 Examination of the behavior of R&D returns using a power lawSébastien Casault, Aard J. Groen and Jonathan D. Linton Science and Public Policy, 2012, vol. 40, issue 2, 219-228 Abstract: This paper provides an improved model, based on historical data, that describes the returns on assets that result from R&D efforts to assist managers of public and private R&D activities. Such a model may lead to better decision support tools to monetize the value that may be extracted from R&D, which is otherwise often undervalued. Real option pricing models are used to gauge appropriate funding levels for assets such as R&D projects that contain large time-dependent uncertainties. However, this study finds that assuming the Gaussian distribution describes fluctuations in value is not appropriate for assets whose value is derived from R&D activities. This conclusion is based on a study of 43 military R&D projects and 100 technology-intensive small firms. A power law, such as the Cauchy distribution, is shown to be more accurate in describing fluctuations in returns from R&D investments. Copyright The Author 2012. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:scippl:v:40:y:2012:i:2:p:219-228 Access Statistics for this article Science and Public Policy is currently edited by Nicoletta Corrocher, Jeong-Dong Lee, Mireille Matt and Nicholas Vonortas More articles in Science and Public Policy from Oxford University Press |
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