Technology valuation of NTBFs in the field of cleaner production in terms of investors' exibility and uncertainty in public policy

Abstract

Technology valuation, especially in the early growth stages of New Technology- Based Firms (NTBFs), is one of the most critical challenges that most often hinders investors and entrepreneurs' deals in the Venture Capital (VC) financing process. It is clear that uncertainties arising from the likelihood of implementing public policies could significantly affect the volatility of NTBFs' cash ows in the field of cleaner production. Commonly, these types of technologies require public supportive policies for achieving success. Consequently, technology valuation is more challenging and traditional valuation methods are not suitable anymore because of the definitive assumption of cash ow and disregard for investors' exibility and uncertainty. Therefore, this study proposes a method to perform the technology valuation of firms during all their growth stages by introducing a framework based on decision tree and real options analysis. Furthermore, unlike previous papers that have utilized the compound options, the option to choose approach was used to consider investors' exibility. Then, the proposed framework was supported by a case study, which was conducted to verify and validate it. Finally, the conclusion section discusses the contributions and limitations of the study and provides directions for future research.