The analysis about decision-making of technology innovation investment based on real options

This paper analyzes the optimal investment decision-making rules of technology innovation project conditioning on considering the economic effects of technology innovation. The paper takes the update of technology or product by innovation as embedded option of current investment opportunity. Thus, the current project just likes an American compound call option. By dividing the economic effects into cost-saving and demand-pulling effects and using contingent claims analysis, we deduce the option value of the investment project, and solve the critical value of optimal investment decision-making. Finally, we analyze the impacts of innovational market and technology risk to investment decision-making.