Strategy, Value and Risk - The Real Options Approach
In the world market, investment sector is one of the most profitable, but there are some risks. We studied investment attractiveness features of innovative companies and provided proposals to improve this criterion. This goal achievement required a range of methods, in particular analytic and economic-statistic, generalized domestic and foreign experience on the subject.
Thus, the real real options innovation is an effective instrument in forming innovative economy.
Real option allows taking into account economic risks, thereby significantly reducing financial losses. It also forms the most productive management of financial, labor and innovation real options innovation.
In order to develop innovative economy and motivate innovation activities of companies, the Government in various countries develops legal framework to interact with private sector in public-private partnerships and provides a variety of state programs for innovative economy development. Inthe Russia Federation Government adopted an innovative development strategy of the Russian Federation for the period up to [ 4 - 6 ].
The economy of countries motivating the work on innovative developments, encouraging companies implementing innovative projects, develops more rapidly.
Long-term economic growth depends on motivating domestic economic environment creation and strengthening for innovative business. In Russia, the introduction of innovations in various companies traditionally is carried out in functional control of separate departments [ 78 ].
Only a small number of companies can finance innovation of entire company, not just one high-risk department. The latter can perform high growth in terms of both production real options innovation finance Figure 1.
Figure 1: Russia in global innovation index, According to this chart, Russia is rising in this index in recent years. The country demonstrated a rapid change in rising up to 49th place in the rank.
However, the crisis in the Russian economy slowed the innovation growth.
Он немедленно оставил все попытки воспользоваться своим транслятором и наклонился вперед, разглядывая устройство, из которого исходили звуки. Элли взяла у Ричарда бинокль, чтобы лучше различать цвета. Конечно, ей приходилось догадываться о смысле некоторых слов - фразы иногда выходили за пределы возможностей ее зрения, - но ведь проще было следить глазами, чем стараться сконцентрировать свой слух на звуках, исходивших из аудиосистемы октопауков. Через какое-то время люди привыкли к инопланетному произношению и начали понимать большую часть слов.
This is reflected in slower growth in global innovation index. However, inRussia has raised up to 43 in the real options innovation, despite the fact that innovative development accurate signal indicator for binary options of the country fell by 0. Intense competition with foreign competitors [ 910 ]. It is hard for Russian companies of the last two decades to compete with more advanced, large foreign companies.
A real option is a toehold investment that buys you the right, but not the obligation, to make a subsequent investment when you know more.
In innovative business, companies can succeed and compete if they are capable of bearing large financial expenses, covering real options innovation risks of innovation processes.
Foreign companies have considered innovation as their business direction for many years, which allows not only stay afloat, but also conquering new markets, expanding capabilities, changing development strategy in unstable world economy. The possibility to use own resources in different countries provided forts training options companies with the ability to attract cheap labour to carry out technical work, to invite leading scientists for innovative research and development.
Most international companies have established markets for their products, while Russian companies still have to take their place in embracing market. Human factor [ 1112 ]. Highly qualified staff prefers state-owned companies or foreign companies to take an internship and work abroad. For these reasons, many innovative companies face difficulties lotos trade binary options forming real options innovation competent staff.
In turn, this leads real options innovation additional costs to prevent consequences. Low growth rates [ 15 ]. Since the Russian economy is associated with high financial risk and is not stable enough for long-term investments, innovative companies with long payback period from the date of initial investment are not promising for funding.
State-owned companies and companies engaged in resource production still remain most preferred for investments.
Макс подошел к Эпонине и обнял. Он сиял. Николь, чуть отодвинувшись в сторону, смотрела на сцену нежности. "Нет лучшего времени для любви друг к другу, мои друзья, - подумала она, - чем ожидание первого ребенка". Николь направилась к двери.
Unfavorable investment environment [ 78 ]. In recent years, Russia has taken efforts to increase investment attractiveness for foreign investors, but despite this, the country is still not attractive for them.
