Real Options and Intellectual Property: Capital Budgeting Under Imperfect Patent Protection (Lecture Notes in Economics and Mathematical Systems, 587)

Over the last years, due to intensive competition in the knowledge economy, legal aspects surrounding intellectual property (IP) rights - including litigation and settlement - have continuously gained in importance. Correspondingly, professional IP management has become an indispensable element of successful value-based management (VBM) in research-intensive firms. With this text, the author proposes an integrated approach to patent risk and capital budgeting in pharmaceutical research and development (R and D), developing an option-based view (OBV) of imperfect patent protection, which draws upon contingent-claims analysis, stochastic game theory, as well as novel numerical methods. Bridging a widening gap between recent advances in the theory of financial analysis and current challenges faced by pharmaceutical companies, the text re-initiates a discussion about the contribution of quantitative frameworks to value-based R and D management. Front Matter....Pages I-X Introduction....Pages 1-6 Front Matter....Pages 7-7 Patent Protection, the Firm, and the Economy....Pages 9-20 Uncertainty, Irreversibility, and Flexibility....Pages 21-57 Patent Protection in the Pharmaceutical Industry....Pages 59-70 Front Matter....Pages 71-71 Introduction and Related Work....Pages 73-76 Patents as Investment Opportunities....Pages 77-113 Patent Risk as Jumps in the Underlying Process....Pages 115-176 From Business Shifts to Jump Processes....Pages 177-179 Preliminary Conclusion....Pages 181-182 Front Matter....Pages 183-183 Introduction and Related Work....Pages 185-186 Patent Risk as an Option to Litigate....Pages 187-219 Preliminary Conclusion....Pages 221-222 Conclusion....Pages 223-224 Back Matter....Pages 225-278 Philipp N. Baecker. Includes Bibliographical References And Index.