Financial Considerations in Technology Management
Major financial questions related to technology management include assessing the value of a technology project, financing tech start-ups, and communicating with investors. Concepts like project valuation, financing sources, investor relations, and project life cycle are crucial. Challenges in technology project financing include adverse selection and moral hazard, with various sources of financing available such as private equity markets, operational funds, and collaborative arrangements.
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Presentation Transcript
Ch 15 Project Project Valuation and Valuation and Financing Financing
We will focus on the major financial questions invoved in management of technology: 1. How is the value of a technology project to be assessed? 2. How can one finance a technology start-up or project? 3. How do firms communicate with their investors regarding the attractiveness of a technology project?
Financial Considerations: A Conceptual Overview Project Valuatin Source of Financing Intellectual Capital Investor Relation Small firm Large firms
The concept of Project Life Cycle is useful to illustrate three key ideas: 1. The funds required for completing the activities in a project will vary over time 2. The risk-return trade-off in a project changes over its life cycle; and 3. Different project control mechanisms are needed over the course of the project.
FINANCING Fundamental challenges are involved in financing technology project: adverse selection, and moral hazard. 1. Adverse selection refers to a problem that can occur in two way. First, only those firms who are not good at innovation will go to outside financing: second, firms go for outside financing because they know that the technology project is too much of a risk for them to use their won money and would rather use someone else s 2. Moral hazard refer to the problem that can occur in a principal-agent relationship: The financier employs an agent or a manager to undertake the technology project.
Source of Financing 1. Private equity market 2. Funds generated from operation 3. Collaborative arrangement
