Option-games approach to the strategic partnership of biotech start-ups

For most biotech start-ups´ financing, the fundraising from the venture capital and capital market is not enough. Strategic partnership with the big pharmaceutical or biotech companies is also necessary. At the uncertain projects in the biopharmaceuticals, the flexibility of decision making is valuable against irreversibility. On the other hand, the strategic flexibility tends to become the trade-off relationship with the commitment against the preemptive behavior by rival companies. Therefore, what kinds of conditions are necessary for matching between the decision under uncertainty on flexibility value and the Nash equilibrium on commitment value, for the partnership formation? Under such research question, this study applies the option-games by integrating between the real options for evaluating the flexibility value and the game theory for estimating the commitment value. Then a research objective is to develop and test the managerial logic and tools for the optimization between the long-term technological project value and the competitive position, in order to facilitate the strategic partnership as a technological and financial survival method for the biotech start-ups, whose majority always is in deficit conditions. As a conclusion, this study found some information about parameter setting forward open innovation by simulation based on option-games models.