Real option as strategic technology uncertainty reduction mechanism: inter-firm investment strategy by pharmaceuticals |
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Authors: | Tariq Malik |
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Affiliation: | 1. International Centre for Organization &2. Innovation Studies, Dongbei University of Finance &3. Economics , Dalian, China Tmalik@dufe.edu.cn |
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Abstract: | Whether pharmaceutical firms use the real option (RO) mechanism for strategic technology uncertainty reduction and whether the role of RO decreases when industrial technology progresses from research and development (R&D) to commercial activities in a product life cycle is discussed. The evidence confirms that pharmaceutical firms enter different in the external technology sourcing. Moreover, RO-based entry coefficients differ in sizes at different levels in the industrial value chain. The R&D entry stage is relatively greater than the clinical trials entry stage. However, contrary to the proposition that the commercial entry coefficient will be relatively lower; the results indicate that the commercial RO-entry stage appears to be relatively greater than both the R&D entry stage and the clinical trials entry stage. The overall RO-based entry in external technology sourcing appears to be a U-shaped curve along the product life cycle. The article highlights some theoretical and practical implications of these findings. |
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Keywords: | real option investment uncertainty reduction mechanisms management of external technology uncertainty |
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