Abstract
Many larger, technology incumbent companies involve smaller, high-tech entrepreneurial firms in their innovation processes. These parties need to make coordinated investments in R&D under considerable uncertainty. We study the use of customer value propositions and real options in this context. We analyze these as mediating mechanisms that frame the capital spending decisions of individual firms and agencies, and that help to align them with investments made by other firms and agencies in the same or related industries (Miller and O’Leary, 2007). Conditions are hypothesized under which customer value propositions and real options can be appropriate mediating mechanisms, and we provide empirical support based on two case studies.
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