The Value of Innovation in Nanotechnology
This paper introduces and discusses a comprehensive valuation model, developed for the Shyman (Sustainable Hydrothermal Manufacturing of Nanomaterials) project, which researched and implemented new technologies in nanomaterial production and application. Combining various analytical methods, including a recursive form of life cycle costing (LCC), as well as statistical simulation (Monte Carlo) and real options, a high Net Advantage to Innovating (NAI) has been identified in the industry. This result is strongly biased in favour of end-product innovators. Nevertheless, the hydrothermal synthesis-based nanomaterial production process benefits from its high degree of flexibility, i.e. option to switch, with a significant value premium arising due to outsize dynamics and uncertainty in the nanoindustry. More generally, this research contributes to the highly current topic of quantitative value-based analysis in innovative industries and develops a viable methodology that can facilitate capital budgeting decisions related to innovations.