Managing Technology: The Technology Valuation Approach

In recent years, technology valuation has been seen as an important decision-making mechanism for high-tech business. It involves not only technical steps of valuation (for instance, financial engineering) but also the strategic management of a technology. Unfortunately, the academic concept of technology valuation has not been explored scientifically until recently. This paper is designed to help bridge the gap by exploring the concept and context of technology valuation. We develop a new "technology evaluation framework" addressing the concepts and differences between terms such as technology assessment, technology valuation, technology pricing and technology price to make them more understandable. We then establish a "hybrid valuation formula" which expands traditional cost or income perspective, and recent option perspective by suggesting strategic choice and combination of valuation tools in order to mitigate the impacts of risks and uncertainties that a technology usually bears. From cases of TFT-LCD investment in Taiwan, we further discuss the concept of these perspectives that companies apply and evidenced a sound performance if company apply hybrid model properly. Finally, we reveal the possible existence of a "strategic value space" for a technology if it's to be planned or valued strategically by a company. Our results expand views in technology valuation, both in academic and in practice. We help clarify valuators' or managers' roles and responsibilities in valuing and applying their technologies better.