Optimal Project Rejection and New Firm Start-ups

Cassiman, Bruno ; Ueda, Masako

Management science, 2006-02-01, Vol.52 (2), p.262-275 [Peer Reviewed Journal]

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Title:
Optimal Project Rejection and New Firm Start-ups
Author: Cassiman, Bruno ; Ueda, Masako
Subjects: new firm start-ups ; IPR ; bargaining ; real option ; project selection ; Technological innovation ; Management science ; Product innovation ; Open innovation ; Business innovation ; Business structures ; Modeling ; Destiny ; Start up firms ; Profitable firms ; Applied sciences ; Firm modelling ; Operational research and scientific management ; Operational research. Management science ; Exact sciences and technology ; real option; project selection; new firm start-ups; IPR; bargaining ; Business creativity ; Entrepreneurship ; Analysis
Is Part Of: Management science, 2006-02-01, Vol.52 (2), p.262-275
Description: We study the decision of an established firm to commercialize innovations. An innovation can be exploited by the established firm as an internal venture, pursued by a new firm start-up as an external venture, or not commercialized at all. The limited commercialization capacity of the established firm in the short run results in an option value of waiting. In this setup, start-up firms emerge when the established firm is generating many innovations or is selective because the option value of waiting is high, or both. The model predicts that innovations commercialized through internal ventures are characterized by a higher fit with the internal resources of the established firm, a higher cannibalization of the established firm's existing businesses, and a lower profitability than innovations commercialized through external ventures. The model furthermore generates predictions on the relation between firm performance and spin-off performance.
Publisher: Linthicum, MD: INFORMS
Language: English
Identifier: ISSN: 0025-1909
EISSN: 1526-5501
DOI: 10.1287/mnsc.1050.0458
CODEN: MSCIAM
Source: JSTOR Arts & Sciences IV
JSTOR Business I
RePEc
Business Source Complete
Alma/SFX Local Collection

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Optimal Project Rejection and New Firm Start-ups

Cassiman, Bruno ; Ueda, Masako

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