Real Options Reasoning and a New Look at the R & D Investment Strategies of Pharmaceutical Firms

  title={Real Options Reasoning and a New Look at the R & D Investment Strategies of Pharmaceutical Firms},
  author={Rita Gunther McGrath and Atul Nerkar},
Real options reasoning (ROR) is a conceptual approach to strategic investment that takes into account the value of preserving the right to make future choices under uncertain conditions. In this study, we explore firms’ motivations to invest in a new option. We find, based on an analysis of a large sample of patents by firms active in the pharmaceutical industry, that their investments in R&D are consistent with the logic of ROR. We identify three constructs—scope of opportunity, prior… CONTINUE READING
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