R&D Investments and Strategic Use of Financial Models

Wesley L. Harris () and Jarunee Wonglimpiyarat
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Wesley L. Harris: Department of Aeronautics and Astronautics, Massachusetts Institute of Technology, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139, USA
Jarunee Wonglimpiyarat: Department of Aeronautics and Astronautics, Massachusetts Institute of Technology, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139, USA

International Journal of Innovation and Technology Management (IJITM), 2020, vol. 17, issue 04, 1-16

Abstract: Given that making research and development (R&D) investments has the potential to generate high profits in the future, this research aims to discuss the merits and demerits of using the major financial models — net present value (NPV), internal rate of return (IRR) and Black–Scholes — in assessing R&D investments. The study follows the appreciative theorizing to examine the strategic implications of financial models for managing R&D and building firm’s competitiveness. Conclusively, the analyses point out how conventional financial models fail to recognize the importance of strategic positioning as there are limits in terms of using the quantified approaches to measure the performance of R&D investments. The main contribution of this paper is the insights as well as the comprehensive and deeper understanding of using the financial models for evaluating investments in new technologies.

Keywords: R&D projects; R&D investments; financial models; net present value (NPV); internal rate of return (IRR); Black–Scholes (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0219877020500303

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