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Course Syllabus

Master 2020/2021

Finance of Innovation

Type: Elective course (Governance of Science, Technology and Innovation)
Area of studies: Management
Delivered by: Department of Educational Programmes
Where: Institute for Statistical Studies and Economics of Knowledge
When: 1 year, 4 module
Mode of studies: offline
Instructors: Yury Dranev, Ilia Kuchin
Master’s programme: Governance of Science, Technology and Innovation
Language: English
ECTS credits: 3
Contact hours: 32

Course Syllabus

Full SyllabusAsk Question

Abstract

This course provides a background on how organizations make innovation project management decisions including financing and investing. A general introduction to finance issues in innovation projects is provided, followed by a discussion of specifics of innovation project management for companies and the meaning of expected return and cost of capital. This illustrates management of the financial structure and leverage for strategic development, shows how man-agers, shareholders and investors resolve possible conflicts of interests based on corporate governance best practices. Also capital budgeting issues in innovation project management are considered. This helps students to understand the principal factors determining companies’ incentives for whether to invest or not in a project in the long-term. Approaches towards assessing in-novation projects with regard to the financial investment are discussed and sources of finance for innovation projects introduced.
Learning Objectives

Learning Objectives

  • The course spans 1 academic module. Students are assessed with a written exam. The teaching is based on selected writings and experiences of the instructor. In addition views from different perspectives on the meaning of finance of innovation provide in-depth learning opportunities for all students
  • Lectures are designed to deliver theoretical frameworks and international experiences. The course is accompanied by a seminar where students present projects on innovative financing. Lectures and seminars introduce and develop new approaches to understand and further develop different facets of innovation thinking and to provide participants with ready to use state of the art knowledge as well as academic training.
Expected Learning Outcomes

Expected Learning Outcomes

  • Knowledge of the role of innovations in the modern economy. Knowledge of creating value through technology innovation
  • Knowledge of Stages of innovations. Uncertainties in financial assessment at different stages. Knowledge of the most promising innovative products and markets for investors
  • Knowledge of the investment process, active and passive investors. Know how to assess the investment in innovation. Equity financing and debt financing
  • Understanding of venture capital and government support of innovation
  • Know how to analyse the industry trends, forecast industry trends, estimate projected relative market share. Adoption curves
  • Understanding how to model revenue and cost structure
  • Know how to estimate the cost of capital and NPV of a project
  • Understanding of comparables analysis and other approaches of valuation of innovative projects
Course Contents

Course Contents

  • Topic 1. Requirements on innovation from financial point of view
    The role of innovations in the modern economy. Creating value through technology innovation
  • Topic 2. Financial issues of strategic and competitive analysis for innovative project
    Stages of innovations. Uncertainties in financial assessment at different stages. The most promising innovative products and markets for investors.
  • Topic 3. Issues of investment in innovation
    The investment process: term sheet, commitment letter, due diligence, closing. Active and passive investors: monitoring of portfolio firms. Exit and assessment of investment in innovation. Equity financing and debt financing
  • Topic 4. Venture capital and Public support
    Sources of venture capital. Advantages of venture capital syndication. Availability of venture capital. Government policies and innovation. Sources of government support. Instruments of government support
  • Topic 5. Market forecasting for innovative project
    Analysis of the industry trends and forecasts. Estimation of projected relative market share. Adoption curves
  • Topic 6. Building a financial model for innovative project
    Revenue modelling. Unit economics. Cost structure modelling
  • Topic 7. Estimation of return on investment in innovation projects
    Estimating the cost of capital. Net present value analysis
  • Topic 8. Financial valuation of innovation projects
    Comparables analysis. Other approaches to valuation of innovative projects
Assessment Elements

Assessment Elements

  • non-blocking Homework includes preparation of oral presentations at seminars and written essay before final exam.
  • non-blocking Written exam (1 hour 20 minutes exam)
    The exam is planned online on ZOOM Platform, held with ONLINE PROCTORING technologies: Examus Platform (https://hse.student.examus.net). A Student should log in 20 minutes prior to Exam Session. Examus system can be tested in advance. Computer should meet the technical requirements: https://elearning.hse.ru/data/2020/05/07/1544135594/Технические%20требования%20к%20ПК%20студента.pdf) Before the Examination: a student should log into the Examus System, test the system, switch on the cam and the micro, identify oneself by the passport (!). During the examination a student is not allowed to use any other internet-resources, communicate to the others. Temporary internet breakdown is for up to 10 min. If longer - a written request to the course director, cc study office manager for further decision to reschedule the Exam for another date for examination: with different exam questions.
  • non-blocking Homework includes preparation of oral presentations at seminars and written essay before final exam.
  • non-blocking Written exam (1 hour 20 minutes exam)
    The exam is planned online on ZOOM Platform, held with ONLINE PROCTORING technologies: Examus Platform (https://hse.student.examus.net). A Student should log in 20 minutes prior to Exam Session. Examus system can be tested in advance. Computer should meet the technical requirements: https://elearning.hse.ru/data/2020/05/07/1544135594/Технические%20требования%20к%20ПК%20студента.pdf) Before the Examination: a student should log into the Examus System, test the system, switch on the cam and the micro, identify oneself by the passport (!). During the examination a student is not allowed to use any other internet-resources, communicate to the others. Temporary internet breakdown is for up to 10 min. If longer - a written request to the course director, cc study office manager for further decision to reschedule the Exam for another date for examination: with different exam questions.
Interim Assessment

Interim Assessment

  • Interim assessment (4 module)
    0.7 * Homework includes preparation of oral presentations at seminars and written essay before final exam. + 0.3 * Written exam (1 hour 20 minutes exam)
Bibliography

Bibliography

Recommended Core Bibliography

  • Akhavein, J., Frame, W. S., & White, L. J. (2001). The diffusion of financial innovations: an examination of the adoption of small business credit scoring by large banking organizations. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.7D05AF00
  • BROWN, J. R., FAZZARI, S. M., & PETERSEN, B. C. (2009). Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom. Journal of Finance (Wiley-Blackwell), 64(1), 151–185. https://doi.org/10.1111/j.1540-6261.2008.01431.x
  • Cumming, D. (2007). Government policy towards entrepreneurial finance: Innovation investment funds. Journal of Business Venturing, (2), 193. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.jbvent.v22y2007i2p193.235
  • de la Torre, A., Gozzi, J. C., & Schmukler, S. L. (2007). Innovative experiences in access to finance : market friendly roles for the visible hand ? Policy Research Working Paper Series. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.wbk.wbrwps.4326
  • Julian Atanassov, Vikram N, Amit Seru, Gautam Ahuja, Nike Bharucha, John Dinardo, … Er Koch. (2007). Finance and Innovation: The Case of Publicly Traded Firms. SSRN working paper. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.5346B5BA

Recommended Additional Bibliography

  • Amer Alzaidi, & Shahzad Qamar. (2018). Factors affecting the adoption of internet banking: a systematic literature review. International Journal of Business Information Systems, (1), 95. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ids.ijbisy.v28y2018i1p95.124