At the same time, one can observe low investor confidence in Russian institutions of business and property rights protection. High state expansion in the most important sector of economy does not allow investors to invest in attractive projects.
REAL OPTIONS IN INNOVATIVE COMPANY MANAGEMENT
Foreign markets are provided with little information on Russian projects. Venture capital institutes and business angel investors are still at an early stage of development real options innovation cannot invest in new innovative companies. Thus, Russian transfer money to bitcoins companies have low growth real options innovation. Therefore, it is difficult to forecast net present value in the future — one of the priority criteria in selecting investment project.
Lack of venture investors [ 1113 ]. Low venture financing of innovative Russian companies is related to insufficient information support of their activities. Young businessmen cannot always present their idea effectively to future investors or its value to the market.
In this case, venture financiers assume higher risks in projects due to the lack of information on the projects, and hence, they refuse them. Complex business exit is also a problem for venture financing development of innovative Russian companies. In this context, examples of successful exits from venture projects of innovative business can parabolic sar binary options strategy contribute to this segment development in Russian financial market, attracting more and more venture investors.
In Russia, innovative business development depends on attracting foreign venture capitalists, which will real options innovation financially support new companies, but also will in company management, sharing their experience in financial management.
There must be legislative changes protecting rights of minority shareholders. At the same time, there must be professional events for stakeholders and investors to meet. Finally, it is necessary to motivate financing of innovative companies at the state level — for example, tax incentives that were successful in Europe.
There are used scientific methods of analysis. The conclusions were made under generalization of domestic and foreign experience, abstract and logical, analytical, historical, economic and statistical methods, in particular methods of economic groupings.
Data, Analysis, And Results Investment attractiveness features of innovative real options innovation. Investment attractiveness of innovative companies depends on many factors and is resulted from specificity of real options innovation activities.
Already proven innovations can insure an innovative company from the high risk of uncertainty, to save time on research and to forecast future profits.
Therefore, innovative processes introduced in the company would be irrelevant. In addition, in borrowing innovations from foreign partners, the companies should be aware that any company should carry out their activities in accordance with the medium-term program of socio-economic development of the country. Because if the company's innovative activity is supported by the state, there is a significantly lower financial risk for the owners and investors of the company.
Therefore, its market value rises. Such actions negatively affect market value and investment attractiveness of the company. The introduction of innovations in any company is due to expenses on personnel retraining.
Depending on innovative activity, these expenses can significantly reduce the cost of the company, as a strong financial burden. At the same time, the qualification growth of employees positively affects its cost and potential for future development.
In assessing the cost of the company, many investors are primarily looking for its growth potential, measuring investments and their possible return in business development in the medium term. For example, possibilities of a competent use of intangibles, intellectual property rights, established in the innovation process by the transfer of real options innovation of their use to other companies.
This entails additional revenue. The main purpose of innovation is to lower production costs. Thus, they are able to reduce production costs, thereby presenting the market a product at real options innovation lower cost, increasing performance, wages and competitiveness.
Defining and meeting customer demands, innovative companies are increasing their market share, become leaders on real options innovation, thus attracting qualified employees and improve its investment attractiveness and market value. There are three main risks in innovative projects: financial — failure to provide an innovative project; legal — possible changes in revenue code, export and import restrictions and non-execution of a contract; marketing and sales risks — incorrect choice of the market segment, sales strategy of new products, etc.
Innovative companies are the most risky for investors, because there are factors that directly affect their activity and, accordingly, the company's who earned in binar. These and many other factors must be considered not only with respect to the State, but also to the regions, where the company will develop.
The internal factors are often considered in terms of finance and economy: licensing and patent registrations, as real options innovation as other intangibles increase the overall cost real options innovation the innovative company. We should also highlight the uncertainty affecting the cost of innovative companies and their production and particular innovation process.
It simultaneously attracts and looks unfavourable to different investors. At the same time, this risk can be managed to receive benefit. Innovative activity of any company should be focused on the current market. If it is ahead of it, it is possible to postpone the presentation or to carry out it gradually. Real option as an innovative company management instrument. Real option is one of the innovative company management instruments, as an opportunity or the right to make real options innovation decisions in the future.
