Nitin Joglekar: Technology Commercialization- Managing Production Scale Up Risks

Whether to invest in process R&D to reduce unit cost, and raise future profits, instead of [...]conserving cash to enhance the likelihood of survival is a dilemma faced by many start-ups. We examine this dilemma in a two period model. As a benchmark under deterministic demand, we show the optimality of producing monopoly quantity with all-or-nothing-investment policy in the first period. Then, under stochastic demand, we identify conditions for creating operational hedges, e.g. when can a manager to make "conservative" investment and produce less than optimal to increase survival chances? Theory (for derivation of risk adjusted investments) and policy (for funding clean-energy start-ups) implications of these results are offered.

Tags: boston university, smg, School of Management, faculty research day, startup firms, nitin joglekar

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