A Theoretical Model for Valuing Technology SMES

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02 22, 2022

 

Speaker:王树勋 教授

Title: A Theoretical Model for Valuing Technology SMES

Time: Oct.16, 2021 15:30  

Venue: N205

Abstract: The opening of the New Beijing Stock Exchange highlights the importance of technology SMEs in powering future economic growth. For those SMEs, R&D activities are at the core of their business models. I will present a theoretical model for valuing the R&D capabilities, with three components: the timing of R&D discovery, the likelihood of success, and potential market value of the R&D product. The model allows for explicit quantification of the heterogeneity of firms with varying characteristics or risk factors. The Gompertz-Cox proportional hazard model is used for describing the R&D discovery time, and the Wang Transform frailty model is used for the likelihood of success. Calibration of the model parameters shall require empirical analysis of the influences of multiple risk factors (e.g., the quality of research team, the life cycles of the technology, and availability of funding. Equipped with data, the model can serve as a tool for investors to perform relative comparisons of expected returns of R&D programs, across firms and at various time horizons.

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