Introduction of technological innovations: valuation, selection and timing

Grushka-Cockayne, Yael (2009) Introduction of technological innovations: valuation, selection and timing. Doctoral thesis, University of London: London Business School.

Abstract

In this dissertation, we tackle challenges associated with the introduction of technological innovations, namely (1) the difficulty of valuing new initiatives due to inherent uncertainties and optionalities, (2) the challenges in selecting innovations due to conflicting objectives and stakeholders, and (3) the trade-offs associated with timing the development activities and product introduction. Our research is inspired by problems faced by companies we have worked with and aims to offer practical decision making support and valuable managerial insights.
Following an introduction, the second and third chapters present a multi-stakeholder, multi-objective methodology we developed for the valuation and selection of air traffic management system enhancements in relation to the Single European Sky initiative, in effort to cope with forecasted increase in traffic, whilst maintaining safety and protecting the environment. We frame this strategic decision problem and develop a mathematical model, combining quantitative and qualitative multi-criteria decision analysis techniques with large-scale optimization methods, allowing for different stakeholder views on the importance of the objectives and on the performance of the possible enhancements.
The fourth chapter examines technological innovation at the firm level. We develop a stochastic dynamic programming framework for valuing managerial flexibilities, accounting for (1) uncertainty in product performance and market requirements, (2) different market environments, and (3) varying strength of competition. We introduce two dimensions of competition, namely its intensity and the competitors' capabilities. We show that the effect of competition on the value of managerial flexibility is complex. Stronger competition may increase or decrease the value of flexibility. We demonstrate that the option of delaying product launch is typically most valuable when competitors are weak, but under certain conditions, delay can offer value in more competitive environments. Our insights can help firms understand how managerial flexibility should be explored, depending on the nature and intensity of the competition they face.