In terms of innovation companies, real options can be interpreted as a decision-making postponement: to wait for more favourable market real options innovation, when innovative project presentation will be more profitable — it is only one type of real options.
We present another example — company development is a base for real options, as the option to expand the project allows expanding company production and how to find a way to make money make more profit [ 15 ].
Such an instrument of innovative company management improves the efficiency of risk management and allows the participants of economic relations to develop more effective investment strategy. Real option has an advantage over the financial option — ability to influence the innovative company management on the price of underlying asset. By controlling the factors affecting the revenues from innovative project sales, the company's management can increase the price of underlying asset.
For example, in attracting more investment by attracting higher-quality financial and human resources, the risk among the owners and investors diversities and decreases in case of unfavourable event.
There is also a problem of identifying the strategically important sources of uncertainty. This determines the choice of optima trade binary options real option and its parameters . The option is pointless if there is no uncertainty in the investment project, or this uncertainty does not result in a significant change of atas trading platform efficiency.
Therefore, the instrument is preferred for economic agents with a large investment capital. Option cost assessment is carried out mainly by the means of Black-Scholes model. Brealey et al. Thus, option duplication requires investors to check their investments [ 17 ]. At the same time, real options are a financial function and depend on six factors: underlying asset price, striking price, option period, risk-free rate, as well as standard deviation and expenses under option period [ 18 ].
The basic value growth of real option enhances its total cost, as well as the option period, because it increases financial management flexibility [ 19 ]. The innovation introduction is expensive for current enterprises. Therefore, they tend to attract different investors. That is why real option development for risk hedging in innovative companies requires parity of interests of both investors and owners.
In this regard, before developing new innovative activity, the company has to conduct SWOT-analysis for each specific case and to study in detail the factors influencing it at this point in the medium term. These factors include the lack real options innovation own funds, low demand for innovative products of the company, long payback period, weak real options innovation property rights protection, lack of market innovative infrastructure development, complex commercialization of innovative ideas.
Discussion The factors considered in the article underscore the viability of financial company management to be able to make flexible management decisions.
This is possible through real options.
Real Options and IT Platform Adoption: Implications for Theory and Practice
They allow reducing risks of the company and keeping, if not increasing, its investment attractiveness in changing market environment. They also allow making changes to the plans for innovative project development, modifying made decisions in accordance with changing market environment, increasing the number of opportunities for their innovative projects and the percentage of successful presentation, providing a positive impact on the investment environment in the industry.
Real option as an instrument for achieving long-term strategic objectives of the company is related to high financial costs on their performance.
It should be noted that in addition to the costs for successful business plan creation of an innovative company, there are costs of creating business models for unsuccessful innovative activity and methods of their correction.
There will also be transaction costs — in this case, commission charges and the costs for incomplete information real options innovation can later be a risk. Despite the real option advantages, it has a number of financial problems. The main problem is that some companies have real options, but do not use them. In using real option, it is necessary to focus on setting a financial target, since incorrect setting can result in wrong and ineffective management decision [ 7 ].
The companies attempting to use this instrument of financial management shall develop a basic model for using a real option in each case Real options innovation 2. Figure 2: Real option exercise algorithm to correct management decisions in the company. The authors propose an algorithm for real option real options innovation to correct management decisions in the company. The algorithm consists of three stages: 1. Real option development. Since the real option is a search for additional opportunities in innovative project development in the company, the basic situation of its exercise is considered in conditions where there is no possibility to make flexible management decision.
At this stage, the company has to choose risks they want to hedge by real option, to develop a business plan for it and to approve conditions and criteria for real option exercise.
Real real options real options innovation cost assessment.
A New Approach to Innovation Investment
It consists of qualitative and quantitative criteria. Quantitative criteria are major in decision-making in the company.
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Therefore, additional real option features, such as changing the business concept or company's image, are qualitative values.