Adoption timing of technology innovative investment project in economic rents perspective

Abstract

Economic rents (i.e. the excess profit over the opportunity cost of capital) occur only if comparative competitive advantage exists. Considering the adoption of innovative technology is one of the main ways to achieve competitive advantage. A hi-tech firm can capture the economic rents if the position with strategic benefit of innovative activities has been implemented; however, any postpone for carrying out the innovative technology may erode the value of the project. The appropriate investment timing will make a substantial influence on the competitive advantage induced by innovative technology. A real option pricing procedure is proposed in this work to explore the evaluation of innovative technology as well as to study the appropriate adoption timing of the investment project to formulate an innovative technology strategy. The numerical example for demonstrating the proposed procedure of this study could give some counsel for decision-making analysis of the new-generation TFT-LCD panel plant investment project.