• The tools for controlling and financing innovation as well as the dilemmas and effects of such efforts
• Develop cost management systems and performance management systems for innovative activities
• Generate financing of innovative activities and manage a portfolio of innovative activities
• Analyze systems and tools for control and financing of innovative activities
• Design systems of cost and performance management
• Generate finance and manage a portfolio of innovative activities

The objective of this course is to conceptualize the dilemma of control and financing of innovative firms, analyze the relevant control and financing mechanisms and discuss how control systems may be used in a way that increases rather than destroys firm value.

The course will help students understand dilemmas of control and financing of innovation as well as the techniques through which innovation is financed and controlled, i.e., it deals with control and financing of innovative firms’ activities. As innovative activities increase in importance for firms’ competitiveness, the need for control of innovative activities becomes more important. Controlling and financing innovation however is not unproblematic as innovative activities are more uncertain compared to other activities. Control and financing of innovation may therefore produce dysfunctions and unintended effects. Despite these potential problems many firms increasingly make innovation activities subject to cost and performance control. With respect to tools and problems, the course will focus on target costing, performance management and incentives, budgeting, real options and financial deal making.

The course is divided in to 4 parts:

Part 1: Management control systems for innovation

The first part focuses on conceptualizing and analyzing the dilemma between control and innovation. This block draws on literature that conceptualizes the dilemma and documents surprising effects of control systems.

Part 2: Performance measures for innovation - stage gate systems, budgets and incentives

This block discusses the use of budgets, stage-gate systems and incentives in innovation processes. It addresses both the elements of control systems and the effects of the use of these systems on learning processes and performance, and further analyzes how uncertainties affect the relevance and use of performance measurement.

Part 3: Cost control in innovation

This part relates to cost control in innovation. The primary focus is on target costing which is a comprehensive system for controlling cost in innovation processes. It will start out with a simulation of the target costing process and will then proceed to discuss the elements and practices of target costing. The block ends with a discussion of how design processes relate to target costing and how it affects inter-organizational relationships.

Part 4: Financing innovation

This part focuses on financing of innovation projects for both established firms and starts-ups. In relation to start-ups the role of venture financing is in focus and alternative forms of financing such as crowdfunding are discussed. In relation to established firms corporate venturing and the real options approach for financial management are analyzed. The block discusses deal structures, agency problems and organizational solutions to agency problems and financing issues.

Available via LEARN