A model for valuing new technologies under a pull incentives environment

Investment in innovation and Research & Development (R&D) projects is one of the key strategies that firms need to implement to enhance growth, increase profitability and create value. On the other hand, R&D projects are characterized by significant levels of risk due to limited information and uncertainty over both the investment costs and the expected returns. In order to encourage the development of high-risk, but relevant, R&D projects, some risks can be mitigated by other project stakeholders through the use of pull incentives, such as a minimum guaranteed demand.