We examine a real option model with governance friction and optimal investment and financing decisions when an entrepreneur facing ambiguity considers investing in an innovation project. The novel features of our model are the introduction of jumps in the returns to innovation and investors’...

There are lots of research about how to motivate employees to innovate. However, there are still pros and cons about whether financial rewards can motivate employees to innovate. Moreover, previous studies tend to analyze R&D employees, who have specific innovation functions within the...