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Innovation risks

The innovation risk is especially important in modern business activity which is at a stage of increase in the capitals used as for production of the existing goods and services, and for creation new, earlier not made.

The innovation risk is a probability of the losses arising at attachment entrepreneurial firm of means in production of new goods and services which, perhaps, will not find the expected demand in the market.

The innovation risks arises in the following situations:

  • at introduction of cheaper production method of goods or service in comparison with already used. Similar investments will bring to entrepreneurial firm a temporary excess profit until she is the only owner of this technology. In this situation the firm faces only one type of risk - possible wrong assessment of demand for the made goods;
  • during creation of new goods or service on the old equipment. In this case the risk of discrepancy of goods quality or service in connection with use of the old equipment is added to risk of the wrong assessment of demand for new goods or service;
  • by production of new goods or service by means of the new equipment and technology. In this situation the innovation risk includes: risk that new goods or service can not find the buyer; risk of discrepancy of the new equipment and technology to necessary requirements for production of new goods or service; risk of impossibility of sale of the created equipment as it is not suitable for production of other products, in case of failure.

Level of the innovation risks is rather high. The possibility of losses and failures in this sphere is much higher, than in all others. It is enough to tell that on average only four of ten innovation projects come to an end successfully, other six, according to statistical data, are obviously doomed to failure. For this reason venture capital companies (the firm which are engaged in development and deployment of the innovation projects) when planning the financial and economic activity use the highest rates of profitability.

In literature according to the theory of business it is often possible to meet the terms "high risk" and "weak risk". In this case it is about various risk levels. The risk level depends on the relation of scale of expected losses to the volume of property of entrepreneurial firm and also on the probability of approach of these losses.