ABSTRACT
For most biotech start-ups’ financing, the fund raising from venture capital and the capital market are not enough. Strategic alliance with big pharmaceutical or biotech companies is also necessary. At the uncertain projects in the biopharmaceuticals, the flexibility of decision-making is important against irreversibility. On the other hand, the strategic flexibility tends to become the trade-off relationship with the commitment against the preemptive behaviour by rival companies. Therefore, what kind of conditions are necessary for matching between the Pareto optimal solution on the flexibility value and the Nash equilibrium on the commitment value for the formation of partnerships? Under such research question, this study applies the option-game as the new approach, by integrating between the real options for evaluating the flexibility and the game theory for estimating the commitment. Then a research objective is to bridge the gap between a long-term technological potential and a more short-term survival, through, strategic partnerships of the biotech start-ups, whose majority is always in deficit. In conclusion, this study found some knowledge about parameter setting forward open innovation by simulation, based on option-game models.
