a b s t r a c tThe pharmaceutical landscape has changed, and new business models, based on alliances, are increasingly being adopted in this industry. Biotechnology advances have pushed this development, and pooling complementary resources coming from incumbents and newcomers is a key skill to succeed: these are the premises for a quick spread of the open innovation (OI) paradigm in this industry. R&D portfolio selection needs R&D project evaluation, and Real Options Analysis (ROA) is acknowledged as a powerful tool to evaluate uncertain projects that have an intrinsic flexibility. The present research aims to foster the use of ROA in the OI field in order to encourage firms to undertake this innovation model; to achieve this goal the authors propose a closed-form model that is easy to implement, to evaluate the OI initiative for selecting an optimal R&D portfolio. The study wants to support managers in optimal R&D portfolio construction in terms of choosing the most promising products, the means by which the related project has to be undertaken (in an open or closed manner; i.e. licensing-in or not) and the self-financing policy. The proposed model can be easily implemented into a spreadsheet, and the inputs needed to run it are usually requested to evaluate projects using the most used net-present-value-based methods. Moreover, some parameters of the model allow strategic aspects to be considered: for example the nature of the project (core/non-core), the impending project phase, and the risk-sharing opportunity.The results of the developed numerical example show that the selected portfolio is well balanced in terms of development stages, core/non-core therapeutic areas and, licensing-in (an inbound open innovation solution), is preferred in the case of products at their early stages of development.

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Arguably, for many citizens the perceived expected disutility from sanctions is smaller than the monetary gain from tax evasion. Nevertheless most people pay their taxes most of the time. In a lab experiment, we show that the willingness to pay taxes even absent enforcement is indeed pronounced. Yet voluntary compliance is reduced if participants learn that income is heterogeneous. The effect is driven by participants with the lowest income. The reduction obtains irrespective of the tax regime. If the tax is proportional to income, or progressive, participants become more skeptical about the willingness of participants with high income to comply.

The competitive landscape where pharmaceutical and biotechnology companies operate has changed radically due to a scientific/technological progress that has revolutionised the process by which drugs are developed. In fact, pharmaceutical industry more and more relies on advances in biochemistry and molecular biology. As a consequence, the number of partnerships between pharmaceutical and biotech firms has grown significantly. Research contributions addressing the biopharmaceutical alliances design have also focused on the optimal timing to sign a partnership. In this paper, we introduce and analyse the effect of competition in biotechnology industry by modelling the decisions of whether and when ally with a pharmaceutical company through a real options game. We find that the timing decisions depend on the level of the competition, synergies obtained through the alliance and contract terms offered by the pharmaceutical company as well. Also, we show that the first mover might not always pre-empt the follower in partnering with the pharmaceutical company.

Drugs available in the market today, selected several years ago under very uncertain future scenario, have experienced a long and expensive process of research and development carried out following both a closed and an open innovation path. To support this critical selection process, we propose a Decision Support System, able to choose among different candidates the most promising drugs along their best development path. The Decision Support System, based on a real options portfolio optimization model, mapping tools, and what‐if rules as well, has been applied to a numerical example available in literature, and the research findings show interesting managerial and academic implications. Copyright © 2015 John Wiley & Sons, Ltd.