Real Options in Equity Partnerships

  title={Real Options in Equity Partnerships},
  author={Timothy B. Folta and Kent D. Miller and Krannert},
We examine factors influencing the decision to acquire additional equity in partner firms in research-intensive industries. This decision involves choosing between flexibility and commitment. Option theory motivates hypotheses regarding the effects of uncertainty, valuation of developing technologies, and the threat of preemptive rivalry. Our main hypothesis is that the resolution of uncertainty for high-value technologies motivates commitment decisions. We also argue that when the underlying… CONTINUE READING
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