present in the literature. We show that different authors propose similar sequences of stages of real options valuation, but devote much less attention to planning of real options execution and developing rules of switching between stages. Based on this comparison an innovation project analysis algorithm with embedded real options is proposed. The specific features of this algorithm are as follows: it augments real options valuation with the analysis of conditions of their implementation; development of plan of real options implementation management and design of ties system between different stages of the algorithm. We use a hypothetical example to show the work of the proposed algorithm. Refs 26. Figs 4.